Impecuniosity may mean little to the layman, but to credit hire practitioners it is a fundamental concept. The recoverable rate for hire charges is limited to a basic hire rate (market rate) unless the claimant proves that they are impecunious. The reduction strips out the charge for additional services (credit, accident management etc.), the cost of which is irrecoverable at law. But what makes a claimant impecunious?
The leading case which created the premise, Lagden v O’Connor, defined impecuniosity as “inability to pay car hire charges without making sacrifices the plaintiff (sic) could not be reasonably expected to make.” However, Lord Hope of Craighead amplified the definition confirming that “in practice the dividing line is likely to lie between those who have, and those who do not have, the benefit of a recognised credit card or debit card.”
Over the years since Lagden it is arguable that the definition has loosened so that a finding that a claimant had a credit card limit to cover the level of of the basic hire rate of hire charges meant that you were dealing with an impecunious Claimant was far from the norm. Indeed expecting the claimant to use a credit card to fund hire was seen to be an ‘unreasonable sacrifice’.
Probably the peak for claimants seeking to allege an impecunious status is the matter of W v Veolia Environmental Services where an actuary with a 30,000 overdraft limit, £50,000-£100,000 savings and a £20,000 pension but limited income, no available credit on his credit card and in the midst of a divorce was found to be impecunious as the capital which he had was to fund himself and family in the future. I recall a case of my own where a claimant was deemed impecunious as to just £408.50 (the replacement cost of his vehicle) as he had no monies and no overdraft despite spending on ‘luxuries’ such as Sky, broadband, eating out and online gaming. The result of the finding justified him incurring over £20,000 hire charges across 11 months. The question is was the expectation on the claimant to change his spending habits a reasonable or an unreasonable sacrifice?
More recently in Irving v Morgan Sindall HHJ Turner stated “I cannot ignore the fact that by reducing her capital to the bare minimum and increasing her debt, the claimant would be exposing herself to the risk of a serious financial challenge in the event that even a modest but unexpected financial reverse might have afflicted her before her claim was satisfied. Impecuniosity need not amount to penury.” So arguably if the claimant is not expected to enter extreme poverty then similarly the claimant cannot be expected to put himself in debt by using a credit card?
This year there has been a glimmer of light for those challenging credit hire claims. In the recent matter of Puttna v Royal & Sun Alliance the claimant was found not to be impecunious where he had £7645.00 available to him if he used his overdraft and credit cards. The court distinguished the case from Irving because the claimant would not be up to his credit card limit and also had a further £2500 set aside to pay tax. So could the matter have come full circle with an claimant with an available credit card limit to comfortably fund the hire being a claimant who is not impecunious, as it was suggested by Lord Hope? Time will tell.
I suspect that the effect of Covid-19 on the economy will see further movements in the courts’ attitudes as to what the claimant can be expected to do and whether a sacrifice is a reasonable or unreasonable one. But, as it stands HHJ Stewart has focused the minds of practitioners back to where we started on the trick issue of impecuniosity.