EUI –v- Charles and others: a warning to Credit Hire Organisations and their solicitors
The reported case of EUI –v Charles  is one of the more recent in a very long line of cases that chart the battles between the credit car hire industry (that hire out cars to road traffic accident victims) and the insurance industry (that has to pay those charges).
This case, heard before His Honour Judge Robert Harrison, dealt with the obligations upon a Claimant to provide personal financial information to enable them to claim the enhanced credit hire charges. The question the court had to consider was whether a claimant should be compelled to produce such documentation before the issue of court proceedings.
Harrison HHJ very helpfully summarised the background to the case law surrounding this issue and explained (per the case of Stevens –v- Equity) a claimant is only entitled to the lowest quoted Basic Hire Rate (“BHR”) of a mainstream supplier (the rate that would apply to the ordinary consumer who is not obtaining a hire car on credit – and therefore not paying the “additional services” that justify the enhanced credit hire rate), UNLESS they can show that they were “impecunious”, in which case the exception to that rule applies and the full credit hire rate is allowed (Lagden –v- O’Connor).
The way in which a claimant can show they are impecunious is to disclose financial documentation showing they are… well…. skint!
In the present case, the Defendant wanted this documentation well before litigation commenced and the Claimant refused. The Defendant then issued an application for pre-action disclosure. This case was heard along with six others.
The Claimant argued that they should only be required to disclose such documentation:
- Once proceedings have been issued; and
- Only as part of formal disclosure directions; and
- Only after the Defendant had disclosed its Basic Hire Rate Evidence. The Claimant’s reasoning was that until such time as it became apparent that there was a massive difference between BHR and the Credit Hire Rate, the question of impecuniosity did not become an issue for consideration.
The Claimant further argued that as it was the Defendant who was seeking a deduction in the amount claimed on the grounds of the Claimants failure to mitigate their losses i.e. if the Defendant wanted to argue the Claimant could have afforded to pay for the hire car from his own funds, and therefore should have done so to reduce (“mitigate”) his loss, then the burden of proving that failure to mitigate fell on the Defendant in the first instance, not the Claimant.
The Claimant also argued that to be compelled to disclose what might be considered sensitive financial information outside court proceedings was a breach of the Claimants data protection rights.
Finally, the Claimant put forward that the defendant’s argument that disclosure of such documentation may well avoid litigation was not borne out by past behaviours of the insurer running the case on behalf of the Defendant, who had continued to run matters to trial even after receipt of impecuniosity documents.
Harrison HHJ then considered the law applicable to pre-action disclosure applications. The learned judge explained that the test to be applied is broken down into two parts: jurisdictional and discretionary. The jurisdictional test asks whether the circumstances of the disclosure request falls under the wording of the applicable court rules (CPR 31.16 (3)) namely:
- the respondent is likely to be a party to subsequent proceedings;
- the applicant is also likely to be a party to those proceedings;
- if proceedings had started, the respondent’s duty by way of standard disclosure, set out in rule 31.6 , would extend to the documents or classes of documents of which the applicant seeks disclosure; and
- disclosure before proceedings have started is desirable in order to —
(i) dispose fairly of the anticipated proceedings;
(ii) assist the dispute to be resolved without proceedings; or
(iii) save costs.
Once a court establishes that the jurisdictional criteria has been satisfied it must then consider, in the exercise of its discretion, whether an order for disclosure should yet be made by considering all the circumstances of the case.
The judge concluded that the jurisdictional test had been satisfied (not least of all because the Claimant accepted that a) and b) applied – and found that these documents were likely to be ordered to be disclosed as part of the court action and could well resolve some of the major disputes between the parties.
He then considered the discretionary test and in applying this, the judge took into account submissions made by the Defendant about the Claimant’s hire company’s web-site. He concluded that its entire business model was based around servicing the hire needs of impecunious clients and so would always need to ultimately adduce financial documentation as matters progressed to court. Harrison HHJ concluded that such clients were targeted for their impecuniosity to unlock the higher rates that could be recovered and, against that background, to suggest that evidence of BHR was needed firstly to show that such rates would be vastly different to the enhanced credit hire rate was to “suspend reality”.
The judge did consider the allegedly onerous nature of the disclosure request (namely 3 months worth of bank statements and wage slips for the period before and after hire) and concluded that this was “something that required little input from a solicitor and frankly is not onerous”.
Accordingly, he ordered that the Defendant was entitled to sight of the Claimants financial documentation prior to the issue of proceedings and ordered the Claimant to disclose it.
Having read this judgement I can see why the court arrived at the decision it did. Ultimately the credit hire company involved in this case had openly admitted on its web-site what its business model was centred around maximising hire recovery by focusing on impecunious clients and that for the Claimant to argue that it was not known at the pre-issue stage if such documentation was going to be needed (or relevant) was a weak argument. The hire company was never going to gain the sympathy of the Court.
I do however have a few issues with the judgement:
- The issue raised by the Claimant in relation to the perceived breach of their data protection rights was not really dealt with.
- His Honour Judge Harrison also did not address the Claimant’s concerns raised about the past behaviours of the Defendants insurance company in that, even when provided with financial documentation to show impecuniosity, this insurer still chose to fight such cases. Surely this would impact on the jurisdictional considerations of CPR 31.16 (3)(d) – disclosure before proceedings being desirable to assist in the resolution of the dispute without the need for proceedings? Even if it was still considered that the jurisdictional threshold was established because the documentation was required for the fair disposal of anticipated proceedings, it surely must be a consideration when the court comes to exercise its discretion? As Harrison HHJ himself said, “In considering whether to exercise its discretion the court must have regard to all the circumstances including the reality of this type of litigation. Surely, a defendant insurance company’s habitual reluctance to enter into negotiations even after receipt of impecuniosity documents must be a valid consideration here.
- Finally, the courts assessment of the “not very onerous nature” of getting a claimant to produce financial documentation displayed an unfortunate lack of understanding about just how private individuals tend to feel about such things. Often it takes hours for a claimant’s solicitor to prise this documentation out of their client, who will quite often feel that the world knowing about their finances is far more intrusive than them simply signing a medical authority for the release of medical records in a personal injury case.
- Point 3 then merges into my issues with the courts consideration of the overriding objective and the Claimants argument that the Fixed Recoverable Costs regime allows for very little work to be done on a matter pre-issue. The court appears to have unfortunately considered this issue in light of its misapprehension of just how allegedly easy a task it is to collect and collate sensitive financial documents from a reluctant claimant client. The work required to achieve this goal is, in my view, not a proportionate and cost effective disclosure exercise against the backdrop of fixed costs.
On a more general note, claimant practitioners could be forgiven for holding the view that the courts inadvertently support the insurance industry’s agenda to destroy the credit hire industry by ordering vast and “onerous” financial disclosure directions in fixed recoverable cost cases and, worse still, small claims matters which go way beyond what is, in my view, proportionate. This is especially the case against a backdrop of years of austerity when there seems to be no acknowledgement on the part of the judiciary that very few people can afford to pay out of their savings or monthly earnings an extraordinary amount of money to repair their car and fund a hire car whilst theirs is off the road. An impecunious client is not the exception to the rule – a client who can afford to pay out that much money after an accident is.
Until the Court acknowledges this and understands just how painful (and therefore disproportionate) the process of producing personal financial information is, claimants who have entered into credit hire arrangements will need to be prepared to disclose financial documentation even when it is obvious, for example, because of high vehicle repair costs, that a claimant could not have afforded to pay for such things out of their own pocket.
As to whether this case marks a turning point in the need for claimants to provide financial disclosure prior to the issue of proceedings I would argue it does not. The publicised business model of this hire company was in my view its undoing. In addition, if a defendant insurer has, in its initial response to a letter of claim, raised the usual “plethora” of technical challenges to a claimant’s entitlement to recover hire then surely that must undermine any argument that early disclosure of financial documentation is likely to resolve the dispute without the need for proceedings. Perhaps then, the court will see a defendant’s pre-action disclosure request for what it truly is – just another tactic employed by the insurance industry to render the pursuit of credit hire claims uneconomical.