Steven Turner in Court of Appeal Clarification on Impecuniosity in Credit Hire Claims
SAMEER UMERJI v (1) MUHAMMAD KHAN & (2) ZURICH INSURANCE PLC 2014
1. The Court of Appeal today handed down its judgment in the case of Umerji v Khan & Zurich. The case provides important clarification as to the meaning of ‘impecuniosity’ in a credit hire context, as to who has the burden of proof on that issue and also as to the extent to which a Claimant is expected to get on and repair / replace his own vehicle out of his own funds.
2. Attempts to persuade the Court of Appeal to engage with the question of whether or not a Claimant who declines to use his own fully comprehensive insurance to repair or replace his vehicle fails to mitigate loss were not successful. The Court accepted that the issue was an important one, but declined to adjudicate upon it as the issue had not been pleaded or argued below.
3. This Note is written by Steven Turner, Appellants’ counsel.
Umerji – the facts
4. Mr Umerji’s own car (value £7,100) was written off in an accident. He hired a substitute from Elite in Bolton for 591 days at a total cost of £95,130.14. His car was also placed in storage for over four months at a cost of £3,420.75.
5. Mr Umerji had failed to disclose any evidence as to his means and so had been debarred from pleading impecuniosity.
The decision below
6. The (Second) Defendants approached the trial on the simple basis that, as Mr Umerji was barred from pleading impecuniosity, he could not assert that he had been too poor to replace his vehicle at an early stage. Such submissions did not find favour with the Judge (Recorder Alldis), who held that impecuniosity in a credit hire context went only to rate and not to period. Save for disallowing a short period when the Claimant was out of the country, the hire charges were allowed in full. The storage charges were also allowed in full, on the basis that the Claimant had been entitled to retain his vehicle until the Defendants had confirmed whether or not they wished to inspect it.
The Court of Appeal’s decision
7. The decision was delivered by Underhill LJ, with Moses LJ and Sir Robin Jacob agreeing. The key elements of the decision are:
8. Impecuniosity: The Court held that ‘Lagden’ impecuniosity goes not just to rate, but to period. The decision in Lagden is of general application. Impecuniosity in a credit hire context is not a term of art restricted to rates only.
9. Burden of proof: The Court stated firmly and explicitly that the burden of pleading and proving impecuniosity rests with the Claimant.
10. Debarral Orders: It is not open to a Claimant who has been debarred from pleading impecuniosity to assert that he needed to hire because he could not afford to replace his vehicle. If impecuniosity is off the table, it is so for all purposes.
11. The obligation to repair / replace: It is reasonable for a Claimant to wait until an assessment of whether it is economical to repair his vehicle has been made. It is also reasonable of him to wait until the Defendants’ insurers have had an opportunity to inspect his vehicle and say whether they agree with the Claimant’s engineer’s report. Thereafter, the non-impecunious Claimant should take steps to repair or replace. On the facts of this case, as the Defendant’s insurers failed to respond to the Claimant’s correspondence, it was reasonable for the Claimant to wait until he disposed of his vehicle. He was thereafter given a fortnight to purchase a replacement. A hire period of 140 days (versus 591 claimed) was allowed.
12. Use of fully comprehensive policy: The Court commented that the point is an interesting one and plainly of some general importance. They would not deal with it, however, as the point had not been pleaded or argued below and also because a decision on the point would require examination of the full circumstances, including the terms of the policy / excess / no claims bonus etc.
13. Storage: The Defendants argued that the Claimant should have written to the Defendants at an early stage indicating that the Claimant’s vehicle would be disposed of in, say, 21 days if the Defendants did not express a wish to inspect. The Court had some sympathy with this view and encouraged Claimants’ representatives to impose such deadlines. On the facts of the present case, however, the Court would not say that the Recorder was wrong.
14. The clarifications in relation to the meaning of impecuniosity, the breadth of impecuniosity debarral orders and the burden of proof on the impecuniosity issue are all welcome. In the current unforgiving post-Mitchell environment, the decision on these points should permit significant gains where Claimants fail to plead issues properly and/or are lax in fulfilling their disclosure obligations.
15. Of equal importance, in my view, is the implicit expectation that a Claimant who has funds to repair or replace will get on and do so more or less as soon as the Defendants’ indicate whether or not they intend to inspect and whether or not they are going to fund repairs / replacement. If this approach is followed in the County Courts (and it should be), Courts should be less willing to allow long hire periods for Claimants who just sit back waiting for the Defendants to get their act together or change their mind about liability. Insurers could probably exploit this part of the decision to their advantage by changing the tenor of their early correspondence from ‘please bear with us’ to ‘please get on and repair / replace yourself while our enquiries are on-going’.
16. The decision on the fully comprehensive policy point is disappointing, as the Court were interested enough to hear full argument from both counsel on the issue, with citation of all relevant authorities (which are carefully listed within the judgment). The argument is by no means open and shut in the Claimant’s favour (as many on both sides of the argument believe) and Defendants should now move to bring this argument to the fore. It should be pleaded and details of the Claimant’s policy obtained for use at trial.
17. The outcome on the storage charges point is also disappointing, although Underhill LJ’s assertion that Claimant solicitors ought to impose a clear deadline should help to curtail the most abusive storage claims.
I should have a copy of the approved judgment later today. My clerks (Andy Gray or Mike Stubbs) should be able to get a copy of this to anyone who is interested: email@example.com