UK: The Lion's Share And The Cost Of Living: Credit Hire Revisited

The recent case of Morgan-Rowe v Woodgate [2023] EWHC 2375 (KB) is a helpful authority for credit hire practitioners faced with commonplace issues concerning impecuniosity.

The appeal considered whether the Recorder was wrong not to debar the Claimant from relying on her impecuniosity by reason of a disclosure failure, and whether the Recorder was wrong to conclude that the Claimant was impecunious despite the value of her cash ISA.

Background

The background to this case was simple: the claim arose out of a road traffic accident on 9 December 2019 in which the Claimant and Defendant's vehicles collided, sustaining damage. The Recorder entered judgment for the Claimant, with a 50% reduction for contributory negligence. The main head of claim was the claim for credit hire charges, amounting to £25,830.72 by way of charges for the period of 10 December 2019 – 19 February 2020, and £10,022.24 for vehicle repairs and sundry items. In her Particulars of Claim, the Claimant had alleged impecuniosity. She argued that at the time of the accident she had not been in a financial position to pay credit hire charges upfront nor to pay the vehicle security deposit.

The Claimant had provided financial disclosure in line with the Order of DJ Coonan dated 15 December 2020. She provided a range of paperwork pertaining to her bank account, as well as a joint bank account. The joint bank statement showed a payment into that account from another account, including a credit card payment. No disclosure had been provided in relation to those accounts. The Defendant argued that full disclosure had therefore not been provided. The Claimant argued that the undisclosed account related to her husband and that the credit card was in his name. The second key issue concerned the Claimant's ISA, which contained approximately £12,000; the Claimant said that this sum had been earmarked for mortgage payments. The Recorder accepted this: whilst she was not living in penury, she was impecunious under the applicable impecuniosity test.

The Defendant's grounds of appeal in the High Court were in essence that the Recorder's conclusions on impecuniosity were perverse and / or an error of law, and that the Claimant's claim that the ISA had been earmarked for mortgage payments had not been in her statements or supported by the documents. The Defendant's skeleton argument raised two new matters neither of which formed the grounds of appeal. One of the submissions in the skeleton argument was that the repairs could have been done in a matter of weeks thereby reducing the period, and that whilst she would have been impecunious as to both the costs of the hire and the repairs, the credit hire sum would have been for a shorter duration. Crucially however, the hire period of 72 days had initially been conceded by the Defendant at the trial.

Decision on appeal

The appeal came before Mr Justice Julian Knowles. He held that the Recorder was entitled to find that the Claimant wasn't debarred from relying on impecuniosity by reason of a disclosure failure. The Judge could not go behind the Recorder's finding that the Claimant's transactions were in her husband's sole name, and her husband was not a party to the proceedings. The Defendant's legal team had been aware of this issue but had not made an application for third party disclosure. Moreover, the Defendant had already conceded the hire period therefore could not renege from this in order to make arguments about a reduction to the total credit hire amount. The issue of period should have been raised at the trial: a deliberate decision was taken by the Defendant to concede the issue, so that no live evidence was called, which would have been necessary had the matter remained in dispute. The ship had therefore sailed for raising this on appeal. The Defendant's arguments regarding the hire period were dismissed. The Defendant was in effect circumventing CPR r52.17 by raising new arguments that had not been in the grounds of appeal.

In terms of impecuniosity, the test remains one of unreasonable sacrifice. The Recorder had been properly directed to the case of Irving v Morgan Sindall PLC [2018] EWHC 1147 (QB) and had therefore been made aware of who bore the burden of proof. It could not be said on appeal that the Recorder had reached a decision that no reasonable judge could reach. The Recorder had not ignored the fact that the circumstances did constitute a type of emergency. He had explained that if the Claimant had used the ISA for the hire of a car, she would have no other financial resources remaining for “any other” emergency. This decision had been made with regard to the fact that the money was earmarked for mortgage payments. The Judge said that he would “[not] expect her to spend the lion's share but very uncertain proportion of the totality of her savings on car hire. For most people, their mortgage is the biggest financial obligation which they have, and it is in that context in which the Claimant's decision falls to be assessed.”

The appeal was therefore dismissed. The Judge held that the Recorder had reached the decision on a rational and proper basis, and that it would be an unreasonable sacrifice had the Claimant been asked to expend all of her savings on hire.

Practical Implications

This case does not change the rules on impecuniosity, but it provides a welcome refresher on the fundamental principles. The judgment is a helpful warning for defendants to tread cautiously around concessions on hire period (intrinsically linked to rates arguments), but also serves as a reminder to act promptly where applications may be useful, such as applications for third party disclosure, if relevant. The key take-home message is that impecuniosity will likely be considered holistically in light of wider contextual factors such as financial commitments and emergency savings under the reasonable sacrifices test. If for example a claimant has savings that directly match or even exceed the hire rate, this does not mean that any impecuniosity arguments will fail.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.