THE PLOT THICKENS – THE CREDIT HIRE QUAGMIRE: Zurich Insurance Plc v Sameer Umerji [2014] EWCA Civ 357

PI_Ruwena_Khan Ruwena Khan

The battle between Credit Hire and Insurance Companies continues with the Court of Appeal’s latest foray into the fracas.

In a claim for damages which included the cost of hiring a replacement car on a credit basis, a recital which debarred C from relying on impecuniosity applied to justification for the duration of hire just as much as justification for the payment of credit hire rates. The debarring order did not contain any form of qualification and the two claims of impecuniosity operated in the same way as a matter of law.

  • The starting point had to be the language of the debarring order.
  • The debarring order was straightforward – U could not rely on impecuniosity.
  • There was no qualification in the debarring order.
  • An averment by U that he had to hire a replacement car for as long as he did because he did not have the means to buy one was a claim of impecuniosity.
  • It operated the same way as a matter of law as a claim that he had to pay credit hire rates because he did not have the means to hire on the ordinary market.
  • Impecuniosity relating to rate and means was the same concept, and in both cases the burden was on U, the claimant, to plead and prove his case.
  • U was therefore debarred from asserting that he could not afford to buy a replacement vehicle. It followed that he should only have been entitled to recover hire charges up to the date when he should reasonably have done so – a reduction of 451 days.


Lagden v O’Connor [2004] 1 AC 1067 applied:


The Facts

U’s car had been worth approximately £8,000 and was written off in the accident. He subsequently entered into a series of credit hire agreements incurring rental fees of some £95,000 over 1½ years. U claimed that he had been unable to afford to buy a replacement vehicle until Z paid him the pre-accident value of his old car. U also incurred charges for recovery and storage of his old car for four months. U failed to confirm whether he was impecunious as ordered by the court and thus at a subsequent hearing an order was made containing a recital recording that U was debarred from relying on impecuniosity. At trial, U indicated that he had not had the means to buy a replacement vehicle as soon as he knew that the damaged car was a write-off and Z asserted that he was debarred from relying on impecuniosity. The trial judge concluded that impecuniosity went to the question of credit hire, not duration of hire.

Z appealed against a judgment in favour of U in the sum of £101,559.00. Z’s appeal in relation to the hire charges was successful as noted above.

A Little Additional Guidance from the Court of Appeal

  • The Court of Appeal noted that it was preferable for a claimant to plead his primary loss, wait and see what criticisms are made, and then if necessary plead to those criticisms by way of Reply.
  • However, the position was noted to be different in a case of a claim for expenditure reasonably incurred in mitigation of the primary loss – the claimant should plead his case as to reasonableness, including any assertion of impecuniosity (para.12).
  • If impecuniosity remains in play the claimant is obliged to give disclosure about his means (para. 31).
  • There may be cases where justice requires that the clear terms of an order be treated as having some different meaning in order to reflect the parties’ common understanding, presumably on the basis of an estoppel – but it must be a very clear case (para.36).

The Bloody Aftermath?

As if often the case with credit hire claims, it is inevitable that arguments will continue to rage and loopholes will be hunted for. However, this case will be seen as a significant boost to those defending credit hire cases involving substantial delays in repairs or total loss.

Claimants and their credit hire companies cannot accumulate extravagant costs without being prepared to justify the same fully, in terms of both rates and period and with complete disclosure of impecuniosity documentation. If a claimant wishes to rely on impecuniosity then they must plead and prove their case on this point.

In the post-Jackson, post-Mitchell era, Defendants will be keen to ensure that unless/debarring orders are sought during the currency of proceedings and any failures to comply with court orders are dealt with promptly and appropriately. The Court of Appeal has of course made it apparent that unless there is an incredibly clear case, an impecuniosity related debarring order should obviate any impecuniosity-hire period related submissions at trial.

However, as the Court of Appeal has remarked, there is a grey area about how much needs to be pleaded and proved to establish reasonableness before the evidential burden shifts to the defendant to show that the expenditure was unreasonable. Nevertheless, the Court of Appeal repeatedly warned that it is clearly right that a claimant who needs to rely on his impecuniousness in order to justify the amount of his claim should plead and prove it.

Further Battle Lines Drawn…

During the currency of the proceedings, U had been cross-examined as to whether in the immediate aftermath of the accident he could have claimed the value of the damaged vehicle under his own comprehensive insurance policy and used the proceeds to buy a new car. The Court of Appeal stated that the point was an interesting one and plainly of some general importance. However, it was not pleaded at any stage, nor foreshadowed until raised in cross-examination. The issue could not be treated as one of pure law which could be decided in a factual vacuum. The full circumstances had to be considered including the terms of the policy as regards excess and/or no claims bonus. As remarked by Lord Justice Underhill (paragraph 43):

“This battle will have to be fought, if insurers are so inclined, on another field.”

The plot thickens…



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