Insurers will be pleased to see the Court of Appeal taking a logical approach to interpretation of an order effectively debarring a claimant from relying on impecuniosity in relation to credit hire. As all too frequently happens in practice, the trial judge allowed the claimant to rely on impecuniosity in relation to hire duration, but not in relation to rate – considering that the claimant could successfully argue lack of funds on the duration point, while being debarred from doing so in respect of rate. The Court of Appeal reversed that position decisively, highlighting that it made no sense to treat ‘impecuniosity as it relates to rate’ any differently from ‘impecuniosity as it relates to duration’. Here, associate Andrew London explains the case and highlights its implications.


The claimant, a train guard, was involved in an accident in October 2010. His vehicle, a 2007 registered Mercedes, with a pre-accident value in the region of £8000, was written off. He said he needed a replacement vehicle to get to work, transport his family and carry out domestic tasks, and obtained a vehicle on credit hire the day after the accident. He said that he could not afford to buy another vehicle until he was paid for the value of his written off car. He hired the vehicle for 591 days at a total cost of over £96,000. He also claimed storage costs for his written off vehicle until it was disposed of.

Procedural points and trial outcome

The issues in the case arose following a directions order made during the course of the litigation. On 16 October 2012 the claimant was ordered to confirm, by no later than 16:00 on 30 October, whether he would be alleging impecuniosity in support of his hire claim. The time to confirm came and went and, on 5 November 2012, the defendant made an application for an order de-barring the claimant from raising impecuniosity. The application was heard in January 2013 and the judge indicated that, should the claimant wish to rely on impecuniosity, he would need to make an application for relief from sanctions. The claimant did not do so and a recital was recorded at the end of the hearing that ‘the claimant is debarred from pleading impecuniosity’. This was, in effect, a debarring order.

At trial, notwithstanding the earlier order, the claimant gave evidence that he needed to hire for the duration he did because he could not afford a replacement vehicle. Disagreement ensued between counsel as to whether the debarring order covered arguments about both rate and duration. The judge preferred the claimant’s position considering that arguments to the contrary represented a ‘fundamental confusion’ between the impecuniosity issue on which the claimant bears the burden of proof, and the defendant’s allegations, which were allegations of failure to mitigate which places the burden of proof on the defendant. The judge considered the difference between the two instances to be ‘the difference between a sword and a shield’. The claimant was allowed to recover for the whole period of hire.

Court of Appeal decision

The Court of Appeal reversed the trial decision, therefore shortening the hire period substantially. Starting by considering the language of the order, Lord Justice Underhill considered that this ‘must mean as a matter of ordinary language’ that the claimant was debarred from relying on impecuniosity ‘for either or any purpose’. He commented that it would also ‘… make little practical sense to debar the claimant from relying on his impecuniosity for the purpose of claiming credit hire rates while allowing him to do so for the purposes of justifying the duration of hire’. Even more clearly, he stated: ‘If impecuniosity is off the table, it must be for all purposes.’

Implications for insurers

The decision in this case plays as music to the ears of many practitioners and their insurer clients who have experienced the impact of an inconsistent approach to debarring orders on a regular basis. A decision at this level underlines the correct approach and clarifies any previous uncertainty.

The background to the case also highlights the serious consideration that needs to be given to making a payment for vehicle damage at as early a stage as possible; such a payment would have reduced the exposure suffered by the defendant insurer in this case, although it would have also most likely resulted in the matter being compromised earlier and not being put before the higher courts!