“Opokuing a bankrupt” – Gibbons v NFU Mutual

In a recent County Court decision of HHJ Halbert, sitting in Chester, the claimant’s claim for hire charges was drastically reduced even though the claimant was held to be impecunious for the duration of the hire period. Keoghs were instructed to handle the case of Gibbons v NFU Mutual in June 2015, a few weeks before the trial. The arguments were quickly identified and raised in an updated counter schedule of special damage and successfully argued by Counsel.

Here, Melanie Mooney explains the details of the case and the points to consider in future cases of this kind.

The claim arose out of a road traffic accident on 28 July 2011, as a result of which the claimant’s vehicle was damaged and written-off. The pre-accident value of the vehicle was £585 after salvage. The claimant hired a replacement from 30 July 2011 to 5 August 2013, a period of just over two years. The combined hire charges amounted to £49,104.00.

At trial, liability was found in the claimant’s favour.

In respect of quantum and particularly the period of hire, the claimant’s plea of impecuniosity failed to satisfy the court that the duty to mitigate had been discharged. The court found that the claimant was self-evidently impecunious. Moreover the court declined to find the claimant ‘technically’ pecunious on the basis that full financial disclosure had not been provided.

However, it was persuaded that, in the context of a relatively small pre-accident value to the damaged vehicle, the plea of impecuniosity was not going to assist the claimant in respect of the period during which the replacement vehicle was hired. HHJ Halbert held:

“The next issue is the hire charges. A huge sum is claimed – nearly £50,000 – for a period of more than two years. As pleaded, the claim is frankly absurd. Even the credit hire company were saying at a fairly early stage that the claimant was failing to mitigate his loss. It is in my view established on the balance of probabilities that he was impecunious. He was not working, he had no bank account (he was using his girlfriend’s account), he was in the process of becoming estranged by her, he was being pursued by the Child Support Agency in relation to their child, he did open a bank account of his own in December 2011 and the bank statements have been produced, which disclose that he never had a balance during the relevant period even close to one sufficient to replace the car. Its pre-accident value is assessed at £650. To cap it all on impecuniosity, it is clearly established by court records that in June 2013 he was made bankrupt with a deficit of about £95,000, most of which was mortgage arrears.

Having said that, a hire car at £385 a week was left on his own account undriven for the initial three weeks, and it is quite clear from his own evidence that he could have saved up sufficient to replace or repair the car within 3 months had he chosen to do so. I therefore consider that the appropriate period to allow the hire charges is two months, being just under three months’ total less the early period of three weeks. The total including of VAT for 8 weeks is £3,696…”

The case is a useful illustration of the court’s application of the principles discussed by the Court of Appeal in the case of Opoku v Tintas [2013] EWCA Civ 1299 at [13], namely that credit hire claims generally should be the subject of “careful and proper control” by the court. Beatson LJ was clear that “the case for scrutiny exists not only in respect of the rate charged. It also exists in respect of the period for which a car may be hired under such a scheme”.

The case for scrutiny exists whether the claimant is pecunious or impecunious. It exists because of Beatson LJ’s ‘second feature’ of credit hire claims, namely that “the schemes are marketed on the basis that the charges will be met by the defendants’ insurers”. In many cases, where the evidence is properly explored and tested before the court, a successful plea of impecuniosity may have very little impact on the overall assessment of the quantum of the claim for credit hire. A pecunious claimant is pecunious for all purposes (Zurich v Umerji [2014] EWCA Civ 357); but even the most impecunious claimant (such as Mr Gibbons) has a duty to mitigate, which is overriding and will be looked at more closely still when considered in the context of a credit hire claim (Opoku).

As in Gibbons v NFU Mutual, the careful and proper control approach outlined by Beatson LJ may have implications not only for the substantive claim, but also on the court’s absolute discretion when it comes to costs. As HHJ Halbert concluded:

“The costs should be the claimant’s because he has won on liability, but this case avoided the fast track only because of the grotesquely inflated hire charge claim. In those circumstances it is impossible to avoid the conclusion that this would have been a fast track case had the claim been pleaded at the level which has been recovered. In those circumstances, the claimant will be awarded the costs but they will be restricted to the fast track costs which would have been recoverable had the claim been initially allocated to the fast track…”.

The case of Gibbons v NFU Mutual was handled by Melanie Mooney, Partner and Technical Director of Credit Hire at Keoghs, and Edward Ramsay of 12 Kings Bench Walk Chambers.