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Assessment of damages in taxi credit hire cases – building on Hussain v EUI

14 February 2022

Claims for credit hire charges in taxi cases have always proved problematic. The 2019 High Court decision in Hussain v EUI assisted by ruling that where the cost of hire significantly exceeds loss of profit, the court will ordinarily limit damages to the lost profit. However, the exceptions to that approach set out in the judgment – in particular concerning SDP usage - have continued to cause disputes. 

In a recent appeal decision, HHJ Freeman took a less binary approach, and for good measure, looked at the thorny issue of impecuniosity. Gavin Perry, who acted for the successful defendant, explains the findings.

Hartshorn v NFU Mutual Insurance

Background and first instance findings

The claimant was a taxi driver in Newcastle whose vehicle was written off in the accident. It was a vehicle that he owned. He instructed Winns Solicitors to pursue a claim and hired a replacement vehicle from their linked hire company, On Hire.

The claimant hired for 133 days at a cost of £29,877.12, and incurred recovery and storage charges of £1,344 (largely as a result of initially corresponding with the wrong insurer).

Pre-litigation, NFU Mutual Insurance made Part 36 offers of £1,290 for the recovery and storage charges and £9,850 for the hire charges. 

It wasn't possible to obtain taxi BHR (Basic Hire Rates) in Newcastle, but we obtained SDP (Social, Domestic, and Pleasure) rates in case the court decided to award loss of profits plus SDP, per the decision in Hussain.

The question the court had to determine was whether the claimant had acted reasonably in mitigating his loss by hiring an alternative at a cost of circa £30,000.

The trial judge awarded loss of profits of £2,716.48 for the full period of 133 days, together with fixed overheads – five months of car finance payments - amounting to £740.10, plus storage of £1,024 producing a total of £4,480.58.

Accordingly, the claimant did not beat the pre-action Part 36 offers and was subject to the resulting costs consequences.

Appeal

The claimant appealed, and the matter came before HHJ Freeman in Newcastle.

HHJ Freeman (and the trial judge at the previous hearing) was referred to the 2019 High Court decision in Hussain v EUI where a sum for hire charges was not awarded, instead the sum awarded was based on estimated loss of profits – with no award for SDP as the claimant had access to another vehicle.

In Hussain, the judge set out three exceptions through which a claimant may still get home on a claim for hire charges even where the cost of hire significantly exceeds the sum representing loss of profits. A claimant may still succeed in establishing that they acted reasonably in circumstances where:

  1. Future trading would be compromised.
  2. The need for a replacement vehicle is also for social and domestic use
  3. The claimant is impecunious, i.e. could not afford not to work

"May" is an important word in this context, and the court has wide discretion. So, just because one exception may be made good, it is not mandatory to award hire charges, and that judgment emphasises the need for a claimant to demonstrate that they have acted reasonably.

SDP Exception

In Hartshorn, the SDP usage was occasional. At first instance the judge held it was not such as to warrant the replacement of the vehicle, and the claimant could use a taxi.

The findings of the judge at first instance were upheld on appeal. Whilst there would be an element of inconvenience in using a taxi, this would not necessarily mean a claimant had made their case for the need to hire another vehicle. It is an impressionistic assessment that the trial judge is uniquely positioned to make. Here, the judge made a finding that a replacement vehicle may have been useful at times for SDP, but it was not such a great need as to justify hire on its own.

Impecuniosity

At first instance, the judge found the claimant to be impecunious – but then took into account the finances of the claimant's partner, and as a result, concluded that the claimant did not fall into the third exception.

The claimant had declared a net profit of around £7,000 pa based on his tax returns. His partner was a cleaner. The judge looked at household income and concluded that the claimant did not need to replace the vehicle before receiving the PAV. The judge found that the family would cope without the claimant's income, he was not the main breadwinner, and the family received Working Tax Credits.

On appeal, HHJ Freeman determined that it was within the judge’s discretion to come to that conclusion. He went on to say that judges are bound to look at the bigger picture and what is needed by a household to discharge its outgoings, and it would be artificial not to take account of other members of the household. The appeal judge in Hussain had that in mind when he talked about ‘providing for families’. In that sense he was looking at the overall picture, and that's what the trial judge in this case had done.

Summary

There are a number of points arising from this comprehensive decision, which may be useful in future taxi credit hire cases.

In particular:

  • There is now a potential argument to defeat hire charges in a case where a claimant claims to use their taxi for SDP purposes. HHJ Freeman determined that even where some SDP use is established, this does not automatically put the claimant into one of the Hussain v EUI exceptions (to the general rule that loss should be assessed by reference to profits, rather than hire costs). Essentially, the question of need is a matter of degree rather than a binary question.
  • It has been successfully argued that impecuniosity as it relates to credit hire (in a Lagden sense - can a claimant afford to hire on spot rates?) is materially different to the question of impecuniosity for the purposes of Hussain (i.e. whether the claimant needed to work to survive). In this instance, the latter was a fundamentally lower standard. This allows the argument to be made, even where a claimant may be traditionally impecunious 

HHJ Freeman has confirmed that where there are joint funds, a claimant's spouse can be taken into account in respect of impecuniosity. This is very useful, as it appears to push the envelope, even if it is already intuitively sensible.

NFU Mutual Insurance were represented by DWF's Gavin Perry who instructed Aidan O'Brien of Farrar's Building Chambers.

Contact Gavin Perry for more information.

Further Reading