HOLT v ALLIANZ INSURANCE PLC [2023] EWHC 790

An insurer’s application for pre-action disclosure – requiring disclosure and inspection of a credit hire customer’s financial documents – should have been dismissed below on the basis the at-fault insurer was unlikely to be a party to underlying proceedings, per CPR, r. 31.16(3)(b). 

However, if the insurer could have caused the application to be made in the name of its insured instead, the application would generally be granted because if proceedings were issued on the substantive claim, the credit hire organisation’s customer would be likely to make a disputed claim alleging impecuniosity [CPR, r. 31.16(3)(a)], the documents sought by the at-fault insurer would be within the scope of standard disclosure [CPR, r. 31.16(3)(c)], disclosure of those documents before any proceedings were brought was desirable in order to assist the dispute to be resolved without proceedings and to save costs [CPR, r. 31.16(3)(d)], and it would be just and proper in the exercise of the court's discretion to order that the documents be disclosed.

Introduction
[1]    The appellant was involved in a road traffic accident on 16 July 2020 that, it is accepted, was the fault of the other driver, liability for whose negligent driving was covered by insurance provided by the respondent insurer. 
A [replacement] car was provided to the appellant from 10 August to 3 September 2020 (inclusive), a rental period of 25 days, on credit hire terms agreed between him and Auxillis Services Ltd ('Auxillis').
[2]    On 4 September 2020, Auxillis presented a written claim to Allianz with a demand for payment of £10,387.50 (£8,656.25 + VAT) in respect of its credit hire charge for that hire period. Proceedings were threatened if payment in full was not received "by return". The claim amount was presented in a table with rows also for repair costs, engineer's fee and storage/recovery charges, all of which were stated at £0.00. In short, the credit hire charge of over £10,000 was the only claim intimated. 
A supporting document sent with the letter showed that the amount claimed represented 25 days rental at £343.05 + VAT, plus delivery and collection charges of £40 + VAT (each).
[3]    Allianz responded with evidence that it said showed a going rate at the time, to hire an equivalent car on ordinary rental terms (not credit hire terms), of just under £62 per day (including VAT), say £1,550 for a 25-day rental. 
That was based on rates available for 7-day hire periods, making £434 per week. If four 7-day rentals were used as a measure, that would be £1,736 to cover the 25 days for which Auxillis was claiming that the appellant needed a replacement car because of the accident.
[4]    Having in mind the prima facie irrecoverability of credit hire costs incurred in excess of an ordinary going car hire rate, under Dimond v Lovell  [2002] 1 AC 384, Lagden v O'Connor [2003] UKHL 64, and the cases that have developed the law since, Allianz asked Auxillis:
(i) to say whether the case for the appellant was one of impecuniosity, and
(ii) if it was, to disclose some basic documentation for that case.
[5]    Auxillis refused to countenance any such thing at the pre-action stage, and insisted on payment of its claimed amount in full if Allianz wished to avoid litigation. Allianz therefore applied for pre-action disclosure of:
(i) the appellant's bank, credit card and savings account statements covering the period of hire and three months prior to it;
(ii) wage slips or other proof of income covering the same period.
[6]    By Order dated 13 January 2022, following argument of the application on 18 October 2021 and the handing down of a reserved judgment dated 3 December 2021, HHJ Harrison granted the application…
[7]    On oral renewal of the application for permission to appeal, Bourne J granted permission, although he considered that the appeal did not have a real prospect of success. Bourne J judged there to be a compelling reason for the grant of permission because there was "a divergence of practice between different courts… The reasons for making the order in this case could apply in many, if not most, other credit hire cases. In those circumstances, I consider it proper for the matter to be considered at High Court level because that may, I stress may rather than will, lead to guidance which would be binding at County Court level."
[9]    The appeal hearing came before me, leading now to this judgment.

The Law [Pre-Action Disclosure]
[12]    The County Courts Act 1984 provides, by s.52(2), that:
"On the application, in accordance with rules of court, of a person who appears to the county court to be likely to be a party to subsequent proceedings in that court, the county court shall, in such circumstances as may be prescribed, have power to order a person who appears to the court likely to be a party to the proceedings and to be likely to have or to have had in his possession, custody or power any documents which are relevant to an issue arising or likely to arise out of that claim–
(a) to disclose whether those documents are in his possession, custody or power; and
(b) to produce such of those documents as are in his possession, custody or power to the applicant or, on such conditions as may be specified in the order,–
(i) to the applicant's legal advisers; or
(ii) to the applicant's legal advisers and any medical or other professional adviser of the applicant; or
(iii) if the applicant has no legal adviser, to any medical or other professional adviser of the applicant."
[13]    The leading authority on the scope of that power is Black v Sumitomo Corpn [2002] 1 WLR 1562, which considered the High Court's exactly similar power under s.33(2) of the Supreme Court Act 1981 (as it was then)…
[15]    Rix LJ concluded that the requirement that the parties to the pre-action disclosure claim are "likely to be" party to subsequent proceedings requires only that they may well be party to proceedings if proceedings are later commenced (ibid at [71]-[72]). 
Mr Hough KC submitted, and I agree, that the other statutory requirements defined in that way must be construed similarly. Thus:
(i) the requirement that the respondent is "likely to have or to have had" documents requires only that they may well have, or have had, documents; and
(ii) the requirement that such documents be relevant to an issue "likely to arise" in the proceedings requires only that the issue, to which the documents would be relevant, may well arise.
[16]    The rule of court governing applications for pre-action disclosure, and under which Allianz made its application in the present case, is CPR 31.16…

[The Law: Credit Hire Rates]
[27]    A detailed review or analysis of the case law is not required. Suffice it to say that the question, overall, if the cost of a temporary replacement car on credit hire terms is claimed, is one of causation, whether the claimant was caused to incur that full cost by the negligent driving for which the defendant is liable. Where a suitable replacement car would have been available on ordinary terms, the negligent driving will not have caused a materially greater car hire cost to be incurred, unless the claimant reasonably could not have accessed that ordinary car rental market.
[28]    The cost of hiring a comparable car from a conventional car hire company has become known in this field as the "basic hire rate" or "BHR", as to which see Pattni v First Leicester Buses Ltd; Bent v Highways & Utilities Construction (No.2) [2011] EWCA Civ 1384 at [30]-[41] & [73], Zurich Insurance plc v Umerji; Umerji v Khan [2014] EWCA Civ 357 at [37], Stevens v Equity Syndicate Management Ltd [2015] EWCA Civ 93 at [35]-[36], and McBride v UK Insurance Ltd [2017] EWCA Civ 144 at [49]-[56]. 
Where a credit hire company such as Auxillis asserts and threatens litigation to pursue a claim for over £10,000, and the response is to assert, in terms or effect, a BHR of less than £2,000, the credit hire company must have in mind either (i) a case that the asserted BHR is wrong, and the £10,000+ claimed will not be shown to have been materially greater than the true BHR (as in Bent v Highways & Utilities), or (ii) a factual case specific to the particular claimant that renting at the BHR was not a realistic option for them, or (iii) both ((ii) in the alternative to (i)).
[33]    The importance in a credit hire case of the claim of impecuniosity, if made, and thus the importance of knowing whether it is to be made and, if so, upon what basis, properly particularised, is now reflected in:
(i) the rule in CPR PD16, para 6.3, that if a claim includes the cost of hire of a replacement vehicle following a road traffic accident, the claimant must state in the particulars of claim: 
"(1) the need for the replacement vehicle …; (2) the period of hire claimed …; (3) the rate of hire claimed; (4) the reasonableness of the period and rate of hire; and (5) if the claim relates to credit hire, whether the claimant could afford to pay in advance to hire a replacement car, and, if not, why not ("impecuniosity")";
(ii) the associated rule in CPR PD16, para 6.4(2), that the obligation to state the matters set out in para 6.3 "includes an obligation to state relevant facts";
(iii) the practice, reflected in cases such as Umerji and Bojaj, supra, of granting unless orders to debar the pursuit of an impecuniosity claim not properly particularised or in respect of which basic disclosure has not been given;
(iv) the Ministry of Justice's model directions for use in cases of "RTA credit hire impecuniosity" requiring a pleaded reply, typically within 14 days of the directions order, setting out all facts in support of any assertion that the claimant was impecunious, and disclosure of the basic documentation sought in this case by way of pre-action disclosure, typically within 28 days of the directions order, in default of either of which the claimant will be debarred from relying on impecuniosity for the purposes of determining the appropriate rate of hire.
[36]    Turning, then, to the pre-action context with which I am directly concerned, there is no pre-action protocol in relation to claims for credit hire costs following a road traffic accident. So the general Practice Direction – Pre-Action Conduct and Protocols ('the Practice Direction') applies, under which:
"3. Before commencing proceedings, the court will expect the parties to have exchanged sufficient information to–
(a) understand each other's position;
(b) make decisions about how to proceed;
(c) try to settle the issues without proceedings;
…
(f) reduce the costs of resolving the dispute.
…
6. … Where there is no relevant pre-action protocol, the parties should exchange correspondence and information to comply with the objectives in paragraph 3, bearing in mind that compliance should be proportionate. The steps will usually include–
(a) the claimant writing to the defendant with concise details of the claim. The letter should include the basis on which the claim is made, a summary of the facts, what the claimant wants from the defendant, and if money, how the amount is calculated;
(b) the defendant responding within a reasonable time … . The reply should include confirmation as to whether the claim is accepted and, if it is not accepted, the reasons why, together with an explanation as to which parts of the claim are disputed and whether the defendant is making a counterclaim as well as providing details of any counterclaim; and
(c) the parties disclosing key documents relevant to the issues in dispute."
[37]    Where a claim arising out of a road traffic accident is intimated the sole or major element of which is credit hire charges of over £400 per day, concise details of the basis on which the claim is made will not be given unless it is explained whether the claim is that the charges claimed were not materially greater than the BHR, or that the claimant realistically could not have hired at lesser cost due to impecuniosity or due to some other factor, identified in the explanation, or (perhaps) both. 
Where the response to the intimation of such a claim is that the BHR was greatly lower (here, it was said, only £62 per day) and asks for assistance to understand how it is proposed that the much higher credit hire charges will be recoverable:
(i) confirmation of whether impecuniosity or some other factor particular to the claimant, if so what other factor, is said to render the asserted BHR irrelevant, would be no more than the most basic of information to provide so that the claimant's position can be understood and an initial idea of what will be involved in the claim can be obtained as part of making a decision as to how to proceed and/or to try to settle without the need for litigation;
(ii) provision of some basic documentary evidence supporting the asserted BHR would be no more than the disclosure of key documents relevant to the issues in dispute; and
(iii) provision of some basic documentary evidence supporting a claim of impecuniosity, if made (see (i) above), would likewise be no more than the disclosure of key documents relevant to the issues in dispute.
[38]    I agree with an observation of HHJ Harrison in the present case, made as part of explaining why he considered it right, as a matter of discretion, to make the order, that "the prospective claimant in a credit hire case should not be able to avoid the issue of impecuniosity by saying that [they] do not deal with the issue at a pre issue stage. To do so would be contrary to the overriding objective and the [Practice Direction]." 
To be clear, the sense of that is not that the prospective claimant can somehow be required to claim impecuniosity if that is not their case. Rather, HHJ Harrison was expressing the view, with which I agree, that the claimant (probably, in practice, the claimant's credit hire company) cannot, by reason that litigation has not yet been commenced, properly refuse to have a position on whether the basis of the claim they have chosen to assert and threaten to litigate is or includes a claim of impecuniosity.

The Decision [below]
CPR 31.16(3)(a)-(b)
[60]    There was no suggestion, nor could there have been, that the appellant was not likely to be the claimant if proceedings were commenced. It was contended, however, that "the application should fail because the likely defendant is not [the insurer] but [their insured]" (judgment at [33]).
[61]    The judge noted that insurers are routinely pursued directly in road traffic accident cases, under the European Communities (Rights against Insurers) Regulations 2002 (a piece of retained EU law), and that they are frequently joined as a party to proceedings. 
The reality was, he said, that the insurer meets the claim and makes the decisions in the case. On that basis, the judge determined the 'likely to be party' requirement as follows (judgment at [34]):
"The requirement is only one of "likelihood" in the sense that it may well be that the [applicant] will be a party (see Rix LJ in Black at para72). I am satisfied that this threshold is met. To hold otherwise would be to disregard the fact that in vast numbers of cases of this sort up and down the country where proceedings are issued directly on insurers as of right."
[74]    … [However] the pre-action disclosure application… should have failed, and this appeal now must be allowed, on what might be considered a 'technical' objection. It could readily have been overcome by Allianz's insured being named as co-applicant, if Allianz was in a position to bring that about. Mr Hough KC said that the application could be amended or re-issued, if necessary, with the insured as applicant. That submission was made in Allianz's skeleton argument for the appeal dated 6 May 2022. No application to amend the application was made, however.
[76]    Since the other grounds were fully argued, I shall set out my conclusions on them, but I shall do so relatively briefly given that they will not now determine the outcome of this appeal.

Discretion
[91]    HHJ Harrison dealt separately, as required, with the question whether in all the circumstances of the case it was fair and proper to make the order sought. He did not treat the satisfaction of the requirements as sufficient to justify an order, albeit of course by nature it weighs in favour of an order rather than being only neutral.
[93]    I agree with HHJ Harrison here too, and would also have exercised my discretion in favour of ordering the limited disclosure sought. 
The plea to privacy and confidentiality in particular is, with respect, misplaced. The appellant invited and required sufficient intrusion into his financial affairs to warrant the order sought and granted by asserting (through Auxillis) a claim for credit hire charges that on the material put before the court appeared likely to be six times or more higher than the BHR, in context implicitly indicating that the claim thus asserted involved and depended on a claim he would be making that he was impecunious…
[94]    Limited and focused pre-action disclosure would disturb the confidentiality of the disclosed financial information only to the very limited extent that it would have been provided, in confidence, to the [defendant insurer]… with a view to avoiding litigation in which… that information and more would have to be provided in public. 
The suggestion that a desire on the part of the appellant to protect the privacy of his financial affairs told against ordering pre-action disclosure designed to further the aim of avoiding public litigation is in truth somewhat bizarre.

Conclusion
[95]    Pre-action disclosure should not have been ordered in this case because it was sought only by Allianz. On the evidence before the court, it should not have been concluded that Allianz was likely to be party to any proceedings that the appellant might commence…
[96]    This appeal must therefore be allowed, although but for that first conclusion, possibly a technicality if Allianz could have caused the application to be made in the name of their insured instead, I would have dismissed the appeal and endorsed every aspect of HHJ Harrison's decision to grant the pre-action disclosure sought.
[97]    … The conclusion of the judge that I would have upheld and endorsed had Allianz been the right applicant, stated compendiously, was that if proceedings were issued on the substantive claim, the appellant would be likely (in the sense required by s.52(2) of the 1984 Act) to make a disputed claim of impecuniosity in respect of which the documents sought by Allianz would be within the scope of standard disclosure, disclosure of those documents before any proceedings were brought was desirable in order to assist the dispute to be resolved without proceedings and to save costs, and it was just and proper in the exercise of the court's discretion to order that they be so disclosed…

Costs Appeal
[108]    HHJ Harrison's reason for limiting the scope of the appellant's recoverable costs of compliance appears, in substance, to have been that Allianz should never have been put to the trouble of applying under CPR 31.16 and, if no application had been required, the appellant (and Auxillis) would not have involved solicitors in complying with the order…

[111]    To my mind, HHJ Harrison was entitled to form the view he did that Auxillis had adopted, applied, and chosen to stand their ground on, a wrongheaded policy of refusing even to consider, before intimating a claim and threatening litigation, the obviously central issue of their client's means and what, if any, case of impecuniosity they would assert as a result, but for which, in the particular circumstances of this case, the request for pre-action disclosure would have been complied with "at very limited cost indeed" ([10]), viz. any "cost … of obtaining the documents sought and any copying charges incurred”.