Hussain v EUI [2019] – 2 Years on and DAC ask if we are seeing a difference?

The article below has just been published by DAC Beachcroft. It’s basically propaganda, but useful on that you can at least see what insurers are being told as DAC seek to re-emphasise their strategic importance in the fight against credit hire.


Published 21 September 2021


"Can you pay £366 per day to earn £20 a day?


Whilst this may appear to be a simple question, as Mr Hussain found out, it is one with a complicated answer.


In this article we will look at the decision in Hussain v EUI Ltd [2019] EWHC 2647 (QB), including a short history of how this decision was arrived at and why it was necessary.


As we approach the 2-year anniversary of Hussain, we will also consider the impact this decision had on the law surrounding loss of profit of profit earning chattels, with some consideration to the behaviours we have observed from Claimants and the Courts as a result.


#1 The decision in Hussain v EUI Ltd [2019] EWHC 2647 (QB)


Mr Hussain was a self-employed taxi driver who was involved in a road traffic accident with EUI’s insured in 2016. His own vehicle, a BMW 320D, was damaged and subsequently required repairs. Whilst the repairs were undertaken, he hired a plated taxi on credit for a period of 18 days at a total cost of £6,596.50.


Mr Hussain’s trading accounts showed that in the financial years of 2015/2016 and 2016/2017 he earnt a modest profit of £7,644 and £6,429 respectively for each financial year. Notably in the second financial year, in which the Claimant had the accident, he earnt less than the 18 days credit hire claimed.


At the first instance hearing before Her Honour Judge Wall, she concluded that as his weekly earnings were £141 per week, the damages claimed ‘grossly exceed the loss of profit’ and as such capped the Claimant’s loss at this level.


Mr Justice Pepperall on appeal upheld this decision, concluding at paragraph 20:


[20] Upon the evidence before her, the judge was right to conclude that Mr Hussain had not acted reasonably in incurring hire charges over a period of 18 days that equated to almost a full year’s profit. She was therefore right to limit damages under this head to the avoided loss of profit.


Which brings us back to the question; can you pay £366 per day to earn £20 a day, as Mr Hussain did? The answer is no you cannot… Unless you fit into one of the three exceptions.



#2 The Exceptions to the Rule


Mr Justice Pepperall in his Judgment set out a clear and concise ‘test’ for insurers, credit hire companies, litigants, litigators and the bench alike to follow, when assessing claims for financial losses to drivers of profit earning chattels.


He found that the starting position for professional drivers, whether that be; taxi drivers, chauffeurs, delivery drivers or hauliers, is that ‘where the cost of hire significantly exceeds the avoided loss of profit, the court will ordinarily limit damages to the lost profit’.


There are 3 exceptions to this rule however found at 16.6 of the Judgment:


The Risk of Greater Loss


The first exception found at 16.6(a) is a real risk of greater future loss through the loss of contracts or regular clientele. What the Claimant is essentially saying here, is that their lost profits are not limited to those in the immediate period where their vehicle is unavailable to them, but rather extends to future lost income.


When giving consideration to this exception, this is an entirely reasonable and logical application, as the Claimant’s true loss (including such future loss or work) does exceed the cost of the hire. This is so, even if that loss would have taken several years to accumulate, as it would have for Mr Hussain.


The Claimant is not required to weigh these factors precisely, however it is clear an assessment must take place before entering into hire and incurring disproportionate hire costs.


Social, Domestic and Pleasure


The second exception at 16.6(b) is where the a professional driver uses the vehicle not solely as a business asset, but also for private and family uses. This is to treat the driver of a profit earning vehicle as an ordinary private motorist, subject to the same ordinary rules around need.


It is worth noting in the case of Mr Hussain, that he did state that he needed the vehicle for ‘family trips and longer journeys’, however this was not the family’s only vehicle as his wife owned a Toyota Yaris. As he provided no evidence of family holidays or other long journeys in the 18 day period, HHJ Wall rejected that the Claimant required another vehicle, as the Toyota Yaris was sufficient for his family of four.


In previous cases on this issue, such as Ali v Spirit [2014] (noted below), if the professional driver did use the vehicle for social, domestic and pleasure purposes, it was often compensated for by a nominal daily sum for the loss of use, often in the region of £10-15 per day. This ignored the fact that many Claimants who use their vehicle for business purposes, do still need a vehicle for day-to-day living. It also over compensated those who did not.


In practice now, it is common place for the provision of a standard, non-plated vehicle to be offered alongside the Claimant’s lost profits where a need for SDP purposes is established.


Impecuniosity


At 16.6(c) is the third exception to rule. For those in the credit hire arena, impecuniosity is a well-known concept, however for those who are not, its Latin translation is loosely ‘without wealth/money’. It makes sense that a professional driver will only be able to not work, should they be able to suffice from their own available funds. This is to say that if they cannot afford not to work, they are impecunious.


Ultimately, a self-employed Claimant cannot be expected to be left without any income and forced to look to the state to provide for their families, on the basis that they might eventually recover their loss of profit some months or years later.


This is however for a Claimant to plead and prove. A generic assertion of impecuniosity or low income will not be enough to justify this exception, in order to overcome the starting position that loss of profit is the correct measure of loss.


It is important to consider that Claimants are not to be expected to weigh their losses precisely. Where a professional driver has acted reasonably in hiring a replacement vehicle at around the same cost as the avoided loss of profit, the court will not hold the Claimant to the hypothetical lost profits, if it turned out that they were nominally lower. The Court would ordinarily only limit damages to the lost profits where the cost of hire significantly exceeded the lost profit.


The decision in Hussain was a welcome one. With a myriad of County Court level decisions, it was important that clarity was given, to what was a very uncertain area for credit hire practitioners of all sides and disciplines.



#3 Looking Back Before Hussain


As previously mentioned, there were a number of County Court decisions routinely rolled out to the lower Courts on hire claims, where the lost earnings were far lower than the hire claims sought. One of these cases was widely recognised as the leading, but highly disputed, authority on this issue. This was the Judgment of His Honour Judge Saffman in Ali v Spirit [2014].


In Ali, HHJ Saffman relied upon the extract from Clerk & Linsell on Torts, now in its 22nd edition, in which the authors stated that the hiring of an alternative chattel to avoid lost profits, would be recoverable if it was reasonable to do so. If however the cost of hiring exceeds the profit which could have been earned, only the latter may be recovered. The same extract is referenced in Hussain.


The passage from Clerk & Linsell was routinely met by such a wide and varying response from Judges in County Courts up and down the country, that the reality was that each case was a roll the dice for both parties, with any number of outcomes a possibility.


Ali was compromised by the Defendant before the appeal, however was still commonly referred to. Several years later HHJ Saffman was afforded the opportunity to weigh in again on the issue, in the case of Dix v Zurich [2018], where he found for the Claimant on the arguments. He did however also grant permission to the Defendant to appeal and to seek a ‘leapfrog’ appeal to the Court of Appeal to determine the issue, each side now essentially one a piece. It was clear he recognise the need to seek guidance for both Judges and the market generally.


Whilst this particular case was not pursued and became just another steppingstone on the way to Hussain, it showed the willingness of the bench to resolve this issue.



#4 The impact of Hussain – And are we really seeing a difference?


As we approach the 2-year anniversary of the decision, we can reflect on the impact that Hussain has made, whilst also looking to the future of claims from taxi drivers and other professional drivers.


The most important impact of Hussain is that it reverses the burden of proof from the Defendant to prove that the Claimant failed to mitigate, to the Claimant to prove that they fit into one of the exceptions. This makes sense, as the Claimant holds all the cards to evidence their claim.


DAC Beachcroft have had significant success with these claims and this is as a result of the clear position that can be taken in light of the Judgment of Mr Justice Pepperall.


Khan v Srie – The Claimant sought £7375 for credit hire charges following his taxi being damaged. After the Claimant failed to evidence that he fit into one of the exceptions, and his annual profits being just £6,000, the Judge reduced his claim to £317.76.


Kalinleh v AXA – The Claimant claimed £26,350 of credit hire charges, claiming he required the vehicle for SDP purposes and was impecunious. After giving inconsistent evidence with little explanation as to why, the Judge held that loss of profit was the appropriate measure of loss as the Claimant failed to evidence an exception, limiting the claim to £5685.


Patel v Yates – The Claimant accepted in cross examination that the vehicle was actually solely used for business use and was not a family vehicle, given he lived with his parents. When asked why he had not provided his profit and loss accounts he was evasive and did not give a good reason. Finding that he had failed to prove an exception and failed to provide any evidence of his profits in disclosure, the credit hire claim failed and was dismissed entirely.


These examples tend to arise where there is a lack of engagement from the Claimant in attempting to deal with the exceptions. This is not typical however and there has been significant engagement between insurers and many Claimant’s and their representatives. This has resulted in early offers based on the Claimant’s lost profits being accepted or appropriate evidence being provided pre-issue of an exception, with negotiated settlement as a result. There has been a very positive step here in relation to taxi claims with the clarity that this Judgment brings.



#5 The Issues Faced


The decision in Hussain is not without its issues. Why after nearly 2 years, is there still so much friction between the parties on claims of this class? How can this be, when the guidance for dealing with claims involving professional drivers in profit earning chattels has never been so clear? But could it be clearer?


As with any decision on a contentious issue or overhaul of existing law, there is commonly many interpretations that can lead to inconsistency in its application. The decision in Hussain is no different. Some of the issues arise, where despite the law being established and the burden being upon the Claimant to evidence the exception(s) they rely upon, such evidence is not being provided either prior to litigation or in the pleaded case. Often the first time a Defendant is made aware of the reliance on an exception is in oral evidence at trial.


Where evidence is provided it can be generic allegations of lost contracts, bland pleadings of social domestic and pleasure or one line assertions of impecuniosity. There are also instances of outright refusals to provide any documentation in support of the Claimant’s profits, as being ‘irrelevant’ due to hire being claimed. This frequently leads to nil awards at trial, when loss of profit is considered the correct measure of loss.


One such example of this dealt with by DACB was a £35,000 hire claim, which was the only head of loss sought and liability was not in issue. The Claimant’s pleaded case failed to address at any point that the Claimant’s vehicle was a taxi vehicle. The Claimant later filed a witness statement which included just 4 generic lines dealing with the need and taxi use of the vehicle. In dismissing the claim, the Judge noted that the Claimant had failed not only to address need for a taxi vehicle, but even for a private driver generally.


In our experience however, the first exception remains the most contentious between the parties. The loose definition of Claimant’s not needing to 'weight precisely’ their options (and thus what amounts to evidence of the first exception), is seemingly wide and open to interpretation. This creates friction, as whilst the Defendant will ultimately state that it is for a Claimant to plead and prove their case and the normal rules of evidence should apply, many Claimant’s will advocate for a lower standard of evidence.


It is clear that some level of evidence through pleadings, provision of contacts or statements from work providers should be required to show that a greater loss will occur over that of the immediate lost profits. This must be the case, as if a mere assertion that some work may be lost, without a degree of evidence in support that would satisfy the first exception, this would undermine the Judgment in its entirety, as it would make these claims unchallengeable and not capable of proper scrutiny. This in turn would create a significant imbalance between the parties.


Mr Justice Pepperall states within his Judgment that when properly analysed, the first exception is arguably not an exception at all, due to the Claimant’s actual position being that their true loss of profit exceeds the pro rata lost profit. Is it not right then that the Claimant evidence their future lost profits in the same manner they would when bringing such a claim?


Whilst the judicial response to Hussain has been a positive one, often Judges are faced with facts provided in oral evidence that they cannot ignore. Cases where if the facts presented at trial had they been provided before issue, they would likely have been settled without the need for litigation. The issue this causes, aside from the increased claims costs and wasting of the Courts time, is that defending claims of this nature is often an all or nothing affair, where the lack of information provided creates a roulette of outcomes which cannot be prepared for. What will the Claimant say on the stand? Will the Defendant be blindsided by a material fact of which they have no knowledge? Will this be accepted by the Judge?


It is highly likely that this issue will be dealt with by the Courts by satellite litigation around the issue. Ultimately the parties do need some consistency and certainty in the law to prevent spurious litigation. We are already seeing consideration of this issue from the appellate Courts and in the recent CPR amendments, in clarifying the level of evidence that is required in the pleadings for credit hire matters.


In Diriye v Bojaj [2020] EWCA Civ 1400, David Fardy (now of 8 DAC Beachcroft Buildings) presented to the Court of Appeal on behalf of the Defendant on a breach of an unless order for the Claimant to provide ‘all the facts’ as it pertained to the Claimant’s alleged impecuniosity, the Claimant in this case being a ‘minicab driver’.


In the Judgment of Lord Justice Coulson, he makes clear the requirement for a Claimant to properly plead their claim from the outset:


[52] […] On this issue, therefore, there was no room for any gap between the pleading and the statement. Secondly, the submission seemed to be based on the incorrect notion that a claimant was entitled to advance a rubbishy case in stages, from pleading to witness statement to trial, presumably in the hope that, by the time the trial came on, there was a commercial imperative on the part of the respondents to settle the case.


[53] […] They are entitled to know the case they have to meet. They should not be expected to have to prepare for a trial where the critical item of claim depends on a one line assertion, and hoping that, as a result of the cross-examination of the appellant, the judge will reject the claim. That is not how civil litigation is supposed to work post-CPR. And fourthly, the argument was unsupported on the facts.


Whilst indirect in its application, in applying this to the issue of loss of profit in the Hussain sense, this was essentially an order to properly plead the 3rd exception. Why should the Claimant not properly plead their case on loss of profit and any exception relied upon? It is not acceptable, if it ever was, to hold out on key facts or evidence that are central to the issues in the case.


Similarly, it is recognised in the CPR in the specific credit hire direction at Practice Direction 16 6.3(1), that the Claimant ‘must state in the particulars of claim; the need for the replacement vehicle at the relevant time’. There is therefore little ambiguity that any important fact upon which the case could turn upon, should form part of the pleaded case and not be raised for the first time at trial.


To the issue of impecuniosity, there has undoubtedly been a shift in the way that it is pleaded and advanced post-Diriye. Undoubtedly behaviours are starting to change. We can hope that it’s application and wider principle can be applied to loss of profit claims in the future, to aid the parties in a ‘cards on the table’ approach to resolving matters between them.


Has Hussain made a difference? Yes, but just as the law has developed with basic hire rates and impecuniosity, it is very likely there is a ‘fare’ way to go yet.”

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