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Court of Appeal clarifies approach to credit hire claims in the context of the RTA Protocol


London Borough of Islington v Bourous and Davis v Yousaf [2022] EWCA Civ 1242

On 16 September 2022 the Court of Appeal handed down its decision in the joined appeals of London Borough of Islington v Bourous and Davis v Yousaf [2022] EWCA Civ 1242. The decision largely focused on the issue of impecuniosity in the context of taxi claims in the RTA Protocol as well as reiterating the importance for adequate Stage 2 pleadings. 

First instance decision and the initial appeals

In the two cases, both respondents (Mr Bourous and Mr Yousaf) were taxi drivers and as a result of being involved in RTAs they each claimed PSLA for whiplash type injuries and associated credit hire losses as a result of their respective vehicles being damaged to the extent that they were not capable of use.

In Mr Bourous’ claim, an argument that the damages should be limited to loss of profit in accordance with the finding in Hussain v EUI was not raised in any capacity by the appellant at Stage 2; however, the point was raised in correspondence on the eve of the Stage 3 hearing.  The appellant was allowed to rely on the argument by the DDJ at the Stage 3 hearing, which ultimately resulted in the claim being dismissed. The rationale was that Mr Bourous had not made a claim for loss of profit which was averred to be the starting point for such a claim in the context of a taxi driver and ergo his claimed failed.

On appeal, this finding was overturned due to the issue of loss of profit point not having been raised by the appellant at Stage 2. It was reiterated that a defendant could not object at Stage 3 to a claim under a particular head of damage except on those grounds expressly raised at Stage 2; therefore, for the same reasons as Mulholland v Hughes, albeit reached independently to that decision.

As part of his evidence submitted at Stage 2 of the RTA process, Mr Yousaf provided a witness statement that made an assertion of impecuniosity that was not supported in any way by any financial disclosure. At Stage 2 the defendant insurer put the claimant to proof over the claim for hire and, inter alia, the issue of impecuniosity more specifically.  

On appeal it was found that the plea of impecuniosity in the witness statement was sufficient to discharge Mr Yousaf’s burden in proving to be impecunious. It was held that the RTA Protocol was not a forum for extensive disclosure and the material contained within the witness statement entitled the DDJ to find in favour for impecuniosity.

The Court of Appeal’s findings

Upon the appellants challenging these findings, the Court of Appeal dismissed both appeals. It was held that neither appellant had taken the appropriate steps within the procedural framework prescribed by the RTA Protocol.

In Bourous, the appeal failed because they had simply not sought to argue at Stage 2 of the RTA Protocol that the appropriate measure of loss was loss of profits per Hussain v EUI. This was a new issue which was not permitted and should not have been considered by the DDJ on first instance.

In Yousaf, the appeal failed because the court was satisfied that Mr Yousaf had proven his impecuniosity by way of his witness statement. It was found that if there was simply no scope for investigation of the issue of impecuniosity in the confines of a Stage 3 hearing and if there was a requirement for the issue to be investigated beyond the evidence given in the witness statement, then the appellant should have applied at an appropriate time for the claim to be removed from the RTA process and transferred to Part 7.

Comment and implications

As stated above, the decision presents a timely reminder of the importance of raising all relevant credit hire issues at Stage 2 of the RTA process. It is now abundantly clear, if it was not already, that the court will not permit any argument to be raised at Stage 3 that has not been properly pleaded in the Stage 2 response. The decision also provides clarity as to how claims will be determined at a Stage 3 hearing where there is an assertion of impecuniosity.

It would appear that taxi drivers, and arguably any claimants who incur credit hire charges in a wider context, will not be required to provide any financial disclosure to support a plea of impecuniosity within the RTA Protocol. A simple witness statement will, on the face of it, suffice for proving the issue of impecuniosity within the RTA Protocol.

Impecuniosity is, of course, already a common pleading in many credit hire claims. It is fully anticipated that following this decision we will now see an increase in the use of stock witness statements being used to plead impecuniosity at Stage 2, potentially based on very limited knowledge of a claimant’s actual financial circumstances (or even none at all).

It would appear the only way to challenge an assertion on impecuniosity would be to remove the claim from the RTA process and ‘drop’ the same into CPR Part 7. Clearly such steps will increase the scope for costs and the rather daunting task for insurers is now to carry out a cost benefit analysis and consider at a relatively early stage whether the increased costs risk is worth taking when weighed against the value of the credit hire claim and other associated issues of the case.

Economics have always played a key a part in decisions to remove individual cases from the RTA process, but now arguably even more so.  Coupled with additional issues such as need, removal from the MOJ process can still make commercial sense. The merits of each case, therefore, need to be considered on a case-by-case scenario and early investigations need to be considered with the view to forming a view on prospects of defeating a pleading on the issue of impecuniosity outside of the RTA process.

One crumb of comfort that insurers can take from the Court of Appeal’s judgment is that the burden in terms of transferring cases to CPR 7 has now seemingly been lowered. It was held that when it comes to the issue of transfer, the White Book commentary that only “rare and exceptional” cases should be dropped to Part 7 is “is not an accurate statement either of the actual decision in Phillips v Willis, or of its implications”.

Therefore, if there is a case where it is believed that there is merit in removing the case from the RTA Protocol, this should be easier than before.

Should any further guidance or information be required, please do not hesitate to contact Scott Croft on 01204 678705 or scottcroft@keoghs.co.uk.


Scott Croft

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