Impecuniosity, mitigation and credit hire on appeal

In the case of MIB v Houston [2025] EWHC 3178 (KB) (In the County Court at Birmingham, on appeal from Recorder Brown), Mr Justice Cavanagh (Cavanagh J) considered the defendant’s appeal of the decision of Recorder Brown to award the full period for credit hire and storage when the claimant was debarred from relying on impecuniosity for the purpose of deciding the daily rate of hire. 

The facts of the case

The matter revolved around a road traffic accident that occurred on 13^th June 2019. The claimant was the passenger and owner of a vehicle that was involved in a collision with the first defendant’s vehicle. 

The first defendant at the time of the accident was uninsured. The collision occurred when the claimant’s vehicle was proceeding on Brooklands Road, Hall Green, Birmingham, when the first defendant, who was travelling in the opposite direction, proceeded around a bend, veered into the wrong lane and collided with the claimant’s vehicle. As a result, the claimant sustained injury and losses.

Due to the impact, the claimant’s vehicle was written-off beyond economical repair.

The claim was submitted to the Motor Insurers Bureau (MIB) for investigation. The claimant could not afford to replace his damaged vehicle nor purchase a hire vehicle outright and entered into a credit hire agreement. An interim payment was sought from the MIB in respect of the PAV so that the claimant could replace their damaged vehicle and end the hire agreement. 

After significant delays, the MIB raised the payment. The delays resulted in the claimant requiring the credit hire vehicle for a total of 197 days. The final credit hire invoice totalled £44,305.52. Storage and recovery were also incurred in the sum of £5,246.40. In addition to these losses, the claimant also sought a modest claim for general damages as well as the cost of physiotherapy treatment.

The claim was issued against the driver of the vehicle as first defendant and the MIB as the second defendant. The first defendant disputed liability whereas the second defendant simply put the claimant to strict proof in respect of the accident and losses. 

As the claimant contended to be impecunious at the time of the accident and when entering the credit hire agreement, court directions set down compelled the claimant to disclose specific documentation to evidence their financial situation failing which he would be debarred from relying on the fact of impecuniosity for the purposes of determining the appropriate rate of hire.

Whilst the claimant provided some documentation, he failed to comply with the full extent of the disclosure and was debarred from relying on impecuniosity. 

It is important to note that, at the time of the accident the claimant had numerous unroadworthy vehicles. It was the claimant’s part-time business that he would repair a vehicle, sell the vehicle and use those monies to fund the repair of another vehicle before repeating the process. 

The claimant’s evidence was that he did not have another roadworthy vehicle, and he did not have the means to repair one of his unroadworthy vehicles, nor purchase a replacement vehicle until the PAV interim payment was made by the MIB.

Basic hire rates evidence was produced by the parties, and standard fast track directions, including disclosure and statement exchange, were completed. The matter was set down for trial on 30th June 2023.

The ruling of Recorder Brown

In the trial, all parties attended the trial which was heard by Recorder Brown at Birmingham County Court. Recorder Brown found that the uninsured driver was at fault for the accident. When considering quantum, Recorder Brown made awards for personal injury and physiotherapy treatment in the sums of £5,000 and £315 respectively.

Regarding the hire claim, the claimant was cross examined on their financial position, and it was his evidence that he could not afford to purchase a replacement vehicle out of his savings as he had three children to support and needed to maintain a buffer. The claimant had no more than £3,000 in savings at any one time. The statements disclosed showed that the accounts fluctuated, thus evidencing that the claimant needed and used the funds for careful family resource.

Recorder Brown accepted the claimant’s evidence and found that he could not afford to replace their vehicle prior to being placed in funds by the MIB. Recorder Brown awarded the full period of hire totalling £40,918.34 based on the BHR evidence, as well as an award for storage and recovery in the sum of £4,159.20.

Second defendant’s appeal

An appeal was lodged by the second defendant following the order of Recorder Brown on the grounds that the judge’s findings regarding the claimant’s financial position and debarment from relying on impecuniosity was perverse and that they had misdirected themselves in respect of the application of law relating to mitigation of loss. 

The main points to the appellant’s appeal were as follows:

• The judge failed to place any or any significant weight on the claimant’s failure to comply with the court order regarding disclosure of financial evidence.

• The judge failed to properly apply the law in relation to mitigation.

• The judge’s conclusion that it was reasonable for the claimant to hire a relatively expensive car over a period of 6 months and to store a written off vehicle for a similar period was wrong and /or perverse;

• The appellant alleged that Recorder Brown had expressly stated that the claimant was unable to prove impecuniosity but at the same time found that the claimant was entitled to claim for the entire hire period because he could not afford to buy a replacement car during that period, thus being inconsistent in their judgment.

• In line with Zurich Insurance plc v Sameer Umerji [2014] EWCA Civ 357, it was clear that impecuniosity applied to both rate and duration.

• That if the claimant could not rely on impecuniosity, then there was nothing to justify the conclusion that the claimant could not afford to buy a replacement car, just as there was nothing to justify the conclusion that the claimant had no choice but to go for the more expensive credit hire option.

On 2nd December 2025, the appeal took place before Cavanagh J. Cavanagh J dismissed the appeal and found that in the context of this case, the judge was using the word “impecuniosity” solely to mean impecuniosity as to rate; and in other words, whether a lack of funds meant that the claimant had to resort to more expensive credit hire rather than basic hire.

Cavanagh J highlighted that the directions order stated that unless certain conditions were complied with, the claimant would be debarred from relying upon the fact of impecuniosity “for determining the appropriate rate of hire”. Cavanagh J stated the order must be given its “ordinary and natural reading”.

Cavanagh J was satisfied that the Judge asked herself the correct questions in relation to mitigation and there was nothing in the judgment that suggested otherwise nor was there anything to suggest that the experienced recorder was unaware of the fundamental legal principles that a claimant must take reasonable steps to mitigate their losses and that a claimant is only able to recover funds reasonably spent in mitigation. 

Cavanagh J went on to detail that there was ample evidence to justify the recorder’s conclusions regarding the hire period and storage cost. It was noted that that the recorder was entitled to accept the claimant’s evidence in respect of their financial position that was put forward in their evidence and given under cross examination. It was held that there was no basis for overturning the recorder’s conclusion. 

Cavanagh J found that the judge’s ruling was not plainly wrong or perverse. There was no illogicality in finding that the respondent was debarred from relying on impecuniosity for rate because the claimant had failed to provide the required evidence at trial. 

The claimant was also awarded considerable costs in respect of successfully defending the appeal.

This case gives us a stark reminder of the extraordinary extent an appellant has to go to in order to overturn a finding of fact made by a judge at first instant.