Does Mehmood v AIG Europe Ltd and Simpson [2023] EW Misc 1 (CC) make any difference to taxi credit hire claims?

I ­­­would not normally write an article on a non-binding credit hire decision but I will make an exception in the case of Mehmood v AIG Europe Ltd and Simpson [2023] EW Misc 1 (CC) (“Mehmood”). This is a non-binding decision on a taxi credit hire from a Circuit Judge in the county court.

The reasons I have felt compelled to write this article are for the following reasons:

(1) I have noted references to this case within the legal profession as supporting the view that hire as opposed to loss of profit will be allowed only if one of the three exceptions in Hussain v Eui [2019] EWHC 2647 (QB) is satisfied, and further the claimant proves he has acted reasonably. Consequently, this had led some to say that hire as opposed to loss of profit will only be allowed in exceptional circumstances;

(2) I have had cases where judges in the county court have at the outset of the case stated that they have read this decision of Mehmood. On a recent case, a judge whilst acknowledging that Mehmood was a non-binding decision stated he was going to refer to the decision for the purposes of the “reasoning” in that case. So, this is a case which warrants some attention, notwithstanding the non-binding nature of the case.

I will deal with the case in the following ways:

(1) Summary of the decision;

(2) Potential new implications on taxi credit hire;

(3) Does Mehmood make any difference to credit hire?

(4) Conclusion

Summary

In Mehmood, there was claim for £107,340 for credit hire, which was reduced to £346 for loss of profit. The Claimant was a taxi driver. There were other claims for recovery and storage and vehicle damage, which are outside the scope of this article. There was also a liability dispute between the parties and the judge decided that liability was split equally between the parties at 50/50 - the £346 for loss of profit was therefore further reduced to take account of the split liability, amounting to hire charges close to £150.

The court found that the Claimant did not fulfil any of the three exceptions referred to within Hussein v Eui, exceptions which I referred to within my earlier article “Implications of Hussain v Eui” in shorthand as: the “impecuniosity” exception, the “greater loss” exception and the “social and domestic use” exception – please see my article for more details.

In summary, HHJ Malik found that:

(1) the three “exceptions” referred to within Hussain v Eui just go to show whether or not the claimant was acting reasonably (paragraph 18 of the judgement);

(2) the court must also consider “overall” whether the claimant acted reasonably as well as considering the “exceptions”, which may be implicit in the reasoning of the court (paragraph 18 of the judgement);

(3) the Claimant had been using the vehicle on a private use basis on a no more than a minimal basis. If the judge was wrong about this and the vehicle was used for domestic use on a more than “de minimis” basis (that is more than on a minimal basis), the evidence showed that personal use was likely to have been “fairly minor” something in the order of 10%. In that case the court would have “provided for the cost of hiring a vehicle” for a reasonable period, which would have served his personal needs (i.e., not a taxi plated vehicle) and reduced this by 90%.

There were other findings and observations on this case, which I do not consider it relevant to mention in this article, as I am dealing with whether this case makes any difference to taxi credit hire.

Potential new implications for taxi credit hire

There are a number of propositions in Mehmood, which I summarise as follows: (1) Mehmood suggests that even if a claimants case falls within one of the three exceptions referred to in Hussain v Eui, then the court still has to consider whether “overall” the claimant has acted reasonably; (2) if a non-impecunious taxi driver claimant for example can show that he needed a hire vehicle only for domestic use for part of the time, let's say 10% for domestic use, then s/he can only recover 10% for what would be recoverable for a non-plated hire vehicle.

I deal with each in more detail and their potential implications on taxi credit hire.

The overall test of reasonableness over and beyond the three exceptions referred to within Hussain v Eui

It seems to me that the case appears to be introducing a “double” test of reasonableness which may be tantamount to suggesting that in order to recover credit hire (as opposed to loss of profit), the case needs to be exceptional. In Mehmood, the court stated:

“The first point to note is that the overall test remains whether the claimant has acted reasonably in hiring a vehicle where the cost of hire far exceeds the loss of profit. In my judgment the “exceptions” identified by Pepperall J go to show whether or not the claimant has acted reasonably and nothing more. The court, in my judgment, must consider whether, overall, the claimant has acted reasonably as well as considering the “exceptions”. This may, of course, be implicit in the reasoning given by a judge”.

I certainly agree that the “overall” test is the well know test in law as to whether a claimant acted “reasonably”. The law has always had an affinity, some would say a fixation with all things “reasonable”. This should not come as a surprise and is the easy part of the decision.

What I have great difficulty with, is that the court seems to suggest that even if one of the exceptions in Hussain v Eui is satisfied, then hire can be declined on the basis of the overall test of reasonableness.

I accept that the issue is always whether the claimant acted reasonably. I also accept that the three exceptions referred to within Hussain v Eui just demonstrate that in these circumstances the claimant is said to have acted reasonably.

However, in Mehmood, it appears to say that even if a claimant can prove that s/he falls within one of the three exceptions identified in Hussain v Eui, then the court still has to consider whether “overall” the claimant acted reasonably.

n other words, even if the claimant can for example show himself/herself to be impecunious, then a court could still find “overall” that a claimant had not acted reasonably in hiring a vehicle. I consider this to be surprising, especially when no assistance is provided as to the circumstances in which a claimant who proves that their case comes under one of the three exceptions under Hussain v Eui, can still considered to have acted unreasonably.

Let's look at this more deeply.

I have always taken the view that impecuniosity more generally in credit hire cases is not an “exception” as such. It's just a subset of reasonableness. It is precisely because a claimant is impecunious that it can be said that s/he had no choice but to hire a vehicle on credit and therefore he is acting reasonably. If one were to say that even if impecuniosity is established, then the overall reasonableness of whether a vehicle should have been hired on credit had to be considered, then arguably this would be considered a “game changer”.

In my view the exceptions referred to within Hussain v Eui, once satisfied do show that a claimant has acted reasonably “overall”. Indeed, so wide are the three exceptions referred to within Hussain v Eui, that it could be considered a misnomer to refer to them as exceptions.

When the court refers to the need for a taxi driver to act reasonably “overall” in addition to the three exceptions, I do not know what this could possibly add. Does this mean that for example a court could find that that a claimant is impecunious in a high value hire case and then say that looking at the position “overall” a taxi driver on a net profit of £40 a day should not have accrued £30, 000 worth of credit hire charges?

In Mehmood after all, the court stated that having dealt with the exceptions, it only needed a “moment or two on whether, overall, the Claimant acted reasonably in incurring £107,340 where the cost of repair (at the highest) was some £1800” (paragraph 28 of the judgment).

Logically this type of reasoning, which I consider to be flawed, could lead to a taxi driver not recovering credit hire in every hire case with high hire charges, even where the claimant was found to be impecunious.

Indeed, it's no surprise that some defendant insurers have interpreted the case as meaning that a taxi case has to be “exceptional” for hire charges to be recoverable. This is because the case of Mehmood seems to suggest that two layers of reasonableness are required: a claimant needs to prove that his case falls within one of the three exceptions in Hussain v Eui and then still has to prove overall that s/he acted reasonably.

It’s surely a contradiction to say on the one hand that you have acted reasonably by bringing yourself under one of the “exceptions”, though you have still not acted reasonably when looked at overall – even if not a contradiction, then at best it involves mental gymnastics of Himalayan proportions!

Nowhere in the binding decision of Hussain v Eui is it suggested that over and beyond the three exceptions, the court then has to consider whether “overall” the claimant has acted reasonably.

Justice Pepperall describes the three situations in which a claimant can be said to be acting reasonably. In my view it is not clear whether these three instances are the only examples of a claimant acting reasonably, or just examples of a claimant acting reasonably. It may well be that there are other circumstances apart from the three exceptions which show that a taxi driver claimant was reasonable in hiring a vehicle.

It does not however seem to me logical that once a taxi driver proves s/he was acting reasonably by fulfilling one of the three exceptions, they must still show that “overall” that s/he was acting reasonably. In any event if a claimant can prove that her/his case comes under one of the three circumstances described, then in my view as per Hussain v Eui s/he is entitled to the credit hire as opposed to loss of profit.

Pepperral J in paragraph 16 (6) of his judgment states: "Even where the costs of hire significantly exceeds the avoided loss of profit, the claimant may still succeed in establishing that he or she acted reasonably” and then he outlines the exceptions (the bold on the word “may” are my emphasis only).

This has led to speculation that even if a claimant proves one of the exceptions, the court can still decide that loss of profit as opposed to hire should be recoverable under the overall consideration of reasonableness. When Pepperral J states the claimant “may” be able to prove that s/he acted reasonably, in my view this means that if the claimant can bring it within one of the three exceptions referred to, then the claimant is acting reasonably - the word “may” is used in this context. The word “may” is not used in the sense that a claimant having brought his/her case within one of the three circumstances, can then still be said to be acting unreasonably according to some undefined “overall” situation.

Pepperral J stated in paragraph 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”.

Perhaps this has been understood to mean that the court can simply look at the high hire charges and conclude that it's not reasonable notwithstanding the claimant being impecunious. If so it’s a dangerous conclusion to be drawn from the case of Hussein v Eui, as it means it could apply to any high value credit case involving an impecunious taxi driver. However, this comment from Pepperral J seems to be more of an endorsement of the county court judges view that the claimant was not impecunious. Any other reading is not only dangerous, it also does not accord with what Hussain v Eui is stating namely that the three “exceptions” do allow for recovery of hire charges which are significantly higher than loss of profit.

If a non-impecunious taxi driver claimant for example can show that he needed a hire vehicle only for domestic use for part of the time, let's say 10% for domestic use, then s/he can only recover 10% for what would be recoverable for a non-plated hire vehicle.

This point seems to place the claimant under a tiresome and burdensome duty over and above reasonableness. Even though in Mehmood, it was found that the Claimant had not required a hire vehicle for domestic use for no more than “minimal” use, it was stated that if the court was wrong on this, then Mr Mehmood would have recovered no more than 10% of hire charges for a non-plated vehicle.

The question is: how does a claimant deal with this?

A taxi driver who mainly uses his vehicle for taxi use, however s/he also requires it for some occasional social, domestic and private use cannot be expected to return a hire vehicle according to when s/he needs it, particularly as it would not be known precisely when a vehicle is required for such use in the day/week – this is neither practical for the claimant nor workable with any hire company. It would be over and beyond even a counsel for perfection. A hire vehicle is usually hired on a 1-day basis or a 7-day basis, and it would not be reasonable to expect a claimant to return back and forth a hire vehicle. I doubt it would even be possible? The fact is that a claimant has incurred hire charges due to the negligence of the tortfeasor (the wrongdoer) and for her/him to recover only 10% of those incurred hire charges seems particularly harsh for the taxi driver.

This would mean for example that if a taxi driver who would have incurred let's say £50 a day for social, domestic and pleasure use for a non-plated hire is entitled to only £5 per day? The other £45 a day is according to this reasoning not recoverable against the defendant.

Fortunately, I have not seen any courts so far actually apply this route, though the risk is always there that a court in adopting the reasoning of Hussain v Eui may follow this path.

Does Mehmood make any difference to credit hire?

The decision is non/binding but is already being referred to by judges in credit hire case, from my real time experience. So, without any doubt it is already making some difference!

This case is particularly referred to in relation to the point that even if a claimant can prove that his case falls within one of the three exceptions, the court still has to be persuaded that the claimant acted “reasonably” overall.

In my view once one of the exceptions in Hussain v Eui is satisfied, this is a “route in” to say that the claimant has acted reasonably overall. Mehmood seems to introduce a “double” test of reasonableness which can be said to be tantamount to suggesting that the case needs to be exceptional, as the claimant has to prove one of the exceptions in Hussain v Eui and also that s/he acted reasonably overall. In my view this is not what Hussain v Eui stated, though it would be helpful to have a higher court clarify this point.

In my opinion the case of Mehmood should not make any difference to credit hire.

It is a non-binding decision, and it seems to me that a “double test” of reasonableness is being suggested which could be said to be introducing exceptionality into the test, which in my view was never the intention in Hussain v Eui (though as I state, clarification from the higher courts would be welcome and helpful). There is a clear difference between establishing a case falls within an “exception” and a test of “exceptionality”. Exceptions and exceptionality must not be confused. This is particularly so when the “exceptions” are potentially so wide.

Whilst I argue the case should not make any difference to credit hire claims, the harsh reality is that it is making a difference already.

Conclusion

(1) Hussain v Eui is a binding decision whereas Mehmood is not and so should be of persuasive value only;

(2) Mehmood suggests that even if the exceptions in Hussain v Eui are established, then the claimant taxi driver still has to show s/he acted reasonably “overall” in hiring on credit hire. In my view the case of Hussain v Eui did not state this, as proving an exception referred to within Hussain v Eui does mean that a claimant has acted reasonably overall. However, guidance from the higher courts would be helpful and welcome on this;

(3) Mehmood is having an impact in the courts on the issue of whether in addition to proving one of the three exceptions referred to within Hussein v Eui, a claimant has to also show that s/he acted reasonably overall;

(4) The case is however, having minimal impact on the issue of whether a taxi driver who proves the need for social and domestic use is only entitled to (in addition to loss of profit) the percentage s/he would have used a vehicle for social and domestic use – for example if s/he used a vehicle for 10% for social and domestic use only, then the hire for a non-plated vehicle is reduced by 90%. From my experience so far, this reasoning is not being applied so far.

Those who have been in the profession as long as I have, will know that some non-binding decisions can have a significant impact on cases for a short period (short period relatively speaking). Mehmood reminds me of a decision by a Circuit judge over 20 years ago, where the judge found in an “insured hire subrogation” case that the agreement between the insured driver and the provider of the vehicle (a situation facilitated by the insureds drivers hire company, who had a separate agreement with the hire company to pay for the hire) which provided that the insured will take good care of the vehicle etc, but had no term that the insured would pay for the hire, was unenforceable pursuant to the Consumer Credit Act 1974. This of course had nothing to do with consumer credit, as it was an insured hire subrogation situation something that was understood clearly by all years later. However, for a short period of time relatively speaking, this was an often-quoted case in credit hire claims.

It may well be that a similar fate awaits Mehmood, though only time will tell.

Please note this article does not constitute legal advice for any specific case or cases or for any circumstances.

© Mohammed Azeem Ali 29/08/2023