Pre-Action Disclosure and Credit Hire

The importance of pre-action disclosure and credit hire should not be underestimated. Pre-action disclosure and credit hire should be considered with a great deal of care. Indeed, it potentially benefits both credit hire companies and defendant insurance companies in leading to a satisfactory settlement, with minimal risk. Credit hire has been described as a “secular war”, which is still raging.

Paying careful attention to pre-action disclosure, may lead to the war abating. After all, it was in no less than the House of Lords in Lagden v O'Connor [2002] EWCA Civ 510, para 9 that Lord Nicholls stated in setting the criteria for impecuniosity that he was “...fully conscious of the open-ended nature of this test. But fears that this will lead to increased litigation in small claims courts seem to me exaggerated. It is in the interests of all concerned to avoid litigation with its attendant costs and delay.” Undeline is my emphasis only.

The scope of this article will be dealing with financial documents requested from the claimant by the defendant in a credit hire claim before any proceedings are issued, which is the usual request for any pre-action disclosure. I will deal with the topic in the following way:

1. Relevant law concerning pre-action disclosure and credit hire.
2. Some relevant cases.
3. Implications for pre-action disclosure in credit hire cases simply explained.
4. Some interesting points on pre-action disclosure and credit hire and
5. Conclusion

Relevant law concerning pre-action disclosure and credit hire

The source of the power to make a pre-action disclosure in the county court is derived from Section 52 (2) of the County Court Act 1984, which states:

“On the application, in accordance with [rules of court]¹ , of a person who appears to [the county court]² to be likely to be a party to subsequent proceedings in that court [...]³ the county court shall, in such circumstances as may be prescribed, have power to order a person who appears to the court to be 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...”.

That power provided under section 52 (2) is manifested in CPR 31.16, which states that: “(2) The application must be supported by evidence. (3) The court may make an order under this rule only where— (a) the respondent is likely to be a party to subsequent proceedings; (b) the applicant is also likely to be a party to those proceedings; (c) if proceedings had started, the respondent’s duty by way of standard disclosure, set out in rule 31.6, would extend to the documents or classes of documents of which the applicant seeks disclosure; and (d) disclosure before proceedings have started is desirable in order to —

(i) dispose fairly of the anticipated proceedings;
(ii) assist the dispute to be resolved without proceedings; or
(iii) save costs …”

CPR 25.2.(3) states that: “A defendant may not apply for an interim remedy before filing either an acknowledgment of service or a defence, unless the court directs otherwise.” Note it does not refer to a claimant. This is on the face of it appears to make it more difficult for a defendant in pre-action disclosure, but please see how the case law addresses this and my analysis later.

Some relevant cases

Black v Sumitomo Corp [2001] EWCA Civ 1819 is an important case on pre-action disclosure. It did not involve credit hire, but the principles apply to credit hire cases also.

There are two points emerging from this case, which is particularly relevant to this article. First is the interpretation of CPR 31.16 (2) (a) and (b), which states that it needs to be shown that it is “likely” that the applicant and respondent will be parties. But the Court of Appeal confirmed that this only meant are “...likely to be parties in proceedings if those proceedings are issued...” (para 71) - underline is my emphasis only. But what does “likely” mean? The question of whether it is likely does not mean “more probably than not”, but rather it means that they “may well” be parties - para 72. So, in other words, the test is they “may well” be a party, if proceedings are issued. So much for an easy read – likely means “may well”, but this is what the Court of Appeal states and it should be followed!

Secondly the case confirmed that there are two aspects to CPR 31.16, namely the “jurisdictional” (para 37) aspect and the “discretion” aspect (para 37).

The jurisdictional aspect means: “...there is a real prospect in principle of such an order being fair to the parties if litigation is commenced, or of assisting the parties to avoid litigation, or of saving costs in any event.” - Black v Sumitomo Corp para 81. This is what CPR 31.16 means when it says it should be “desirable in order (i) to dispose fairly of the anticipated proceedings; (ii) assist the dispute to be resolved without proceedings (iii) or save costs”.

What is interesting is that words such as “desirable” do also involve an element of discretion. So, the jurisdictional and discretionary elements do somewhat merge. But it is important to keep the jurisdictional and discretionary elements separate. This was acknowledged in Black v Sumitomo Corp (see paragraphs 79 and 81). The jurisdictional element necessarily contains some discretion and hence the merging with the discretionary elements (dealt with in the next paragraph). But they are still separate. It's a two-limb test, jurisdictional and discretionary.

On the discretionary element it was stated in paragraph 88: “That discretion is not confined and will depend on all the facts of the case. Among the important considerations, however, as it seems to me, are the nature of the injury or loss complained of; the clarity and identification of the issues raised by the complaint; the nature of the documents requested; the relevance of any protocol or pre-action inquiries; and the opportunity which the complainant has to make his case without pre-action disclosure.”

It seems to me that the discretionary element must derive from the words used in CPR 31.16 that “...the court may make an order...”.

In Holt v Allianz Insurance Plc [2023] EWHC 790 pre-action disclosure in relation to credit hire was specifically dealt with. This is a very important case. There was a claim for credit hire for over £10,000. The defence had responded with evidence to show a vehicle being hired on non-credit hire terms on far lower range from about £1,500 to £1,700. The county court had ordered pre-action disclosure of financial documents regarding bank statements, credit card statements, savings account and wage slips or equivalent. This was a case in which the High Court concluded that because the Claimant instructing solicitor had stated in a statement with “...certainty that the [insurer] is not likely to be a party to proceedings" (para 63), then the appeal should be allowed, as the defendant insurance company was never likely to be a party to proceedings. HHJ Harris had looked at the issue generally as insurance companies are frequently sued, but the High Court stated on the evidence it should not have been found that the insurance company was likely to be a party to proceedings. But this was referred to as a merely a “technicality” which would have been easily remedied by Allianz if the application had been made in the “... name of their insured instead...” -para 96. Otherwise, the High Court endorsed in every regard the lower court's decision and reasoning for making a pre-action disclosure order.

A number of important principles can be discerned from Holt v Allianz, namely:

(a) it was agreed (para 15) that the other references to “likely “in section 52 (2) of the County Court Act 1984 namely the respondent is “likely to have or to have had” documents and the requirement that such documents be relevant to an issue " likely to arise " in the proceedings requires only that the respondent “may well” have/had those documents, and that issues relevant to the claim “may well arise” in those documents – so the same meaning as in whether a party is “likely” to be a party as expressed in Black v Sumitomo Corp;

(b) so in Holt v Allianz, the relevant test expressed as “(i) Allianz might well be party to any proceedings later issued by the appellant; (ii) impecuniosity might well be an issue in any such proceedings; and (iii) requiring the disclosure to be given before proceedings had been commenced offered a real prospect in principle of disposing fairly of the prospective proceedings, assisting the dispute to be resolved without proceedings, or saving costs.” – Para 23;

(c) CPR 25 (2) is really given short thrift that it can somehow become a stumbling block in pre-action applications for defendants. Or in the eloquent words of the High Court: “...it will be easy to persuade the court to order otherwise, as permitted by the rule.” - para 25. In other words, if a pre-action disclosure application is made out under section 52 (2) of the County Court Act 1984 and CPR 31.16, then the court can order “otherwise”;

(d) where there was a claim for credit hire for over £10,000 and the defence assert in their response a BHR of under £2000, the credit hire company must have in mind impecuniosity, referred to as “... the most common claim in credit hire cases...” - para 29;

(e) it was pointed out that the importance of impecuniosity in credit hire claims is now reflected by the following (para 33): (i) CPR PD16, para 6.3 (5) which provides that impecuniosity needs to be asserted; (ii) CPR PD16, para 6.4(2) which states the matters set out in para 6.3 "...includes an obligation to state relevant facts..."; (iii) unless orders in relation to impecuniosity are common practice; (iv) the Ministry of Justice's model directions for use in cases of " RTA credit hire impecuniosity " which requires a pleaded reply, setting out all facts in support of any assertion that the claimant was impecunious, and disclosure of the basic documentation in relation to this.

(f) the claimant (or in reality probably the credit hire company) “...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.” – para 38. This was considered a proper matter which the lower court considered in the exercise in discretion in making the pre-action order. Whilst it is not always the case that the claimant had to state whether the case involved an assertion of impecuniosity or not, as each case depended on the circumstances, but “...it will generally be the case where...” a credit hire claim is met with a “serious response” that the credit hire rates are “...very much higher...” than BHR – paragraph 39;

(g) as impecuniosity was not “disowned” (para 82) and no “case-specific” (para 82) ground was mentioned why BHR was not a realistic option, then impecuniosity was in all probability going to be a live issue – on any view it “...may well be the case...” that impecuniosity would be an issue. This was a “sensible inference” by the judge (para 82);

(h) the High Court agreed any intrusion upon the private financial affairs of the appellant was “...outweighed by the beneficial impact of pre-action openness as to the issues and an exchange of sufficient basic information and evidence to enable a meaningful assessment to be made of them in keeping with the overriding objective and the Practice Direction.” - para 92. Any intrusion had been considered under the “discretionary” element;

(i) intrusion into financial affairs was “invited” by the assertion of a credit hire claim which was “...six times or more...” higher than BHR - para 93;

(j) the confidentially of the financial information would be disturbed to a “...very limited extent...” that it would have been provided, in confidence, to the party to whom the making of his claim made it important was – para 94.

(k) In fact, it was “bizarre” that it was stated privacy was protected in declining to provide pre-action disclosure when the pre-action disclosure was designed to “...further the aim of avoiding public litigation...” - para 94.

(l) there was 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') was also taken into account (paragraph 36). This protocol in summary discusses amongst other things, the need for parties to make their case clear and provide “key documents”. This seems to have been considered under the discretionary limb – after all in Black v Sumitomo Corp (para 88) “...the relevance of any protocol...” was mentioned as one of the potential factors in in exercising discretion.

Implications for pre-action disclosure in credit hire cases simply explained

So, what does this all mean in simple terms?

There is considerable legislation, CPR and some considerable detail within the case law, which I have had to cite. I would however like here to explain in hopefully more laymen terms as to what this all actually means?

In my view this is what this all means, namely:

(i) impecuniosity is a very central issue in most credit hire cases;

(ii) therefore, where the claimant asserts credit hire and the defendant in pre-action correspondence asserts BHR (which is usually considerably lower than credit hire) and provides some basis for this, then if the defendant is asking for financial documents regarding impecuniosity, then this is a valid request. In these circumstances it can be inferred that impecuniosity will be a live issue;

(iii) As this is a valid request, then the claimant should provide these financial documents;

(iv) if in the circumstances described in (ii) above the claimant declines to provide financial documents for impecuniosity, then generally speaking a pre- action disclosure application will succeed;

(v) I will go so far as to say that in the circumstances described in (ii) above, it is arguable that there is almost what is tantamount to a presumption that pre- action disclosure of relevant financial documents should be provided;

(vi) generally speaking, a claimant should not be able to say that they don't have a position on whether they are impecunious or not at the pre-action stage, though it all depends on the circumstances. Generally speaking, a claimant should be in a position assert their position on impecuniosity at the pre-action stage and be ready to provide relevant financial documents if requested.

Some interesting points on pre-action disclosure and credit hire

The observations of the court in Holt v Allianz appear to be made in very wide terms, not just specific to the case they were dealing with. The court has appeared to be very clear in their observations.

Nevertheless, there are some interesting points to note here, namely:

(i) there is no automatic right to pre-action disclosure. You need to make a request! In practical terms, a claimant may want to disclose key financial documents at the pre-action stage in any event, but that is a separate issue;

(ii) as a defendant, it is important to make a request in the right terms, namely: that the BHR suggests a considerably rate lower than the credit hire rates and that is why the financial documents are being asked for.

(iii) But following on from (ii) above, in Holt v Allianz there appears to be a suggestion that there has to be some basis for the figures on BHR provided by the defendant – after all in paragraph 39 the court states that generally it is expected that the claimant will make its position clear on whether impecuniosity is being asserted where the “...credit hire rates is met with a serious response suggesting that those rates are very much higher than the BHR” - underline is my emphasis only. In paragraph 48, the court stated that the claim “...was obviously disputed on serious grounds...” - underline is again my emphasis only.

(iv) In Holt v Allianz itself, the defence had provided evidence of BHR rates (para 45). So, if the defendant does not provide evidence of BHR rates, but merely makes an assertion that BHR would be cheaper than credit hire, does this mean that a court could decline the application for pre-action disclosure? The general Practice Direction – Pre-Action Conduct and Protocols ('the Practice Direction') in para 6 (c) does refer to “the parties disclosing key documents relevant to the issues in dispute” - underline is my emphasis. Evidence of BHR is surely a “key document” in any credit hire case? It will be interesting to see how courts over time deal with this scenario.

Conclusion

It seems that where credit hire is asserted, and the defendant “seriously” responds with BHR, then the courts generally expect claimants to nail its colours to the mast on impecuniosity and to provide relevant financial documents. These are documents such as bank statements, credit card statements, wage slips, tax returns and profit/loss accounts. Whilst not set in stone as it depends on all the circumstances of the case, the court expects the claimant to be able to say whether impecuniosity is asserted and to provide relevant financial documents if the defendant “seriously” puts forward BHR. For a claimant to not commit or stay silent will just mean that a court is likely to find that it is inferred that impecuniosity is a live issue. There is an interesting situation as to what exactly “seriously” respond with BHR means and whether of necessity it means that the defence have to provide evidence of BHR and not just an assertion. In Holt v Allianz BHR evidence was provided. It will be seen how the court interprets this, with the passage of time.

One can wade endlessly through the criteria set out in section 52 (2)of the County Court Act 1984 and CPR 31.16, but the reality is that in the above scenario (para 21 above) a court is most likely to take the view that the position on impecuniosity should be made clear and that relevant financial documents should have been provided and if they are not, then a court will generally speaking make an order for pre-action disclosure.

It's good practice anyway for a claimant to decide early on how to set their stall. Come to the problem, before it comes to you. Forewarned is always forearmed in credit hire...

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

© Mohammed Azeem Ali 2025                                                                       31/10/25