INSURER FAILED IN PRE-ACTION DISCLOSURE APPLICATION: BUT… IF THE RIGHT PARTY HAD BROUGHT THE APPLICATION IT WOULD HAVE BEEN GRANTED

The judgment of Mr Justice Baker in Holt v Allianz Insurance Plc [2023] EWHC 790 (KB) is another round in a long running battle between car hire companies and insurers.  Whilst the insurer may have lost this round it is likely that overall they will benefit from this case. The appeal succeeded because it was shown that that the insurer that had brought an application for pre-action disclosure was unlikely to be a party to subsequent litigation.  However the judge made observations that made it clear that if the application had been issued in the name of the insured then it would have succeeded.

“Limited and focused pre-action disclosure would disturb the confidentiality of the disclosed financial information only to the very limited extent that it would have been provided, in confidence, to the party to whom the making of his claim made it important, in the interests of justice, that it be provided, with a view to avoiding litigation in which inter alia that information and more would have to be provided in public. The suggestion that a desire on the part of the appellant to protect the privacy of his financial affairs told against ordering pre-action disclosure designed to further the aim of avoiding public litigation is in truth somewhat bizarre.”

THE CASE

The appellant (Mr Holt) was involved in a road traffic accident which was not his fault. The respondent (Allianz) insured the driver responsible for the accident.

Mr Holt made a claim for hiring a car for the period his own car could not be used. The hire claim amounted to £10,387.50.   Allianz adduced evidence that the normal rate for car hire for that time would amount to £1,550 for a 25 day rental.  This claim was provided on terms agreed with a hire company Auxillis.

However the higher rate could be justified if Mr Hold could establish that he was impecunious.  Allianz asked Auxillis whether impecuniosity was being alleged and, if so, to disclose some basic information.

Auxillis refused to provide the information and stated that the whole amount should be paid to avoid litigation.

ALLIANZ’S APPLICATION FOR PRE-ACTION DISCLOSURE

Allianz made an application for pre-action disclosure of documents, this was allowed by the Circuit Judge.

MR HOLT’S APPEAL

Mr Holt’s appeal was successful, but on a very narrow ground.    Those representing Mr Holt showed that they would never have issued proceedings directly against the insurer. CPR 31 states that before a court can make a pre-action order for disclosure it has to be satisfied that the parties are likely to be a party to proceedings. The evidence established that Mr Holt was unlikely to sue the Allianz directly.

1. 1. Pre-action disclosure should not have been ordered in this case because it was sought only by Allianz. On the evidence before the court, it should not have been concluded that Allianz was likely to be party to any proceedings that the appellant might commence in respect of the substantive claim. I consider that HHJ Harrison’s approach to that requirement of a pre-action disclosure order, being part of s.52(2) of the County Courts Act 1984 and then also CPR 31.16(3)(b), was flawed.

THE STING IN THE TAIL (FROM THE HIRER’S POINT OF VIEW)

It is necessary to read the following paragraph in the judgment.

1. This appeal must therefore be allowed, although but for that first conclusion, possibly a technicality if Allianz could have caused the application to be made in the name of their insured instead, I would have dismissed the appeal and endorsed every aspect of HHJ Harrison’s decision to grant the pre-action disclosure sought.

THE RULES

CPR 31.6 (3) sets out the conditions that must be satisfied before a court makes an order for pre-action disclosure.

(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.

THE MERITS OF THE APPLICATION

It is necessary, therefore, to look at the judge’s views of the substantive merits of the pre-application itself. These were obiter observations.

1. 1. I agree with Mr Hough KC that the pre-action disclosure application therefore should have failed, and this appeal now must be allowed, on what might be considered a ‘technical’ objection. It could readily have been overcome by Allianz’s insured being named as co-applicant, if Allianz was in a position to bring that about. Mr Hough KC said that the application could be amended or re-issued, if necessary, with the insured as applicant. That submission was made in Allianz’s skeleton argument for the appeal dated 6 May 2022. No application to amend the application was made, however.

1. 1. Mr Williams KC for his part conceded that for the court to allow the appeal on this ground could limit the usefulness of this judgment, since anything I now say on the main merits of the application will be obiter. That is not an entirely satisfactory outcome, as Mr Williams KC also acknowledged, given the basis on which permission to appeal was granted. However, permission to appeal was granted unconditionally on all grounds raised, including this one, and Mr Williams KC did not receive instructions to withdraw this ground with a view to increasing the utility of any judgment. I do not consider that I can in those circumstances ignore the view I have formed on this first ground of appeal or decline to allow the appeal on the basis of it.

1. 1. Since the other grounds were fully argued, I shall set out my conclusions on them, but I shall do so relatively briefly given that they will not now determine the outcome of this appeal.

CPR 31.16(3)(c)

1. 1. The argument before the judge was that the documents sought would only fall within the scope of standard disclosure if and when impecuniosity was asserted by the prospective claimant, and that no such assertion had yet been made (judgment at [36]). The ground of appeal in respect of CPR 31.16(3)(c) is that the judge was wrong to reject that argument. Thus the contention was and is that by refusing to indicate explicitly the appellant’s position on a key issue in dispute suggested by the claim correspondence, the appellant could avoid the possible operation of CPR 31.16 no matter how probable it was, considering that same correspondence, that impecuniosity would be an important issue in the case.

1. 1. The skeleton argument for the appeal also took the point I rejected in paragraph 19 above, and the point that Mr Williams KC did not pursue to which I referred in paragraph 20 above.

1. 1. The judge rightly regarded it as helpful to remember that the statutory condition stated in s.52(2) of the 1984 Act was relevant to an issue arising or likely to arise. The basic features of the substantive dispute revealed by the claim correspondence were that Auxillis was claiming, the judge said, £345 per day (in fact, over £400 per day with VAT), Allianz had responded suggesting a BHR of £61.94 inclusive of excess waiver (with, I would add, evidence appearing to back up the suggestion), and Auxillis had declined a clear invitation to indicate “whether impecuniosity is an issue or perhaps more importantly is not an issue” (judgment at [37]). The judge therefore concluded (at [39]) that “whilst at any trial there will be a requirement for the insurer to adduce evidence of the BHR relied upon, the relevant features set out above are … sufficient to allow the court to conclude that the documents sought are relevant to an issue that is likely to arise and as such would fall within standard disclosure” (original emphasis).

1. 1. Any possible difference between relevance to an issue, in the language of s.52(2), and the scope of standard disclosure, the language of CPR 31.16(3)(c), does not affect the outcome in this case (see paragraph 20 above). The question for HHJ Harrison was whether impecuniosity was likely to be an issue if proceedings were brought, in the sense that it might well be an issue (see paragraph 19 above).

1. 1. I agree with HHJ Harrison’s conclusion – which would also have been my conclusion – that on the material before him, impecuniosity might well be an issue. The limited response to Allianz’s pre-action information and disclosure on the BHR suggesting that it was “contrived and invalid” because Arbitrate had used 7-day rental rates was not a credible basis for imagining a serious contest over the BHR, or a serious prospect of the appellant avoiding a finding if the claim litigated that the BHR was very much lower than the claimed credit hire rate. What was contrived and invalid here, with respect, was any notion that Auxillis might have in mind that if the claim fought the appellant (in reality, Auxillis) would take a stand on a dispute over the BHR and not contend that the BHR was not a realistic option for him.

1. 1. Where the typical ground for such a contention, viz. (asserted) impecuniosity, is not disowned, but also no other case-specific ground for it is suggested, in the face of a fair and reasonable pre-action request to understand the basis of the putative claimant’s claim, the only sensible inference was the one drawn by the judge. In truth, impecuniosity is very probably going to be asserted and disputed in this case, if it litigates. On any view, that may well be the case.

CPR 31.16(3)(d)

1. 1. HHJ Harrison considered this condition to be straightforward, and so do I:

“45. … Impecuniosity in the context of credit hire is central. It is central because it governs the basis by which damages are calculated. It is in my judgment plainly desirable for a prospective defendant to know the basic principles upon which a claim is put to calculate any offer. I remind myself again of how Lord Nicholls in Lagden expressed his expectation for the future. Having sought to define impecuniosity he said:

“I am 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. Motor insurers and credit hire companies should be able to agree on standard enquiries, or some other means, which in practice can most readily give effect to this test of impecuniosity.”

46. If “litigation and its attendant cost and delay” is to be avoided and if the aims of paragraph 3 of the Practice Direction are to be achieved then in my judgment disclosure as soon as possible of the sort of evidence of impecuniosity that would have to be disclosed if the case were to be issued is in my judgment desirable.“

1. 1. The proper test to be applied was whether requiring the disclosure to be given before proceedings had been commenced offered a real prospect in principle of assisting the dispute to be resolved without proceedings or of saving costs (those being the elements of CPR 31.16(3)(d) upon which HHJ Harrison focused): see paragraph 23(iii) above. In my judgment, HHJ Harrison’s view that the test was satisfied was plainly a reasonable view he was entitled to form. It is also my view.

1. 1. Mr Williams KC argued that Allianz’s ability to make an offer (such an offer, indeed, having in fact been made, on an open basis) to settle the credit hire claim at a figure calculated by reference to what it said was the BHR disproves the claim that the limited disclosure sought was essential for a sensible evaluation of the claim. To the contrary, however, the ability, and (it may be) a willingness, to offer a certain minimum that Allianz may feel it is unlikely to beat, or that it would not be proportionate to incur time and cost trying to beat, is not the same thing at all as having the information needed to understand and begin to assess the very much higher litigation claim being intimated and threatened.

1. 1. The first ground of appeal in relation to CPR 31.16(3)(d) is that as a matter of principle it is not desirable to compel a claimant to produce sensitive financial information before they have chosen to issue proceedings and to make in those proceedings an assertion to which that information would be relevant. The fact that the pre-action disclosure sought would reveal personal financial information is nothing to the point so far as assisting the dispute to be resolved without litigation or saving costs is concerned. It might have gone to whether the court’s discretion should be exercised in favour of ordering the disclosure. It did not go to whether CPR 31.16(3)(d)(ii) or (iii) was satisfied.

1. 1. The second ground of appeal is that the pre-action disclosure ordered was not needed for a fair disposal of any proceedings that might be brought, since if they were brought and if impecuniosity were asserted, as appeared to the judge to be likely (in the relevant sense), the documents would then have to be disclosed. I agree, and that may be why the judge did not found his decision on CPR 31.16(3)(d)(i).

1. 1. The third ground of appeal is that it is “entirely proper and reasonable” to leave consideration of impecuniosity and its potential effect on the claim until after proceedings have been commenced. I agree with the judge that where claim correspondence indicates that impecuniosity is likely (in the relevant sense) to be an important part of the claim, then it is contrary to the letter and spirit of the Practice Direction not to give serious consideration to it at the pre-action stage.

1. 1. The fourth ground of appeal is that the pre-action disclosure ordered was unlikely to dispose of the claim without litigation, or to save costs, because there was a range of other issues including, in particular an ‘intervention rate’ issue. As I said when dealing with CPR 31.16(3)(a)-(b), the suggestion that there might be an intervention issue in this case is wrong. More generally, the fact that there might be other issues could be relevant to an assessment of the importance of the impecuniosity question in a particular case. The judge had that well in mind, and I agree with his assessment that in this case the claim correspondence left no sensible room for the conclusion that impecuniosity was anything other than a central issue, and probably the key real issue.

1. 1. That final ground of appeal also, it seems to me, overlooks the fact that the test of desirability under CPR 31.16(3)(d) is only the offering of a real prospect in principle of achieving one or more of the stated aims.

Discretion

1. 1. HHJ Harrison dealt separately, as required, with the question whether in all the circumstances of the case it was fair and proper to make the order sought. He did not treat the satisfaction of the requirements as sufficient to justify an order, albeit of course by nature it weighs in favour of an order rather than being only neutral.

1. 1. The judge said it would be wrong to require unnecessary pre-action disclosure of personal information, so the court should approach the making of an order requiring such information to be disclosed with caution. But the gist of his reasoning for granting the order sought was that in his view the degree to which it would intrude 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. It would also be wrong, the judge considered, to endorse Auxillis’ stated policy of not addressing their client’s means, even with their client, before commencing litigation, even where those means will be or are likely to be central to the question of what they might be properly entitled to recover.

1. 1. I agree with HHJ Harrison here too, and would also have exercised my discretion in favour of ordering the limited disclosure sought. The plea to privacy and confidentiality in particular is, with respect, misplaced. The appellant invited and required sufficient intrusion into his financial affairs to warrant the order sought and granted by asserting (through Auxillis) a claim for credit hire charges that on the material put before the court appeared likely to be six times or more higher than the BHR, in context implicitly indicating that the claim thus asserted involved and depended on a claim he would be making that he was impecunious in the sense used in this context.

1. Limited and focused pre-action disclosure would disturb the confidentiality of the disclosed financial information only to the very limited extent that it would have been provided, in confidence, to the party to whom the making of his claim made it important, in the interests of justice, that it be provided, with a view to avoiding litigation in which inter alia that information and more would have to be provided in public. The suggestion that a desire on the part of the appellant to protect the privacy of his financial affairs told against ordering pre-action disclosure designed to further the aim of avoiding public litigation is in truth somewhat bizarre.