A new ruling on a case brought by HF and Admiral Insurance, sets a crucial precedent for credit hire claims to limit indemnity spend.

In 2019, Hussain v EUI set a crucial precedent by limiting credit hire claims for profit-earning vehicles, like taxis, to loss of profit unless claimants could meet one of three exceptions. Now, in a pivotal follow-up ruling (Hussain II), the courts have tightened these exceptions, bolstering insurers’ ability to reduce inflated claims and indemnity spend.

 

The Original Hussain Framework

The 2019 the High Court judgment in Hussain v EUI established that only loss of profit is recoverable in credit hire cases for profit-earning vehicles unless:

  1. A claimant must provide services at a loss to maintain a valuable trade, contract or relationship.
  2. A claimant needs a vehicle for both business and private use.
  3. A claimant cannot afford not to work (impecuniosity).

Since then, claimants and insurers have challenged the level of detail in the evidence required to satisfy these exceptions and therefore beat the loss of profit rule.

 

Hussain II: Narrowing the Exceptions

In October 2024, the case of Mazahar Hussain v EUI Limited (“Hussain II”) came before HHJ Malek at Bradford County Court. Mr. Hussain, a taxi driver, pursued a claim for personal injury, storage, recovery, and £33,140 in credit hire costs after hiring a replacement taxi for 162 days at £203 per day. Vehicle damage had already been settled, leaving credit hire as the primary issue. The claimant did not provide financial disclosure and so could not rely on the third exception.

The claimant argued he met exceptions 1 and 2 of Hussain, relying on a letter from Barkerend Taxis. The letter warned:

“We put you on notice that you are required to work with a licensed vehicle that is in a suitable condition with the relevant licensing documentation within the next 7 days. If you do not return to work within the prescribed 7 days you will be disconnected from our dispatch system. A driver who has been disconnected, cannot rejoin on a later date.”

HF argued that the claimant had not met the burden of proof and that only loss of profit should be awarded. The case proceeded to trial.

 

The Trial

At trial, HHJ Malek delivered a reserved judgment, offering important clarifications on the Hussain framework.

Exception 1: Operating at a Loss to Preserve TradeThe judge noted:

“…this exception is not a true exception to the general rule… Here, all that is being said is that the potential future loss of profit also needs to be measured and added to the pro-rata loss of profit calculation.”

Supportive of our arguments, in order to assess whether a claimant meets this exception the judge ruled that the court must consider:

  • How long it is reasonable for a business to operate at a loss to avoid permanent harm.
  • The profitability of the business, the size of the loss, and the likelihood of permanent damage.

Importantly, he referenced Mahmood v Liverpool Victoria Insurance Ltd (2023), where a judge decided that a claimant earning just £8,062, should consider that any “contract that might be lost is, in reality, unprofitable and therefore not worth saving.”

In Hussain II, the claimant failed to provide profit and loss accounts or tax returns to demonstrate profitability. HHJ Malek went on to say the Barkerend Taxis letter was “woefully inadequate” and “implausible to say the least” as evidence of future lost business. If accepted, the letter said that Barkerend Taxis would permanently end a relationship with a driver of 8-9 years merely because he could not work for one week. This was “inherently unlikely.”

The claimant therefore failed to meet this exception.

 

Exception 2: Mixed Business and Private Use

The claimant did satisfy the second exception for mixed business and private use and therefore BHR for a standard vehicle (not a taxi) was allowed for a reasonable period of repair. This was assessed at 5 weeks only.

In conclusion, the judgment highlights the difficulty claimants face in meeting these exceptions, particularly the conflict between exceptions 1 and 3. As HHJ Malek observed:
“There is a tension for the self-employed professional driver in demonstrating profitability to come under the first exception and showing impecuniosity under the third exception… In most cases claimants will, likely, have to nail their colours to the mast – and I would suggest early on in proceedings.”

Claimants with minimal profits risk proving their business is not worth saving, undermining the need for credit hire as mitigation.

Ben Elliot, Partner at HF, said: “This is a welcome judgment and clarifies that any claimant who wishes to prove either the 1st or 3rd exception in Hussain must provide full financial disclosure including their business accounts and tax returns. Any claimants relying on hearsay evidence in support of supposed lost business should now be given short shrift from the courts”.

Ryan Lewis, Head of Credit Hire at Admiral, said: “This is an important decision, which highlights the arguments we have been making for a long time on loss of profit. It is pleasing to see that we have built upon the first decision of Hussain v EUI and the court accepted our arguments on the friction the 1st and 3rd exceptions posed for insurers. We are hopeful that this will reduce the arguments on what is required for claimants to claim full credit hire rates.”