High Court of Justice in Northern Ireland Queen's Bench Division Decisions

McMullen v. Gibney and Bibney [1999] NIQB 1 (13th January, 1999)

IN THE HIGH COURT OF JUSTICE IN NORTHERN IRELAND

1. This is an appeal from a decision of District Judge Wheeler, sitting as a Deputy County Court Judge, by which he decreed that the respondents were justly indebted to the appellant in the sum of [sterling]100 damages loss and damage sustained by the appellant by reason of the negligence of the respondents in and about the driving, management, care and control of a motor vehicle on 19 May 1996. He also made an order for costs. As this is an appeal by way of re-hearing I shall make no comment on the form of the order. He also gave a written judgment on which I shall comment briefly.

2. The appellant's claim arises out of a road traffic accident in which the appellant's motor car was in collision with the Gibneys' motor car and sustained damage.

3. A Civil Bill was issued on 8 August 1996 claiming [sterling]500 for loss and damage sustained by the appellant by reason of the negligence of the respondents. A Notice of Intention to defend the proceedings was served on 23 August 1996 with a Notice for Particulars which included a request for details of how the figure of [sterling]500 was made up and for details of the alleged negligence. The solicitors for the appellant drew attention to a letter of 12 June 1996 admitting liability in their reply to the Notice and at some stage thereafter before the civil bill came on for hearing the respondents admitted liability. The details of loss and damage were stated to be [sterling]100 excess on insurance and a hire account for [sterling]250.50.

4. I infer that the appellant is required under his policy of insurance to pay the first [sterling]100 of the cost of repairs. He would have been entitled to claim the full amount of the cost of repairs but he would have held the balance on trust for his insurers if, as he did, he called upon his insurers, the Legal and General Insurance Company Limited, to pay the balance.

5. This is an illustration of the well-known legal principle that a tortfessor cannot require the injured party to invoke his contract with his insurers in order to mitigate his loss. At the same time a plaintiff cannot recover the cost or balance of repair from the tortfessor and call upon his insurers to pay the cost or balance as well and pocket both.

6. Apparently the appellant's insurers had a "courtesy car" service of which the appellant was unaware. He did not make use of it. If he had availed himself of this service, which is apparently free and does not require him to recover the cost from a 'tortfessor' he would not have been entitled to claim the cost of hiring a car against the Gibneys. But, they were not entitled to require Mr McMullan to invoke this clause in his policy of insurance, assuming that it was a term of that policy as distinct from an offer of a courtesy car if available. See, inter alia, Parry v Cleaver [1940] AC1, at p. 14 per Lord Reid as to the legal principle.

7. Before I deal with the contract between DAS Legal Expenses Insurance Company Limited and the appellant, I propose to determine what sum, if any, is proper to award as cost of hiring a car to replace Mr McMullan's car while it was being repaired. I am satisfied that he needed a car to replace his own during that time (a) because of his work and (b) because he had a mentally handicapped child who required to be driven daily. Indeed it may be a rare case in which a tortfessor can resist a claim for the cost of hiring a car whilst it is being repaired as the result of the negligence of the tortfessor.

8. His evidence satisfied me that a claim for six days' hire was reasonable and this was not disputed. A witness for County Car Hire Limited from which the car was hired gave evidence of a charge of [sterling]180 plus [sterling]39 for insurance and [sterling]31.50 VAT totalling [sterling]250.50. This charge was based on the premise that the firm would not be paid until the appellant's claim was settled or proceedings in court were completed. For the Gibneys evidence was given from McCausland Hire Car that hiring for 6 days would cost [sterling]179.98 inclusive of insurance and VAT with charges for delivery and collection of [sterling]10 each, and that payment would be required before the hiring. In circumstances such as these the injured party must act reasonably and is not entitled to hire a Rolls Royce or select the most expensive car hire company. But in estimating the proper cost of hire I consider that where the tortfessor has admitted liability, it is reasonable for the injured party to hire a car on the basis that the hirer will not be paid until he is paid. In this case I estimate the reasonable cost of hire at [sterling]225.

9. But the respondents contend that the appellant suffered no loss. He had taken out a policy described as a Legal Protection Policy with DAS and had exercised his rights under that policy to hire a car before the civil bill proceedings were heard. The agreement provided expressly or impliedly that the appellant would claim the cost of hire from the respondents and, if he failed to do so, he would be in fundamental breach of the policy and DAS would rescind it. He would be left with a hiring agreement between County Car Hire Limited and himself for [sterling]250.50 on which, doubtless, they would sue. If he complied with all the terms of the policy (or contract) he would pay over such sum as was recovered from the respondents for cost of hire and DAS would pay County Car Hire Limited the sum of [sterling]250.50. To argue that he suffered or would suffer no loss seems to me unsustainable.

10. It was argued that a plaintiff cannot enlarge his claim by contract for an enhanced benefit and I have already agreed with that submission which was also accepted by the appellant in the skeleton argument put in on his behalf.

11. It was argued that the agreement between DAS and the appellant was not a policy of insurance because the element of risk was missing. DAS would cover the cost of hiring only if the other party was entirely at fault. The difficulty with this argument is that the court might not accept as reasonable the hire of a car and might not accept the cost of hire as reasonable - as in the present case. DAS choose one car hire firm and agree a rate with that firm. In the present case the court has held that the rate was excessive.

12. In so far as it is relevant to consider whether the contract between DAS and the appellant is a contract of insurance - and I do not hold that it is necessary to decide this - the elements of such a contract are that one party (the insurer) promises in return for a premium (or money consideration) to pay to the insured a sum of money or provide services for the benefit of the insured or a corresponding benefit upon an event involving uncertainty. MacGillivray on insurance law argues that the event must be outside the control of the insurer.

13. The authorities which support the view that a corresponding benefit or services instead of money may be provided include DTI -v- St Christopher Motorists' Association Limited [1974] 1 WLR 99 where the insurer provided a chauffeur where a driver was prevented from driving by disqualification or injury, Prudential Insurance Co -v- IRC [1904] 2 KB 658 where Channell J said that a contract of insurance must be a contract for the payment of a sum of money or for some corresponding benefit and Medical Defence Union -v- Department of Trade [1980]Ch.82 where Megarry VC said at p. 95:

"I do not know whether a satisfactory definition of 'a contract of insurance' will ever be evolved.

.... It may be that it is a concept which it is better to describe than to attempt to define ... Plainly a provision for the payment of money is one of the usual elements in a contract of insurance. The main difficulty is in formulating what extension of this concept there should be; for plainly there must be some. If the extension is framed in terms of the equivalent of money, then this will be both limited in extent and consonant with the central concept .... in other words 'money's worth is merely an extension of money' ..."

14. Applying this definition to this case, the provision of a car whilst the insured's car is under repair, as distinct from providing money to hire a car is money's worth. It is the provision of a service akin to providing a chauffeur. It is a 'corresponding benefit' to money.

15. It is argued that there must be an uncertain event outside the control of the insurer. That there was an uncertain event is undeniable but it is contended that because DAS only undertake responsibility for car hire if the other party is entirely at fault the event is not outside the control of DAS.

16. It appears to me that the event has two aspects, one of which is under the control of DAS - namely that the other party is entirely at fault. But the other, which involves the replacing of the car while it is being repaired is not under the control of DAS. A court may take the view that the hiring of a car whilst the motorists' car is under repair is unnecessary or the length of hire or cost of hire is inappropriate.

17. It is further argued that the appellant has no residual or suspended liability for the costs of hire. But there is a contract of hire. If the hirer is found by the court to be partly at fault, the agreement with DAS is no longer enforceable against DAS. If the terms and conditions which DAS imposes or requires to be complied with are not met by the motorist the latter has a residual liability eg. if the period of hire is extended by the hirer beyond the period sanctioned by DAS or if DAS fails to honour its agreement with the car hire firm or goes into liquidation. There are also terms in the agreement between DAS and the car hire firm which may give rise to liability on the part of the motorist. One of the terms of the agreement between DAS and the car hire firm is:-

"Subject to due compliance with the terms of this agreement. The insurer agrees to pay to CCH [the care hire firm] sums due in respect of such monies by the insurer or upon receipt of invoice on conclusion or settlement of the claim."

18. There may be a dispute between the insurer and the car hire firm as to whether the terms of the agreement between them have been duly complied with. In such an event the car hire firm may look to the motorist for the costs of hire. This is another illustration of residual liability.

19. Accordingly I consider that the DAS contract is a contract of insurance. But if it is not, I would still hold the respondents liable to pay the sum of [sterling]225 to the appellant. I am of the view, therefore, that this argument fails.

20. I am most grateful to the District Judge for setting out the evidence, arguments and his findings in such detail. As I have reached a different conclusion from him it may be that the case was presented on appeal differently. I do not consider it appropriate on a re-hearing to point out the differences in approach to the claim which we have adopted.

21. I propose to refer to Giles -v- Thompson [1993] 3 AER 321 in which the argument that there was 'no loss' was advanced. Steyn LJ dealt with this issue in the Court of Appeal at pp. 337 to 339.

22. At p. 338 he said: On behalf of the insurance companies the argument is that, although as a matter of law the plaintiffs sustained a prima facie loss, they successfully mitigated or avoided their loss by entering into agreements for free car hire. ..... If the plaintiffs recover damages in respect of replacement car hire charges it will be on the basis that these charges were reasonably incurred and were reasonable as to amount. The fact that the plaintiffs will have to pay that part of the damages to the car hire companies ought not to make a difference ..... The car hire companies will simply be compensated in circumstances where the charges were reasonably incurred and were reasonable as to amount. The insurance companies would enjoy a windfall if the law compelled the court to rule that the plaintiffs had suffered no loss because they had fully mitigated or avoided their loss. It would be surprising if the common law compelled such an unreasonable result ....

23. Ralph Gibson J dealt with the same point at pp. 339-340 and the Master of the Rolls (as he then was) dealt with it at pp. 345-346 and at p. 349 where he stated:-

"As a general principle it is of course true that a plaintiff's claim for special damage can only succeed to the extent of losses he has actually sustained and liabilities he has actually incurred. But the rule is not absolute: the proceeds of private insurance and charitable benevolence are, for differing reasons, disregarded. Nor, in my view, does it relieve the defendant of liability if the plaintiff's liability to pay charges to a third part is contingent on his recovery against the defendant: that is the effect of Harlow & Jones Ltd -v- Panex (International) Ltd [1967] 2 Lloyd's Rep 509 at 531 and Cosemar SA -v- Marimarna Shipping Co Ltd, The Mathew [1990] 2 Lloyd's Rep 323 at 327-328. I further understand Donnelly -v- Joyce [1973] 3 All ER 475, [1974] QB 454 and McAll -v- Brooks [1984] RTR 99 to concentrate attention on the question whether the plaintiff has suffered a loss and away from the question what he will do with any money he may recover. The issue may be tested by asking whether, if these plaintiffs recover reasonable charges reasonably incurred, they will be overcompensated. They will not. Nor will the car hire companies. Neither will enjoy double recovery, or any windfall. The only windfall would be enjoyed by the insurance companies if the plaintiffs did not recover. I regard the insurance companies' submission on this point as unsound."

24. In the House of Lords Lord Mustill dealt with the question whether the motorists had suffered loss at p. 362:

"I now turn to the wholly distinct question whether the motorists have proved that they have suffered a recoverable loss through the unavailability of their own cars pending repairs. The defendants say that they have not, because the cars were replaced by substitute vehicles which the motorists were able to use free of charge. In essence, it is said that the motorists have mitigated what would otherwise have been a valid claim for general damages reflecting their loss of the opportunity to make use of their own vehicles.

On the opinion which I have formed of the obligations created by the obscure and incomplete terms of the two agreements this contention admits of a very short answer. In my judgment the motorists do not obtain the replacing vehicle free of charge. If the motorist had simply persuaded a garage to hire her a substitute on credit, without any of the superstructure of the present transaction, it would be no answer to a claim for damages equivalent to the sums due to the garage that these sums would not in practice be paid until a judgment in the motorist's favour had provided the necessary funds: for the amount of the outstanding liability represents the loss suffered by the motorist, and the question whether the motorist intends to apply the damages recovered in satisfaction of the debt, or in some wholly different way, cannot affect his right of recovery.

To distinguish that case from the present the defendants are forced to contend that the consideration for the provision of the cars consisted solely of a right to recoup themselves from the damages for loss of use. As will have appeared, I do not accept this interpretation. The hiring company has no direct right to the damages. The car hire company is not an assignee or chargee of the cause of action or its fruits, although it expects that the damages for loss of use will form part of the assets from which the motorist will in due course pay for the substitute. The liability for the car hire, although suspended as regards enforcement, rests upon the motorist throughout. It is a real liability, the incurring of which constitutes a real loss to the motorist. Whatever the publicity material may have conveyed, the provision of the substitute cars was not 'free'.

25. In the light of this conclusion I find it unnecessary to discuss the question, by no means easy, what the position would have been if the use of the substitute car really had been free; as, for example, if it had been lent by a kindly friend. To do so would require a reconciliation of cases such as Harlow & Jones Ltd -v- Panex (International) Ltd [1967] 2 Lloyd's Rep 509, Donnelly -v- Joyce [1973] 3 All ER 475, [1974] QB 454, McAll -v- Brooks [1984] RTR 99 and Cosemar SA -v- Marimarna Shipping Co Ltd, The Mathew [1990] 2 Lloyd's Rep 323. This question, which is of much general importance, is in my view far better left for decision when it actually arises rather than as a by-product of two schemes which have not, as I suggest, been fully worked out."

26. These cases differ from the present case by reason of the contract between DAS and the appellant in the present case. The appellant has to comply with stringent conditions imposed by DAS but the fact remains that the appellant does not obtain the replacing vehicle free of charge. He has chosen to enter into this onerous contract with DAS. The respondents might not have admitted liability and if he had been found partly to blame for the accident he would have been liable to the car hire company. If he had failed to comply with any of the other onerous requirements of DAS - for example, by appointing his own solicitor to act or dismissing the appointed solicitor he would have been liable to the car hire company. If he had considered the terms of the car hire imposed by DAS as unreasonable and departed from them, he would have had to pay for his car hire.

27. Sir Thomas Bingham explained the reason why the respondents' insurers have contested this case so vigorously at pp. 345-346:

"It is a common feature of such actions that the plaintiff's car is unavailable for his use during a period when it is awaiting and undergoing repairs. The cost of hiring a substitute car for use during such a period is in principle a legitimate component of such a claim, provided only that the plaintiff acted reasonably in hiring the substitute car which he did and incurred no more than reasonable charges in doing so.

In the past, claims by plaintiffs for the cost of hiring a substitute car have featured in such actions relatively infrequently, no doubt because plaintiffs hired substitute cars relatively infrequently. This is understandable. Many car-owners can, at a pinch and at the price of some inconvenience, manage without a car for a limited period; and many owners will be reluctant to incur substantial immediate liabilities to car hire companies when they do not know whether, or when, or to what extent they will be able to recoup their outlay from the other driver and his insurers. The result has probably been that innocent owners have chosen to forego claims which they could have sustained for the cost of hiring substitute cars, and the insurers of drivers responsible for causing collision damage have escaped liability for claims which, if advanced, they would have had to meet.

This situation gave rise to a commercial opportunity which care hire companies such as those involved in these appeals recognised and exploited. They did so by making substitute cars available to injured owners while their own cars were off the road on terms that the owners would not have to pay the hiring charges until recovery, or the conclusion of any claim, against the insurers of the guilty driver."

28. In the present case it is DAS which has seized on the commercial opportunity. But it is the respondents' insurers who would enjoy a windfall, if the court held there was 'no loss' - which, as Steyn LJ, pointed out in Giles case, would be an unreasonable result.