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OPINIONS
OF THE LORDS OF APPEAL
FOR JUDGMENT IN THE CAUSE
Lagden (Respondent)
v.
O'Connor (Appellant)
ON
THURSDAY 4 DECEMBER 2003
The Appellate Committee comprised:
Lord Nicholls of Birkenhead
Lord Slynn of Hadley
Lord Hope of Craighead
Lord Scott of Foscote
Lord Walker of Gestingthorpe
HOUSE OF LORDS
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
Lagden (Respondent) v. O'Connor (Appellant)
[2003] UKHL 64
LORD NICHOLLS OF BIRKENHEAD
My Lords,
- This appeal is a sequel to the decision of the House in Dimond v Lovell [2002] 1 AC 384. It represents a further step in clarifying the obligations of motor insurers regarding the cost of hire of a replacement car while a damaged car is undergoing repair. It is part of the long continuing contest between motor insurers and credit hire companies. The issue raised is narrow, and the amount of money involved in this case is modest. But the issue is important because it raises a principle of general application affecting many people.
- When one person's car is damaged by negligent driving on the part of another motorist and the damaged car is economically repairable, the owner of the damaged car loses the use of his vehicle while it is being repaired. In the ordinary course the damages payable by the negligent driver include, in addition to the cost of repairs, damages for loss of use of the damaged car. In the ordinary course the reasonable cost of providing the innocent motorist with a suitable replacement vehicle while his own car is off the road crystallises the amount of loss suffered by him under this head of loss. In practice it is a convenient yardstick by which to measure the damages payable to the innocent driver for temporary loss of use of his own car.
- In cases of this type accident hire companies, or credit hire companies, as they are variously known, provide a service additional to hiring out replacement cars. Unlike the arrangements normally made by car hire companies, credit hire companies do not require the motorist to produce an acceptable debit or credit card in advance ('up front'). Nor, in practice, is the hirer required to pay the hire charges in any other way. Instead, when a motorist seeks a replacement car for the period while his own car is off the road, the company checks whether the motorist seems to have an unanswerable claim against the other driver. Having satisfied itself on this score, the company provides the car sought and then seeks to recover its charges from the negligent driver's insurers. For these services, which go beyond simple car hire, credit hire companies charge an additional fee.
- In Dimond v Lovell [2002] 1 AC 384 the majority of the House expressed the view that a car owner cannot recover this additional fee element from the negligent motorist or his insurers. The damages recoverable for loss of use are limited to the 'spot rate' quoted by hirers other than accident hire companies. In the case of a hiring from an accident hire company the equivalent spot rate will ordinarily be the net loss after allowance has been made for the additional benefits the accident hire company has provided: see Lord Browne-Wilkinson [2002] 1 AC 384, 390, Lord Hoffmann, at p 403, and Lord Hobhouse of Woodborough, at p 407.
- In Dimond v Lovell Mrs Dimond could have found the money needed to hire a replacement car until she was reimbursed by Mr Lovell or his insurers. The case proceeded on this basis. Understandably enough, she preferred to take advantage of the services of an accident hire firm. But what if the innocent motorist, like many people, is unable to afford the cost of hiring a replacement car from a car hire company? Unlike Mrs Dimond, he cannot find the necessary money. So, unless he can use the services of a credit hire company, he will be unable to obtain a replacement car. While his car is being repaired he will have to make do as best he can without a car of his own. If this happens, he will be without his own car and in practice will receive little or no recompense for the inconvenience involved.
- My Lords, the law would be seriously defective if in this type of case the innocent motorist were, in practice, unable to obtain the use of a replacement car. The law does not assess damages payable to an innocent plaintiff on the basis that he is expected to perform the impossible. The common law prides itself on being sensible and reasonable. It has regard to practical realities. As Lord Reid said in Cartledge v E Jopling & Sons Ltd [1963] AC 758, 772, the common law ought never to produce a wholly unreasonable result. Here, as elsewhere, a negligent driver must take his victim as he finds him. Common fairness requires that if an innocent plaintiff cannot afford to pay car hire charges, so that left to himself he would be unable to obtain a replacement car to meet the need created by the negligent driver, then the damages payable under this head of loss should include the reasonable costs of a credit hire company. Credit hire companies provide a reasonable means whereby innocent motorists may obtain use of a replacement vehicle when otherwise they would be unable to do so. Unless the recoverable damages in such a case include the reasonable costs of a credit hire company the negligent driver's insurers will be able to shuffle away from their insured's responsibility to pay the cost of providing a replacement car. A financially well placed plaintiff will be able to hire a replacement car, and in the fullness of time obtain reimbursement from the negligent driver's insurers, but an impecunious plaintiff will not. This cannot be an acceptable result.
- The conclusion I have stated does not mean that, if impecunious, an innocent motorist can recover damages beyond losses for which he is properly compensatable. What it means is that in measuring the loss suffered by an impecunious plaintiff by loss of use of his own car the law will recognise that, because of his lack of financial means, the timely provision of a replacement vehicle for him costs more than it does in the case of his more affluent neighbour. In the case of the impecunious plaintiff someone has to provide him with credit, by incurring the expense of providing a car without receiving immediate payment, and then incur the administrative expense involved in pursuing the defendant's insurers for payment.
- In your Lordships' House the appellant sought to derive assistance from Liesbosch Dredger (Owners of) v Owners of SS Edison (The Liesbosch) [1933] AC 449 and Lord Wright's much discussed observations, at pp 460-461, regarding not taking into account a claimant's want of means when assessing the amount of his loss. For the reasons given by my noble and learned friends Lord Hope of Craighead and Lord Walker of Gestingthorpe these observations, despite the eminence of their source, can no longer be regarded as authoritative. They must now be regarded as overtaken by subsequent developments in the law.
- There remains the difficult point of what is meant by 'impecunious' in the context of the present type of case. Lack of financial means is, almost always, a question of priorities. In the present context what it signifies is inability to pay car hire charges without making sacrifices the plaintiff could not reasonably be expected to make. 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. I would dismiss this appeal.
LORD SLYNN OF HADLEY
My Lords,
- I have had the advantage of reading in draft the opinion of my noble and learned friend, Lord Nicholls of Birkenhead. I wholly agree with his reasoning.
- It was plainly foreseeable that Mr Lagden would, or might reasonably, need another car whilst his was not available. It was no less clear that he could only obtain the use of another car through the services of a credit hire company since he could not hire a car at the spot rate either at all or without taking steps which he could not reasonably be expected to take in the light of his financial position. The latter consideration distinguishes this case from Dimond v Lovell [2002] 1 AC 384. Moreover I do not consider that deductions have to be made for related benefits which resulted from his having to go to the credit hire company.
- In Alcoa Minerals of Jamaica Inc v Broderick [2002] 1 AC 371, the Judicial Committee of the Privy Council found it possible to distinguish the case from Liesbosch Dredger (Owners of) v Owners of SS Edison (The Liesbosch) [1933] AC 449 and accordingly thought it right to leave for consideration by your Lordships' House the question as to whether Liesbosch is still good law. In the light inter alia of the criticism and qualifications of that decision to which I refer in the Board's judgment, it seems to me with great respect that your Lordships should now say that the observations that a claimant's lack of means should not be taken into account when assessing his loss should no longer be followed.
- I would accordingly dismiss the appeal.
LORD HOPE OF CRAIGHEAD
My Lords,
- This is an appeal against the decision of the Court of Appeal (Aldous, Tuckey and Jonathan Parker LJJ) in Burdis v Livsey [2002] EWCA Civ 510, [2003] QB 36 in which judgment was given in a number of test cases concerning the provision by credit hire companies of car hire and repair services to the innocent victims of road accidents. As the Court of Appeal explained at the outset of its judgment, this was the third round of a contest between the motor insurance market and the credit hire companies: [2003] QB 36, 55, para 1. It is to be hoped that this appeal will be the last and final act in that long-running contest.
- Four of the cases with which the Court of Appeal was concerned related to a credit hire scheme provided by the Helphire group. Those cases were heard by Judge Charles Harris QC sitting at Oxford County Court: Clark v Ardington [2002] Lloyds Rep IR 138. There was a fifth case which raised a different issue involving another credit hire company called Accident Assistance. It had been heard by Gray J in an appeal from Judge Hewitt sitting at Doncaster County Court: Burdis v Livsey [2001] 1 WLR 1751. Leave to appeal to your Lordships' House was given in only one of the cases which were dealt with by the Court of Appeal. This was the case of Lagden v O'Connor, which was one of the four cases decided in the Oxford County Court by Judge Harris.
- Mr Lagden's case raises an issue which is of concern to those innocent motorists who wish to hire a car while their own car is being repaired but, for economic or financial reasons, have no choice but to use the services of a credit hire company. It is of concern too to the motor insurance industry, as the effect of the services which the credit hire companies provide has been to increase substantially the cost of claims which must be met by insurers on behalf of the motorists who were responsible for these accidents. It arises from the decision in Dimond v Lovell [2002] 1 AC 384 that only the spot hire rate of hiring an alternative vehicle is recoverable, and not the higher rates charged by credit hire companies. The question is whether that decision applies to a claimant who, due to lack of funds or for any other reason which is reasonably foreseeable, has no alternative but to use the services of a credit hire company.
The facts
- On 29 November 1999 Mr Lagden's 10 year old Ford Granada sustained damage while it was parked and unoccupied. The damage was caused by the negligence of Ms O'Connor, who had driven her Mitsubishi Shogun into collision with Mr Lagden's vehicle. Mr Lagden took his car for repair to a nearby coach works. But he was unemployed and in poor health. He had very little money, so he could not afford to pay for the hire of a car while his own car was off the road. While he was in the garage he saw a poster by Helphire Group Plc ("Helphire") inviting custom for its services. He rang Helphire from the garage with a view to taking advantage of what they had on offer.
- On 6 December 1999 Mr Lagden signed an agreement with Helphire UK Ltd, one of the subsidiaries of Helphire, to hire a Ford Mondeo car from them while his own car was being repaired. On the same day he signed a supplementary credit hire agreement which provided for Helphire UK Ltd to extend a credit facility to him for the hire charges for a period of 26 weeks. He also entered into an insurance policy with Angel Assistance, another subsidiary of Helphire. The purpose of the policy was to provide for the payment by Mr Lagden of the costs incurred by Helphire if they had not been recovered from Ms O'Connor by the end of the 26 week period.
- The total cost of the Helphire scheme was £659.76. This cost included certain sums which, in the light of the decision in Dimond v Lovell [2002] 1 AC 384, would not normally have been recoverable. In the case of the other three cases involving the Helphire scheme Judge Harris held that only the spot hire rate of hiring an alternative vehicle was recoverable. But he held that the full reasonable costs of the Helphire scheme were recoverable in Mr Lagden's case. He gave the following reasons for his decision [2002] Lloyd's Rep IR 138, 164, para 142:
"There will be some motorists who are too poor to be able to afford to hire a replacement car at commercial rates. Mr Lagden was such a person. For such people hiring on the spot market is not an option. Mr Lagden had no other choice and could not obtain a Helphire package without extra benefits. It was therefore in my view reasonable both for him to take the package, and that the total sum should be recoverable. To allow recovery of a greater sum than was strictly necessary to rent a car is in these circumstances as legitimate as allowing the degree of betterment that there is in repairing or replacing new for old, when this is all that can practicably be done. I would again refer to the passage in the citation of Pearson LJ in Derbyshire v Warren [1963] 1 WLR 1067: 'The plaintiff is not entitled to charge the defendant by way of damages with any greater sum than that which he reasonably needs to expend for the purpose of making good the loss.' If an impecunious claimant can only get himself a replacement car as part of a credit hire package then he reasonably needs in my judgment to expend the sum which that package costs."
- The Court of Appeal agreed with the decision of Judge Harris: [2003] QB 36, 83, para 127:
"The judge came to the right result. A defendant who damages another's car should not be surprised to find that he will have to pay for a replacement car if it is needed by the claimant. A wrongdoer must take his victim as he finds him. The loss is measured as the cost of repair plus the value of the loss of its use to the victim. Of course, additional benefits obtained as a result of taking reasonable steps to mitigate loss need to be brought into account in the calculation of damages: see Lord Hoffmann in Dimond v Lovell [2002] 1 AC 384, 401-402. But nobody suggests that there were any steps that were reasonable which would have mitigated Mr Lagden's loss which did not involve paying the full cost of the scheme. It was not suggested he could have obtained a loan or that there was any cheaper way of obtaining a replacement car. It seems that the Helphire charge was, to him, the cheapest way to remedy the loss. He was therefore entitled to recover the full cost of the scheme."
Is the decision in this case foreclosed by Dimond v Lovell?
- The main issue that had to be resolved in Dimond v Lovell [2002] 1 AC 384 was whether the form of agreement which had been used in that case satisfied the requirements of a regulated consumer credit agreement for the purposes of the Consumer Credit Act 1974. For reasons that it is not necessary to explain for the purposes of this case where the same difficulty does not arise, the agreement was held to be unenforceable. But one of the points that was argued was whether, even if the claim had been sound, the damages recoverable ought to be limited to the spot hire rate quoted by hirers other than credit hire companies.
- The leading speech was delivered by Lord Hoffmann. He accepted the judge's finding that Mrs Dimond acted reasonably in going to the credit hire company (referred to in that case as an accident hire company - the two expressions are interchangeable) and availing herself of its services. But he said that this did not necessarily mean that she could recover the full amount charged by the company as, by virtue of her contract, she had obtained not only the use of the car but additional benefits as well. English law did not regard the need for any of these additional services as compensatable loss, but the effect of the judge's award was that Mrs Dimond had obtained compensation for them indirectly because they were offered as part of a package by the company. There was something wrong with that conclusion. He referred to the rule that requires additional benefits obtained as a result of taking reasonable steps to mitigate loss to be brought into account in the calculation of damages which was applied in British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673. The hiring contract did not distinguish between what was attributable simply to the hire of the car and what was attributable to the other benefits, but it seemed to him that prima facie the value of these benefits was represented by the difference between what she was willing to pay the accident hire company and what she would be willing to pay an ordinary car hire company for the use of a car. As he put, at pp 402H-403B:
"The difference represents the value of the additional services which they provided. I quite accept that a determination of the value of the benefits which must be brought into account will depend upon the facts of each case. But the principle to be applied is that in the British Westinghouse case [1912] AC 673 and this seems to me to lead to the conclusion that in the case of a hiring from an accident hire company, the equivalent spot rate will ordinarily be the net loss after allowance has been made for the additional benefits which the accident hire company has provided."
- Lord Browne-Wilkinson said, at p 390B, that he agreed with Lord Hoffmann that, if the claim for damages for the loss of use of the car had been sound, the damages recoverable would have been limited to the spot hire rate. Lord Hobhouse of Woodborough was of the same view: pp 406-407. He agreed that it was reasonable for Mrs Dimond to pay the additional sum in order to obtain the benefits under the scheme, but this did not mean that she could claim the whole cost as the cost of mitigating her loss of use of the car. The cost of that was a lesser sum than that which she had expended on the hire of a substitute, on the evidence. The remainder was attributable to other matters and should not be included in the cost of mitigation. He said that this was the preferred way of looking at the problem. But there were other ways which led to the same conclusion, one of which was the distinction which was discussed in the British Westinghouse case between what was and was not collateral.
- My noble and learned friend, Lord Nicholls of Birkenhead disagreed with the opinion of the majority on this point. At p 391A he said that it took too narrow a view of the position in which the no-fault driver found himself. He pointed out that in practice the existence of liability on the part of the other motorist did not yield money in time to be of use to him, and that the additional services provided by accident care hire companies bridged that gap. He said that the law of the measure of damages should reflect the practicalities of the situation in which a wronged person found himself, otherwise it would mean that the law's response to a wrong was a right to damages which would in practice often be illusory. Lord Saville of Newdigate said, at p 403B-C, that he preferred to express no view on the question of the principles by which damages should have been calculated had the agreement been enforceable.
- For the appellants in this case it was submitted that the principles which were discussed in Dimond v Lovell were of general application and were not limited to claimants who are not impecunious. As Mr Flaux QC for the appellant put it at the outset of his argument, the opinion of the majority in that case provided both the starting and the finishing point for his argument. He submitted that the respondent's approach to the issue was wrong in principle. But it was common ground that the question of the impecunious motorist was not directly in issue in that case. There was no suggestion that Mrs Dimond would not have been able to afford the spot hire cost of hiring a substitute for the car which she was driving home from work when it was run into behind by the car which was being driven by Mr Lovell. It was on the advice given to her husband by his insurance brokers that she hired a replacement vehicle while her car was in the garage for eight days undergoing repair from the accident car hire company.
- The fact that the position of the impecunious motorist was not directly in issue in that case does not, of course, in itself mean that that we are at liberty to depart from the reasoning of the majority. I agree with Mr Flaux that the opinion which they expressed about the proper approach to the issue of damages provides the starting point for an examination of the issue that has been raised in this case. Whether it provides the finishing point too, as he submitted, is another matter. That is the question which we have to decide. The answer to it raises issues of law and of policy.
The law
- Mr Lagden's claim was, in essence, a claim for the loss of use of his car while it was in the garage undergoing the repairs which needed to be done as result of the accident. There was no evidence that he would have suffered financial loss as a result of being unable to use his car during this period. But inconvenience is another form of loss for which, in principle, damages are recoverable. So it was open to him, as it is to any other motorist, to avoid or mitigate that loss by hiring another vehicle while his own car was unavailable to him. The expense of doing so will then become the measure of the loss which he has sustained under this head of his claim. It will be substituted for his claim for loss of use by way of general damages. But the principle is that he must take reasonable steps to mitigate his loss. The injured party cannot claim reimbursement for expenditure by way of mitigation that is unreasonable. So the motorist cannot claim for the cost of hiring another vehicle if he had no reason to use a car while his own car was being repaired - if, for example, he was in hospital during the relevant period or out of the country on a package holiday. If it is reasonable for him to hire a substitute, he must minimise his loss by spending no more on the hire than he needs to do in order to obtain a substitute vehicle. If the defendant can show that the cost that was incurred was more than was reasonable - if, for example, a larger or more powerful car was hired although vehicles equivalent to the damaged car were reasonably available at less cost - the amount expended on the hire must be reduced to the amount that would have been needed to hire the equivalent.
- There is however another principle, as was made clear in Dimond v Lovell [2002 ] 1 AC 384, that must be given effect to in the calculation of the amount of the damages. This is the principle that requires additional benefits which are obtained as a result of taking reasonable steps to mitigate loss to be brought into account when the damages are being calculated. The question which has been raised in this case is whether this principle is subject to modification where, if he is to minimise his loss, the claimant has no choice but to accept those additional benefits.
- As Lord Hoffmann said, at p 402A, the leading case on this subject is British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673. In that case the turbines which were purchased in place of the defective turbines were more efficient than the defective turbines supplied by British Westinghouse, even if those turbines had been in accordance with the specification in their contract with the railway company. In the result the railway company obtained benefits over and above their contractual entitlement. That was their choice, and it was a reasonable and prudent choice to make in the circumstances. But it was held that it was nevertheless necessary to balance loss against gain when the amount of the damages was being calculated.
- So far so good. But what if the injured party has no choice? What if the only way that is open to him to minimise his loss is by expending money which results in an incidental and additional benefit which he did not seek but the value of which can nevertheless be identified? Does the law require gain to be balanced against loss in these circumstances? If it does, he will be unable to recover all the money that he had to spend in mitigation. So he will be at risk of being worse off than he was before the accident. That would be contrary to the elementary rule that the purpose of an award of damages is to place the injured party in the same position as he was before the accident as nearly as possible.
- Some guidance as to the approach which should be taken to this problem is provided by The Gazelle (1844) 2 W Rob 279. That was a case where a vessel was damaged by collision. The question was as to the amount that was to be paid to the owners of the damaged vessel for its repair. At p 281 Dr Lushington said that the measure of the indemnification to which the owner of the damaged vessel was entitled was co-extensive with the amount of the damage:
"The right against the wrongdoer is for a restitutio in integrum, and this restitution he is bound to make without calling upon the party injured to assist him in any way whatsoever. If the settlement of the indemnification be attended with any difficulty (and in those cases difficulties must and will frequently occur), the party in fault must bear the inconvenience. He has no right to fix this inconvenience upon the injured party; and if that party derives incidentally a greater benefit than mere indemnification, it arises only from the impossibility of otherwise effecting such indemnification without exposing him to some loss or burden, which the law will not place upon him."
The principle which emerges from this passage is that it is not open to the wrongdoer to require the injured party to bear any part of the cost of obtaining such indemnification for his loss as will place him in the same position as he was before the accident.
- In Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447 the plaintiffs' factory, which was in an old mill, was destroyed by fire as a result of defects in the design of equipment supplied by the defendants and its having been switched on and the plant left unattended. A new factory had to be built. The plaintiffs had no other option if they were to continue their business of making plasticine. They were not allowed to rebuild the old mill, so they had to put up a new factory. A question was raised as to the measure of damages. The defendants said that it should be limited to the difference in the value of the old mill before and after the fire and that the plaintiffs should not be allowed the cost of replacing it with a new building. This argument was rejected. Lord Denning MR said, at p 468A-C:
"If a second-hand car is destroyed, the owner only gets its value; because he can go into the market and get another second-hand car to replace it. He cannot charge the other party with the cost of replacing it with a new car. But when this mill was destroyed, the plasticine company had no choice. They were bound to replace it as soon as they could, not only to keep their business going, but also to mitigate the loss of profit (for which they would be able to charge to defendants). They replaced it in the only possible way, without adding any extras. I think they should be allowed the cost of replacement. True it is that they got new for old; but I do not think the wrongdoer can diminish the claim on that account. If they had added extra accommodation or made extra improvements, they would have to give credit. But that is not this case."
- Widgery LJ in the same case dealt with the question of betterment in this way, at p 473B-C:
"It was clear in the present case that it was reasonable for the plaintiffs to rebuild their factory, because there was no other way in which they could carry on their business and retain their labour force. The plaintiffs rebuilt their factory to a substantially different design, and if this had involved expenditure beyond the cost of replacing the old, the difference might not have been recoverable, but there is no suggestion of this here. Nor do I accept that the plaintiffs must give credit under the heading of 'betterment' for the fact that their new factory is modern in design and materials. To do so would be the equivalent of forcing the plaintiffs to invest their money in the modernising of their plant which might be highly inconvenient for them. Accordingly I agree with the sum allowed by the trial judge as the cost of replacement"
Cross LJ too rejected the proposition that the defendants were entitled to claim a deduction from the actual cost of rebuilding and re-equipping on the ground that the plaintiffs had got new for old, adding at p 476B-C:
"I can well understand that if the plaintiffs in rebuilding the factory with a different and more convenient lay-out had spent more money than they would have spent had they rebuilt it according to the old plan, the defendants would have been entitled to claim that the excess should be deducted in calculating the damages. But the defendants did not call any evidence to make out a case of betterment on these lines and we were told that in fact the planning authorities would not have allowed the factory to be rebuilt on the old lines. Accordingly, in my judgment, the capital sum awarded by the judge was right."
- Of course, the facts in these two cases were quite different from those in this case. But I think that the principles on which they were decided are of general application, and it is possible to extract this guidance from them. It is for the defendant who seeks a deduction from expenditure in mitigation on the ground of betterment to make out his case for doing so. It is not enough that an element of betterment can be identified. It has to be shown that the claimant had a choice, and that he would have been able to mitigate his loss at less cost. The wrongdoer is not entitled to demand of the injured party that he incur a loss, bear a burden or make unreasonable sacrifices in the mitigation of his damages. He is entitled to demand that, where there are choices to be made, the least expensive route which will achieve mitigation must be selected. So if the evidence shows that the claimant had a choice, and that the route to mitigation which he chose was more costly than an alternative that was open to him, then a case will have been made out for a deduction. But if it shows that the claimant had no other choice available to him, the betterment must be seen as incidental to the step which he was entitled to take in the mitigation of his loss and there will be no ground for it to be deducted.
- Applying those principles to the present case, I would hold that the defendant's insurers have not made out a case for the deduction which they seek. The evidence showed that Mr Lagden had no choice but to use the services of the credit hire company and that, if he was to make use of these services, he had no way of avoiding the additional benefits that were provided to him. The principles which I would apply are of general application. But it by no means follows that the same result must follow in every case where the innocent motorist uses the services of a credit hire company. The criterion that must be applied is whether he had a choice - whether it would have been open to him to go into the market and hire a car at the ordinary rates from an ordinary car hire company.
- In practice, for reasons that are obvious, companies which offer cars for hire in the open market insist on payment of the rental up front before the car is collected, together with a sum to cover the risk of damage to the car while it is on hire. Payment is usually made by means of a credit card or a debit card. Some companies may accept cash, but if they do the sum that will have to be paid up front will not be small. Many car owners are, of course, well able to provide what is needed to satisfy the hirer that the money which is needed to pay for the hire is available. If they choose to use the services of a credit hire company they must accept as a deduction from their expenditure the extra cost of doing so. The full cost of obtaining the services of a credit hire company cannot be claimed by the motorist who is able to pay the cost of the hire up front without exposing himself or his family to a loss or burden which is unreasonable.
- But it is reasonably foreseeable that there will be some car owners who will be unable to produce an acceptable credit or debit card and will not have the money in hand to pay for the hire in cash before collection. In their case the cost of paying for the provision of additional services by a credit hire company must be attributed in law not to the choice of the motorist but to the act or omission of the wrongdoer. That is Mr Lagden's case. In law the money which he spent to obtain the services of the credit hire company is recoverable.
Policy
- The background to the litigation which culminated in the decision in Dimond v Lovell [2002] 1 AC 384 was the increase in the cost of third party claims against motor insurance companies. This was due to the fact that motorists were hiring replacement cars when they would not previously have done so. It was also due to the fact that, as they were protected against the cost of paying the hire charges, they did not exercise the same scrutiny over those charges as they would have done if they themselves were having to meet the cost of paying them. In Mrs Dimond's case, for example, the daily spot rate for car hire in her area varied between £27.42 and £23.89, whereas the sum which she was charged by the credit hire company was £43.33 inclusive of everything. In the present case the judge held that the spot car hire rates were about 70 per cent of the sums charged by Helpline: [2002] Lloyd's Rep IR 138, 163, para 137.
- The view of the majority in Dimond v Lovell was based on their analysis of the law, not on consideration of issues of policy. But Mr Flaux sought to invoke policy considerations in this case in order to support his argument that claims handing charges should not be recoverable under any circumstances. He submitted that, if there were to be a relaxation of the rule that claims handling charges were irrecoverable in the case of the cost of car hire, this would increase the burden of insurance premium payments on the whole community. There was also the prospect of claims handling charges being built into damages claims in other fields as well as that relating to car hire. He pointed out how important it was to distinguish between costs and damages in cases brought in the county court in view of the costs limits that are applied to cases under the small claims track. He submitted that, if the claimant were to be allowed to recover the full cost of the Helphire scheme, that would be tantamount to awarding him costs to which he would not otherwise be entitled. To allow the impecunious to recover claims handling charges as part of their claim of damages would encourage accident management companies to market and direct their services at those of limited means with results that would be undesirable.
- On the other hand there is the point to which Lord Nicholls drew attention in Dimond v Lovell [2002] 1 AC 384, p 391A-B that for many motorists the liability of the negligent motorist in no-fault cases to pay the cost of the hire charges is more theoretical than real, as they do not have the means to enter into a car hire contract. This may be because they lack the cash in hand to pay in advance for the car hire, or it may because they are unable to produce an acceptable credit or debit card. Recompense from the insurer of the wrongdoer, or even an acceptance of liability, will in practice come too late to be of use to them. Impecuniosity, in that sense, is a fact of life for them. The importance of the service that is provided, in those cases, by the credit hire company was not further explored in that case. But I consider that it cannot be left out of account if regard is to be had to considerations of policy. Where the law shows that the lack of choice should be taken into account in the assessment of damages, the policy of the law ought to be to provide the innocent party with that remedy.
- There is another consideration which must be mentioned. We cannot ignore the fact that accidents of the kind that befell Mr Lagden's motor car happen every day. There are thousands of such claims, most of which are of very small value and not worth the cost of litigating. It is in nobody's interest that these cases should be forced into court where there is no issue about liability. Everything points to reducing the opportunity for dispute to a minimum so that they can be settled out of court at minimum cost as soon as possible. It was largely with a view to achieving this object that this series of test cases was brought before the courts by the motor insurance companies. It is suggested that the benefits that were achieved by the decision in Dimond v Lovell will be set aside if an exception were to be made in favour of the impecunious. The adjective is incapable of precise definition. Case after case, it is said, will have to come to court in order to resolve the issue whether the claimant had no choice but to use the services of a credit hire company.
- The Court of Appeal [2003] QB 36 was alive to this issue. In its judgment, at p 83, para 128, the court said:
"We realise that in some cases it will be necessary to consider the financial ability of a claimant to pay car hire charges. However we do not anticipate that district and county court judges will not be able to arrive at a just result without putting the parties to great expense."
That seems to me to be a fair assessment. In practice the dividing line is likely to lie between those who have, and those who do not have, the benefit of a recognised credit or debit card. It ought to be possible to identify those cases where the selection has been made on grounds of convenience only without much difficulty.
- I recognise that, if an exception is to be made in favour of the car owner who is impecunious, there may be some cases where motor insurers will feel that they have no alternative but to take the case to court in order to resolve the question of fact as to whether the claimant had no choice but to use the services of a credit hire company. This may lead to an increase in contested small claims. I do not think that we are in a position to assess the scale of that increase. But motor insurers will be as anxious as anybody to keep these cases out of court with a view to keeping costs to a minimum. This suggests that the better course is to leave it to the insurance market to find its own solution to this problem. We must bear in mind, too, that the object of the law of damages is to put the injured party into the same position as he was before the accident. It would defeat this object if we were to arrive at a decision on policy grounds that would deprive the impecunious motorist of the opportunity of minimising his loss of use while his car is being repaired by obtaining the hire of an alternative vehicle.
- For these reasons I would hold that the policy objections do not justify a departure from what I take to be the law as to the assessment of the damages that are recoverable.
The Liesbosch
- The appellant points out that this case cannot be distinguished from the facts which were before the House in Liesbosch Dredger (Owners of) v Owners of SS Edison (The Liesbosch) [1933] AC 449. He seeks, as a last resort, to rely on the rule that was established by that case about the consequences of the claimant's pre-existing impecuniosity.
- As everyone knows, the claim in that case arose as a result of the fouling of the moorings of the Liesbosch by the Edison when she was proceeding to sea from the Greek port of Patras, as a result of which the dredger sank and was a total loss. The dredger was engaged on work in the harbour under contract with the harbour board at the time of the accident. All the owners' liquid resources were engaged in the contract undertaking, and matters were made worse by the fact that their deposit under the contract was liable to forfeiture if the work was delayed. They were unable to raise the funds that were needed to buy another dredger, so they decided to hire one called the Adria from Italy. The cost of the hire was high, and the other dredger was more expensive to work than the original. The result was that, due entirely to their lack of means, the owners incurred much more expense in the provision of an alternative dredger than they would have done if they had been able to purchase an equivalent. The monthly rate of hire became so burdensome that the harbour board purchased the Adria from her Italian owners and sold her to the owners of the Liesbosch for a sum to be paid by instalments over four years.
- The owners of the Liesbosch claimed their actual loss, on the basis that all the circumstances should be taken into account and they had acted reasonably in hiring the Italian vessel in view of their financial embarrassment. But the sum that they were awarded as damages was restricted to the market price of a comparable dredger at the time of the loss, together with the cost of transporting her and insuring her to Patras.
- The Registrar and the judge had disallowed the objection that the damages claimed by the owners were too remote. They were awarded the value of the Liesbosch, which was taken to be the amount for which the Adria had been purchased by the Harbour Board. They were also awarded the cost of hiring the Adria until she was purchased, the extra cost of working her and their loss of profit on the contract while the work was stopped for want of a dredger. This approach was rejected by the Court of Appeal, which held that any loss due to the fact that the owners were impeded in the performance of their contract was too remote and not recoverable. It was the decision of the Court of Appeal that prevailed in the House of Lords, where it was held that anything beyond the cost of a replacement vessel had been properly disallowed. The House of Lords differed from the Court of Appeal as to the amount to be awarded as the value of the dredger. The Court of Appeal had awarded the sum which had been paid for the Adria when it been purchased from the Harbour Board. The case was referred back to the Registrar so that he could ascertain the market value of the dredger when she was lost.
- The owners' principal argument in the House of Lords was that the hiring of the Adria was a reasonable and natural result of the loss of the Liesbosch. They referred, at p 452, in support of their argument to an observation by Lord Collins in Clippens Oil Co v Edinburgh and District Water Trustees [1907] AC 291, 303 that the wrongdoer must take his victim talem qualem (as he finds him), adding that:
"if the position of the latter is aggravated because he is without the means of mitigating it, so much the worse for the wrongdoer, who has got to be answerable for the consequences flowing from his tortious act."
- Lord Wright, whose speech was concurred in by all the other members of the House, rejected this argument, at p 460:
"The respondents' tortious act involved the physical loss of the dredger; that loss must somehow be reduced to terms of money. But the appellants' actual loss in so far as it was due to their impecuniosity arose from that impecuniosity as a separate and concurrent cause, extraneous to and distinct in character from the tort; the impecuniosity was not traceable to the respondents' acts, and in my opinion was outside the legal purview of the consequences of those acts…In the varied web of affairs, the law must abstract some consequences as relevant, not perhaps on grounds of pure logic but simply for practical reasons. In the present case if the appellants' financial embarrassment is to be regarded as a consequence of the respondents' tort, I think it is too remote, but I prefer to regard it as an independent cause, though its operative effect was conditioned by the loss of the dredger."
At p 462, he said that the damages must be assessed as if the appellants had been able to go into the market at the time of the loss and buy a dredger to replace the Liesbosch.
- The rule which was established by that decision is generally understood to be that the damages for which the defendant is liable cannot be increased by reason of the claimant's impecuniosity. But, as the editors of Halsbury's Laws of England, 4th ed, vol 12(1) (reissue, 1998), pp 322-323, para 858, note 4 have observed, this rule is difficult to reconcile with the principle to which Lord Collins referred in the Clippens Oil case [1907] AC 291, 303, that the defendant must take his victim as he finds him. Lord Wright said [1933] AC 449, 461 that that principle was not in point, as Lord Collins was dealing not with measure of damage but with mitigation. But this seems to be a distinction without a difference. And the rules for mitigation, both in tort and in contract, do not require the injured party to do what he cannot afford to do when he is seeking to reduce the damages payable by the wrongdoer.
- The decision has frequently been criticised: see, for example, McGregor on Damages, 17th ed (2003), para 332 and, for a helpful and detailed review of its defects, Coote, "Damages, The Liesbosch, and Impecuniosity" [2001] CLJ 511. Burrows, Remedies for Torts and Breach of Contract, 2nd ed (1994), p 88 observes that the rule seems unjustified in terms of policy; Salmond and Heuston on the Law of Torts, 21st ed (1996), p 515 state that it is hard to reconcile with the principle that it is the claimant's duty to mitigate his loss, which should allow him to borrow money to do so; and Winfield and Jolowicz on Tort, 16th ed (2002), p 238 do not find it possible to give any logical reason for regarding the claimant's impecuniosity as extrinsic but taking into account his physical disability. It has been doubted whether Lord Wright was laying down a rule of law or was simply saying that the loss claimed was too remote in that case. If he was laying down a rule of law, the decision has scarcely ever been followed. It has frequently been distinguished or confined to its own facts. As time has gone by the rule has been more and more attenuated, to such an extent that it is on the verge of extinction. The respondents submit that it should not be followed in this case. They say that the time has now come for the House to depart from it.
- In Ramwade Ltd v W J Emson & Co Ltd [1987] RTR 72 the plaintiffs had been obliged to hire vehicles to perform the work carried out by their skip lorry which had been damaged beyond repair in a road accident. Their insurance brokers had, contrary to instructions, failed to procure a comprehensive insurance policy, and the claimants could not afford to replace it by buying another skip lorry. Parker LJ, at pp 75-76, rejected the plaintiffs' argument that the damage consisting in the hire of the vehicles flowed from the defendants' failure to provide them with a comprehensive insurance policy. One of the reasons which he gave for reaching this conclusion was that it flowed from the impecuniosity of the plaintiffs which rendered them unable to afford a substitute vehicle, adding that "if that is the true cause the hire charges are irrecoverable on the principles laid down in The Liesbosch [1933] AC 449." But that is an isolated instance, and it is hard to find any other examples. The trend of the authorities has been almost always in the contrary direction.
- The Liesbosch was decided not long after the decision in In re Polemis & Furness, Withy & Co [1921] 3 KB 560 in a climate when directness of causation was the test for remoteness of damage in tort, as Coote [2001] CLJ 511, 535 has pointed out. That rule was finally departed from in Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd (The Wagon Mound) [1961] AC 388. But there were earlier signs that a broader test, approaching the test whether the loss was foreseeable which was established by that case, was becoming recognised. In Monarch Steamship Co Ltd v Karlshamns Oljefabriker A/B [1949] AC 196, in which damages had been sought for breach of contract, Lord Wright reviewed the cases on remoteness of damage. He started his review by reaffirming the broad general rule that a party injured by the other's breach of contract is entitled to such money compensation as will put him in the position in which he would have been but for the breach. He ended it with the propositions that the matters did not depend on the differences (if any) between contract and tort in that connection, that the reasonable contemplation as to damages was what the court attributed to the parties and that the question in such a case must always be what reasonable business men must be taken to have contemplated as the natural or probable result if the contract was broken. The change in terminology is significant. It might have led to a different conclusion if it had been used to guide the result in The Liesbosch.
- In Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297, 306 Denning LJ set the modern trend when he said:
"It was also said that the damages were the result of the impecuniosity of the sellers and that it was a rule of law that such damages are too remote. I do not think there is any such rule. In the case of a breach of contract, it depends on whether the damages were reasonably foreseeable or not."
In Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 433, 458 Donaldson LJ came as close as he could to saying that the rule laid down by the House in The Liesbosch was wrong. He said that it was not at once apparent why a tortfeasor must take his victim as he finds him in terms of exceptionally high or low earning capacity, but not in terms of pecuniosity or impecuniosity which may be their manifestation. At p 459, having examined the decision, he said:
"As I understand Lord Wright's speech, he took the view that, in so far as the plaintiffs had in fact suffered more than the loss assessed on a market basis, the excess flowed directly from their lack of means and not from the tortious act, or alternatively it was too remote in law. In modern terms, I think that he would have said that it was not foreseeable."
- In Perry v Sidney Phillips & Son [1982] 1 WLR 1297, 1302 Lord Denning MR said that Lord Wright's statement must be restricted to the facts of The Liesbosch and was not of general application. At p 1307 Kerr LJ adopted the same approach. He said:
"If it is reasonably foreseeable that the plaintiff may be unable to mitigate or remedy the consequence of the other party's breach as soon as he would have done if he had been provided with the necessary means to do so from the other party, then it seems to me that the principle of The Liesbosch [1933] AC 449 no longer applies in its full rigour."
- In Mattocks v Mann [1993] RTR 13, 19 Beldam LJ, with whom Nourse and Stocker LJJ agreed, referring to his observations in Bolton v Price (unreported), 24 November 1989; Court of Appeal (Civil Division) Transcript No 1159 of 1989, said:
"I there said that at the present day it is generally accepted that, in what Lord Wright termed 'the varied web of affairs' that follows a sequence of events after an accident of this kind, it is only in an exceptional case that it is possible or correct to isolate impecuniosity, as it is sometimes called, or the plaintiff's inability to pay for the cost of repairs from his own resources as a separate cause and as terminating the consequences of a defendant's wrong. It seems to me necessary today to consider whether, having regard to all the circumstances of the case and the resources available to a plaintiff, resources known by the defendant or her representatives to be of a kind that will not be able to provide for the repairs themselves, in all the circumstances, the plaintiff has acted reasonably and with commercial prudence."
- The same approach has been adopted in Scotland. In Chanthall Investments Ltd v F G Minter Ltd, 22 January 1976 (reported on another point in 1976 SC 73) Lord Keith, sitting in the Outer House of the Court of Session, said:
"I am of opinion that in each case where the matter arises it is a question of fact, in the particular circumstances, whether loss associated with the impecuniosity of the party claiming to have suffered loss was within the contemplation of the parties. Authority for this proposition is to be found in Trans Trust SPRL v Danubian Trading Co [1952] 1 KB 285."
This statement was approved by the Inner House in Margrie Holdings Ltd v City of Edinburgh District Council, 1994 SLT 971, 976-977, where the Lord President (Hope), delivering the opinion of the court said that the proper approach, consistent with the modern authorities, was to ask whether the loss was or was not foreseeable and that this was ultimately a question of fact in each case.
- So too in New Zealand. In Attorney General v Geothermal Produce NZ Ltd [1987] 2 NZLR 348, 355 Cooke P said:
"it seems to me that Liesbosch is certainly not to be extended as far as logic could be said to carry it. The difficulties so generally experienced in accommodating the decision with principle and justice, as commonly understood at the present day, suggest that any continuing effect given to it as a precedent should at least be strictly confined to damages for the loss of a profit-earning chattel, in use for performing a contract, for which a replacement is available by purchase on the market. That is not the present case, which is much more complicated… On the judge's findings, fully supported by evidence, the company acted reasonably to mitigate its losses, and that is enough to exclude any defence based on impecuniosity."
- In Alcoa Minerals of Jamaica Inc v Broderick [2002] 1 AC 371 the plaintiff was unable to afford repairs to his roof and deferred carrying them out while the issue of liability was being disputed. The Judicial Committee rejected the argument that the damages should be assessed as at the date of the physical damage and that the fact that the plaintiff could not afford to pay for the repairs should be ignored. Delivering the judgment of the Board, my noble and learned friend Lord Slynn of Hadley said that the case was clearly to be distinguished from the position in The Liesbosch, as the need to repair the roof was a direct consequence of the tort and the real question was whether Mr Broderick was in breach of his duty to mitigate his damages. He went on to say this with regard to the issue of impecuniosity, at pp 382H-383A:
"Lord Wright in The Liesbosch thought in the alternative that the owners of the dredger's financial embarrassment was too remote. In the present case it seems to their Lordships to have been obviously foreseeable that if the house of a person in the position of Mr Broderick was seriously damaged he would not or might not have the wherewithal to repair it and that his ability to do so would depend on his establishing the liability of, and recovering damages from, the defendant."
Here again the test which was applied as the measure of damages was the modern test of whether the loss was reasonably foreseeable.
- The Judicial Committee did not go so far in Alcoa Minerals as to say that The Liesbosch was wrongly decided. As it was a decision of the House of Lords, it was for the House and not the Board to decide whether the rule that was laid down in that case should now be departed from. The opportunity for the House to take that step has now come. It is not necessary for us to say that The Liesbosch was wrongly decided. But it is clear that the law has moved on, and that the correct test of remoteness today is whether the loss was reasonably foreseeable. The wrongdoer must take his victim as he finds him: talem qualem, as Lord Collins said in the Clippens Oil case [1907] AC 291, 303. This rule applies to the economic state of the victim in the same way as it applies to his physical and mental vulnerability. It requires the wrongdoer to bear the consequences if it was reasonably foreseeable that the injured party would have to borrow money or incur some other kind of expenditure to mitigate his damages.
- For these reasons I would reject the appellant's argument that we should apply the rule that was laid down in The Liesbosch that loss due to the claimant's pre-existing impecuniosity is too remote and cannot be recovered as damages. I would hold that this rule should now be departed from.
Conclusion
- I consider that the decision of the Court of Appeal should be affirmed. I would dismiss the appeal.
LORD SCOTT OF FOSCOTE
My Lords,
- The facts of this case are not in dispute and can be very shortly stated. On 29 November 1999 Mr Lagden's car, while unoccupied and parked at the roadside, was run into and damaged by a vehicle driven by Mrs O'Connor. It needed to be repaired. Mr Lagden took it to a garage for the necessary repairs to be carried out. By 16 December 1999 the repairs had been completed and Mr Lagden recovered his car from the repairers. So he was without the use of his car from 29 November to 16 December.
- In order that he should not be without the use of a car while his own car was being repaired Mr Lagden decided to hire a car. Having seen an advertisement by Helphire Group plc ("Helphire") advertising their services to those whose cars had been damaged in a car accident and were off the road through no fault of the owner but solely due to the fault of the driver of the other vehicle, Mr Lagden contacted Helphire. Having done so, he entered into a number of agreements, four in all, each with a Helphire subsidiary. One was a vehicle hire agreement; another was a 26 week credit hire agreement; another was a credit repair agreement. Each of these three agreements was dated 6 December 1999. So it seems that Mr Lagden had some seven days without the use of a car. The credit agreements were framed so as to avoid unenforceability under the provisions of the Consumer Credit Act 1974. Challenges to the enforceability of the agreements, based upon alleged infringements of the 1974 Act, were raised in the courts below. But these challenges failed and, in the appeal to this House the enforceability of the agreements was no longer in issue.
- The purpose of the credit hire agreement was to relieve Mr Lagden of the need to find the money to pay for the hire of the substitute car. It was assumed that the hire charges would be covered by the damages payable by Mrs O'Connor, or, in practice, Mrs O'Connor's insurers. The credit period of 26 weeks allowed, it was hoped, time for liability to be accepted and payment to be made by the insurers. This was, after all, as simple a case as there could be. But, in case for some reason payment should be delayed, Mr Lagden entered into an insurance agreement with Angel Assistance Ltd (another subsidiary of Helphire) in order to provide for the payment of the hire charges in the event that recovery from Mrs O'Connor (or her insurers) had not been obtained by the end of the 26 week credit period. The credit hire agreement provided for the prosecution of the damages claim to be dealt with by Helphire. So, once the agreements had been signed and the hired car had been made available to Mr Lagden there was nothing he need do save await the recovery of his own car from the repairers, upon which he would return the hired car, all within the 26 weeks. He would pay nothing. Helphire would recover its charges by prosecuting Mr Lagden's claim against Mrs O'Connor.
- Helphire's charges for its services in relation to the car hire were £659.76. This sum, therefore, was included in Mr Lagden's damages claim. But the £659.76 represented not simply a charge for the car hire. Included within that sum was recompense to Helphire for allowing credit to Mr Lagden for the 26 weeks and recompense to Helphire for their services in prosecuting the claim. The "spot" rate for hire of a similar car to that provided to Mr Lagden would have been a good deal less than £659. But, of course, Mr Lagden would have had to pay the spot rate up front. And if he had hired a car under an ordinary car hire contract either he, or lawyers on his behalf, would have had to undertake the task of recovering the car hire charge as damages from Mrs O'Connor or her insurers. So Mrs O'Connor's insurers declined to pay the £659.76. They accepted liability for a reasonable car hire charge, based upon the spot rates in the area, but contended that Mr Lagden was not entitled to recover as damages the part of the £659.76 that reflected the two additional benefits that Mr Lagden had obtained under the Helphire agreements, namely, the 26 weeks credit facility and the services of Helphire in prosecuting the claim. The amount involved is trivial. But the principle is important, both to car hire firms such as Helphire and to car insurers.
- At first sight the principle would appear to have been settled by the majority opinions expressed in the House in Dimond v Lovell [2002] 1 AC 384. As in the present case the litigation arose out of a trivial accident in which the claimant's car was damaged by the negligent driving of the defendant. There was no dispute about the defendant's liability. The claimant, like Mr Lagden, wanted a replacement vehicle while her car was being repaired. So she entered into a car-hire agreement with a company called 1st Automotive Ltd. The agreement had credit provisions that postponed the time at which the claimant would have to pay the car-hire charges. It also had provisions that allowed 1st Automotive to handle the damages claim. So, as in the present case, the car-hire charges were significantly higher than the spot rate charges for car-hire in the area. The defendant's insurers refused to pay the sum claimed and litigation resulted. In the event the agreement the claimant had entered into with 1st Automotive was held to be unenforceable on account of provisions of the Consumer Credit Act 1974. But Lord Hoffmann (with whose opinion Lord Browne-Wilkinson expressed agreement), Lord Hobhouse of Woodborough and Lord Nicholls of Birkenhead expressed opinions as to whether, if the agreement had not fallen foul of the 1974 Act, the full car-hire charge would have been recoverable as damages.
- Lord Nicholls of Birkenhead, in agreement with the view that had been expressed on the point by the majority in the Court of Appeal, would have allowed recovery of the full car-hire charge. The 1st Automotive agreement, under which the claimant obtained not only a hired car but the other benefits as well, was, he held, a reasonable one for claimants, whose cars had been put off the road by the negligence of someone else, to enter into. He held, at p 391, that :
"So long as the charge for the additional services is reasonable, this charge should be part of the recoverable damages."
- Lord Hoffmann and Lord Hobhouse of Woodborough agreed that the claimant had acted reasonably in availing herself of 1st Automotive's services and that the sum she had agreed to pay for the services was a reasonable one (pp 401E and 407B) but took the view that she was obtaining benefits for which the negligent defendant could not be required to pay. Lord Hoffmann said, at pp 401-402:
"I think that what has gone wrong is that the Court of Appeal did not consider the rule that requires additional benefits obtained as a result of taking reasonable steps to mitigate loss to be brought into account in the calculation of damages."
And per Lord Hobhouse, at p 407:
"But [the claimant] cannot claim the whole cost as the cost of mitigating the loss of the use of her car. The cost of that was, on the evidence, only about £24 per day. The remainder of what she paid was attributable to other matters and therefore should not be included in the cost of mitigation".
Both Lord Hoffmann and Lord Hobhouse referred to British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 in support of their approach.
- Lord Hoffmann and Lord Hobhouse approached the issue in slightly different ways but the principle underlying their conclusions is the same. First, where an injured party as a consequence of the negligence has made payments that are recoverable as special damages, the costs to the injured party of financing the payment does not become an additional item of special damage. Compensation for the financing costs can be obtained by an award of interest on the damages running from the date the payments were made. Second, compensation for payments that have been made by an injured party for the services of those who have prosecuted the damages claim can be recovered only by an order for costs. Payment for those services does not constitute an item of special damage. It is important to notice that Lord Hoffmann's and Lord Hobhouse's conclusions did not depend on the absence of reasonable forseeability. Reasonable forseeability is the criterion that generally governs the recoverability of items of special damage. It was not applied in Dimond v Lovell because payment for the additional benefits in question could not be claimed as special damage. Reasonable forseeability was irrelevant.
- If the approach of the majority in Dimond v Lovell is adopted in the present case, this appeal must succeed. But, it is argued, Dimond v Lovell is distinguishable. Although the decision of Mrs Dimond to contract with 1st Automotive and agree to pay their charges for the bundle of services that they were offering — car-hire, a credit line and handling of the damages claim — was a reasonable decision, Mrs Dimond did have a choice. She could have obtained a substitute car by paying the spot rate on offer from a number of local car-hire firms. By contrast, in the present case Mr Lagden, it is said, had no choice. He was seriously impecunious. He could not afford to pay a spot rate up-front car hire charge. His only means of obtaining a substitute car was to enter into an agreement or agreements under which, by a combination of credit facility and insurance cover, he was assured of having a substitute car without having to find the money to pay the charges.
- The trial judge, Judge Harris, and the Court of Appeal accepted this argument. The Dimond v Lovell principle should not, they held, be applied to an impecunious claimant who had no alternative but to use the services of a credit hire company. In the Court of Appeal [2003] QB 36, 83, para 127 the point was put thus:
"Of course, additional benefits obtained as a result of taking reasonable steps to mitigate loss need to be brought into account in the calculation of damages: see Lord Hoffmann in Dimond v Lovell [2002] 1 AC 384, 401-402. But nobody suggests that there were any steps that were reasonable which would have mitigated Mr Lagden's loss which did not involve paying the full cost of the scheme. It was not suggested he could have obtained a loan or that there was any cheaper way of obtaining a replacement car. It seems that the Helphire charge was, to him, the cheapest way to remedy the loss. He was therefore entitled to recover the full cost of the scheme".
- My Lords, I do not regard the factual basis on which Dimond v Lovell has been distinguished as very persuasive. The relevant findings are in the judgment of Judge Harris [2002] Lloyd's Rep IR 138, mainly at pp 148-149, paras 34 and 35: "[Mr Lagden] had very little money, he was indeed … subject to an administration order" and "Mr Lagden was not a wholly convincing witness … His answers about why he felt the hire charges were reasonable were curious and he seemed for no very obvious reason anxious to assist Helphire if he could". Then, at p 164, para 142, under the heading "The impecunious hirer", the judge says this:
"There will be some motorists who are too poor to be able to afford to hire a replacement car at commercial rates. Mr Lagden was such a person. For such people hiring on the spot market is not an option. Mr Lagden had no other choice and could not obtain a Helphire packet without extra benefits … If an impecunious claimant can only get himself a replacement car as part of a credit hire package then he reasonably needs in my judgment to expend the sum which that package costs".
- The proposition that Mr Lagden "had no other choice" does not seem to me satisfactorily based given the rather sparse facts set out in paragraphs 34 and 35. It is very rare indeed for there to be "no other choice". There are nearly always choices. Mr Lagden might have chosen to forgo the use of a car during the short repair period. The purposes for which he needed a car for daily use, or was accustomed to use his car daily, are not known. The practicalities of use by Mr Lagden of public transport during that short period are not known. It may very well have been reasonable for Mr Lagden to want to have a substitute car available for his use during the repair period but to say that he had "no other choice" seems to me somewhat implausible. It is to be noticed also that Judge Harris based his conclusion on the reasonableness of Mr Lagden's decision to accept Helphire's car hire package. This is the approach that Lord Nicholls of Birkenhead adopted in Dimond v Lovell. It is the approach that I had adopted in the Court of Appeal in that case. But it was not accepted by the majority in Dimond v Lovell, Lord Hoffmann, Lord Browne-Wilkinson and Lord Hobhouse, as being the right approach.
- On the basis of the impecuniosity, "no other choice", finding relating to Mr Lagden it is correct that there is a factual difference between the present case and Dimond v Lovell. The issue is whether that factual difference justifies a departure from the principle expressed by the majority in Dimond v Lovell. In trying to resolve that issue I find it helpful to start with first principles. The damage to Mr Lagden's car, or for that matter to Mrs Dimond's, led to two heads of recoverable loss. First, there was the physical damage to the car. The car was not a write-off. It was repairable and the measure of the recoverable damages for this head of loss was the reasonable cost of the repairs. There is no issue about this. Second, there was the loss of use of the car. Mr Lagden had been deprived of the use of his car for the 17 day period between the date of the accident and the completion of the repairs. He was entitled to damages as compensation for that deprivation. If he had not hired a substitute vehicle, he would still have been entitled to general damages. His entitlement to general damages would not have depended on the degree of use to which he would, if his car had not been damaged, have been likely to put it. He had been deprived of the benefit of having his car available for whatever use he might from time to time decide upon. The measure of damages for this deprivation would, prima facie, have been the spot rate charge for a comparable vehicle over the repair period. In The Greta Holme [1897] AC 596, 604 Lord Herschell said:
"I take it to be clear law that in general a person who has been deprived of the use of a chattel through the wrongful act of another is entitled to recover damages in respect thereof, even though he cannot prove what has been called 'tangible pecuniary loss', by which I understand is meant that he is a definite sum of money out of pocket owing to the wrong he has sustained. This was not disputed."
And in The Mediana [1900] AC 113, 117, Lord Halsbury LC said:
"What right has a wrongdoer to consider what use you are going to make of your vessel? … Here, as I say, the broad principle seems to me to be quite independent of the particular use the plaintiffs were going to make of the thing that was taken."
In both these cases the issue was as to the damages to be paid to the plaintiffs for their loss of use of a ship while the damage caused by the defendants' negligence was being repaired. In the Susquehanna [1926] AC 655, 661, another ship collision case, Viscount Dunedin made clear that:
"There is no difference in this matter between the position in Admiralty law and that of the common law …. "
So, in car accident cases as in ship accident cases, the negligent driver must compensate the owner of the other car for his loss of use of the car while it is undergoing repair. If there is no more to the loss of use claim than that, the claim will be for general damages and a fair approach to quantum would be to award a sum based upon the spot rate hire charge for a comparable vehicle.
- However if the owner of the damaged car - or the damaged ship, as the case may be - hires a replacement vehicle for use during the repair period, the general damages claim becomes a special damages claim based upon the cost of hire. In Prehn v Royal Bank of Liverpool (1870) LR 5 Ex 92, 100 Martin B explained:
"Special damages are given in respect of any consequences reasonably or probably arising from the breach complained of."
- In hiring a replacement vehicle and incurring the hire charges, the injured party is not, in cases like the present and Dimond v Lovell, mitigating his loss. In the Court of Appeal in Dimond v Lovell [2000] 1 QB 216, 238 I referred to the issue as one of mitigation. In this House [2002] 1 AC 384 the issue was similarly referred to by Lord Hoffmann (at p 401E) and Lord Hobhouse (at p 406B). But I think this was a misdescription. Mitigation is the process whereby the injured party attempts by some course of action to reduce the consequential loss he has suffered or will suffer if nothing is done. If he succeeds in reducing his loss, the guilty party will have the benefit of the reduction. If the mitigating steps do not succeed in reducing the loss but were, nonetheless, reasonable steps in all the circumstances for the injured party to take for the purpose of mitigation, the injured party can add to his damages claim the cost of taking the steps in question. All of this is well established law (see McGregor on Damages 16th ed (1997), pp 216-217 paras 333 and 334). Unsuccessful attempts at mitigation may, therefore, increase the damages payable by the guilty party.
- However, in cases where the damaged car was not used for any commercial or business purpose and where the absence of a car available for the injured party's use will not lead to any special damages claim for financial loss, the hiring of a substitute car cannot be regarded as a step taken in mitigation of loss. It has nothing to do with mitigation. Mrs Dimond hired a substitute car in order to have the convenience of a car available for daily use, not in order to avoid some financial loss that she might otherwise have incurred for want of the use of a car. Similarly Mr Lagden did not enter into the credit hire agreement in order to mitigate some loss and avoid some special damage that he might otherwise have suffered. He entered into the agreement in order to have a car available for his ordinary domestic purposes while his own car was being repaired. I am not for a moment suggesting that it was not reasonable for each of them to have decided to hire a substitute vehicle. But their respective decisions did not represent mitigation of loss. The principle that allows the costs of mitigation reasonably undertaken to be added to the damages bill has no application to cases like the present.
- There are two ways, in cases like the present, in which the hiring of the substitute car may be relevant to the quantum of the injured party's damages claim. One the one hand, the hire charges may be viewed as, in effect, quantifying what would have been a general damages claim for loss of use of the damaged car. A special damages claim to recover the hire-charges becomes substituted for the general damages claim but without broadening the scope of the claim. If that is how the claim should be regarded then, plainly, for the reasons given by Lord Hoffmann and Lord Hobhouse in Dimond v Lovell, the part of the hire charges attributable to benefits other than the car-hire should be eliminated.
- Alternatively, and more accurately, the claim to recover the car- hire charges can be viewed simply as a claim to recover an item of special damages representing expenditure incurred as a result of the defendant's negligence. On that approach, however, recovery cannot be claimed simply on the basis that the expenditure was reasonably incurred by the injured party. It would, in principle, be necessary also to show that the expenditure reasonably or probably arose out of the defendant's negligence (see Martin B in Prehn v Royal Bank of Liverpool); in other words, the expenditure must have been reasonably foreseeable.
- The criterion of reasonable forseeability, where the impecuniosity of a claimant has led to his incurring expenditure that he would not otherwise have incurred and recovery of which as special damage is sought has, I think, overtaken the principles about impecuniosity expressed in The Liesbosch [1933] AC 449. I agree with and have nothing useful to add to what has been said about this by my noble and learned friends, Lord Hope of Craighead and Lord Walker of Gestingthorpe. So it might be thought that Mr Lagden's ability to recover the whole of the credit hire charges that, on account of his impecuniosity, it was found that he had no choice but to incur would depend on whether the criterion of reasonable forseeability could be satisfied. But that would be to ignore Dimond v Lovell.
- The majority decision in Dimond v Lovell did not bar recovery on the ground that the incurring of the higher car-hire charges was not reasonably foreseeable. It barred recovery on the ground that, in law, the cost of financing payment of the repairs bill and payment of the car hire charges and the cost of services in handling the damages claim could not, as a matter of law, constitute special damages claims. If reasonable forseeability had been the criterion, Mrs Dimond would have recovered the whole of the credit hire charges. Everyone, in the Court of Appeal and in this House, agreed that it had been reasonable for her to enter into the credit hire agreement. None of your Lordships on this appeal has suggested that the majority view in Dimond v Lovell was wrong.
- It must follow, first, that reasonable forseeability may be a necessary but is not a sufficient criterion for the recovery of the full car hire charges, and, secondly, that your Lordships must approach this appeal on the footing, confirmed by Dimond v Lovell, that, in principle, the law will not permit the cost of financing a payment recoverable as special damages to be itself recoverable as special damages nor the cost of services in handling a damages claim to be recoverable as special damages.
- The issue in this case is, therefore, whether your Lordships should construct an exception to the principle to which I have referred, and for which Dimond v Lovell stands as a very recent authority, in order to allow those who, like Mr Lagden, are sufficiently impecunious as to be unable to afford to pay spot rates for a substitute car, to claim as special damages the full charge made by credit hire companies such as Helphire. In favour of creating such an exception would be that otherwise the individuals in question would be unable to obtain replacement vehicles while their own vehicles were undergoing repair. I can see the force of this but there are, in my opinion, countervailing considerations that need to be taken into account.
- One of the main functions of the law of obligations, contractual or tortious, is to provide, or attempt to provide, a set of yardsticks for determining whether a legal injury has been inflicted on a person (the claimant) by another person (the defendant) and, if so, for determining the amount of the damages that the defendant must pay by way of reparation. If the two parties are unable to agree, an answer can be found by recourse to litigation. But the cost of litigation, often excessive both in absolute terms and in relation to the amount in dispute, and the inevitable delay, worry and anxiety that accompany court proceedings provide impelling reasons why the yardsticks by means of which legal liability is to be measured should be kept as simple and uncomplicated as practicable. The common law is, and always will be, in a constant state of development, adjusting to changes in social habits, technological changes, changes in notions of what is fair and of what justice requires. From time to time Parliament intervenes and statutory changes to the law are made. Otherwise the changes come about by means of case law. But however the changes come about it is, in my opinion, of the greatest importance that sight is never lost of the need to try and keep the law simple so as to avoid, so far as possible, recourse to litigation.
- In the present case it is proposed that a distinction should be drawn between persons who are too impecunious to be able to afford to pay spot rates for car hire and others who are financially able to do so. The former can recover in full the charges for car hire made by credit-hire companies; the latter can only recover the spot rate level of charge. In my respectful opinion this result will do a disservice to the law. What is to be the test of sufficient impecuniosity? The suggestion has been made that lack of possession of a credit card or a debit card might be taken as an indication of sufficient impecuniosity. But there are still many people in this country who keep cash in their houses, would be accounted quite well-off by most standards, but who do not have credit or debit cards. Some people have bank accounts and overdraft facilities. Their accounts may be consistently overdrawn but within the facility. They have no spare cash but the facility to borrow. How, sensibly, can their position be distinguished from that of those like Mr Lagden who, similarly, have no spare cash but have no bank overdraft facility? If Mr Lagden is to be entitled to re-imbursement of Helphire's financing charge, why should the others not be entitled to re-imbursement of their bank's financing charge? In each case it could be said that without the financing the replacement vehicle could not have been hired. It would be equally reasonable for all of these to enter into a Helphire type of credit-hire agreement and equally foreseeable that they would want to do so. Indeed, I think it would be very difficult to construct a case in which it was not reasonable for the innocent owner of a car damaged by the negligence of another to enter into a credit-hire agreement in order to obtain a substitute car while the damaged car was being repaired.
- A criterion of reasonableness as a test for recovery of the full credit hire charges would be easy and simple to apply. It was the test proposed by the majority in the Court of Appeal and by Lord Nicholls in the House of Lords in Dimond v Lovell. But that criterion is barred by the majority opinion in Dimond v Lovell. The Dimond v Lovell principle, if applied to all cases, too would provide a simple and uncomplicated yardstick. The injured party would recover the spot rate charge but no more. But the impecuniosity, no other choice, exception that your Lordships are introducing is not based on any principle that can be reconciled with Dimond v Lovell and is conceptually imprecise. It will, I believe, prove an obstacle to the swift and economical settlement of a very large number of simple cases. I think it will be a disservice to the development of the law.
- For these reasons, my Lords, I would have allowed this appeal.
LORD WALKER OF GESTINGTHORPE
My Lords,
- Since I have the misfortune to differ from the majority of your Lordships as to the disposal of this appeal, I will state my reasons briefly at the end of this opinion. But the House is, I understand, unanimously of the view that we should lay to rest what is left of Liesbosch Dredger (Owners of) v Owners of SS Edison (The Liesbosch) [1933] AC 449, and I wish to say something on that topic.
- The facts of the case are well known. They are summarised in a valuable article by Professor Brian Coote ("Damages, The Liesbosch, and Impecuniosity" [2001] CLJ 511) to which I gladly acknowledge my indebtedness. For present purposes it is sufficient to note that as a result of the sinking of The Liesbosch no dredging took place at the harbour for over six months, and for a year after that The Adria (an older but larger dredger) was hired by the syndicate (together with a tug and two hopper barges) at high rates. Then the Patras Harbour Board purchased The Adria and resold it on easy terms to the syndicate (which had not had the funds to make an outright purchase a year before).
- Professor Coote closely analyses the progress of the litigation through different courts, commenting (at p 513) that the proceedings:
"are illustrations of the truth that the answers a court will, or should, give depend crucially on how it classifies the problem before it".
Before Langton J (on a motion to vary the Admiralty Registrar's report) counsel for the appellant defendants argued that the case was concerned with remoteness of damage; counsel for the respondent plaintiffs argued that the issue was "minimising the damages" (The Edison [1931] P 230, 232). Langton J (at the beginning of what Greer L J in the Court of Appeal, [1932] P 52, 74, called a "very breezy judgment") recorded (at p 233) that counsel for the appellants had pressed on him:
" … that the main question in issue raises a novel and most important point in the law of damages … It was accordingly disappointing to hear from [counsel for the plaintiffs] that the case presented no opportunity for blazing a trail for the enlightenment of future generations, and was in truth confined to a very ordinary question of fact which the registrar had already determined in his favour".
Langton J upheld the registrar although he did observe (at p 239):
"I can imagine few things more maddeningly provoking than to be called upon, as a consequence of sinking a somewhat elderly dredger, to pay a sum amounting to more than twice her value when generously computed".
- That is the point which was seized on by the Court of Appeal. The registrar had valued the sunken dredger at a little over £9,000, the sum at which the Patras Harbour Board had purchased The Adria for resale to the syndicate. The Liesbosch had been purchased for £4,000 and (apparently after some expenditure on refitting) was insured for £5,250. Scrutton LJ quoted Langton J's remark and observed caustically [1932] P 52, 58:
"But it does not seem to have occurred to him that to pay twice the value generously computed of the ship you have sunk suggests that something has gone wrong with the assessment".
- Scrutton LJ reviewed numerous authorities as to the measure of damages for the total loss of a profitable vessel, and (at 65) quoted Gorell Barnes J in The Harmonides [1903] P 1, 6:
"the real test … is … what is the value [of the vessel] to the owners, as a going concern, at the time the vessel was sunk".
Scrutton L J added:
"But if this is 'the value' of the ship to which the claimant is entitled, payable at the time of the loss, I do not see any room for the addition of profits on an existing contract which would have been made but for the loss. Suppose the lost ship is under a ten years' charter, is the claimant to have both the value of the ship as a going concern at the time of the loss, and the profits he would have made under the ten years' charter? The value of the ship is an estimate, or rough capitalisation, of the earning power of the ship for its life. You cannot give both the value of the ship and the profits it would probably earn".
Greer L J followed much the same line of reasoning. He thought (at 68) that the plaintiffs' case was based on the fallacy that all loss in any way causally connected with a breach of duty was recoverable, subject only to the requirement to mitigate loss. Slesser LJ agreed with both judgments.
- Had the plaintiffs not appealed to your Lordships' House the case would probably have earned no more than a passing reference in the textbooks. It would have been no more than an example of an error of double counting made by the registrar, not corrected by the Admiralty judge but corrected by the Court of Appeal. However there was a further appeal, the main ground being ([1933] AC 449, 451-2) that the hiring of The Adria was a reasonable and natural result of the sinking of The Liesbosch, and that the defendants must take the plaintiffs (in terms of affluence as well as in terms of health) as they found them. The respondents supported the reasoning of the Court of Appeal without any particular emphasis (so far as appears from the report) on the plaintiffs' impecuniosity.
- That was the background to Lord Wright's famous and controversial speech, in which the rest of the House concurred. I need not repeat the often-cited passage (at p 460) on remoteness of damage and "consequences of consequences". But it is noteworthy that (at p 461) Lord Wright quoted from the speech of Lord Collins in Clippens Oil Co v Edinburgh & District Water Trustees [1907] AC 291, 303 ("the wrongdoer must take his victim talem qualem, and if the position of the latter is aggravated because he is without the means of mitigating it, so much the worse for the wrongdoer, who has got to be answerable for the consequences flowing from his tortious act"). Lord Wright then observed:
"But, as I think it is clear that Lord Collins is here dealing not with measure of damage, but with the victim's duty to minimise damage, which is quite a different matter, the dictum is not in point".
Lord Wright, at pp 460-461, treated the plaintiffs' impecuniosity as "extraneous" or "extrinsic", in contrast to "that physical delicacy or weakness which may aggravate the damage in the case of personal injuries".
- Whether a victim's duty to minimise damage is indeed "quite a different matter" from measure of damage is by no means obvious, although (as so often) it ultimately comes down to choice of terminology. That can be illustrated by a small anthology of citations. In Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653, a decision of the High Court of Australia in which The Liesbosch, while not actually departed from, was referred to with little enthusiasm, Gibbs CJ said (at p 659) that the reason for Lord Wright's distinction was not altogether clear.
- In Radford v De Froberville [1977] 1 WLR 1262, 1272, Oliver J said:
"No doubt the measure of damages and the plaintiff's duty and ability to mitigate are logically distinct concepts (see for instance, the speech of Lord Wright in Liesbosch (Dredger) v SS Edison (Owners) [1933] AC 449, 456-469). But to some extent, at least, they are mirror images …"
In Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 433 Megaw LJ (at p 453) and Browne LJ (at p 456) agreed with Oliver J's observations.
- In Koch Marine Inc v D'Amica Societa Di Navigazione ARL (The Elena d'Amico) [1980] 1 Lloyd's Rep 75, 88 Robert Goff J set out the three heads of mitigation as listed in McGregor on Damages (then the 13th ed (1972), pp 145f, now 16th ed (1997), pp185f) that is non-recovery for avoidable loss; recovery for loss incurred in reasonable attempts to avoid loss; and non-recovery for avoided loss. Robert Goff J then observed:
" … these three aspects of mitigation are all really aspects of a wider principle which is that, subject to the rules of remoteness, the plaintiff can recover, but can only recover, in respect of damage suffered by him which has been caused by the defendant's legal wrong. In other words, they are aspects of the principle of causation".
- Robert Goff J was in my respectful opinion right to see mitigation of loss as an aspect (or category) of the larger principle of causation. Although almost all the authorities cited to your Lordships on this appeal have been concerned with after-the-event expenditure by the claimant (replacing, reinstating or repairing property destroyed or damaged by the defendant's breach of duty) action to mitigate loss does not always require the expenditure of money. A failure to mitigate may, for instance, consist of an unreasonable refusal to undergo free surgical treatment after a bodily injury (see for instance McAuley v London Transport Executive [1957] 2 LR 500).
- Where the claimant does spend money after an accident in which his property has been damaged, that expenditure may well be described as incurred as part of his duty to mitigate. If the claimant's car is damaged and is unserviceable in its damaged state, but is repairable at reasonable cost, he cannot refuse to have it repaired and claim for a total loss. But his hiring of a replacement car while the repairs are being carried out cannot be analysed in quite the same way. The claimant's hire of the replacement car will (by turning a claim for general damages into a claim for special damages) quantify and increase (rather than minimising) the damages which can be recovered. Your Lordships were told that where a claimant has not hired a replacement car, the county court routinely awards general damages at the rate of about £10 a day for loss of the use of the car (whereas hire of a replacement car may cost anything from at least twice to several times that figure). This notion of a substituted expense has been explained by Lord Hobhouse of Woodborough in his speech in Dimond v Lovell [2002] 1 AC 384, 406.
- In the light of the development of the law in the 70 years since The Liesbosch was decided, it has in my view become apparent that Lord Wright's sharp distinction between mitigation of damage and measure (meaning, as I understand it, heads) of damage it is not helpful. Nor do I think his general classification of impecuniosity as "extraneous" or "extrinsic" is consistent with the modern state of the law (although loss attributable to impecuniosity, on a claim in contract or tort, may on examination prove to be too remote). Many recent cases, both in England and in the Commonwealth, have noted that The Liesbosch has been distinguished so often that its authority has been greatly attenuated. The most recent case is Alcoa Minerals of Jamaica Inc v Broderick [2002] 1 AC 371, an appeal from Jamaica to the Privy Council when the Board included my noble and learned friends, Lord Slynn of Hadley and Lord Hope of Craighead. In my view the time has now come to say that the law has moved on from Lord Wright's exposition in The Liesbosch, although the actual decision in that case can be readily justified by the reasoning of Scrutton and Greer LJJ in the Court of Appeal. The correct principle is that stated in the speech of Lord Hope, with which I am (so far as The Liesbosch is concerned) in full agreement.
- I find myself unable to agree with the majority of your Lordships as to the disposal of the appeal. I will state my reasons as briefly as possible. The starting point is the majority view (of Lord Browne-Wilkinson, Lord Hoffmann and Lord Hobhouse) in Dimond v Lovell that the additional benefits which the claimant obtained (additional, that is, to the use of the replacement car provided by the accident hire company), although obtained by a course of action which was reasonable, were not compensatable loss. The correctness of that view is not challenged. (It was submitted that Lord Hoffmann and Lord Hobhouse differed in their reasoning, but for present purposes at least I do not discern any significant difference).
- Should your Lordships reach a different conclusion in a case where the additional benefits were obtained by a course of action which was not merely reasonable, but was (as the county court judge held) the only course of action by which the claimant could obtain a replacement car? I would answer that question in the negative, both as a matter of principle and for reasons of policy. As a matter of principle, it would not in my view be right to permit a claimant's impecuniosity, however much it may attract sympathy, to enable him to obtain compensation under a head which English law does not regard as part of his compensatable loss. This claimant's choice was restricted by his extreme impecuniosity. The freedom of choice open to other claimants might be restricted by all sorts of other circumstances, such as the remote geographical location in which an accident occurred, the specialised character of the claimant's vehicle, or a dislocation of the normal market caused by exceptional demand. The proposed modification of the principle in Dimond v Lovell seems dangerously open-ended.
- I have not lost sight of the decision of the Court of Appeal in Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447, in which Lord Denning MR (at p 468) referred to the claimant as having had no choice, and Widgery LJ referred (at p 473) to a situation where "no reasonable alternative can be provided". But in that case the rebuilt factory, although of a different shape, was the same size and had the same facilities as before. The Court of Appeal recognised that an element of betterment, if pleaded and proved, would have had to be accounted for. They might have taken that view even if the betterment (not being merely "new for old") had been forced on the claimant by planning or health and safety requirements or other outside circumstances. But in any event the present case is different, since the element of betterment is of a quite different character and has never been regarded as a head of recoverable damage.
- To my mind policy considerations point to the same conclusion. The concept of a claimant being unable to hire a replacement car (otherwise than through an accident hire company) because of impecuniosity is, as was acknowledged in the course of argument, a vague one. In practice, many claimants will go to an accident hire company if they can, simply because of its convenience, without asking themselves whether they could afford the alternative of hiring from a conventional car-hire firm; and if they do consider the alternative, the choice is likely to depend on temperament and resourcefulness, rather than on some minute calculation of their margin of solvency. To allow the exception would be liable to lead to an increase in contested small claims, contrary to the public interest.
- I would therefore allow this appeal.
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