Coles v Hetherton
| Jurisdiction | England & Wales |
| Judge | Lord Justice Aikens |
| Judgment Date | 20 December 2013 |
| Neutral Citation | [2013] EWCA Civ 549,[2013] EWCA Civ 1704 |
| Docket Number | Case No: A3/2012/2800 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 December 2013 |
[2013] EWCA Civ 1704
Lord Justice Moore-Bick
Lord Justice Aikens
and
Lord Justice Vos
Case No: A3/2012/2800
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR JUSTICE COOKE
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Curtis QC & Justin Davis (instructed by DAC Beachcroft LLP) for the Appellants
Christopher Butcher QC & Jonathan Hough (instructed by Herbert Smith Freehills LLP) for the Respondents
Hearing dates: 16–17/10/2013
Approved Judgment
This is the judgment of the court.
I. Synopsis
Formally speaking this appeal concerns thirteen comparatively small "managed claims" that arise out of minor road traffic accidents. In reality, however, it is another major battle between large motor insurers, with Royal & Sun Alliance Insurance plc ("RSAI") on one side and Provident Insurance plc ("Provident") and Allianz Insurance plc ("Allianz") on the other. In each case the claimant had motor insurance with RSAI and the claimant's vehicle was damaged as a result of the admitted negligence of the defendant driver, who was insured by either Provident or Allianz. In each case the claimant's motor policy contained an option whereby the insured could have his vehicle reinstated if the cost of repairs were judged to be less than the vehicle's market value. If that option was chosen then the insured had a further choice under the policy terms; he could elect to engage his own repairer or elect to use RSAI's system for repairing vehicles. If the policyholder chose the latter, the policy also gave him the option of using a "courtesy car" if he wanted one. In all 13 cases the claimant policyholder chose the RSAI repair system option and his vehicle was repaired. In some of the cases the claimant also decided to take advantage of the courtesy car offer. In each case RSAI, exercising its rights of subrogation as insurer, has brought a claim (in the name of the insured) against the negligent driver, claiming the total cost of the repairs paid out by it, which included some ancillary charges and the cost of the courtesy car.
The main question of principle at issue is whether the claimant (in reality RSAI) can recover the full cost of the repairs to the vehicle (as invoiced to RSAI) when it has been repaired using the RSAI repair system, which has been set up through another company in the RSAI group. Provident and Allianz argue that the RSAI repair system is operated has the effect of inflating by about 25% the total cost of claims for repairs made against the defendant tortfeasor (in reality, his insurer) and that the claimant is not entitled, as a matter of law, to claim that full sum, but only about 75% of it. There is a subsidiary question concerning the right to recover the cost of the courtesy car. We were told that there are a number of claims in the County Courts where similar issues have arisen and that the decisions of County Court judges have not all been to the like effect. That is one reason why permission was granted to appeal the judgments and orders of Cooke J of 15 June and 4 October 2012.
In order to test the issues of principle in the 13 managed cases, in January 2012 Teare J ordered that there be a determination of three preliminary issues. He also ordered that the judge hearing those issues would, at the same hearing, determine an application of the claimants to strike out parts of the defendant's pleadings in these managed cases, or alternatively, to have summary judgment in their favour on the issues raised by those parts of the pleadings.
The three preliminary issues are:
(1) Measure of Loss: Where a vehicle is damaged as a result of negligence and is reasonably repaired (rather than written off), is the measure of the claimant's loss taken as the reasonable cost of repair?
(2) Test of "reasonable repair charge": If a claimant's insurer has arranged repair, is the reasonableness of the repair charge to be judged by reference to: (a) what a person in the position of the claimant could obtain on the open market; or (b) what his or her insurer could obtain on the open market?
(3) Recoverable amount: Where a vehicle is not a write-off and an insurer indemnifies the insured by having repairs performed and paying charges for those repairs, and where the amount claimed is no more than the reasonable cost of repair (on the correct legal test determined under (2) above), is that amount recoverable?
Cooke J heard argument on the three preliminary issues on 29 and 30 May 2012 and handed down his judgment on 15 June. 1 His answers to the first two preliminary issues were, in short: (1) yes; (2) the test set out in (2)(a). He was asked not to answer the third question and he did not do so, although he made some statements of principle on that issue.
On 4 October he heard further argument on the strike-out/summary judgment points in the light of his earlier conclusions and he gave an ex tempore judgment at the conclusion of the argument. 2 At that hearing, counsel for the claimants, Mr Christopher Butcher QC, made it clear (in response to comments concerning the pleadings made in the earlier judgment) that in each case the claim for the cost of the repairs (together with the claim for sundry service charges), and the cost of a courtesy vehicle were sought respectively as direct and consequential "general damages" (as opposed to "special damages") resulting from the collision between the two vehicles, so that the pleaded cases of the claimants should be read in that way. On that basis, Cooke J made orders striking out parts of the pleaded case of the Provident and Allianz policy holder defendants which raised points contrary to his conclusions on the preliminary issues. He also struck out those parts of the defendants' pleadings which objected to payment of (a) an uplifted hourly rate as charged to RSAI; (b) the sundry service charges; and (c) the cost of providing a courtesy vehicle, together with other aspects of the defendants' pleadings with which this court is not concerned.
On appeal, Provident and Allianz, through Mr Michael Curtis QC, argue that the judge's answers to the three preliminary questions were wrong. They further submit that the judge was wrong to strike out those parts of the defendants' pleadings challenging (a) the hourly rate claimed; (b) the claim for sundry service charges; (c) the claim for the cost of the courtesy vehicle; and (d) those parts of the pleadings that were to be struck out as a consequence of the conclusions on the three preliminary issues. RSAI, through Mr Butcher QC, opposes all of those challenges.
We heard argument on 16 and 17 October 2013 and reserved judgment.
II. The RSAI Repair Scheme and how it works in practice.
Cooke J described this in some detail at [3]-[13] of judgment (1) and his description is not challenged for the purposes of this appeal, although the defendants emphasise that they will, so far as they can, challenge the claimants' assertions in any subsequent proceedings.
The key facts concerning the scheme, for the purposes of this appeal, are: (1) there is a company in the RSA group called MRNM, which is the trading name of RSA Accident Repairs Limited. MRNM owns six garages (called Quality Repair Centres — QRCs) which are staffed by its own employees. (2) If an RSAI policyholder elects to have his damaged vehicle repaired through the RSAI repair scheme under the policy terms, it will either be repaired by one of the QRCs or MRNM will sub-contract the repair to another, independent garage. This garage will be part of MRNM's "Priority Repair Network" (PRN repairers). If neither a QRC or a PRN repairer is used, an independent garage, known as a "non-recommended garage", or NRG, will be engaged. NRGs are outside the RSAI scheme. They are usually used when the policyholder elects to have repairs done outside the scheme. (3) There is a Services Agreement ("SA") between RSAI and MRNM which stipulates in clause 3.1 that MRNM, through the QRC or the PRN repairers, is required to provide the services set out in Schedule 1 of the SA. 3 Clause 7 provides that MRNM's contract charges to RSAI must be those set out in Schedule 3 (which are updated from time to time). Clause 7.4 requires MRNM to raise invoices on RSAI in an agreed manner and MRNM has to provide such information as RSAI reasonably requires to substantiate any charges that it makes on RSAI. Clause 28 stipulates that there will be no relationship of agency between MRNM and RSAI. (4) Schedule 3 of the SA provides for the labour and other charges to be made on RSAI by MRNM according to a set formula, which allows MRNM, when billing RSAI, to make a profit on what it has had to pay its PRN repairers. 4 (5) Schedule 3 of the SA sets out three hourly rates regimes for labour charges. (6) In cases where MRNM's net invoice total (to RSAI) exceeds £300 and more than 4 hours labour has been used on the repairs to a vehicle, Schedule 3 provides for an additional flat rate charge (of three times the appropriate hourly rate charged) which is to be made for "Sundry Services" provided, which MRNM and RSAI agree would cover a number of different services. RSAI asserts (but the defendants do not accept) that in all cases at least some of those services were provided. (7) Courtesy cars were charged at £11 a day and delivery/collection of the damaged/repaired vehicles or courtesy cars were charged at £110. (8) The amounts charged to RSAI by MRNM were designed not to exceed the amount which...
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