Copley v Lawn
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Jacob,Lord Justice Waller |
| Judgment Date | 17 June 2009 |
| Neutral Citation | [2009] EWCA Civ 580 |
| Docket Number | Case No: B2/2008/2815 & B2/2008/2816 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 June 2009 |
[2009] EWCA Civ 580
The Right Honourable Lord Justice Waller, Vice President of the Court of Appeal
The Right Honourable Lord Justice Longmore and
The Right Honourable Lord Justice Jacob
Case No: B2/2008/2815 & B2/2008/2816
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEEDS COUNTY COURT
HIS HONOUR JUDGE LANGAN QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Christopher Butcher QC & Mr Benjamin Williams (instructed by Burges Salmon LLP) for the Appellants
Mr Ronald Walker QC & Mr James Sullivan (instructed by Rollingsons) for the Respondents
Hearing dates : 14 th May 2009
Lord Justice Longmore:
Introduction
These two appeals raise a common issue. If, after a road accident caused by a defendant's negligence the insurers of the negligent defendant offer to provide a “free” car to the claimant for such period as the claimant needs a replacement car while his own car is being repaired but that offer is rejected by the claimant (whether because he has already got a replacement car from his own insurers or any other reason), can the negligent defendant say that the claimant has failed to take reasonable steps to mitigate his loss? HHJ Langan sitting in the Mercantile Court in Leeds has held that such an argument is open to the two negligent defendants in the present case and that, on the facts, the rejection of the defendants' insurers' offer was unreasonable; he held, further, that the hire costs incurred by the claimants were irrecoverable. In so holding he disagreed, on this second point, with an earlier decision of HHJ Wyn Rees sitting in the Pontypridd County Court in Evans v TNT Logistics Ltd [2007] Lloyd's IR 708 in which that learned judge had held that, although the offer of the defendant's insurers could be taken into account, it could (if unreasonably refused) only go to reduce the claim for loss of use to the cost that would have been incurred by the defendants' insurers if the offer had been accepted. If, therefore, the claimant incurred a cost of £100.00 per day for use of a replacement car, but the defendants' insurers would only have had to pay £60.00 per day, it would only be the latter cost that would be recoverable.
The Facts
The primary facts may be shortly stated.
i) Mrs Copley's car was damaged in an accident caused by the negligence of Mr Lawn on 23 rd November 2006. She was an estate agent and needed a replacement car immediately. On 26 th November she made an agreement with Helphire (UK) Ltd (“Helphire”) whereby she agreed to hire a car, while her car was being repaired, for £39.90 per day. On the same day (but after she had signed the Helphire agreement) she received a cold telephone call from Mr Lawn's insurers, KGM Policies at Lloyd's (“KGM”), offering her a replacement car. Unsurprisingly perhaps Mrs Copley could not recall this telephone call when she came to give evidence but her response was, no doubt, non-committal, if not frigid. Nothing daunted, KGM wrote to Mrs Copley on that day repeating their offer; she received that letter on 28 th November 2006 and immediately asked her solicitor for advice. Apparently no advice was tendered until 5 th March 2007 but the repairs had been completed by 2 nd February and Mrs Copley therefore claimed for loss of use of her own car for 71 days at the price agreed with Helphire of £39.90 per day. Deputy District Judge Reed only awarded 7 days hire because, in his view, Mrs Copley should, by the expiry of that time, have availed herself of the right to cancel contained in the Helphire agreement.
ii) On 26 th July 2006 Captain Maden's car was damaged in an accident as a result of Mr Haller's negligence. Captain Maden was a marine consultant and also needed a replacement car. This time it only took 24 hours for KGM to offer him a replacement car. It was found that Captain Maden ignored the offer and made an agreement with Helphire for a replacement car on 18 th August 2006 of £156.80 per day. He took his car for repair on 21 st August and the repairs were completed 3 days later. He accordingly claimed for 3 days hire in the sum of £611.47. District Judge Flanagan dismissed the claim on the basis that Captain Maden had ignored KGM's reasonable offer.
HHJ Langan dismissed appeals in both cases upholding the reasoning that refusal of an offer of a “free” car amounted to a failure by the claimants to take reasonable steps to mitigate their loss.
Legal background and submissions
No doubt defendants' insurers wish to take steps to inhibit unreasonable car hire costs incurred by claimants. But not the least curious thing about the dispute which has arisen in these standard running-down cases is that it is well settled that, although a claimant can recover the cost of hiring a replacement car, he can only recover the reasonable rate of such hire; that has been held in Dimond v Lovell [2002] 1 A C 384 to be the market or “spot” rate. Thus to the extent that the Helphire rate contained an element of uplift due to the fact that payment of hire was deferred or the claimant was given easy credit terms or the fact that the possibility of failure to recover from the defendant was covered by insurance, that uplift could not be recovered. It is not usually difficult to ascertain the spot hire rate for cars equivalent to a claimant's car and one would therefore expect any argument between claimants and their insurers on the one hand and defendants or their insurers on the other hand to be confined to ascertainment of the “spot” or market rate.
Mr Butcher QC for the claimants did not, however, feel able to submit that the doctrine of mitigation had no application at all to claims for loss of use of a car whenever a claim for the “spot” rate was made. He accepted that if a defendant's insurers could obtain an equivalent replacement car and offered to provide it to a claimant, the question could arise whether it was reasonable for a claimant to reject that offer. His submission was first that on the facts of the present case it was not unreasonable for Mrs Copley and Captain Maden to have taken no (or no positive) action in response to KGM's letters and secondly that, if it was unreasonable to have failed to respond, they could nevertheless recover the rate that the defendants' insurers would themselves have had to pay. Since the defendants' insurers had never stated what rate they would have had to pay, there was no basis for making any deduction from the rate claimed which should be recoverable in full.
Mr Walker QC for the defendants relied on what he called the “findings of fact” of Deputy District Judge Reed and District Judge Flanagan that the claimants had acted unreasonably in failing to respond to the defendants' insurers' offer of a replacement car and submitted that it followed that, since the replacement offered was free to the claimants, their loss could have been wholly (or in Mrs Copley's case mainly) avoided; no claim for loss of use was, therefore, sustainable.
Despite Mr Butcher's recognition that the doctrine of mitigation can have a part to play in cases like the present, judges should, in my view, be reluctant to become too readily involved in complicated mitigation arguments since the major protection for the defendant and his insurers is that the claimant can only recover the “spot” or market rate of hire as explained in Dimond v Lovell. One rarely encounters mitigation arguments in ordinary sales of goods cases precisely because the relevant statute provides that damages are to be prima facie assessed by reference to the market value of the goods. The reason is that it is usually open to the innocent buyer or seller to go into the market to acquire other goods or dispose of the contractual goods and that is what he ought to be doing by way of mitigation of his loss. There is no reason why loss of use claims based on the hire of goods should be any different. I would, therefore, look with some scepticism on arguments that an innocent claimant should take further steps (over and above ensuring that he is not hiring a replacement car for more than the market rate) by way of mitigating his own loss or protecting the tortfeasor's position.
Further facts
Before considering the legal submissions it is necessary to set out or summarise some further facts. As far as the claimants are concerned, their arrangements with their insurers and Helphire (to the extent that they are relevant to the dispute between the parties) required them to sign (1) a Mitigation Questionnaire which informed them of their duty to mitigate their loss and asked if they had had any offer of a replacement from the defendants (2) a hire agreement with Helphire and (3) a combined Credit Agreement which enabled the claimants to cancel the hire agreement up to 14 days after its receipt. The effect of those agreements together with a tied insurance policy is that the victim of a motor accident can hire a replacement without himself having to lay out funds. The position was explained by the claimants in their skeleton argument in the following way:-
“Helphire provides a hire car, and where appropriate will also arrange vehicle repairs. It does so under credit agreements, where liability to pay is deferred while a claim is pursued against the insurer of the culpable motorist. A tied insurance policy protects its client against the risk the claim will fail, or take longer than the credit period to settle. On the sooner of the failure of the claim or the expiry of the credit...
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