Dimond v Lovell

I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Hoffmann. I agree with it and for the reasons which he gives would dismiss the appeal. I further agree with his view that, even if the claim for damages for loss of the use of the car had been sound, the damages recoverable would have been limited to the sum required to provide an alternative vehicle i.e. the spot rate quoted by hirers other than accident hire companies.

I have had the advantage of reading a draft of the speech of my noble and learned friend Lord Hoffmann. For the reasons he gives I would dismiss this appeal. The only point on which I differ from Lord Hoffmann concerns the measure of damages which would have been recoverable had the claim not been dismissed. The point is of general importance to accident car hire companies and to insurance companies operating in this field.

These proceedings arise out of an everyday occurrence. Momentary inattention by a driver results in his car running into and damaging another vehicle. The damaged car needs repair and is off the road for some days while being repaired. The owner of the damaged car requires a replacement vehicle. Many car insurance policies make no provision for a replacement if the insured car is damaged in an accident. So the victim of a no fault accident has to make his own arrangements to tide himself over the days he is without his car.

Under an ordinary car hiring arrangement, the hirer has to produce the hire charge up front. Usually the amount of money involved is not large, but for many people it is still a considerable sum to have to find. Further, there is no certainty the money will ever be recovered from the insurers of the car whose driver was at fault. The innocent motorist has no clout when it comes to seeking payment from someone else's insurers. And no one would wish to become involved in court proceedings to recover the money from the insurers. So there are many cases where innocent motorists make do as best they can. They manage somehow without a car, or borrow one from a relation, or get lifts from friends. Either that, or they hire a car and write off the hire charge as just one of those things.

So it comes about that accident car hire companies are fulfilling a real need. They provide replacement cars and additional services as well. The hirer does not have to produce any money, either at the time of the hiring or at all. The hire company pursues the allegedly negligent driver's insurers. The hire company is not deterred by having to bring court proceedings should this become necessary. If the claim is unsuccessful, in practice the hire company does not pursue the hirer.

These are valuable additional services. At first sight there seems to be no reason why the negligent driver's insurers should have to pay for these additional services. If a car owner wishes to have these services he should pay for them himself. I consider this would be to take too narrow a view of the position in which the no-fault driver finds himself. The position in law is that the negligent driver, backed by his insurers, is liable to pay reasonable charges incurred in hiring a replacement car if this is reasonably necessary. For many motorists the existence of this liability of the other motorist can be more theoretical than real. In practice this source of recompense frequently does not yield money, or even an acceptance of liability, in time to be of use. In Giles v. Thompson [1994] 1 A.C. 142, 155A, Lord Mustill observed that:

'… there exists in practical terms a gap in the remedies available to the motorist, from which the errant driver, and hence his insurers, frequently profit'.

The additional services provided by accident car hire companies bridge this gap. They redress the imbalance between the individual car owner and the insurance companies. They enable car owners to shift from themselves to the insurance companies a loss which properly belongs to the insurers but which, in practice, owners of cars often have to bear themselves. So long as the charge for the additional services is reasonable, this charge should be part of the recoverable damages.

This House was told by counsel of a scheme or proposed scheme, the 'A.B.I. Initiative', whereby insurance companies and car hire companies will provide hire vehicles to victims of no fault accidents. Depending on its terms, a scheme of this nature may meet the need which has given rise to the accident car hire business. Until that happens, the accident car hire arrangements provide a reasonable basis by which no-fault victims can in fact obtain the benefit of the right which the common law and compulsory third party insurance seek to give them against careless drivers. A measure of damages which does not achieve this result would be sadly deficient. The law on the measure of damages should reflect the practicalities of the situation in which a wronged person finds himself. Otherwise it would mean that the law's response to a wrong is a right to damages which will often be illusory in practice. I do not believe this can be the present state of the law in a situation which affects thousands of people every year.

1. The Facts

On 30 December 1996 Mrs. Vanessa Dimond was driving her Suzuki Vitara home from work when a car driven by Mr. Lovell ran into her from behind. Her vehicle was damaged but still drivable. Her husband made an appointment for a garage to do the repairs two or three weeks later. While it was in the garage, she needed a replacement vehicle to get to work. On the advice of her insurance broker, she hired a Ford Mondeo from a car hire company called 1st Automotive Ltd. The charge was £30 a day for the 8 days during which her vehicle was off the road, together with £5 a day collision damage waiver and a £15 delivery charge. The total charge including VAT was £346.63.

2. The Issues

The Co-operative Insurance Society ("C.I.S."), which insured Mr. Lovell, accepted that he had been negligent and was liable for the loss caused to Mrs. Dimond by the accident. They paid for the cost of repair. But they refused to pay for the hire of the replacement car. They did not say that it was unreasonable for Mrs. Dimond to have hired a car. But they raised two defences. The first was that the form of agreement under which Mrs. Dimond hired the car was technically defective. It was a "regulated agreement" within the meaning of the Consumer Credit Act 1974 and did not contain the particulars that the Act required. As a result, it was unenforceable. Mrs. Dimond could not be required to pay for the hired car and therefore had suffered no loss. The second was that the sum claimed was excessive. Mrs. Dimond could have hired a suitable car from another company for less. She had therefore either failed to take reasonable steps to mitigate her loss or the hire agreement had given her benefits additional to the use of the car which she should bring into account in calculating her loss. The Court of Appeal [1999] 3 W.L.R. 561 held (reversing the judge) that the defendant succeeded on the first point. The hire agreement was unenforceable under the Act of 1974 and Mrs. Dimond had suffered no loss. She had been lucky enough to have a replacement car for nothing. It was therefore not necessary for the Court of Appeal to consider whether, if it had been enforceable, the full amount of the hire could have been recovered. But they said that they agreed with the judge that it could. Mrs. Dimond appeals to your Lordships' House against the decision that she was under no liability to 1st Automotive and Mr. Lovell invites your Lordships to express a different view on the quantum of damages. Of course the real parties in interest are 1st Automotive and the C.I.S. and I shall therefore refer to them as appellant and respondent respectively.

3. Accident hire

My Lords, I should explain why this dispute over £346.63 comes before your Lordships' House. 1st Automotive is an accident hire company. It specialises in hiring cars to people like Mrs. Dimond whose cars have been damaged in road accidents caused by the fault of someone else. I shall in a moment invite your Lordships' attention to some of the terms of its standard form of hiring agreement. But the effect of the agreement is that, in the normal course of events, the hirer will not have to pay. The company pursues the hirer's claim at its own expense and satisfies its claim for hire out of the damages recovered on the hirer's behalf. Thus the hirer is spared the need to lay out the cost of the hire in advance of recovery from the defendant or his insurers, the trouble and anxiety of pursuing a claim and the risk that the claim may fail.

The services thus offered by an accident hire company, in providing the car on credit and assuming the burden and risk of pursuing the claim, have filled a gap in the market. Many comprehensive motor insurance policies cover damage to the vehicle but not the cost of hiring a replacement. The owner of a damaged car can arrange for his car to be repaired in the knowledge that the bill will be sent to the insurance company. Whether his company meets the cost itself or recovers it from the other driver's insurer is (apart from the question of a no-claim bonus) not a matter which need concern him. If, however, he wants to hire a replacement vehicle, he will have to make the arrangements at his own expense and...