Lagden v O'Connor
Jurisdiction | UK Non-devolved |
Judge | LORD NICHOLLS OF BIRKENHEAD,LORD SLYNN OF HADLEY,LORD HOPE OF CRAIGHEAD |
Judgment Date | 04 December 2003 |
Neutral Citation | [2003] UKHL 64 |
Date | 04 December 2003 |
Court | House of Lords |
[2003] UKHL 64
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
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.
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.
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...
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