West Midlands Travel Ltd v Aviva Insurance Uk Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Lord Justice Rimer,Lord Justice Underhill |
| Judgment Date | 18 July 2013 |
| Neutral Citation | [2013] EWCA Civ 887 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2013/0188 |
| Date | 18 July 2013 |
[2013] EWCA Civ 887
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LIVERPOOL DISTRICT REGISTRY
His Honour Judge Armitage Q.C.
OLV00559
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-bick
Lord Justice Rimer
and
Lord Justice Underhill
Case No: A2/2013/0188
Mr. Edward Bartley Jones Q.C. and Mr. Stephen Connolly (instructed by Greenwoods) for the appellant
Mr. Craig Sephton Q.C. and Mr. David Boyle (instructed by Hill Dickinson) for the respondent
Hearing date: 6th June 2013
Approved Judgment
The respondent in this case, West Midlands Travel Ltd ("the company"), provides public transport services using buses which operate from eleven depots situated in various locations around the west midlands. The present proceedings arise out of damage caused in a road traffic accident to one of the buses which operate out of its depot at Wolverhampton. The accident was caused by the negligence of a driver insured by the appellant, Aviva Insurance UK Ltd ("the insurer"), against whom the company made a claim under the European Communities (Rights against Insurers) Regulations 2002. The bus was off the road for 31 days undergoing repairs and the company duly made a claim for the cost of the repairs. Like most bus operators, however, it maintained a certain amount of spare capacity and was able to cover the loss of the bus from its existing resources. It could not therefore make a claim for special damages in the form of lost profits and instead made a claim for general damages for loss of use, using for that purpose a formula produced by the Confederation of Passenger Transport UK ("CPT"), which, broadly speaking, ascribes to each bus in the operator's fleet a proportion of the total overheads incurred in operating the whole fleet. This has become known as the "standing charge" approach and led in the present case to a claim for £106.80 a day, totalling £3,310.80.
The insurer admitted liability for the accident and settled the cost of repairs, but it disputed the company's claim for general damages, both as a matter of principle and because it considered it to be substantially over-stated in the form in which it was put forward. It submitted that if general damages for loss of use are recoverable (a proposition which it reserves the right to challenge if the case goes further), they should not be assessed by reference to the standing charge, but by reference to interest on capital together with an allowance for depreciation and other fixed charges referable to the damaged vehicle and that an appropriate sum in this case is something in the order of £1,000. The issues raised by the insurer concern questions of principle which are of relevance to other claims of a similar kind. We were told that the company's buses alone were involved in about 3,000 road traffic accidents each year, of which about half were caused by the fault of third parties. If one multiplies that figure by the number of bus operators across the country, it is clear that the questions raised on this appeal are of some importance both to bus operators and motor insurers generally.
The claim started life as a small claim in the Liverpool county court. However, once it became clear that it raised points of principle of general application it was transferred to the multi-track. Later still, it was transferred to the District Registry of the High Court and in due course it came on for hearing before His Honour Judge Armitage Q.C. sitting as a judge of the High Court. In a detailed and careful judgment he held that the company was entitled to recover general damages for 31 days' loss of use assessed by reference to the standing charge and awarded it £3,317. The insurer has appealed against that decision with the permission of the judge.
Before turning to the authorities it is necessary to say a little more about the factual background. At the time of the accident in December 2006 the company required at peak times 205 vehicles operating from the Wolverhampton depot in order to provide all the services for which it was responsible. In order to provide spare capacity to cover for routine maintenance, accidents and other contingencies the company operated 228 buses out of the depot, all of which were used in providing public services on a rotating basis. There were sound operational reasons for running all the vehicles in rotation rather than retaining a dedicated fleet of buses in reserve, but however the fleet was managed, the company maintained spare capacity to cover routine maintenance and emergencies. Similar arrangements were in place at the company's other depots. The standing charge which formed the basis of the claim was calculated by reference to the overheads incurred across the whole of the company's fleet, rather than just the Wolverhampton depot itself. It included, for example, the cost of corporate services, the provision of canteen and medical facilities, fire prevention expenses, rent, rates and the cost of electricity and thus reflected the average unit cost per bus incurred by the company in running its business.
Since the decision of the House of Lords in The Owners of No. 7 Steam Sand Pump Dredger v The Owners of S.S. 'Greta Holme' (The 'Greta Holme') [1897] A.C. 596 it has been accepted that the owner of a chattel damaged by a third party who is unable to establish a claim for special damages is entitled to recover general damages for loss of use. In the ' Greta Holme' the vessel in question was a sand dredger owned by the Mersey Docks and Harbour Board which was being used to deepen the river near the landing stage. It was damaged in a collision with the ' Greta Holme', for which the latter was solely responsible. The dredger was out of action for fifteen weeks undergoing repairs and was available only for use as a hopper barge for a further period of sixteen days while repairs to her machinery were completed. Since the owners were not an ordinary trading organisation and had not obtained a temporary replacement, they were unable to show that they were out of pocket and were thus unable to make a conventional claim for special damages in respect of the period during which the dredger was unavailable for use. The House of Lords held that although they could not show that they had suffered any specific loss, the owners were entitled to recover damages for loss of use of the dredger. Lord Halsbury regarded it as axiomatic that the owner of property could recover damages for loss of use in such a situation, even though he could not show that he had suffered any specific loss. The other members of the House, apart from Lord Morris who dissented, were of the same opinion and the principle has since been applied in a variety of cases in which the owners of property (mainly ships) have been deprived of its use. In those circumstances, while wishing to keep open the right to argue that the decision in the present case was wrong in principle, the insurer accepted that as the law currently stands general damages may be awarded for loss of use of a chattel in cases where no special damage can be proved.
The real dispute in the present case, therefore, is not whether general damages are recoverable, but how they are to be assessed. In one sense the question can be answered by saying that the assessment of such damages is a matter of fact for the jury (whose function is now, of course, discharged in nearly all cases by the judge), whose task it is to award such an amount as will fairly compensate the claimant for his loss. However, as Viscount Sumner observed in Admiralty Commissioners v Owners of Steamship 'Chekiang' (The 'Chekiang') [1926] A.C. 637 at page 643, it is not good enough to hide behind the fact that the assessment of general damages is a matter of fact for the jury. Damages must be assessed in accordance with a proper direction from the judge as to what the law requires and that involves the application of principle. It is necessary, therefore, to examine the authorities to see what has been said about the principles on which the judge must direct himself when making an award of general damages.
In the ' Greta Holme' only Lord Herschell dealt with this aspect of the case in any detail. He said at page 605:
"If the appellants had hired a dredger instead of purchasing one, and had during the months they were deprived of its use been bound to pay for its hire, it cannot be doubted that the sums so paid could have been recovered. How can they the less be entitled to damages because, instead of hiring a dredger, they invested their money in its purchase? The money so invested was out of their pockets, and they were deprived of the use of the dredger, to obtain which they had sacrificed the interest on the money spent on its purchase. A sum equivalent to this, at least, they must surely be entitled to. But I think they are also entitled to general damages in respect of the delay and prejudice caused to them in carrying out the works entrusted to them. It is true these damages cannot be measured by any scale; but that would be equally true in the case of damages in respect of the deprivation of an individual of a chattel which he had purchased for purposes of comfort and not profit."
The owners were claiming £1,500 in respect of the fifteen weeks during which the dredger was out of use altogether, based on what they would have had to pay to hire an equivalent, and £91 8s. 6d. in respect of the days during...
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