#6613 - Dimond V. Lovell - Commercial Remedies BCL

Dimond v. Lovell

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.

The Co-operative Insurance Society ("CIS"), 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.

Nature of services offered by the hiring company: 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…. 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.

Holding

Lord Hoffmann

Since the hire agreement is defective, claimant did not incur the cost of hire. Can she still claim hire costs?

The House treated the two cases mentioned by Lord Reid in Parry v Cleaver [1970] AC 1, 14 (“the fruits of insurance which the plaintiff himself has provided” and “the fruits of the benevolence of third parties”) as “apparent exceptions to the rule against double recovery” founded on the special considerations of policy which Lord Reid had explained: see Lord Bridge of Harwich, at p 358. The House declined to create another exception for the case in which, as in Donnelly v Joyce [1974] QB 454, the plaintiff claims compensation for the reasonable cost of necessary services which have in fact been provided voluntarily by a third party. It decided that in such a case damages cannot be recovered for the plaintiff's own benefit. He can sue only if he claims as trustee for the person who provided the services: see p 363.

This case is of course far away from the gratuitous provision of services (usually by a relative) which was considered suitable for recovery as trustee in Hunt v Severs [1994] 2 AC 350. If Mrs Dimond is allowed to sue Mr Lovell as trustee for 1st Automotive, the effect will be to confer legal rights upon 1st Automotive by virtue of an agreement which the 1974 Act has declared to be unenforceable. This would be contrary to the intention of the Act. The only way, therefore, in which Mrs Dimond could recover damages for the notional cost of hiring a car which she has actually had for free is if your Lordships were willing to create another exception to the rule against double recovery. I can see no basis for doing so.

Assuming that the agreement is valid

Findings of fact by the trial judge

The judge accepted evidence on behalf of CIS that the local "spot rate" for hiring a car similar to the Ford Mondeo was a good deal less than that charged by 1st Automotive. But he said that Mrs Dimond had acted reasonably. She acted on the recommendation of her broker and it was reasonable of her to accept the specialist services which 1st Automotive offered… The judge accepted the evidence given on behalf of the CIS that 1st Automotive's rates were considerably higher than the "spot rate" for which a car could have been obtained for cash from an ordinary car hire company.

Principles from British Westinghouse

My Lords, I would accept the judge's finding that Mrs Dimond acted reasonably in going to 1st Automotive and availing herself of its services. I am sure that any of your Lordships in her position would have done the same. She cannot therefore be said not to have taken reasonable steps to mitigate her damage.

But that does not necessarily mean that she can recover the full amount charged by 1st Automotive. By virtue of her contract, she obtained not only the use of the car but additional benefits as well. She was relieved of the necessity of laying out the money to pay for the car. She was relieved of the trouble and anxiety of pursuing a claim against Mr Lovell or the CIS She was relieved of the risk of having to bear the irrecoverable costs of successful litigation and the risk, small though it might be, of having to bear the expense of unsuccessful litigation. Depending upon the view one takes of the terms of agreement, she may have been relieved of the possibility of having to pay for the car at all.

My Lords, English law does not regard the need for any of these additional services as compensatable loss. As Sir Richard Scott V-C [2000] 1 QB 216, 239 said "damages for worry the effect of the award of damages is that Mrs Dimond has obtained compensation for them indirectly because they were offered as part of a package by 1st Automotive. There is in my opinion something wrong with this conclusion.

I think that what has gone wrong is that the Court of Appeal did not consider the rule that requires additional benefits obtained as a result of taking reasonable steps to mitigate loss to be brought into account in the calculation of damages. The leading case is British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673. Between 1904 and 1906 British Westinghouse...