#6611 - Langden V. O'conno - Commercial Remedies BCL

Lagden v. O’Connor

Facts

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 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.

Holding

Lord Hope (In the majority along with Lord Nicholls and Lord Slyn)

There is however another principle, as was made clear in Dimond v Lovell [2002 ] 1 AC 384 , that must be given effect to in the calculation of the amount of the damages. This is the principle that requires additional benefits which are obtained as a result of taking reasonable steps to mitigate loss to be brought into account when the damages are being calculated. The question which has been raised in this case is whether this principle is subject to modification where, if he is to minimise his loss, the claimant has no choice but to accept those additional benefits.

But what if the injured party has no choice? What if the only way that is open to him to minimise his loss is by expending money which results in an incidental and additional benefit which he did not seek but the value of which can nevertheless be identified? Does the law require gain to be balanced against loss in these circumstances? If it does, he will be unable to recover all the money that he had to spend in mitigation. So he will be at risk of being worse off than he was before the accident. That would be contrary to the elementary rule that the purpose of an award of damages is to place the injured party in the same position as he was before the accident as nearly as possible.

Claim for betterment can be sustained only in case where the claimant had a choice: But I think that the principles on which they were decided are of general application, and it is possible to extract this guidance from them. It is for the defendant who seeks a deduction from expenditure in mitigation on the ground of betterment to make out his case for doing so. It is not enough that an element of betterment can be identified. It has to be shown that the claimant had a choice, and that he would have been able to mitigate his loss at less cost. The wrongdoer is not entitled to demand of the injured party that he incur a loss, bear a burden or make unreasonable sacrifices in the mitigation of his damages. He is entitled to demand that, where there are choices to be made, the least expensive route which will achieve mitigation must be selected. So if the evidence shows that the claimant had a choice, and that the route to mitigation which he chose was more costly than an alternative that was open to him, then a case will have been made out for a deduction. But if it shows that the claimant had no other choice available to him, the betterment must be seen as incidental to the step which he was entitled to take in the mitigation of his loss and there will be no ground for it to be deducted.

Applying those principles to the present case, I would hold that the defendant's insurers have not made out a case for the deduction which they seek. The evidence showed that Mr Lagden had no choice but to use the services of the credit hire company and that, if he was to make use of these services, he had no way of avoiding the additional benefits that were provided to him. The principles which I would apply are of general application. But it by no means follows that the same result must follow in every case where the innocent motorist uses the services of a credit hire company. The criterion that must be applied is whether he had a choice—whether it would have been open to him to go into the market and hire a car at the ordinary rates from an ordinary car hire company.

But it is reasonably foreseeable that there will be some car owners who will be unable to produce an acceptable credit or debit card and will not have the money in hand to pay for the hire in cash before collection. In their case the cost of paying for the provision of additional services by a credit hire company must be attributed in law not to the choice of the motorist but to the act or omission of the wrongdoer.

Lord Scott (Minority)

Characterising “additional payments” as special damages (i.e. damages for consequential loss)

Alternatively, and more accurately, the claim to recover the car-hire charges can be viewed simply as a claim to recover an item of special damages representing expenditure incurred as a result of the defendant's negligence. On that approach, however, recovery cannot be claimed simply on the basis that the expenditure was reasonably incurred by the injured party. It would, in principle, be necessary also to show that the expenditure reasonably or probably arose out of the defendant's negligence (see Martin B in Prehn v Royal Bank of Liverpool ); in other words, the expenditure must have been reasonably foreseeable.

The criterion of reasonable foreseeability, where the impecuniosity of a claimant has led to his incurring expenditure that he would not otherwise have incurred and recovery of which as special damage is sought has, I think, overtaken the principles about impecuniosity expressed in The Liesbosch [1933] AC 449. I agree with and have nothing useful to add to what has been said about this by my noble and learned friends, Lord Hope of Craighead and Lord Walker of Gestingthorpe. So it might be thought that Mr Lagden's ability to recover the whole of the credit hire charges that, on account of his impecuniosity, it was found that he had no choice but to incur would depend on whether the criterion of reasonable foreseeability could be satisfied. But that would be to ignore Dimond v Lovell.

The majority decision in Dimond v Lovell did not bar recovery on the ground that the incurring of the higher car-hire charges was not reasonably foreseeable. It barred recovery on the ground that, in law, the cost of financing payment of the repairs bill and payment of the car hire charges and the cost of services in handling the damages claim could not, as a matter of law, constitute special damages claims.

It must follow, first, that reasonable foreseeability may be a necessary but is not a sufficient criterion for the recovery of the full car hire charges, and, secondly, that your Lordships must approach this appeal on the footing, confirmed by Dimond v Lovell , that, in principle, the law will not permit the cost of financing a payment recoverable as special damages to be itself recoverable as special damages nor the cost of services in handling a damages claim to be recoverable as special damages.

The issue in this case is, therefore, whether your Lordships should construct an exception to the principle to which I have referred, and for which Dimond v Lovell stands as a very recent authority, in order to allow those who, like Mr Lagden, are...