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Lagden v O'Connor, House of Lords, 4 December 2003

10 December 2003
The issues

Credit hire – helphire – RTA.

The facts

Mr Lagden had a 10-year-old Ford Granada, which was damaged when it was hit by
Ms O’Connor’s Mitsubishi Shogun whilst parked and unoccupied. Mr Lagden was unemployed. His car went for repair to a nearby garage. He could not afford to pay for a car while his own car was off the road. He went to Helphire. On 6th December 1999 he signed an agreement with Helphire UK Limited to hire a Ford Mondeo whilst his own car was being repaired. The same day he signed a supplementary credit hire agreement providing for Helphire UK Limited to extent the credit facility to him for the hire charges for a period of 26 weeks. He also entered into an Insurance Policy with Angel Assistance another subsidiary of Helphire. The Policy was to provide for the payment by Mr Lagden of the costs incurred by Helphire if they were not recovered by the end of the 26-week period. The total costs of the Helphire scheme was £659.76. Those costs included certain sums, which in the light of the decision in Dimmond -v- Lovell would not normally have been recoverable. The Court of Appeal decided that the wrongdoer had to take his victim as he found him.

The Helphire charge was to Mr Lagden the cheapest way to remedy the loss and he was therefore entitled to recover the full cost of the scheme.

The Defendant appealed.

The decision

1. In Dimmond the question of impecuniosity was not directly considered. That decision was subject to modification. A wrongdoer is not entitled to demand of an 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. 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 be made out for a deduction. 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 grounds for it to be deducted.

2. In this case the Defendant’s insurers had not made out a case for deduction, which they sought. 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 the services he had no way of avoiding the additional benefits that were provided to him.

3. It by no means follows that the same result must follow in every case where an innocent motorist uses the services of a credit hire company. The criteria must be 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.

4. Policy issues had been raised in this appeal. Accidents of the sort that happened to Mr Lagden happened every day. It was in no-one’s interest that these cases should be forced into Court when there was no issue on liability. It was with a view to achieving certainty that the series of test cases were brought before the Courts by the motor insurance companies. It was suggested that the benefits achieved by the decision in Dimmond -v- Lovell would be set aside if an exception were to be made in favour of the impecunious. Because that word was imprecise it had been argued that case after case would come to Court to resolve the issue as to whether the Claimant had had no choice but to use the services of a credit hire company. However, the dividing line is likely to lie in practice between those who do and those who do not have the benefit of a recognised credit or debit card. It ought to be possible to identify those cases where the selection has been made on grounds of convenience only without much difficulty.

5. The Defendants had relied upon the decision in the Liesbosch Dredger case. Since that case the law had moved on. The correct test was different. The rule laid down in Liesbosch that losses due to the Claimant’s pre-existing impecuniosity were too remote and could not be recovered, as damages should now be departed from. The correct test of remoteness is whether the loss is reasonably foreseeable. The wrong doer has to take his victim as he finds him. This rule applies to the economic state of the victim in the same way as it applies to his physical and mental vulnerability. It requires the wrongdoer to bear the consequences if it was reasonably foreseeable that the injured party would have to borrow money or incur some other kind of expenditure to mitigate his damages.

6. Lord Scott and Lord Walker both dissented.

Comments

Lord Scott considered that the factual basis on which Dimmond had been distinguished by the majority of the House was not persuasive. He noted that the proposition that Mr Lagden had “no other choice” had not been satisfactorily supported by the facts. He commented that it was rare indeed for there to be no other choice as there were always choices including the possibility of Mr Lagden foregoing the use of a car during a short repair period. He noted the purposes for which Mr Lagden needed the car were not known nor was the practicality of the use by Mr Lagden of public transport during that short period. He noted that the majority in Dimmond -v- Lovell did not bar recovery on the ground that the incurring of car hire charges was not reasonably foreseeable but on the basis that the cost of financing payment of the repair 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. Lord Scott and Lord Walker both took the view that the “impecuniosity, no other choice, exception” was not based on any principle that could be reconciled with Dimmond -v- Lovell and was so conceptually imprecise that it would prove an obstacle to the swift and economical settlement of a large number of simple cases and to that extent would be a disservice to the development of the law.

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