0370 270 6000

already registered?

Please sign in with your existing account details.

need to register?

Register to access exclusive content, sign up to receive our updates and personalise your experience on brownejacobson.com.

Privacy statement - Terms and conditions

Copley v Lawn and Madden v Haller, Court of Appeal, 17 June 2009

10 July 2009
The issues

Credit hire – whether Claimant fails to mitigate by refusing an offer of a free replacement car. Whether if the Claimant fails to mitigate their loss this reduces the Claimant’s claim to nil.

The facts

Both cases being appealed arise from similar facts. Both Claimants were involved in a road traffic accident in which their vehicle was damaged and a hire vehicle was required during the period of repair. In both cases the Defendant’s insurers contacted the Claimant to offer a free replacement vehicle.

In the case of Mrs Copley she initially received a cold call from the Defendant’s insurers offering a replacement car which was then followed up with a letter repeating the offer. Mrs Copley was already in a hire vehicle provided by Help Hire (UK) Ltd. Mrs Copley forwarded the letter from the Defendant’s insurers to her solicitors asking for advice. No advice was given until some time after repairs had been completed. Mrs Copley therefore claimed for loss of use of her own car for 71 days at the price agreed with Help Hire of £39.90 per day. At first instance Deputy District Judge Reed awarded the Claimant 7 days hire because in his view Mrs Copley should by that time have cancelled the Help Hire agreement and taken up the Defendant’s offer of a free replacement car.

In the case of Captain Madden an offer was also made by the Defendant’s insurers of a replacement car. It was found at first instance that Captain Madden ignored the offer (although it appears he did in fact forward the offer letter to his insurers who subsequently ignored it) and instead proceeded to enter in to a hire agreement with Help Hire for a replacement vehicle. At first instance District Judge Flannigan dismissed the Claimant’s claim on the basis that Captain Madden had failed to mitigate his loss in ignoring the Defendant’s reasonable offer.

In both cases therefore it was found that a refusal of an offer of a free car amounted to a failure by the Claimants to take reasonable steps to mitigate their loss.

The decision

The Appellant recognised that the doctoring of mitigation can have a part to play however the Appeal Court’s view was that Judges should be reluctant to become to readily involved in complicated mitigation arguments. In the Court’s view the major protection for the Defendant and his insurers is that the Claimant can only recover the ‘spot’ or market rate of hire (Dimmond v Lovell 2002) and therefore the uplift on Help Hire rates (reflecting the easy credit terms, the deferment of payment and/or the possibility of failure to recovery from the Defendant) could not be recovered. The Appeal Court’s starting point therefore was that they would look ‘with some scepticism’ on arguments that an innocent Claimant should take further steps (over and above ensuring that he is not hiring a replacement car for more than the market rate) by way of mitigating his own loss or protecting the tort feasor’s position.

The Appeal Court considered the hire documents ad in particular noted the mitigation questionnaire which informed the Claimants of their duty to mitigate their loss and also asked the Claimant if they had had any offer of a replacement vehicle from the Defendant – which, in the case of Captain Madden, he had. The Appeal Court further considered the Defendant’s offer letter which set out the broad terms of the offer and indicated that a refusal to accept the offer would result in a refusal to pay any subsequent credit hire claim. The Court considered that the letter had an unpleasant threatening tone in that case. Furthermore, in the case of Mrs Copley, the Court of Appeal considered that the cold telephone call was inappropriate.

The Appeal Court questioned whether or not the Defendant’s offer was really an offer of a ‘free car’. They considered that if it was right to regard the car as ‘free’, it may also be right to regard the Claimant’s replacement car (as provided by Help Hire) as free because the Claimant never had to pay the hire cost as this would be incurred by the Claimant’s own ‘tied insurers’ the Court therefore question why the Claimant should be expected to accept the Defendant’s free car when he had already got a free car of his own.

The Court questioned as to why the Claimant should enter in to negotiations with the representatives of the Defendant who damaged the Claimant’s car with a view to clarifying their offer when the Claimant had every expectation that he would be able to obtain a free car anyway. The Court questioned as to why an innocent car driver should be forced to react at all to a complicated letter sent on behalf of the Defendant a day or so after the Defendant had negligently damaged his vehicle.

The Court accepted that when making reference to what should be expected of the Claimant this also incorporated the Claimant’s insurers because it was a natural assumption is that a driver will send correspondence such as the offer letter to his own agents whether they be solicitors, brokers or insurers. The Court therefore accepted that it was appropriate to consider the combined position of the Claimant and their advisors.

In taking account the combined position the Court considered that any offer made by the Defendant’s insurers had to contain all such information as would be relevant for the Claimant and their advisors or representatives to make a reasonable response. The Court noted that one piece of key information which was missing from the Defendant’s offer letter was the cost to the Defendant of hiring the replacement car. Whilst this may not have been of any interest to the Claimant driver it would be of great interest to their insurers or representatives. If the Defendant could genuinely obtain a hire car more cheaply than the Claimant could it may be unreasonable to use the services of Help Hire and the Court accepted that a mitigation argument might get off the ground. This key piece of information had however been omitted from the Defendant’s offer letter. In the circumstances therefore the Court found that no informed choice was available to either the Claimants or their advisors. Accordingly the Court could not say that the Claimant had acted unreasonably it not accepting the offer in the form it was presented. The Claimants and their advisors need to know the true cost to the Defendant and his insurers. Whilst it was submitted on behalf of the respondent that the cost to the Defendant was entirely irrelevant to the Claimant the Court considered that the dispute was an ordinary commercial dispute to which the Court could not close its eyes. A Claimant in this situation cannot be said to act unreasonably if he makes his own arrangements with his own hire company unless he is made aware that this commercial enterprise can be undertaken more cheaply by the Defendant and by his own arrangements.

If a Defendant makes an offer of a replacement car to an innocent Claimant and the Defendant makes clear that he is going to pay less for the replacement cars and the Claimant is intending to pay (or is paying) then it may well be the case that a Claimant should accept that lower cost replacement.

In the circumstances therefore neither of the Claimants could be said to have acted unreasonably in failing to accept the Defendant’s offer or in failing to explore them further and therefore the appeal were allowed.

The Court of Appeal noted that insurers on both sides were anxious to have an answer to the question of whether, if the Claimant did fail to take reasonable steps to mitigate their loss, they can recover nothing or whether they can recover, at least, the cost which the Defendant’s insurers would have had to pay to hire a replacement car themselves. In this regard the Court said obiter that in principle, it cannot be correct that a Claimant who rejects a Defendant’s reasonable offer is entitled to nothing. The Claimant has still suffered a loss. The Court followed the decision of Strutt v Whitnell (1975) and found that there was an undoubted loss to the Claimants because their cars had to be repaired and they needed replacement cars during the period of repair. The Court considered that this loss could not be wiped out by an offer from the Defendants to provide a free replacement.

It was submitted on behalf of the Respondent that a distinction should be drawn between cases where a loss had already been incurred and cases where the loss was only to be incurred in the future (as with hire). The Court considered that this had an unattractive artificiality and considered that the loss of use (although prospective) was a genuine loss at the time of the accident. The cause of action for loss of use accrued at that point although it would no doubt be correct to say that any claim was not, at that point, quantifiable.

The Court on appeal agreed with the decision of Judge Wynn Rees in the case of Evans v TNT Logistics Ltd (2007) to the extent that if the Claimants had acted unreasonably, they should at least recover the actual reasonable cost of hire.

Conclusion
1. It is not unreasonable for a Claimant to reject or ignore an offer from a Defendant (or his insurers) which does not make clear the cost of hire to the Defendant for the purpose of enabling the Claimant to make a realistic comparison with the cost which he is incurring or about to incur.

2. Following Strutt v Whitnell, if a Claimant does unreasonably reject or ignore a Defendant’s offer of a replacement car the Claimant is still entitled to recover at least the cost which the Defendant can show he would reaosmably have incurred and the Claimant does not therefore forfeit his damages claim altogether.

3. The general rule that the Claimant can recover the ‘spot’ or market rate of hire for his loss of use claim is upheld unless and to the extent the Defendant can show that, on the facts on a particular case a car could have been provided even more cheaply than the spot or market rate.

Comments

This is a very disappointing decision from the Court of Appeal decision from the Court of Appeal and revert back to the position of Evans v TNT Logistics in which, irrespective of the Claimant’s conduct in terms of mitigation, the Claimant is always entitled to recovery something for hire on the basis that the loss has already been incurred. The Court in coming to this conclusion appear to amalgamate cause of action with loss. Whilst it must be correct that a cause of action for loss of use has accrued at the time of the accident it is more difficult to accept that a loss has occurred at that point.

Furthermore, whilst the Court of Appeal have concluded that a Defendant is required to provide information as to the cost to them of hire in order that the Claimant can consider it the decision appears to suggest that if this information is not contained the Claimant and his insurers can simply ignore it. There does not therefore appear to be any onus on the Claimant or his insurers to even make a enquiries as to the cost of the Defendant’s offer of replacement. Defendant insurers will therefore need to provide all the required information to enable the Claimant’s insurers to consider the Defendant’s offer from day 1. We anticipate however that the Claimant’s insurers will be able to get around this unless the offer of replacement is for a like for like vehicle where direct comparisons as to costs can be made.

Jo Pruden specialises in credit hire claims. For further information contact her on jp@vpinsurance.net.

focus on...

Legal updates

Non-payment of insurance premiums during the Coronavirus pandemic

The forced closure of many businesses as a result of the Coronavirus pandemic has had a huge impact on the nation’s Gross Domestic Product (GDP). Recent reports from the Office for National Statistics state that the economy was 25% smaller in April than it was in February this year.

View

Legal updates

Reinstatement for property damage losses – when does it apply?

The Court of Appeal has recently considered the correct test for measuring the indemnity for property damage losses and has provided useful guidance on whether an insured needs to intend to reinstate the property to its pre-loss condition.

View

Legal updates

Coronavirus (COVID-19) insurance considerations

With instances of COVID-19 rapidly increasing throughout the UK, many businesses are considering the options available to limit staff and customer exposure to Coronavirus.

View

Legal updates

Insurance annual review 2019-2020

Welcome to our review of 2019 as we look ahead to what is on the horizon for the insurance sector in 2020.

View

The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

mailing list sign up



Select which mailings you would like to receive from us.

Sign up