Chitty Chitty Bang Bang

Many credit hire claimants lead lives of quiet desperation. They exist from day to day, week to week on the edge of financial disaster. They do not have savings. They have little access to credit. They work zero hour contracts and they are one pay packet away from penury. A road traffic accident which writes off their elderly but essential low value vehicle, insured on a third party only basis, is one example of a life event which can prove disastrous. Into this world, at a time of crises, comes credit hire which has a real social utility.

But as the days of hire stretch into weeks and then into months, a defendant will clamour that a claimant could do more to mitigate their loss. In particular the point will be raised that notwithstanding the fact the destroyed vehicle was worth £2000 etc, the claimant should at some point have mitigated his loss by buying a £500 “smoker and banger” to facilitate credit hire coming to an end. How will the courts approach this argument?

Starting with the seminal case in House of Lords and the classical direction on reasonableness of mitigation in Lagden v O’Connor [2004] 1 AC 1067 Lord Hope stated:

Of course, the facts in these two cases were quite different from those in this case. 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.

(emphasis added)

Thus, as a matter of law, when considering reasonableness of mitigation, a defendant is not entitled to demand that a claimant incur a loss or bear a burden of make an unreasonable sacrifice in the mitigation of his loss.

First, what is his loss? It is that measure of damages that represents the full extent of his loss as defined in law. A claimant is entitled to that measure of damages that enables him to be put back into the same position that he was in, prior to the accident.

The claimant having been deprived of the use of his motor vehicle, is under no duty as defined by law, to mitigate his loss by getting on the bus, or buying a smaller car, or in this scenario by buying an older and poorer quality car, as those are not the measure of his “loss”.

Secondly, a defendant’s argument that he should have obtained an older and cheaper car, necessarily of a lower quality than the chattel which has been damaged, represents a defendant demanding of a claimant that he bears a burden or makes a sacrifice. It is accordingly imposing too high a standard on the claimant and fails as an argument in law.

Moreover, the starting point where there is a road traffic accident is that the claimant is entitled to look to the defendant’s insurers in the first instance to pay the costs of repair. Per Mattocks v Mann [1993] RTR 13 and Beldam LJ at page 20

…In these days when everybody looks to one or other of the insurers of vehicles involved in an accident, it is clearly contemplated that where the cost of repairs are of the substantial kind involved in this case, the source of payment of that cost will be the insurers. Looking here at the whole history of events, one cannot isolate the plaintiff’s inability to meet the cost of those repairs and say that that brought an end to the period for which it was reasonable that the second defendant’s insurers should be liable.

And Nourse LJ:

The principle we have to apply derives from the speech of Lord Macmillan in Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 , 506 . It was authoritatively applied to the tort of negligence by Davies LJ in this court in Moore v DER Ltd [1972] RTR 97 , 100C–D, 101G–D . The essence of the principle was stated by Lord Macmillan, at p506:

‘The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.’

In my judgment the question whether the plaintiff acted reasonably or not in hiring the Ford Sierra is not to be answered simply by deciding whether it was a reasonable replacement for her own car. It is to be answered by deciding whether in all the circumstances prevailing between 21 January and 9 June 1990 it was reasonable for her to hire the Ford Sierra which she did hire. That is a different question from that propounded by Mr Anthony. For the reasons given by Beldam LJ I am satisfied that it can only be answered in the affirmative.

(emphasis added)

This is important, because there need to be good and cogent reasons as to why a defendant’s insurers will not pay for the pre-accident value, or the repairs depending as the case may be, because if they do not pay, it will have the effect of prolonging the hire period.

There is often no explanation at trial in the evidence as to why the defendant’s insurers would not release a without prejudice interim payment in respect of the pre-accident value of a claimant’s motor vehicle or pay for the cost of the repairs: a modest amount for them, often an impossible amount for indigent claimants.

There will come a time when the claimant’s own resources may have to be called upon: but the courts readily accept that a claimant only has to act reasonably. Thus, in the case of Umerji v Khan [2014] RTR 23 the court reduced a hire period from 591 days to one of 140 days, on the basis that notwithstanding the Claimant was debarred from asserting impecuniousity this was a reasonable period (see paragraph 40) to allows for the defendant’s insurers to inspect the vehicle and set out their position.

In the case of Opoku v Tintas [2013] EWCA Civ 1299 a period of hire more than 8.5 months was allowed, from the date of the accident on 18th June 2010 and 15th March 2011, to allow the defendant a reasonable time in which to inspect the damaged vehicle and set out their position and to enable the claimant to save for the cost of repairs (see paragraphs 26 to 32). Although the facts of these cases, are case specific, they demonstrate the application of the Banco de Portugal approach noted above in Mattocks.

Applying to this case the correct formulation of the duty to mitigate per Lagden, if a claimant has had to save to fund the repairs to his own vehicle to put himself in the position, he should have been in had the accident not occurred, the hire period would likely have been no less than the claimed hire period, and in all possibility longer, depending on the claimant’s financial circumstances.

The fact that a claimant was prepared to take a lower quality car, going above and beyond her legal duty to mitigate, does not mean that she was acting unreasonably by not doing so, at an earlier point.


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