The issue of whether it was appropriate to take into account a motorist’s personal financial circumstances when deciding whether he could recover the full credit hire rates or was limited to spot hire rates was revisited by the House of Lords in the case of Lagden v O’Connor  1 AC 1067.
The essence of the arguments was that it was unrealistic and artificial to limit a motorist’s damages to spot hire rates, if as a question of fact, they could not have afforded to pay those rates up front and instead would have had to hire from a credit hire company and pay credit hire rates.
The principal speech was provided by Lord Hope who stated at pages 1080 to 1081:
34 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.
The emphasis in Lord Hope’s speech was on choice: what were the options open to the innocent motorist and how much would those options cost.
35 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.
Lord Hope found that an impecunious motorist, one who had no choice but to hire a replacement vehicle on a credit hire basis, was entitled to the full cost of the credit hire. He went on to suggest a simple test for determining whether someone had a “choice” or was impecunious and without choice;
36 In practice, for reasons that are obvious, companies which offer cars for hire in the open market insist on payment of the rental up front before the car is collected, together with a sum to cover the risk of damage to the car while it is on hire. Payment is usually made by means of a credit card or a debit card. Some companies may accept cash, but if they do the sum that will have to be paid up front will not be small. Many car owners are, of course, well able to provide what is needed to satisfy the hirer that the money which is needed to pay for the hire is available. If they choose to use the services of a credit hire company they must accept as a deduction from their expenditure the extra cost of doing so. The full cost of obtaining the services of a credit hire company cannot be claimed by the motorist who is able to pay the cost of the hire up front without exposing himself or his family to a loss or burden which is unreasonable.
This rule of thumb focused on whether someone had ready means by which to pay for hire as an upfront cost, or not:
37 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. That is Mr Lagden’s case. In law the money which he spent to obtain the services of the credit hire company is recoverable.
This ruling did not offend against public policy. He expressly dealt with considerations of public policy at 1083 in these terms:
43 I recognise that, if an exception is to be made in favour of the car owner who is impecunious, there may be some cases where motor insurers will feel that they have no alternative but to take the case to court in order to resolve the question of fact as to whether the claimant had no choice but to use the services of a credit hire company. This may lead to an increase in contested small claims. I do not think that we are in a position to assess the scale of that increase. But motor insurers will be as anxious as anybody to keep these cases out of court with a view to keeping costs to a minimum. This suggests that the better course is to leave it to the insurance market to find its own solution to this problem. We must bear in mind, too, that the object of the law of damages is to put the injured party into the same position as he was before the accident. It would defeat this object if we were to arrive at a decision on policy grounds that would deprive the impecunious motorist of the opportunity of minimising his loss of use while his car is being repaired by obtaining the hire of an alternative vehicle.
44 For these reasons I would hold that the policy objections do not justify a departure from what I take to be the law as to the assessment of the damages that are recoverable.
The approach taken by Lord Nicholls echoed the speech he had given in the earlier case of Dimond and is to be found at pages 1072 to 1073
5 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.
Of concern to him, was to emphasise that credit hire companies provide a reasonable means of providing replacement vehicles, and the absence of the credit hire companies, would enable insurers to shuffle away from their liabilities:
6 My Lords, the law would be seriously defective if in this type of case the innocent motorist were, in practice, unable to obtain the use of a replacement car. The law does not assess damages payable to an innocent plaintiff on the basis that he is expected to perform the impossible. The common law prides itself on being sensible and reasonable. It has regard to practical realities. As Lord Reid said in Cartledge v E Jopling & Sons Ltd  AC 758 , 772, the common law ought never to produce a wholly unreasonable result. Here, as elsewhere, a negligent driver must take his victim as he finds him. Common fairness requires that if an innocent plaintiff cannot afford to pay car hire charges, so that left to himself he would be unable to obtain a replacement car to meet the need created by the negligent driver, then the damages payable under this head of loss should include the reasonable costs of a credit hire company. Credit hire companies provide a reasonable means whereby innocent motorists may obtain use of a replacement vehicle when otherwise they would be unable to do so. Unless the recoverable damages in such a case include the reasonable costs of a credit hire company the negligent driver’s insurers will be able to shuffle away from their insured’s responsibility to pay the cost of providing a replacement car. A financially well placed plaintiff will be able to hire a replacement car, and in the fullness of time obtain reimbursement from the negligent driver’s insurers, but an impecunious plaintiff will not. This cannot be an acceptable result.
The point that he made was where credit hire charges were recoverable, this was a predictable result not of those charges being excessive, but the innocent motorist’s limited means, which meant it cost him more to be put back into his pre-accident position, than a more affluent motorist.
7 The conclusion I have stated does not mean that, if impecunious, an innocent motorist can recover damages beyond losses for which he is properly compensatable. What it means is that in measuring the loss suffered by an impecunious plaintiff by loss of use of his own car the law will recognise that, because of his lack of financial means, the timely provision of a replacement vehicle for him costs more than it does in the case of his more affluent neighbour. In the case of the impecunious plaintiff someone has to provide him with credit, by incurring the expense of providing a car without receiving immediate payment, and then incur the administrative expense involved in pursuing the defendant’s insurers for payment.
The decision of the House of Lords necessitated overturning a case which had stood for 70 years: the Liesbosch, which suggested that a victim’s lack of financial means, should not be taken into account when calculating damages.
8 In your Lordships’ House the appellant sought to derive assistance from Owners of Liesbosch Dredger v Owners of SS Edison (The Liesbosch)  AC 449 and Lord Wright’s much discussed observations, at pp 460-461, regarding not taking into account a claimant’s want of means when assessing the amount of his loss. For the reasons given by my noble and learned friends, Lord Hope of Craighead and Lord Walker of Gestingthorpe, these observations, despite the eminence of their source, can no longer be regarded as authoritative. They must now be regarded as overtaken by subsequent developments in the law.
This led to his observations on who would be impecunious: the simplicity of the test he suggested was grounded in common sense. As financial decisions are dictated by priorities, if the payment of hire charges would involve unreasonable sacrifices on the part of the hirer.
9 There remains the difficult point of what is meant by “impecunious” in the context of the present type of case. Lack of financial means is, almost always, a question of priorities. In the present context what it signifies is inability to pay car hire charges without making sacrifices the plaintiff could not reasonably be expected to make. I am fully conscious of the open-ended nature of this test. But fears that this will lead to increased litigation in small claims courts seem to me exaggerated. It is in the interests of all concerned to avoid litigation with its attendant costs and delay. Motor insurers and credit hire companies should be able to agree on standard enquiries, or some other means, which in practice can most readily give effect to this test of impecuniosity. I would dismiss this appeal.
The approach of the House of Lords followed on from long standing authority and a very famous statement of principle in the case of Banco de Portugal.v.Waterlow and Sons Limited  AC 452.
In that case Lord MacMillan noted at page 506
Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticize the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. 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 recent years, Lord Hope’s rule of thumb has fallen away: the true test remains whether a litigant could have paid hire charges up front as they accrued, or whether his means precluded this, so that credit hire was his only realistic option.