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Mitigation of loss: Impecuniosity – costs of repairs

Opoku v Tintas
5 July 2013
Court of Appeal

Gavin Perry takes a look at this Court of Appeal decision that considered the extent to which the Claimant was impecunious and the reasonableness of the hire period.  The Claimant should have mitigated his loss and repaired his own vehicle, thus reducing the length of the period of credit hire.

Facts

The Claimant appealed from a decision of Her Honour Judge May QC after she awarded him only part of his claim for credit hire, recovery and storage charges, having found that the Claimant failed to mitigate his loss, by not repairing his car sooner than he did. 

The Claimant brought a claim for damages following a road traffic accident on 18 June 2010, when the Defendant drove his van into the back of his car.  The Claimant claimed for the cost of repairs to his vehicle, in the sum of £3,435.92 based on an independent assessor’s report compiled 7 days after the accident. He also claimed storage charges of £19,600 and credit hire charges of £130,000 from the date of the accident to 10 April 2012, a period of just under 2 years. 

The Defendant’s insurers denied liability. They believed the Claimant had stopped for no reason and they requested access to the Claimant’s vehicle for an engineer’s inspection. The inspection took place in February 2011 and the report dated 11 March concluded that the damage resulted from two separate incidents. The other incident was, according to the Claimant, a carjacking incident in April 2010 following which the Claimant had the vehicle repaired at his own expense for £1,475. Whilst maintaining the denial of liability, the Defendant made a without prejudice payment to allow the Claimant’s car to be repaired in March 2012.

At trial in October 2012, Her Honour Judge May QC found the Defendant fully responsible for the accident and also that the entirety of the damage to the Claimant’s vehicle was the result of accident.

Findings on the claim for hire charges

Credit hire rate - the judge concluded that the Claimant was “legally impecunious” and he was entitled to recover vehicle hire charges at the higher credit rate charged by Credit Hire Organisations, as opposed to the lower basic hire rates available to a cash payer.

Period of hire - the judge gave a cut off point of March 2011 for when the Claimant could and should have repaired his vehicle.  It was not beyond the Claimant’s means to have saved some money from June 2010 to February 2011. By late February 2011, the Claimant should have retrieved his car from storage and sent it for repairs. 

The Claimant appealed the finding in relation to the credit hire charges. He argued it was inconsistent for the judge to find that he was impecunious in the context of the credit hire rates but go on to say that he had failed to mitigate his loss by not having the car repaired in March 2011.

Findings

Beatson LJ, McCombe LJ and Patten LJ dismissing the appeal, held:

  • The relevant legal principles could be found in Giles v Thompson [1994]; Lagden v O’Connor [2004] and     [2013]. 

  • A person must take all reasonable steps to mitigate his loss, but he is not obliged to make sacrifices he could not reasonably be expected to make. It is a question of fact and evaluation as to what is reasonable.

  • The first question here was whether the judge was entitled in principle to conclude that there came a time when it was reasonable for the Claimant to fund the repairs. The second was whether the March 2011 cut-off was reasonable.

  • As to the first question the judge had not said that the Claimant should have funded the repairs straight after the accident. There was however sufficient evidence of the Claimant’s finances before the court to entitle the judge to conclude that the Claimant could, and should have used a combination of his existing credit card facility, the savings he was making by not having to pay for the insurance and maintenance and by saving modest sums over the eight month period.  The one off funding of the repairs had to be considered against the background of the monthly hire charges, which were accruing in the sum of £5,000 per month.

  • As to the question of the cut-off date, some judges might have chosen a later cut off point, and others might have chosen an earlier one.  The judge had not gone outside the wide margin a trial judge has in making an evaluative finding and she had not therefore made an error as argued by the Claimant.

  • Whilst the Claimant had been assessed as impecunious for the purpose of deciding whether he could recover the “credit hire” rate, that did not provide him with an open ended argument that he could not afford to fund the cost of repairs in the sum of £3,400. 

Comment

  • It has always been the Claimant’s general common law duty to keep his losses to a minimum, although in recent years the perception has been that there was an entitlement to a "like for like” vehicle, irrespective of that duty.

  • It is wholly unreasonable for the Claimant to hire a car and not take positive steps to attempt to curtail the hire charges and that runs true of cases where liability is disputed.

  • In order for hire charges to be recoverable from the negligent party’s insurers, the Claimant will have signed an agreement rendering him personally liable for those charges.  If the Claimant was taking that liability seriously, then he should have balanced an on-going cost of hire at £5,000 per month against a one-off cost of repair of £3,400, which in turn should have forced him to take stock of the situation and consider all alternatives open to him, rather than continue to incur further hire charges.

  • This is a victory for common sense, but the period allowed by the Judge is still significant, as was the overall amount, when compared to the repair cost.  On that basis, insurers should continue to give consideration to early without prejudice payments on account of the claim generally to prevent significant exposure to hire charges and recovery and storage charges.

  • It is a decision that claimants would also do well to heed.  Whilst all is rosy, there may be no incentive for the hire company to pursue a claimant directly for unrecovered hire charges, but if the hire company were to run into financial difficulty and ultimately ceases to trade, an administrator would be entitled to seek recovery of any outstanding hire charges, as some unlucky customers of DriveAssist are now finding out.  Credit hire is not risk free.

Contact

For further information please contact Gavin Perry, Partner on 0151 907 3493

By Gavin Perry

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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