The decision in Smith v Sabre Insurance dated 9 April 2013 has settled an issue which has plagued insurers for years, namely whether or not it is acceptable for a pursuer to raise separate actions in relation to personal injury and property damage, arising out of the same incident.

The scenario in the Smith case is familiar. Following a road traffic accident which was the sole fault of one party, the innocent party did two things. First, he instructed solicitors to raise a court action against the first party's insurers in respect of personal injuries suffered as a consequence of the accident. His solicitors duly did so, an action was raised in Stirling Sheriff Court and the pursuer was ultimately awarded £4,550 together with expenses.

The second thing the pursuer did was to enter into a credit hire agreement with an accident hire company, Accident Exchange Limited (AEL). AEL provided the pursuer with a replacement vehicle. Thereafter the pursuer sought compensation from the first party's insurers in respect of the hire charges and inconvenience, among other things. As is fairly common, different solicitors were instructed in respect of the latter claim.

When the hire charge case came before a judge in the Court of Session, the action was not allowed to proceed on the basis of res judicata. Res judicata is a plea which can be upheld by the court if certain conditions are satisfied. These conditions include the following: (i) that there has been a prior determination by a court of competent jurisdiction; (ii) generally, that the parties to both actions are the same; and (iii) that the subject matter and medium concludendi (ground of action) of both actions are the same. In other words, it is incompetent for a party to raise a second action against the same defender in respect of the same subject matter and with the same ground of action.

The pursuer appealed. The Inner House dismissed the appeal, agreeing with judge that the plea of res judicata should be upheld. The pursuer had argued that pre-litigation correspondence made it very clear that there were two separate actions and that the grounds of action were different: one related solely to personal injuries and the other to property damage. Much of the pursuer's argument was based on the fact the English Court of Appeal had, by majority, deemed that there is a distinction between these "causes of action".

The Inner House was not convinced, though. Lord Brodie, dealing with the concept of separate causes of action, said:

"We do not see that as being consistent with the law of Scotland. [The English case] has never been approved in Scotland, as far as we are aware. As far as policy is concerned, without something of the nature of a one action rule a defender cannot know if a particular claim does or does not represent the full extent of his potential liability."

This decision is very good news for insurers who are often faced with pursuers having two bites at the cherry. As it is a decision of the Inner House, it is binding on all lower courts in Scotland. Pursuers' agents must now be alert to the fact all loss and damage flowing from the same incident should be claimed for in the initial action, regardless of the type of loss or damage sustained.