There have recently been several cases at first instance regarding a Claimant’s failure to mitigate loss and the recoverability of hire charges. Despite several schemes being introduced by Defendants to provide cheaper replacement vehicles, arguably avoidable losses continue to be incurred. However, one recent case may give motor insurers a glimmer of hope.

Judgment in the case of Steadman v TNT [2008] was handed down by HHJ Oliver-Jones QC sitting in Dudley County Court on 19th June 2008. The claim for hire charges arose out of a road traffic accident, which occurred on 5th April 2006. The Defendant’s driver, drove an Iveco goods vehicle into the Claimant’s parked car. Liability was admitted and the Claimant’s car had to be written off. Proceedings were issued in the small claims court for recovery of hire charges in the sum of £2,332.38, plus £40 collision damage waiver.

At the scene of the accident, the Claimant was given a “Company Driver Information Card” by the Defendant’s driver. On one side of the card, under the heading “Important information for the other party mitigation of losses” was an offer of a replacement vehicle and assistance with vehicle repairs, free of charge, together with the Defendant’s contact details. Further, there was a note explaining that the recipient should show the card to their insurer/legal representative if they did not wish to contact the Defendant direct. The Claimant did not read the card but did show it to her brokers, Swintons, who in turn referred her to Helphire where she entered into a credit hire agreement, and obtained a hire vehicle, the costs of which were in dispute between the parties.

At first instance, the District Judge made a clear finding that the Claimant had failed to mitigate her loss and therefore was not entitled to damages. The Claimant appealed, arguing that she was entitled to recover a sum, which the Defendant would have expended had she accepted the offer of a replacement vehicle. The Defendant argued that there was no loss to the Claimant.

The Claimant sought to rely upon the case of Evans v TNT [2007], the facts of which were not too dissimilar to the present case. In Evans, the Claimant hired a replacement car whilst his own was being repaired. The cost of the hire vehicle was significantly higher than the alternative vehicle offered by the Defendant. It was held that the Claimant had not acted unreasonably as between himself and the Defendant by entering into a credit hire agreement. The Claimant was entitled to recover a sum that did not exceed what would have been the Defendant’s outlay, had the Claimant accepted its offer of a replacement vehicle.

The issue in the present appeal was what was the correct measure of loss. HHJ Oliver-Jones did not agree with the Judgment of HHJ Wynn Rees in Evans. He held that acceptance of the Defendant’s offer would have reduced the value of the Claimant’s damages to nil and that the Defendant’s outlay was entirely immaterial to the issue of the Claimant’s damages. Going back to first principles, where the Claimant’s vehicle is damaged she is entitled to restitutio in integrum – putting her into the position she would have been in had the damage not occurred. An award representing the market value of the damaged vehicle would satisfy this requirement, enabling the Claimant to obtain a replacement vehicle. It is common for a Claimant to hire a replacement vehicle until such payment is made, which is a consequential loss. By offering a replacement vehicle pending payment from her own insurers (of the value of the car), the Defendants had made an offer of restitution. There was therefore no loss to the Claimant. By refusing to accept the offer, which would have been at no cost to her, the Claimant had failed to mitigate her loss and was not entitled to recover anything.

This is an important decision and one which should be encouraging for Defendants and their motor insurers. Companies are already operating schemes offering replacement vehicles in no fault accidents. In his Judgment, HHJ Oliver-Jones endorsed these types of schemes where Defendants or their insurers provide innocent victims of vehicle damage with suitable alternative means of transport. There is clearly a strong case for such schemes to operate successfully, with reduced costs and an avoidance of credit hire litigation. Claimants unreasonably refusing such offers may well struggle to recover hire costs.

As this is a case that is of wide interest to the motor insurance industry, the Claimant is seeking permission to appeal from the Court of Appeal.