Supreme Court finds woman struck by van while in hire car entitled to recover sum due under contract to credit hire company

Supreme Court finds woman struck by van while in hire car entitled to recover sum due under contract to credit hire company

The Supreme Court has found that the insurers of a van driver who negligently collided with a woman in a car she had hired while her own car was in for repairs were required to pay her the amount that she had to pay the hire car company to compensate them for the time the vehicle was not in use.

The case was funded and pursued by the hire car company, Helphire Ltd, in the name of the driver, Lorna Armstead, seeking a payment of £1,560 from Royal & Sun Alliance Insurance Co Ltd, the insurers of the van which struck the hire car. The case had been rejected in the County Court and twice on appeal, albeit for varying reasons on each occasion.

The case was heard by Lord Briggs, Lord Leggatt, Lord Burrows, Lord Richards, and Lady Simler. Benjamin Williams KC and Ben Smiley appeared for the appellant and Lord Marks KC and Quentin Tannock for the respondent.

Lord Leggatt and Lord Burrows wrote the leading judgment, with a concurring opinion issued by Lord Briggs.

Economic loss

The appellant had hired a car on credit hire terms from Helphire while her own vehicle was in for repairs following a road accident that was not her fault. Under the standard terms of such a contract, the cost of hire was to be recovered from the other driver’s insurers. Unfortunately, while driving the hire car, the appellant was again involved in an accident that was not her fault when a van collided with the vehicle in November 2015.

Although the hire car was damaged, the appellant continued to drive it until repairs to her own car were completed, whereupon she returned the hire car to Helphire. The car was then repaired over a period of 12 days, for which under the terms of the hire agreement Helphire sought the rental charge for that period from the appellant under clause 16 of the hire agreement, amounting to £1,560, charged at the credit hire rate rather than a typical lower hire rate.

Ms Armstead brought proceedings against the van driver’s insurer, the respondent, for the sum due. The claim was initially dismissed in the County Court on the ground that the appellant did not have any proprietary interest in the hire car and thus had no right to recover economic loss. In the first appeal it was found that Ms Armstead was entitled to recover the sum but could not do so as a matter of law.

The Court of Appeal dismissed the second appeal on the basis that clause 16 was an internal arrangement between a bailee and a bailor and did not represent a genuine attempt to assess the likely losses incurred by Helphire. It therefore concluded that the clause 16 sum was too remote to be recoverable. The case thereafter proceeded to the Supreme Court.

Short-term extension

In a joint opinion with which Lord Richards and Lady Simler agreed, Lord Leggatt and Lord Burrows noted generally: “The claim has been rejected in all three courts below. But numerous different reasons have been given for this result, most of which are, we think, clearly inconsistent with the basic legal principles applicable to claims in the tort of negligence arising out of damage to tangible property.”

They continued: “It follows that Ms Armstead is entitled to recover the clause 16 sum as damages from RSA, subject only to the question whether this loss is too remote or is excluded by any other limitation on the recovery of damages in tort.”

Assessing whether the damages were reasonably foreseeable, the judges said: “Just as loss of use to the claimant is reasonably foreseeable and not too remote, so is the contractual liability of the claimant to pay damages for loss of use to the hire company. It can also be said that the precise manner by which the loss of use became a loss to the claimant need not have been reasonably foreseeable.”

They went on to add: “Ms Armstead was required by clause 16 to pay, as damages for loss of use, the daily credit hire rate that she was being charged for the hire of the Mini. As Mr Williams submitted, this can be realistically viewed as merely a short-term extension of the hire period at the pre-agreed hire rate. On the face of it, agreeing the damages for Helphire’s loss of use, by taking the contractual rate that Ms Armstead had already agreed, was a reasonable way of pre-estimating that loss.”

Lord Leggatt and Lord Burrows concluded: “RSA, on whom the burden of proof lay, did not plead or adduce any evidence to show that the clause 16 sum was not a reasonable estimate of the hire company’s likely loss. In the absence of any such pleaded allegation or evidence, it was not open to the Court of Appeal to reject the claim on this ground.”

The appeal was therefore allowed.

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