In the recent decision of Armstead v Royal & Sun Alliance Insurance Company Ltd [2024] UKSC 6, the UK Supreme Court examined where the burden of proof lies in relation to the issue of whether or not a particular class of loss is too remote to claim in the tort of negligence.
The claimant (appellant in the appeal), Armstead, hired a car from Helphire Ltd ("Helphire"). The credit hire agreement between Armstead and Helphire specified that, if the hire car was damaged, Armstead was required to pay Helphire's daily hire rate up to a maximum of 30 days for Helphire's loss of use while the hire car was being repaired or awaiting repair (the "Stipulated Amount").
Armstead's hire car was damaged through the fault of a van driver who was insured by Royal & Sun Alliance Insurance Company Ltd ("RSA"), the defendant (respondent in the appeal). Armstead was thus contractually liable to pay to Helphire the Stipulated Amount. Armstead then sued RSA in negligence, seeking to recover from RSA a sum equivalent to the Stipulated Amount. The key issue was whether or not the Stipulated Amount was too remote in law for Armstead to claim.
The lower courts found in favour of RSA – i.e. that the claim for the Stipulated Amount was too remote for Armstead to claim. The Supreme Court overturned the lower courts' decision and found in favour of Armstead. In doing so, the Supreme Court held that:
- Once the claimant proves that a tort had been committed causing the loss claimed, the burden of proof then falls on the defendant to assert and prove that the loss claimed was too remote to be recoverable.
- The Stipulated Amount would not be too remote if it was a reasonably foreseeable type of loss at the time of the breach of duty. Being a contractual liability, it needed to be a genuine and reasonable pre-estimate of Helphire's loss, or else it was unenforceable as a penalty. (*)
- As RSA did not plead a positive case that the loss was too remote and adduced no evidence on the issue, it had not discharged its burden of proof. It was thus not open to the court to reject or reduce the Stipulated Amount claimed.
Before this Supreme Court decision, there was a surprising absence of authority on the question of who bears the legal burden of proof in relation to remoteness. This decision offers finality on the issue.
For more details, please see the blog post from our London team on this case here.
For more information, please contact Gareth Thomas, Partner, Rachael Shek, Partner, Jojo Fan, Partner, Peter Ng, Senior Associate, or your usual Herbert Smith Freehills contact.
(*) Armstead had conceded that, in order to be recoverable, the Stipulated Amount had to be a "genuine and reasonable pre-estimate" of Helphire's loss of use. This did not reflect the modern law on penalties, which instead asks whether the liability imposed is "out of all proportion to a legitimate interest of the innocent party" (see our previous blog "Supreme Court Rewrites English Law Rule on Penalties" regarding the law on penalties). That said, the Supreme Court considered Armstead's concession to be correctly made: on the facts of this case, the results under both the old and modern tests would be the same.
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