UK: Credit Hire: Supreme Court Decision Imminent In Copley v Lawn, Maden v Haller [2009] EWCA Civ 580 On Whether The Defendants Have Permission To Appeal Notwithstanding The Claimants' Objections

Last Updated: 25 February 2010
Article by Thomas Oxton

The Defendants' petition

As mentioned by this author in another current awareness article, the defendants in Copley in July petition for leave to appeal against the Court of Appeal's judgment in June allowing the claimants' appeals.

In Copley, Maden the Court of Appeal (Longmore LJ giving judgment with which Jacob and Waller LJJ agreed) held that the claimants had not failed to mitigate their losses when they opted to make use of vehicles supplied on a credit hire basis by Helphire (UK) Ltd rather than make use of 'free' vehicles offered to them by the defendants' insurer, KGM. The court concluded that it was not unreasonable for a claimant to reject or ignore an offer from a defendant (or his insurers) which does not make clear the cost of hire to the defendant for the purpose of enabling the claimant to make a realistic comparison with the cost which he is incurring or about to incur. It also concluded, obiter, that where a claimant does unreasonably reject a defendant's offer of a replacement car, he is entitled to recover at least the cost which the defendant can show he would reasonably have incurred; he does not forfeit his damages claim altogether.

In their petition the defendants argue that the Court of Appeal's decision represents an "unwarranted and unprincipled development of the doctrine of mitigation which is not only unsupported by, but appears contrary to, established authority ...".

Traditionally, the doctrine of mitigation of loss has been interpreted as involving a principle that claimants should take all reasonable steps to avoid or eliminate their losses whether resulting from a breach of contract or a tort. The sanction for default being that damages are not recoverable to the extent that they relate to losses that could have been avoided or eliminated by the taking of such steps. The defendants argue in the petition in Copley, Maden that the Court of Appeal has erroneously created a new principle that now "the claimant does not even have to consider the prospect of avoiding any potential loss, unless he knows the actual or true impact that acceptance of the [defendant's] offer will have on the defendant's own commercial or financial position".

The Claimants' objections to the petition

The Claimants argue in their objections that the petition misconstrues the doctrine of mitigation of loss.

They maintain that the doctrine's distinctive feature is that an injured party is bound to act with the reasonable interests of the wrongdoer in mind rather than to take steps to avoid or minimise his own injury / losses as such. Referring to the House of Lords decision in British Westinghouse Co v Underground Rly [1912] AC 673, the Claimants assert that the doctrine requires the injured party to concern himself with whether his acts unreasonably result in detriment to a defendant rather than - it is implied - with whether he should avoid his own loss.

Citing Pearson LJ's comment in Darbishire v Warren [1963] 1 WLR 1067 at 1075 that a claimant "is not under any actual obligation to adopt the cheaper method .... he is fully entitled to be as extravagant as he pleases but not at the expense of the defendant", the claimants argue that it is technically inaccurate to say that there ever exists a 'duty' to mitigate. They suggest that the doctrine requires less restrictively that an injured party does not act unreasonably towards a defendant's interests rather than that he does not act unreasonably with regard to his own interests.

These premises lead the authors of the objections to suggest that the defendants' petition rests on a "failure to understand the first principles of mitigation" which petition relies on the following "facile" underlying argument: "'if the claimant had acted reasonably, he would have suffered no loss because KGM would have paid the hire charges directly'". The claimants comment that this argument is question-begging: "how has the claimant acted unreasonably unless, and to the extent that, his actual course of action has increased the potential expense to the defendant? KGM ..." (the defendants' insurer) "... misses the point that it is this issue of unfairly heaping expense onto the wrongdoer which is the law of mitigation's only concern."

The authors of the claimants' objections to the petition advance additionally various policy arguments concerning why the Court of Appeal's decision in Copley, Maden should not be impugned. For example, it is argued that the Court of Appeal's decision ensures that where there is a failure to mitigate the parties are placed in the position they would have been in if the claimant had acted in the way that the court finds that he should have done - "[t]his should be the only concern of the mitigation doctrine, which is not concerned to curb the claimant's behaviour.... but only to protect the defendant from the consequences of unreasonable behaviour" by the claimant. Secondly, it is suggested the Court of Appeal's conclusion prevents a defendant from enjoying a windfall because of his victim's misjudgment where the latter rejects the defendant's offer of a 'free' vehicle when its acceptance would result in some expense albeit a lower expense than the claimant has incurred. Finally, the claimants object that the Court of Appeal's approach must be correct because if KGM's argument were accepted - that the offer of a suitable 'free' vehicle is sufficient to extinguish a claim - claimants would be "driven to accept such offers in terrorem, even if the risk of a court subsequently finding a failure to mitigate was thought to be small". This prospect, they argue, is contrary to the principle that injured parties should have autonomy in deciding how to respond when they suffering a wrong; i.e. their "right to self-determination in light of a wrong ...".

Whether the Supreme Court will share the claimants' view that the principles of mitigation that they refer to are "both settled and salutary" is at present is unknown. However, a decision on the defendants' application for permission to appeal is expected hopefully this month.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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