Lagden (Respondent) v. O'Conner (Appellant)

A claimant whose car is damaged by negligence may recover the reasonable cost of obtaining a suitable replacement during repairs. Ordinarily, recovery is limited to the spot hire rate because the additional services supplied under a credit-hire agreement are not compensatable.

An impecunious claimant may recover the reasonable full cost of credit hire where ordinary hire cannot be obtained without sacrifices which the claimant could not reasonably be expected to make. Unavoidable additional benefits are then incidental to the only practicable means of replacing the lost use.

Pre-existing impecuniosity is not an extraneous cause which automatically makes loss irrecoverable. The wrongdoer takes the victim's economic condition as found, subject to reasonable foreseeability and the ordinary requirement that expenditure be reasonable.

Ms O'Connor negligently damaged Mr Lagden's parked car. Mr Lagden was unemployed, in poor health and unable to pay ordinary car-hire charges in advance. He obtained a replacement vehicle through a credit-hire package costing £659.76, which included credit and claims-handling services.

Judge Harris, in the Oxford County Court test cases reported as Clark v Ardington [2002] Lloyd's Rep IR 138, held that Mr Lagden could recover the package's full reasonable cost because ordinary spot hire was not available to him. The Court of Appeal upheld that conclusion in Burdis v Livsey [2002] EWCA Civ 510, [2003] QB 36.

The central questions were whether Dimond v Lovell [2002] 1 AC 384 confined recovery to the spot hire rate even for an impecunious claimant, and whether pre-existing impecuniosity rendered the additional loss too remote under The Liesbosch [1933] AC 449.

1. Appeal dismissed by a majority of three to two. Lord Nicholls delivered the principal majority speech. Lord Slynn wholly agreed with his reasoning, and Lord Hope reached the same result by a detailed analysis of mitigation, betterment and remoteness.

2. Per Lord Nicholls, with Lord Slynn agreeing, a negligent driver must take the victim as found. Where the claimant cannot afford ordinary car hire without making sacrifices which could not reasonably be expected, the reasonable cost of credit hire is recoverable. The cost is not compensation beyond the claimant's loss. It reflects the greater reasonable cost of providing timely replacement transport to a person who requires credit.

   Dimond v Lovell [2002] 1 AC 384 continued to limit an ordinary claimant to the spot rate, but did not decide the position of a claimant unable to fund ordinary hire. Impecuniosity therefore materially distinguished the present case.

3. Lord Hope, also in the majority, reasoned that additional benefits obtained during reasonable mitigation must ordinarily be brought into account. A deduction for betterment requires more than identification of a benefit. The defendant must show that a less expensive reasonable route was available. A claimant need not bear a loss, burden or unreasonable sacrifice; where there is no alternative, the benefit is incidental and no deduction is made.

   The governing factual criterion was whether the motorist could have hired at ordinary market rates without exposing himself or his family to an unreasonable burden. The full reasonable credit-hire cost was recoverable because Mr Lagden had no practicable alternative.

4. The House was unanimous on remoteness. Per Lord Hope, with all the other Law Lords agreeing on this issue, the rule associated with The Liesbosch [1933] AC 449—that loss attributable to pre-existing impecuniosity was necessarily too remote—should be departed from. The modern test is reasonable foreseeability. The principle that a wrongdoer takes the victim as found applies to economic condition as it does to physical or mental vulnerability.

5. Dissenting, Lord Scott and Lord Walker would have allowed the appeal. They considered that Dimond v Lovell established that financing and claims-handling services were not compensatable loss, irrespective of whether the claimant had another practical choice. They also considered the impecuniosity exception conceptually imprecise and likely to increase contested small claims.

1. House of Lords: By [2003] UKHL 64, dismissed the appeal by a majority of three to two and affirmed the Court of Appeal. The House unanimously departed from the rule on pre-existing impecuniosity associated with The Liesbosch.

2. Court of Appeal: In Burdis v Livsey [2002] EWCA Civ 510, [2003] QB 36, upheld the conclusion that Mr Lagden could recover the full reasonable cost of the credit-hire package because no cheaper practicable means of obtaining a replacement car was shown.

3. Oxford County Court: Judge Harris, in the test cases reported as Clark v Ardington [2002] Lloyd's Rep IR 138, held that Mr Lagden was too poor to use the ordinary hire market and could recover the package's full reasonable cost.