Lagden v O'Connor

The House held that, in claims for loss of use of a vehicle where an innocent motorist cannot, for lack of means, obtain a replacement car except by entering a credit‑hire package, the reasonable cost of that credit hire is recoverable as damages. The decision departs from the strict rule in Liesbosch that a claimant's impecuniosity cannot increase recoverable loss and endorses a modern foreseeability approach to remoteness. The majority confirmed that certain elements identified in Dimond v Lovell remain good law (notably that financing costs and claims‑handling charges are not ordinarily recoverable as separate heads of special damage), but recognised an exception where impecuniosity means the claimant has no practical choice but to accept a credit hire package.

The court explained the test of "impecuniosity" in this context as inability to pay hire charges without making sacrifices the claimant could not reasonably be expected to make. The wrongdoer must take the victim as he finds him (talem qualem) and will therefore be liable where it is reasonably foreseeable that the claimant would need to borrow or obtain credit to mitigate the loss.

Background and facts:

• On 29 November 1999 Mr Lagden's parked car was damaged in a collision caused by Ms O'Connor. The car was repairable and was in the garage for repair from 29 November to 16 December 1999.
• Impecunious and unable to pay an up‑front spot hire rate, Mr Lagden entered into a Helphire credit hire package (including a 26‑week credit facility and insurance) and incurred charges of £659.76, which he claimed as damages from the negligent driver and her insurers.

Procedural history: The county court (Judge Charles Harris QC) allowed recovery of the full Helphire charge in this factual situation. The Court of Appeal [2002] EWCA Civ 510 affirmed that decision. The defendant appealed to the House of Lords.

Nature of the claim / relief sought: Recovery of the full cost of a credit‑hire package as damages for loss of use of the damaged car while undergoing repair.

Issues framed:

• Whether the majority reasoning in Dimond v Lovell precludes recovery of the additional elements of a credit hire package (credit financing and claim handling) or whether an impecunious claimant who has no practical alternative may recover the full reasonable charge.
• Whether the rule in Liesbosch that a claimant's impecuniosity cannot increase recoverable loss remains good law.
• The proper tests for remoteness and for assessing when a claimant's lack of means should be taken into account.

Court's reasoning and conclusions:

• The House rejected rigid application of Liesbosch and held that modern authorities support treating impecuniosity as part of the claimant's factual position where foreseeability and causation so require.
• The majority recognised the continuing authority of Dimond v Lovell that financing and claim‑handling elements are not ordinarily recoverable as separate special damages, but concluded there is a limited exception: where it is reasonably foreseeable and the claimant has no realistic alternative (impecunious in the relevant sense), the reasonable cost of a credit‑hire package may be part of the recoverable loss for temporary loss of use.
• The test of impecuniosity requires inability to pay the spot hire rate without making unreasonable sacrifices; the defendant bears the burden where it is asserted that cheaper alternatives were available.
• Policy considerations favoured allowing recovery in such cases to avoid leaving impecunious victims without a practical remedy, while the court acknowledged the need for practical means to apply the test and to keep small claims settlement efficient.

Appeal dismissed. The majority held that the Court of Appeal was right to allow recovery of the reasonable cost of the credit‑hire package in the particular factual circumstances because the claimant was impecunious in the relevant sense and had no practical alternative; Liesbosch has been confined and cannot be followed as a general rule; Dimond v Lovell remains authoritative on the point that financing and claim‑handling costs are not ordinarily separate heads of recoverable special damage, but an exception applies where lack of means makes the credit hire package the only realistic means of obtaining a replacement vehicle.

Appeal to the House of Lords from the Court of Appeal [2002] EWCA Civ 510 (which had affirmed the county court decision of Judge Charles Harris QC reported [2002] Lloyd's Rep IR 138).