Beechwood Birmingham Ltd v Hoyer Group UK Ltd

A corporate owner may recover general damages when a non-profit earning vehicle is unavailable during repairs, even if no substitute is hired. The award must compensate the financial loss actually suffered by the business.

Where the business could reasonably provide a substitute from its own stock, the notional spot-hire rate is not the proper measure. The court may instead assess interest on the capital value rendered unproductive during the repair period, together with any appropriate depreciation. A claimant cannot recover unnecessary external hire charges and must provide evidence supporting any alternative loss-of-use calculation.

A motor dealer’s vehicle was damaged in a road accident caused by the defendant’s employee. Although the dealer ordinarily replaced unavailable vehicles from its substantial stock, its service manager hired an equivalent vehicle under a credit-hire agreement for 120 days.

His Honour Judge Mitchell found that external hire was neither needed nor reasonable. Nevertheless, he awarded £12,000 as general damages for 48 days’ loss of use, calculated at the agreed spot-hire rate of £250 per day.

The defendant appealed from the Telford County Court. The central issue was how to assess a corporate claimant’s loss of use where it should have supplied a substitute from its own stock and suffered no loss of profit or necessary external expenditure.

Appeal allowed. Sir Mark Potter gave the judgment of the court. Dyson and Maurice Kay LJJ agreed.

1. The trial judge was entitled to find that the claimant failed to mitigate its loss. A need to hire a replacement vehicle is not self-proving. The claimant had ample stock from which it could provide an equivalent vehicle without additional expenditure or loss of profit. Once the claim for external hire was challenged, the claimant had to advance and substantiate any alternative claim for general damages.

2. General damages may nevertheless be recovered for deprivation of a non-profit earning chattel, whether or not a replacement is provided. Such damages are real rather than merely nominal. The absence of necessary external hire did not extinguish the claimant’s loss-of-use claim.

3. A corporate claim for the loss of a vehicle employed in a business differs from an individual’s claim for deprivation of a private car. The former compensates financial damage and must approximate the business loss actually suffered. The latter principally compensates the loss of convenience and advantage arising from the absence of a readily available private car.

4. The observation in Lagden v O’Connor [2003] UKHLC 64 that a spot-hire rate may provide a fair measure was confined to its context: a private motorist who had hired a substitute. It did not justify using a notional hire charge where a corporate claimant neither needed nor reasonably incurred external hire costs.

5. The established loss-of-use methods distinguish between three situations. Actual reasonable hire charges may be recovered where a substitute is hired. Where a fleet maintains and deploys a standby, its upkeep and the capital employed may be considered. Where no hired substitute or maintained standby is involved, an award may be based on interest upon the damaged asset’s capital value during repairs, with any justified depreciation.

6. Here, the appropriate approximation was interest at a suitable rate on the capital value of an equivalent Audi A6 during the reasonable repair period, together with modest, possibly minimal, depreciation. The spot-hire award was wrong in logic and law. The £12,000 award was set aside, with the amount of the substituted award left for agreement or further argument.

1. Court of Appeal (Civil Division): The appeal was allowed. The £12,000 general damages award was set aside, subject to agreement or further argument concerning the substituted amount.
2. Telford County Court: His Honour Judge Mitchell awarded £12,000 as general damages for 48 days’ loss of use, calculated at £250 per day, despite finding that external hire was unnecessary and unreasonable.