Coles & Ors v Hetherton & Ors

For physical damage to a repairable chattel, the claimant’s loss is the diminution in value caused by the damage. The ordinary and conventional measure is the reasonable cost of repair, but that cost is evidence of the loss rather than the loss itself. Recovery does not depend on the claimant having repaired the chattel or paid the repairer.

Where an insurer arranges reinstatement, reasonableness is assessed from the position of the individual claimant. The tortfeasor cannot rely on cheaper options available to the insurer or investigate the insurer’s profitability and repair arrangements. Those arrangements are generally res inter alios acta. The direct physical-damage claim is distinct from consequential loss, such as loss of use.

Thirteen managed actions arose from minor road traffic accidents. Vehicles insured by Royal & Sun Alliance Insurance plc had been damaged by drivers insured by Provident Insurance plc or Allianz Insurance plc. Royal & Sun Alliance indemnified its policyholders by arranging repairs through an associated repair-management company and claimed the repair sums by subrogation.

The defendants challenged the repair model and argued that the recoverable amount should reflect the lower rates available to the insurer. The court determined three preliminary questions concerning the measure of loss, the test for a reasonable repair charge, and recoverability where the insurer had arranged and paid for repairs.

1. Measure of loss. The court held that physical damage to a chattel causes an immediate loss measured by diminution in value. The reasonable cost of repairing the damage is the normal or prima facie measure, but it is only a method of assessing that diminution. It is not a cap based necessarily on the amount actually paid.
2. A claimant may recover the reasonable cost of repair even where the repairs were carried out without charge, were paid for by another, or were not carried out. The loss may be proved by invoices, estimates, or expert evidence. The question is whether the evidence establishes the objectively reasonable cost necessary to restore the asset.
3. The court rejected the defendants’ attempt to treat the insurer’s bargaining power and repair arrangements as matters of mitigation, causation, or diminution in value. The insured’s loss arose when the collision occurred. Decisions later made by the insurer in fulfilling its contractual indemnity did not constitute an intervening cause.
4. Reasonable repair charge. The answer to the second question was (a): reasonableness is assessed by reference to what the individual claimant could obtain on the open market, without reference to the insurer’s options or benefits obtained under the policy. The insurer and insured cannot be conflated, and the insurance arrangements remain behind the curtain. Bee v Jenson (No 2) supported that approach; Copley v Lawn was materially different because it concerned advice about the insured’s future conduct.
5. The court distinguished direct physical damage from consequential loss, including loss of use and replacement-car charges. Mitigation may arise in relation to consequential loss, and potentially collection or delivery charges, but it does not alter the assessment of the direct diminution in value caused by physical damage.
6. The third question was not finally determined. The court identified possible issues concerning whether individual repair items or a package were reasonable, whether charged services were actually provided, and whether particular charges represented repair costs or consequential loss. Those matters, together with costs and any appeal application, were left for a further hearing.

First-instance determination of preliminary questions in managed Commercial Court actions. The judgment records that an application for permission to appeal might follow, but no appeal decision is stated.