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11 July 2013 | Comment | Article by Paul Spiteri

Credit hire: impecuniosity – no defence to a duty to mitigate

The recent Court of Appeal decision in Opoku v Tintas has demonstrated that the duty placed on claimants to mitigate their losses is still a valid argument for defendants to raise, even where the claimant has been deemed to be impecunious.

By way of reminder, the duty to mitigate losses essentially means that a claimant cannot recover damages for any loss which could have been avoided had reasonable steps been taken and prohibits claimants taking unreasonable steps that will increase their loss.

On the facts of this case, following a rear end shunt, the claimant’s vehicle was not driveable but was not deemed a total loss. The repair costs were estimated at £3400 shortly after the accident.

The claimant approached an accident management company, took out a hire vehicle and stored his own vehicle whilst it was awaiting repairs. Liability was disputed and ultimately, the claimant’s hire car claim was sought at £130,000 with the storage element at £19,000.

At trial in the first instance, liability was found entirely to rest with the defendant and the claimant was successful in his arguments that he was impecunious. However, the judge found that the claimant had failed to mitigate his losses by not having his own vehicle repaired sooner, specifically when the defendant’s insurers had inspected it, which was approximately one year before he actually had it repaired (when the defendant’s insurer paid for the repairs on a without prejudice to liability basis). The defendant was awarded £63,000, which equated to less than half the pleaded loss.

On appeal, the claimant argued that there was an inconsistency between the trial judge’s finding that the claimant was impecunious and that he had failed to mitigate his losses by not having his vehicle repaired sooner.

On the face of it, one can understand the crux of the appeal as there does appear to be a glaring inconsistency –“how can someone who has been deemed impecunious mitigate their loss, when to do so would involve spending money”?

The Court of Appeal held however, that there was no such inconsistency and that the trial judge was entitled on the evidence to reach her decision. Whilst it was not the case that the claimant should have repaired his vehicle immediately following the accident, it was reasonable for the claimant to have had his vehicle repaired at some earlier point than it actually was, thus mitigating the credit hire loss.

The Court of Appeal also confirmed that the trial judge was correct in deciding that this could have been achieved via credit cards and by actually saving up money for it, notwithstanding his impecunious status.

The test laid down for impecuniosity in Lagden v O’Connor (2003) is a subjective one and I have seen courts interpret it differently from case to case. Certainly, I have relied on arguments that a claimant should have used a credit card and these have been rejected out of hand, as placing too strict a financial burden on the claimant.

Crucial to this case, in my opinion, would seem to be the actual repair cost at £3400 weighed against the ongoing credit hire charges of £5000 per month, resulting in an overall bill of £130,000. There is a clearly a massive disproportion between these figures.

Whilst the mitigation of loss arguments are but one in the defendant’s arsenal, I have found that the efficacy of this type of challenge is increased substantially when there is a gulf of difference between the cost of repairs/total loss value as compared with the incurred credit hire charges, as is the case here.

Author bio

Paul Spiteri

Senior Associate

Paul Spiteri is a Senior Associate in the Industrial Disease department, where he acts on behalf of clients who are existing or veteran service personnel with noise induced hearing loss claims. He also has experience of dealing with asbestos claims.

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