Credit Hire: Defendants petition House of Lords in Copley v Lawn, Maden v Haller [2009] EWCA Civ 580

by Thomas Oxton 10/08/2009

The defendants in Copley and Maden in late July lodged a petition for leave to appeal against the Court of Appeal’s judgment in June allowing the claimants’ appeals.

In Copley, Maden the Court of Appeal (Longmore LJ giving judgment with which Jacob and Waller LJJ agreed) held that the claimants had not failed to mitigate their losses when they opted to make use of vehicles supplied on a credit hire basis by Helphire (UK) Ltd rather than make use of 'free' vehicles offered to them by the defendants' insurer, KGM. The court concluded that it was not unreasonable for a claimant to reject or ignore an offer from a defendant (or his insurers) which does not make clear the cost of hire to the defendant for the purpose of enabling the claimant to make a realistic comparison with the cost which he is incurring or about to incur. It also concluded, obiter, that where a claimant does unreasonably reject a defendant's offer of a replacement car, he is entitled to recover at least the cost which the defendant can show he would reasonably have incurred; he does not forfeit his damages claim altogether.

In their petition the defendants argue that the Court of Appeal's decision represents an "unwarranted and unprincipled development of the doctrine of mitigation which is not only unsupported by, but appears contrary to, established authority ...".

Traditionally, the doctrine of mitigation of loss has been interpreted as involving a principle that claimants should take all reasonable steps to avoid or eliminate their losses whether resulting from a breach of contract or a tort. The sanction for default being that damages are not recoverable to the extent that they relate to losses that could have been avoided or eliminated by the taking of such steps. The defendants argue in the petition in Copley, Maden that the Court of Appeal has erroneously created a new principle that now "the claimant does not even have to consider the prospect of avoiding any potential loss, unless he knows the actual or true impact that acceptance of the [defendant's] offer will have on the defendant's own commercial or financial position".

Moreover, they argue that because the Court of Appeal's decision in Copley, Maden is not stated as being confined to the sphere of credit hire litigation, it will have "surprising consequences". An example given concerns sale of goods cases where a seller offers replacement goods of satisfactory quality to replace defective goods. In such cases the buyer would have a right to refuse the replacement goods unless the cost to the seller were less than the damages which the buyer would otherwise suffer. Moreover, if the buyer were to unreasonably reject the offer, he would be entitled to recover the amount which it would have cost the seller to supply the replacement goods. Another example relates to personal injury litigation. In such cases it is established law that a claimant fails to mitigate where he unreasonably refuses to undergo treatment that would alleviate his injury. Applying the Court of Appeal's approach in Copley, Maden, if a defendant tortfeasor offers to fund such treatment, the claimant would have no duty to consider undertaking the treatment unless he knew the cost to the defendant, and where such knowledge existed, he would be entitled to recover the cost to the defendant of that treatment in the event that he were to unreasonably refuse it.

Whether the successor to the House of Lords will entertain these arguments will not be known until later in the summer or the autumn when its decision on the petition is expected. However, depending on the outcome of the petition and any eventual appeal, if the Court of Appeal's decision in Copley, Maden is interpreted as being of general application rather than confined to its particular facts, it will be of interest to civil practitioners generally as well as those concerned with credit hire disputes.