From: Robert Stevens <robert.stevens@law.ox.ac.uk>

Sent: Wednesday 14 February 2024 18:42

To: obligations@uwo.ca

Subject: Unforeseen Damage in the Supreme Court

An interesting case on remoteness of loss decided by the UK Supreme Court today: Armstead v RSI [2024] UKSC 6, rightly overturning a decision of the Court of Appeal. Lords Leggatt and Burrows give the lead judgment, with which Lord Richards and Lady Simler concur, with a brief concurrence by Lord Briggs.

https://www.supremecourt.uk/cases/uksc-2022-0100.html

A car was hired by the claimant, and negligently damaged by the defendant. Under the terms of the agreement between the claimant and the hire company, the claimant is liable for costs of repairs, and to pay a daily hire rate up to a maximum of 30 days for every day the vehicle is being repaired. The claimant herself never incurred any costs of repairs nor did she ever suffer any loss of use during the period of hire. Could the claimant recover as damages her contractual liability to the hire company for its costs of repairs and loss of use?

The court correctly concluded that the claimant had title to the car by virtue of her possession and could therefore recover for any loss she suffered as a result of the defendant s negligent damage of the vehicle (disapproving of statements in the Court of Appeal to the contrary). Such consequential loss included her contractual liability to the hire company.

The more difficult remaining question was whether the consequential loss that she suffered, by virtue of her contractual liability to the hire company for the loss of daily use during repairs, was too remote. Lord Leggatt and Burrows state (at [47](ii)]

just as loss of use to the claimant is reasonably foreseeable and not too remote, so is the contractual liability of the claimant to pay damages for loss of use to the hire company.

However, this must be doubtful. If I damage a car, it is reasonably foreseeable by me that the owner will repair it and that they will be unable to use it while it is repaired. One would have to be very perspicacious indeed to be able to reasonably foresee that the car was being hired, and that the terms of the hire would have a clause requiring the hirer to pay a sum for loss of use on a daily rate.

But, although the claimant s unusual actual loss was not foreseeable, it should still be recoverable so long as no higher than the ordinary loss that would be foreseeable, that she did not herself personally incur (under Cory v Thames Trains), so long as not ruled out for any other reason such as the rules on mitigation. Such (ordinary) foreseeable loss is the cost of repairs and the loss of use whilst they re being carried out.

If therefore the liability under the contract with the hire company is a genuine pre-estimate of the loss following from not having a car for that number of days, it should be recoverable. This is because it would be no more than the reasonably foreseeable loss in the ordinary case.

But, what if the clause were unenforceable, perhaps because a penalty or for any other reason? Could damages for loss of use of the vehicle still be recovered by the hirer? Lord Leggatt and Lord Burrows state (in obiter dicta) that it could be (at [72]) but here their reasoning is obscure.

If the clause is unenforceable, the claimant will suffer no consequential loss from the loss of use during repair. The hire company will, but they are not the claimant.

The better answer is that if someone negligently damages a car I have title to, I am entitled to general damages. If it is destroyed, that is measured by its market value, but here that is best calculated as being the reasonable costs of repairs plus a sum reflecting the loss of use during such repairs. Both should be recoverable regardless of whether the claimant actually suffers any consequential loss themselves (The Mediana, Burdis v Livsey).

Alternatively, it may be that in some cases the hire company could recover for loss of use of the car from the hirer independently of the offending clause, because the hirer was in breach of another valid obligation, so that consequential loss is still suffered by her.

Rob