Lagden v. O'Connor

Facts

Lagden's car was damaged in a collision caused by O'Connor's negligence. Lagden had no money to pay for a replacement car or for the hire of one. He took a replacement through a credit hire agreement, under which he paid nothing in advance and the hire company recovered its charge, which was higher than the rate for ordinary hire, from the defendant's insurers. The defendant argued that Lagden should recover only the amount that an ordinary hirer who could afford to pay would have spent.

History

The courts below limited Lagden's recovery to the cost of ordinary hire, and he appealed to the House of Lords.

Issue

Whether a claimant who, because of his lack of financial means, can obtain a replacement vehicle only through a credit hire arrangement may recover the whole charge from the defendant, and how far the rule in The Liesbosch limits recovery where the claimant's loss is increased by his impecuniosity.

Held

Appeal allowed. The claimant was entitled to recover the credit hire charges, since his impecuniosity was a circumstance which the defendant took as found, provided he acted reasonably in mitigation.

Ratio

• A claimant's impecuniosity is not an extraneous cause that breaks the chain of causation; the defendant takes the claimant as he finds him, including his financial position, and the claimant may recover the additional cost he incurs because he lacks means, if he acts reasonably in mitigating the loss.
• The decision in The Liesbosch, which treated the claimant's lack of means as an independent cause that limited recovery, was not to be followed to that extent.

The judgments

Key reasoning

• The wrongdoer has no right to require the victim to have enough money to avoid the consequences of the wrong, so the claimant's lack of means is a feature of the claimant that the defendant must accept.
• The proper limit on recovery is the duty of the claimant to mitigate his loss reasonably, and what is reasonable depends on the claimant's circumstances, including his financial position.
• The rule in The Liesbosch rested on a view of financial impecuniosity as an external event, which was inconsistent with the general principle on personal characteristics of victims.

Where it fits in the module

In the FHS topic on remedies in property torts, Lagden concerns the measure of damages for negligent damage to a chattel, including loss of use, and the limits of remoteness and mitigation in assessing consequential loss. It qualified The Liesbosch Dredger v SS Edison [1933] AC 449 and followed the approach to ordinary hire in Dimond v Lovell [2002] 1 AC 384. Later credit hire litigation, including Stevens v Equity Syndicate Management Ltd [2015] EWCA Civ 93, concerned how to prove impecuniosity and what charges are recoverable. The tutorial question is whether the law should compensate the claimant for extra costs caused by his own financial position.

Criticisms

• Extending the thin skull rule to financial vulnerability makes the extent of liability depend on the wealth of the claimant, which is hard to reconcile with a uniform measure of damages.
• The decision fosters a market in credit hire with high charges that insurers must bear and which are passed on to motorists as higher premiums.
• The test of impecuniosity is difficult to prove and police, and creates incentives for claimants to present themselves as unable to pay.
• Mitigation, which requires reasonable conduct, appears to carry less weight if all costs of credit are passed to the defendant, though the claimant has options such as borrowing or using other transport.