Vehicular Diminution – New Law Journal

Stewart Fairhurst, Managing Director of Clifford James has written an article about vehicle diminution, which has been published in the New Law Journal.

The article can be found at the New Law Journal. The full text is below:

Vehicular Diminution

A vehicle is damaged in a collision and splendidly repaired. But might there still be a claim for damages arising out of the vehicles loss of value, simply because its history now involves it having been in a collision? In the jargon, is there a claim for the vehicle’s diminution, and if so, with what limits? This article seeks to address these questions.

The leading case in the Court of Appeal is the best starting point. Thus, see Payton v Brooks [1974] 1 Lloyd’s Rep 241 (“Payton”), where it was held that damages for diminution of value could be claimed. Roskill LJ set out this principle:

“In a case where the evidence justifies a finding that there has been, on top of the cost of repairs, some diminution in market value – or, to put the point another way, justifies the conclusion that the loss to the plaintiff has not been fully compensated by the receipt of the costs of complete and adequate repairs, because of a resultant diminution in market value, I can see no reason why the plaintiff should be deprived of recovery under that head of damage.”

Payton has recently been reaffirmed in the Court of Appeal case of Coles & Others v Hetherton & Others [2013] EWCA Civ 1704 at paragraph 33 per Aikens LJ (“Coles”):

“The “reasonable cost of repair” is, as a rule of thumb, taken as representing the diminution in value of the chattel that has been suffered as a result of the damage caused by the negligence of the defendant. However, it may not always represent the full amount of the diminution in value, as this court made clear in Payton v Brooks.

It is therefore unarguable that in principle claims can be made for diminution in value. The claim is for the loss in market value to be awarded as a head of general damages (see also Coles). The burden of proof lies with a Claimant. What then are the limits of such a claim?

The first question is whether the value of the diminution must always be too uncertain?

The answer is clearly no.

The first thing to note is that there is nothing new about the difficulties of valuing general damages. E.g. see the valuation of pain and suffering. This apparent difficulty was identified as long ago as 1900 by Halsbury L.C. in The Mediana [1900] AC 113 at 116:

“You very often cannot even lay down any principle upon which you can give damages … Take the most familiar and ordinary case; how is anybody to measure pain and suffering in moneys counted? Nobody can suggest that you can by any arithmetical calculation establish what is the exact sum of money which would represent such a thing as the pain and suffering which a person has undergone by reason of accident … But nevertheless the law recognises that as a topic upon which damages may be given.”

The second question then is: how is the Court to value diminution as general damages?

A vehicle that has suffered structural damage on a balance of probabilities is more likely suffer diminution beyond the cost of repair. But how do you put a financial figure on this loss?

Like pain and suffering, no mathematical formula exists, and even if it did, it is likely to be wrong because the loss is too fact-specific. Nevertheless, the Court has to do its best. For pain and suffering, resort can be had to tables established by the Judicial Studies Board. But unlike pain and suffering claims, no such help exists for claims for diminution of value.

Consequently, most cases will turn on what is necessarily expert evidence (because it is opinion evidence) of what one, who is suitably qualified from experience, might suggest is the broad area of the financial loss. Such experience is typically to be found from the motor industry, usually from motor engineers experienced in this type of work. And it is because it is fact specific, the opposing experts may frequently disagree – but there is nothing new in that. As ever, the result of the case will be typically determined by the strength and quality of the evidence for each side.

How are the Courts dealing with some specific issues that arise?

  1. Point of Loss

This issue may arise in this way: surely the diminution cannot be quantified until a vehicle is sold?

Aitkin LJ in Coles addressed this problem. He confirmed the long line of authority that the time for assessing diminution is the date the damage was caused and quantification must be assessed as of that time. Accordingly, events occurring after this time are irrelevant:

“(1) where a chattel is damaged by the negligence of another that loss (the “direct” loss) is suffered as soon as the chattel is damaged. (2) The proper measure of that loss is the diminution in value that the chattel has suffered as a result of the negligence of the defendant. This follows the general principle in awarding damages, i.e. that of restitution … (4)  Events occurring after the infliction of the damage are irrelevant to calculating the diminution in value measure of damages. Thus, subsequent destruction of the chattel, or a decision to delay repairs, or an ability to have the repairs done at less than cost or for nothing will not prevent the claimant from recovering the diminution in value of the chattel that has been caused by the negligence of the tortfeasor.”

  1. Good Quality Repairs

If repairs are carried out even to the best possible standard, how can it be argued that any diminution of value can arise?

The question here is answered by the Court of Appeal in Payton:

If a diminution in market value of vessels can be established, despite good repairs, the diminution is a recoverable item of damage

  1. Repairs beyond the ‘Norm’

Must the damage be ‘unusual’ or ‘beyond the norm’ for a claim to succeed? This was argued successfully in a Small Claims case in the Newcastle County Court in the case of Hussain v Dhawan (2008), albeit there was no previous authority for this proposition.

It is submitted that this unbinding and unappealled case is wrong in law. Apart from the impossibility of defining usual or within the norm, this attempts to place restrictions on the principle set out in Payton where the Court of Appeal placed no limitations in law on the scope or breadth of the diminution principle. Moreover, nor has that decision been followed. See:

District Judge Jones sitting at Stockport County Court Lex Autolease Limited v Susan Bartlett, 9th May 2011, ruled:

I do not accept the submission of the Defendant that the claim cannot succeed where the repair or the damages were out of the norm. It seems to the Court that the authority of Payton v Brooks laid down no such limitation.”

What has to be proved is that diminution exists.

  1. Does Glass’s Guide Help?

The answer is no, because that is not its function; rather, Glass’s Guide is as to second hand values, without reference to previous accident history of a vehicle.

However, reference has sometimes made to an article published by a Director of Glass’s Guide, in Bodyshop Magazine April 2014. The author opines that where vehicle repairs are carried out to a high standard, no loss of market value occurs and on this basis diminution claims should be challenged. This, however, is to ignore previously decided law (see above).

  1. Uncertainty and proving the loss on a balance of probabilities?

This may risk asking the wrong question. The first question does indeed correctly ask whether, on a balance of probabilities, any loss has been established by reason of the pre-repair damage. (A typical question might well be: “would any potential buyer pay its pre accident value if they knew of the accident?”). The second question is as to what is that loss. If the answer to the first question is yes, the Court must go on to do its best to assess that loss.

Authority established that the Judge must address and resolve any conflicting expert opinion and make proper findings of fact. The Court of Appeal has held, a Judge’s job at trial is to make a judgement (Cooper v Floor Cleaning Machines Limited and Another [2003] EWCA Civ 1649) and a Judge cannot dismiss expert evidence and merely rely on the burden of proof.

Furthermore, the Court does not have the expertise to assess the value of the loss on its own whim. If it rejects any expert evidence, a Judge must go on to explain why (Sewell v Electrolux Limited [1997], The Times 7 November 1997), and, likewise why it might prefer one expert over another. A Judge has a duty to give a coherent reasoned explanation for rejecting any expert evidence (Flannery and Another v Halifax Estate Agencies Limited (trading as Colleys Professional Services) [2000] 1 WLR 377) and failure to do so may be grounds for appeal.

  1. Are there any Diminution Quantum Reports?

These would clearly assist, just as might Kemp and Kemp for Personal Injury claims, but regrettably the only one known to the author is (with due modesty!) that of his own company, Clifford James Consultants.

This has resulted in a database with relevant details for each accident recorded, such as:

  • Vehicle make and model;
  • Vehicle age;
  • Vehicle pre-accident value;
  • Nature and extent of the damage sustained;
  • Nature and the quality of the repairs;
  • Damages award expressed as a monetary figure and percentage; and
  • If settlement was a court award or out of court settlement.

Conclusion

The law states that diminution in value beyond the cost of repair is a recoverable head of damage, subject to obtaining suitable expert evidence.

Stewart Fairhurst

Clifford James Consultants Limited

stewart.fairhurst@clifford-james.com

www.clifford-james.com