Is a taxi driver entitled to more than the pre-accident valuation of the vehicle when written off?

Generally, someone who is involved in a non-fault road traffic accident, whereby their vehicle is written off, is only entitled to the pre-accident valuation of their vehicle, and no more than that.

However, it is not altogether unusual for a taxi driver to require a vehicle which is newer than his damaged taxi, for the purpose of licensing. This is not an uncommon situation in cases where there is also a credit hire claim.

The typical scenario

A taxi driver has a road traffic accident as a result of which the vehicle used as a taxi is written off, which is the fault of the other party. The taxi driver's vehicle is let's say 7 years old at the date of the accident, having being first licensed when it say was only 3 years old. The policy of the relevant council is such that for a taxi to be initially licensed, it has to be less than 5 years old. In accordance with the policy once a taxi is first licensed, it can then be renewed until the vehicle is 10 years old. The third-party insurers offer to pay the pre-accident valuation for a 7-year vehicle only, not for a vehicle under 5 years old. The problem is that if the claimant accepts this offer, then s/he will not be able to purchase a vehicle that can be licensed, as it is too old. So, the claimant refuses the defence offer and issues proceedings.

So what is the claimant entitled to?

The claimant states that s/he has not been restored to his/her position before the index accident, as s/he can longer use a licensed taxi for work. The defendant states that the claimant has been restored to his/her original position, as s/he has been given the monies for the value of the vehicle s/he had before the index accident.

The fact is that there is no clear answer in the courts to this question at the moment.

So how could the courts address the issue by referring to:

(1) basic principle of compensation in tort;

(2) the relevant law;

(3) how does the relevant law apply to taxis?

Basic principle of compensation in tort

The general principle is, in the oft-quoted words of Lord Blackburn, that the court should award “that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation” - Livingstone v. Rawyards Coal Co (1880) 5 App Cas 25 at 39.

This sounds simple enough. However, in the situation of the above scenario it is far more complicated!

A claimant would argue that s/he has not been put back in the same position, as s/he has not been given sufficient monies to purchase a vehicle which can be licensed as a taxi. A defendant would argue that the claimant's vehicle was a 7-year-old vehicle, and s/he has been put back into the same position by sufficient payment that would allow the claimant to purchase an equivalent vehicle.

Relevant law

There are no binding cases covering the specific scenario.

There are however some legal principles that may be of some assistance.

Voaden v Champion [2002] EWCA Civ 89, 2002 WL 45278 was a shipping case where the general principles were referred to and previous cases were summarised.

“In the light of these authorities and the principles discussed in them, I would draw the following conclusions.

(1) ...The question remains, as Lord Blackburn said in Livingstone v. Rawyards Coal Co (1880) 5 App Cas 25 at 39, to find “that sum of money which will put the party who has been injured, or has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.” 84.. As Lord Lloyd emphasised in Ruxley v. Forsyth at 366B ... “Note that Lord Haldane does not say that the plaintiff is always to be placed in the same situation physically as if the contract had been performed, but in as good a position financially, so far as money can do it. This necessarily involves measuring the pecuniary loss which the plaintiff has in fact sustained.” para 85..

(2) It follows that cases where a claimant recovers more than he has lost, as will happen where betterment occurs without a new for old deduction, ought as a matter of principle to be exceptional. Recognised examples of such exceptions ... are cases of the repair of chattels (The Gazelle, Bacon v. Cooper) and also the destruction of buildings provided that a replacement building is necessary to prevent the collapse of a business or loss of profits (Harbutt’s Plasticine, Dominion Mosaics v. Trafalgar Trucking)...A factor mentioned in some of these exceptional authorities is that otherwise the claimant is exposed to an inconvenience or burden or the expenditure of money from which the law ought to protect him.

I suspect, however, that the true principle is that in the relevant cases the betterment has conferred no corresponding advantage on the claimant. Take the ordinary case of the repair of some part of a machine. Where only a new part can be fitted or is available, the betterment is likely to be purely nominal: for unless it can be posited that the machine will outlast the life left in the damaged part just before it was damaged, the betterment gives the claimant no advantage; and in most cases any such benefit is likely to be entirely speculative. So in the case of replacement buildings: the building may be new, but buildings are such potentially long-lived objects that the mere newness of a building may be entirely by the way.

Of much more importance to a business owner is whether the replacement answers the needs of his business. Even where the replacement is of a moderately bigger size (Dominion Mosaics v.Trafalgar Trucking), in the absence of any reason for thinking that the bigger size is of direct benefit to the claimant, he has merely mitigated as best he can. If, however, it were to be shown that the bigger size (or some other aspect of betterment) were of real pecuniary advantage to the claimant, as where, for instance, he was able to sublet the 20% extra floor space he had obtained in his replacement building, , I do not see why that should not have to be taken into account. It is after all a basic principle that where mitigation has brought measurable benefits to a claimant, he must give credit for them: see British Westinghouse v. Underground Electric Railways, where defective machines were replaced by new machines of superior efficiency. 86..

(3) Where in the case of a second-hand chattel there is no market to replace what has been lost, a problem of betterment will often arise because there is no automatic market mechanism for measuring the loss. In physical terms, the only way to replace the loss is to buy new. But the basic principle is not physically to replace what the claimant has lost but to replace it financially, to make him whole in financial terms. If he is given the price of a new chattel, he will be made more than whole...The authorities suggest that prima facie such a case is not within the range of exceptional situations where betterment is ignored. On the contrary, the proper approach appears to be to make a fact specific review of what the claimant has lost and then attempt to put a financial figure on it as best one can: The Harmonides approved in The Liesbosch ; Sealace Shipping v. Oceanvoice approved in Ruxley v. Forsyth. 87..

(4) It is in any event an error to think in terms of the correct answer lying only at the extremes, such as, at one end, the cost of replacement from new. Several of the cases, even those which have on appeal been driven by the way in which the case has been argued to select the answer from a limited choice, have commented on this factor: The Harmonides , Dominion Mosaics v. Trafalgar Trucking and Ruxley v. Forsyth itself. 88..

(5) In such circumstances the test of reasonableness has an important role to play. This role goes further than the proposition that replacement from new has to be absurd for it to be rejected as the measure of loss. The loss has to be measured, and where what is lost is old and second-hand and coming towards the end of its life, it is not prima facie to be measured by the cost of a brand-new chattel, even where the market cannot supply a closer replica of what has been lost; and where such a measure would not be a reasonable assessment of what has been lost, it should not be used. As May J said in Taylor v. Hepworths, cited with approval in Dominion Mosaics v. Trafalgar Trucking and (at 356G and 369G) in Ruxley v. Forsyth, damages ought to be reasonable as between claimant and defendant. I do not see why in the realm above all of remedies the common law cannot mould its principles flexibly to the needs of the situation, and as so often the test of reasonableness lies to hand as a useful tool. It may also be possible to speak in terms of proportionality, a closely analogous but not necessarily identical test: see Lord Lloyd in Ruxley v. Forsyth at 367B and 369H. 89...”.

How does the relevant law apply to taxis?

The case of Voaden v Champion refers to general principles regarding the situation whereby a claimant is asking to recover more than s/he has lost – this was a shipping case. The case does not specifically refer to the situation of taxi drivers. It does however refer to important general principles and is therefore helpful.

It is not an easy task to tailor the general principles mentioned to the case of taxi drivers who for example had a 7-year-old vehicle written off in a road traffic accident, yet s/he is asking for monies to buy a 3-year-old vehicle, so that s/he is able to license it as a taxi. S/he would argue that only this places him/her in the position s/he was in before the index accident, namely being able to purchase a vehicle which is capable of being licensed as a taxi. The defendant argues that the claimant is receiving a newer vehicle than was damaged and therefore s/he is receiving more than the loss caused by the index accident, in other words there is “betterment”.

So, let's take this in stages in tailoring the general principles to the scenario of taxi drivers:

(1) the true position is that the claimant is asking for more than s/he lost as a result of the index accident. Clearly what the claimant has “lost” is to be interpreted narrowly as the loss is focussed on the value of the item damaged (the vehicle) in the index accident;

(2) therefore, the claimant will have to show that the case is an “exceptional” one, as s/he is recovering more than what s/he lost in the index accident. Whilst the claimant does not fall within the established categories of repair of chattels or the destruction of buildings (a discussion not for this article), there is nothing which suggests that the “exceptional” cases are confined to these established categories. It seems to me that the word “exceptional” is free flowing in its application. Therefore, in my view it seems that in the present scenario a case is potentially capable of falling within the exception referred to, though this is subject to the facts of any given case;

(3) whilst the above case states that “prima facie” (on the face of it) where there is no automatic market for second-hand chattels, the “authorities” suggest that this type of case does not fall within the range of exceptional circumstances, it is in reality all-fact dependant as the words “prima facie” are used. In any event it does not seem to be the case that the court has specifically in mind the case of taxis;

(4) so, what type of situation will count as “exceptional” in the case of taxi drivers? Well, there is no binding court guidance on this. I will however be bold and venture into this territory as to what may count as “exceptional”, though this is not an exhaustive list. It seems to me that clear and objective evidence would be required by the claimant to show that an alternative vehicle of the same age as the one damaged in the accident would not be accepted as a taxi – this would probably require evidence from the council in terms of correspondence and/or the terms and conditions of any licence. Further it seems to me that that one would probably need to show that the claimant was “impecunious” (that is a very popular word in the world of credit hire!). As the claimant is required to show that the case is “exceptional” if the claimant could afford a vehicle newer than the one that was damaged in the index accident, then I cannot see how this can prove that the case was “exceptional”. So, it would probably require sufficient evidence of the client’s earnings, any bank statements and credit card statements which lawyers in the credit hire industry are familiar with. In this case, it would be arguable that having a newer vehicle than the one written off was the claimants only reasonable choice. Of course, in the absence of any binding case guidance on this, I am speculating here as to what may count as “exceptional”;

(5) in any event, not every case will be “all or nothing” (these are my words in quote marks, not the courts) - in other words either the claimant will be entitled to a vehicle which was similar to his/her own vehicle age wise or a much newer vehicle. Indeed, in Voaden v Champion, the Court of Appeal stated that it has been noted that in previous cases “extremes” had been argued, when it could have been better argued in between those extremes;

(6) having said that, it is hard to speculate as to what the case can be “in between” (these are my words in quote marks, not the courts) in a taxi driver’s case. One potential example may be when a claimant is close to retirement, let's say that s/he has only two months left. In that case a court may be inclined to allow loss of earnings for the two months, as opposed to allowing damages for a much newer vehicle, providing the case is appropriately pleaded in this way. This maybe in addition to the pre-accident valuation of the vehicle or even just awarded on its own, depending on the circumstances of the case, with the aim being to restore the claimant back to the pre-accident position as far as money can do so. “Reasonableness” appears to be the guiding principle in these cases. The aim is to restore the claimant to the pre-accident position “financially” not necessarily just in “physical” terms.

(7) in the case however of a more usual taxi driver case, it is hard to see what that “in between” case can be? Can a taxi driver afford to sit at home and not work as s/he does not have the tools (in this case a vehicle capable of being licensed as a taxi) to work? In that case in my view, it would be an “all or nothing” case that will either lead to monies for the pre-accident valuation of the vehicle, or monies for a newer vehicle that can be licensed as a taxi. The taxi driver will have to show that the case is an exceptional one.

Conclusion

In this usual scenario, it seems likely that a court will have to find that a case is exceptional in an “average” taxi drivers' case, in order to award more than the pre-accident valuation of the vehicle. This means very careful attention will need to be paid to the evidence required to prove that a case is “exceptional”.

However, in some cases a more nuanced approach will be more appropriate, as the court is always looking to financially place any claimant in the same position as before the tort was committed, as opposed to just the same physical position. A good example is of a taxi driver who was very close to retirement, as explained above. This probably does not require the situation to be exceptional, as the whole purpose of the law of tortious compensation is to try to put the claimant back into the position they would have been if the tort (the wrong) has not been committed.

There is no binding authority specifically dealing with these types of cases. However, these cases are not infrequent scenarios in credit hire and therefore it is worth carefully applying one's mind to the situation to anticipate how a court may possibility deal with these types of cases.

It is very much to be hoped that a higher court case deals with and provides more definitive guidance on the issues for taxi drivers referred to in this article.

I do however hope that this article has provided some clarity over the issues.

Please note this article does not constitute legal advice for any specific case or cases or for any circumstances and should not be relied upon for such.

© Mohammed Azeem Ali 2024 31/01/2023