Business person reviews contractual agreement

In a recent case that went all the way to the Supreme Court (Armstead v Royal & Sun Alliance Insurance Company Limited [2024] UKSC 6), the court looked back at some fundamental legal principles of what financial losses a claimant could claim from a defendant and what was considered too remote.

What losses can I claim in litigation?

This is an important issue as it can dramatically affect how much a claim is worth. Whilst it might be very clear that a defendant has breached their duty of care, if there is no loss, or the loss is minimal, it is often not proportionate for a claimant to pursue the claim.

Remoteness is a legal concept which is often the source of much disagreement between parties in litigation. In this case, the claimant was driving a hire car whilst her car was being repaired after an accident. She was in a further accident whilst driving the hire car and under the agreement she had with the hire car company, she was liable to pay them for the period during which the hire car was being repaired. She therefore brought a claim against RSA to recover the money she was due to pay the hire car company. RSA were the insurer of the driver who had crashed into the hire car.

When the court first heard the claim, it was dismissed because it was considered that the losses being claimed by the hire car company against the claimant were too remote so as to make them recoverable from RSA. It was also considered that these sums were a “pure economic loss” which were not consequential on the damage caused to the hire car, and were therefore not recoverable from RSA. Financial losses that are suffered as a result of damage caused by someone are generally recoverable. However, pure economic loss is a financial loss that is not incurred due to the damage caused, in this case the accident.

The decision was upheld on appeal, but the claimant appealed again. She was again unsuccessful. However, when the case reached the Supreme Court, the court reviewed some fundamental legal principles and decided that a number of decisions made by the lower courts in the previous hearings were incorrect.

The Supreme Court decided that the loss suffered by the claimant was not pure economic loss as it was only incurred because of the damage caused to the hire car, for which the defendant had already admitted he was responsible. The court also confirmed that it was for the defendant, not the claimant, to prove that the loss incurred by the claimant was too remote so as to make them liable.

Ultimately, the Supreme Court found in favour of the claimant. This case serves as a good reminder to claimants to think carefully about what losses they are claiming and to defendants when considering what they have to prove in order to successfully defeat a claim.