Armstead v Royal & Sun Alliance [2024] UKSC 6

Taehyun Baek Taehyun Baek 5th March 2024


On 14 February 2024 the Supreme Court ruled on a case which is likely to affect a significant number of other cases, despite its low value of £1,560. This is a rare situation where a case relating to credit hire has reached the Supreme Court so it is worth taking notice of what happened.

In Lorna Armstead v Royal and Sun Alliance Insurance Company Limited [2024] UKSC 6, the Supreme Court held that the claimant’s contractual liability to pay a hire company for their loss of use of a car could be recovered from the defendant. This was because the sum was a reasonable pre-estimate of loss which was reasonably foreseeable at the time of the defendant’s breach.



Following an accident, Ms Armstead hired a Mini Cooper from a company called Helphire Ltd (now Auxillis) on credit hire terms, whilst her own vehicle was being repaired. Unfortunately, whilst driving the Mini she had a further accident. The driver of the other vehicle involved was insured by RSA.  

The hire agreement between Helphire and Ms Armstead included at Clause 16 a requirement that Ms Armstead pay on demand an amount equal to the daily rental rate for a maximum of 30 days. This was to cover Helphire’s loss of use for each calendar day the vehicle was unavailable to be hired. Such terms are commonly included in car rental agreements.

Though RSA admitted liability for the accident, they contested the “Clause 16 sum”, which amounted to £1,560.

From the County Court to the Court of Appeal, the claim was defended on several issues including bailment, the general principles of recoverability of loss in negligence, and pure economic loss.


Main issues

The main issues were as follows:

1. Recoverable loss v pure economic loss

The court held in clear terms: there is no reason in principle why recoverable loss should not include a contractual liability to a third party provided that liability is consequential on physical damage to the claimant’s property.

Drawing from the authority of Network Rail Infrastructure Ltd v Conarken Group Ltd [2011] EWCA Civ 644, the court held that where physical damage is negligently caused to revenue-generating property, the loss recoverable by the owner of the property from the person who caused the damage includes a sum payable by the owner under an agreement with another party to compensate that party for its loss of revenue resulting from the damage, provided the sum agreed is a reasonable pre-estimate of the likely amount of that loss.

2. Remoteness

The ‘real issue’ was whether the Court of Appeal was entitled to conclude that the Clause 16 sum was too remote to be recoverable on the ground that it was not a reasonable pre-estimate of the loss.

Applying Network Rail, the court found that in order for a contractual liability such as clause 16 to fall within the reasonably foreseeable type of loss, it is necessary for the claimant’s contractual lability to reflect the reasonable loss of use of the hire company; this can be a pre-estimate instead of the actual loss (which may be difficult to calculate in advance).

3. Burden of proof: remoteness

Finally, the court considered who had the burden of proving that Clause 16 was a reasonable pre-estimate of the Helphire’s loss of use.

The court reminded itself of the fundamental principle that the defendant bears the legal burden of pleading and proving a failure to mitigate loss caused by a tort. Remoteness was considered to play an analogous role to the duty to mitigate, contributory negligence, and the concept of intervening cause.

It was held that the burden was on the defendant to plead and prove that loss which was caused by the defendant’s tort was nevertheless irrecoverable because it was too remote i.e., that the loss suffered was not a type that was reasonably foreseeable.



Ultimately, the court found that agreeing the damages for Helphire’s loss of use, by taking the contractual rate that Ms Armstead had already agreed, was a reasonable way of pre-estimating that loss.

The defendant, RSA, on whom the burden laid, pleaded no case and adduced no evidence to prove that Helphire was likely to have had other spare cars available and that a liability to pay the daily hire rate for the vehicle limited to 30 days’ loss of use was likely to result in overcompensation. Therefore, in this case, the defendant was unable to challenge a lesser sum.

However, going forward, a defendant (or their insurer) would be able to obtain judgment for a lesser or more reasonable sum if they were able to prove that the pre-estimate of loss was not reasonable (or a reasonably foreseeable type of loss).

The court warned against the danger of contractual arrangements, such as Clause 16, being open to abuse and inappropriately burdening defendants with a liability that does not reflect any actual loss. Therefore, a clear framework has been set that requires the contractual liability to be a reasonable pre-estimate of loss.



The claimant, Ms Armstead, succeeded in her claim for her contractual liability of £1,560.

The Chair and Chief Executive of The Credit Hire Organisation, Anthony Hughes, described the ruling as a “fair outcome for the recovery of reasonable losses resulting from a loss that, as with credit hire overall, contributes very little to the overall cost of insurance.” He said the decision established a principle of ‘good law’ which overrides economic arguments.

For defendants, this decision will assist to challenge cases where sums sought unreasonably exceed the actual loss to the hire company. As the burden is on the defendant to prove, it will be important to actively engage with the claimant and to obtain evidence in respect of the hire companies’ loss of use, for example fleet availability.  

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