It is not unusual to find that in addition to a claim for vehicle repairs, vehicle excess, and more commonly credit hire charges, a Plaintiff will also make a claim for diminution. This claim is based on the idea that because a vehicle has been involved in a road traffic accident and has been repaired it will have suffered a loss in market value. Imagine 2 identical vehicles in a 2nd hand car showroom; one has been involved in this accident and has been repaired, the other hasn’t. What is the price difference between the two?
One of the earliest reported cases on vehicle diminution loss diminution was Payton v Brooks [1974] RTR 169. Here the courts held for the first time that a claim for diminution in a vehicle’s value was possible, although in this particular case the claimant was not successful in proving that he had suffered such a loss.
There are therefore 2 important issues to consider; is the Plaintiff entitled to claim vehicle diminution and if so what is the extent of the diminution – how is it calculated?
Unfortunately no definitive guidelines have been furnished by case law although it is still possible to discern a number of broad factors which the court will consider in reaching a decision on diminuition. Originally in Northern Ireland the extent of vehicle diminution was assessed as a percentage of the value of the vehicle repairs (normally between 5 – 15%). However in more recent years the courts have, generally speaking, moved towards assessing diminution based on the pre-accident value of the vehicle this has been assessed, generally speaking at anything from 0% to 10%. In order to assess where a particular claim falls one must give consideration to the factors below.
1.Whether or not the vehicle has actually been examined by an engineer. In Schnitzer v Lyons (2001, CL 01/1541) and Good v De Klee, the Court considered this to be a crucial factor- mainly because examination by an engineer provided a justifiable basis for the figure that had been claimed. Diminution reports based on pure theory are unlikely to succeed with the courts as they can be easily discredited by the defendant’s insurers as being based on assumptions. In practice, judges seem to be more persuaded by evidence comparing the vehicle’s worth prior to the accident with its worth after the repairs as opposed to simply a general affirmation that its value has been reduced. If you do wish to dispute a diminution claim it will be essential to have an engineer appointed.
2. The extent of repairs that have been carried out to the vehicle as a result of the subject accident. Generally the higher the figure for repairs the more extensive the damage caused to the vehicle and subsequently the greater effect on the vehicle’s re-sale value. You should also look at the individual repair account and see what repairs were actually carried out. If new parts are fitted as opposed to merely being repairs you could argue that the diminution figure would be less. Another factor is whether the repairs were completed satisfactorily, as if this cannot be established then the defendant may claim that any loss in value is a result of the negligence of the repairer Smith v Loughlin (2000, CL 00/1484).
3. The individual characteristics of the vehicle should be considered in assessing the level of diminution for example –
A common argument put forward by Defendants is that diminution should not recoverable by a claimant until the vehicle has been sold as the loss has not been realised until this has occurred. However, in Hunter v Thomson and another (2004 Scot (D) 9/1), the Inner House of the Court of Session rejected this argument. Although if the vehicle has already been sold at a loss, this should be brought to the court’s attention as it provides conclusive evidence of the worth of the vehicle after the repairs, the lack of such evidence is unlikely to be fatal to the claimant’s case. You should always ask the Plaintiff’s solicitor to confirm if the vehicle has been sold on and if so to provide vouching documentation to support this.
Another point that must be considered is that the level of diminution will be decided ultimately by the courts on the date of hearing. Sometimes by this stage a diminution report by the Claimant’s engineer can be a year or more old. This will have to be revised and undoubtedly reduced. As time passes the pre-accident value of the vehicle and therefore the level of diminution is reduced.
Case Law in Northern Ireland
In one of the few reported cases in Northern Ireland His Honour District Judge Wells considered the issue of vehicle diminiution in the combined cases of Cabrini Deighan V A Armstrong & Emanuel Armstrong (2001) and others. The methodology applied is set out as follows:
“(The Plaintiff) also claimed for the diminution of the market value of her car as a result of the damage. Mr Irwin, a consulting motor engineer called as a witness by (the Plaintiff), preferred to assess this by reference to the value of the vehicle; Mr McIlroy a staff motor engineer with (the Defendant) Insurance company preferred to assess this by reference to the value of the repairs. Both felt that the damage was sufficiently serious that the value of the car would have been affected. It had cost approximately £1400 to repair her 2 year-old car, which had been damaged again since this accident. He rounded up a 10% value of the repair to £200.00 to represent the reduction in value of the car.
Mr Irwin said the value of the car, allowing for the low mileage would have been £14,825. He took half of 7% of this (3.5%), which he rounded down to £500.00. He did not feel that one ought to value by reference to the repair cost, but that his reference formula had been used in the trade for very many years.
It is always regrettable when reputable experts are not able to agree on a methodology for assessing a loss. In real truth the proper measure for this loss is the extent to which a prospective purchase will reduce his offer price for the car. I preferred the methodology of Mr Irwin, in that I am more familiar with his approach than that of Mr McIlroy. A prospective purchaser will consider his capital available and would haggle on the bottom line rather than taking off a figure by way of reference to the value of the repairs. I felt that Mr Irwin was heavy on the amount that he was seeking - indeed on cross-examination he very reluctantly conceded a minimum depreciation of £300.00. I allow this latter sum.”
Some Judges however still prefer to assess depreciation on the basis of the vehicle repairs. A County Court Judge in Omagh, in an unreported May 2008 took the view that diminution should be worked out using the value of repairs as a basis. He did accept that marketability would be affected to some degree, however took the point that it would be, after the vehicle reached three years of age (in this case), a minimal amount. The Judge found that depreciation should be worked out at 5% of an approximate repair figure of £4,600.00, resulting in a figure of £230.00. A calculation on this basis his however more the exception than the rule.
Certainly 2 – 3 years ago the diminution was a hotly disputed issue, however we have found that over the last 2 years the amount of disputed diminution claims has reduced substantially, coinciding with a considerable increase in disputed car hire claims.