UK’S Highest Appeal Court rules in favour of AVIVA Insurance UK Ltd

February 25, 2014

In a decision that will save the insurance industry upwards of £50 million a year, the Supreme Court –  the final court of appeal in the UK for civil cases – has refused  West Midlands Travel Limited permission to appeal a case it lost at the Court of Appeal last year.

Edward Bartley Jones QC and Stephen Connolly from Exchange Chambers successfully acted for Aviva Insurance UK Ltd in the test case at the Court of Appeal last July.

In the case, West Midlands Travel Limited (WMT) v Aviva Insurance UK Ltd, WMT claimed general damages for the loss of the use of one of their buses during the time it was off the road following an accident caused by the negligent driving of Aviva’s insured.

Whilst the claim was modest in value, it was transferred to the High Court and treated as a test case in order to establish what, as a matter of law, the proper measure of damage was for loss of use of a bus put off the road as a consequence of the negligence of another driver.

In particular, the case was concerned with whether the case of Birmingham Corporation v Sowsbery [1970] was good law and whether a longstanding formula for calculating general damages for loss of use developed and promoted by the trade body for the bus industry – the Confederation of Passenger Transport (CPT) – and approved in Sowsbery properly reflected the actual loss suffered by a bus operator when one of its buses was put off the road as a consequence of the negligence of another driver.

Commenting on the case, Edward Bartley Jones QC said:

“It has long been thought by the insurance industry that the CPT formula grossly overstated the actual loss suffered by the bus operators through the loss of use of their buses, but the modest amounts involved in the claims (typically below the small claims limit) made it uneconomic to effectively challenge the claims.

“A challenge was however ultimately made in this case.  Although we lost at first instance, the High Court Judge gave us permission to appeal.

On Appeal, the Court of Appeal reversed the Judge’s decision, concluding unanimously that the CPT formula did grossly overstate the actual loss suffered and could not be relied upon and that the proper measure of damages was generally to be based on interest on the capital value of the bus for the period it was off the road together with expenses actually wasted during that time.  In effect, therefore, Sowsbery can no longer be considered to be good law.

Concluded Stephen Connolly:

“We welcome the Supreme Court’s decision to refuse this application to appeal.

“The effect of the decision will be to greatly reduce the value of claims for loss of use and whilst only time will show the amount of such reduction, it will be substantial and likely to result in annual savings to the insurance industry of many millions of pounds.”

Edward Bartley Jones QC and Stephen Connolly were instructed by Richard Tovell of Greenwoods, London.