Loss of profits claim for damaged taxi (UK)

Where the vehicle of a professional driver such as a taxi driver is damaged in an accident caused by another party’s fault, there is a loss of profits claim while the vehicle is repaired or replaced which may be limited to mitigation costs.

The following principles apply:

• The starting point is the loss of profits suffered as a result of damage to the profit-earning vehicle pending repair or replacement.
• If the claimant chooses to hire a replacement vehicle, expenditure incurred in mitigation of the loss of profits is, on the face of it, recoverable especially if the hiring cost is lower than the loss of profits.
• The steps taken to mitigate the loss must be reasonable but a precise calculation after the event will not necessarily be made by counting the pennies.
• Where the cost of hiring the replacement vehicle significantly exceeds the avoided loss of profits, the damages will ordinarily be limited to the loss of profits.
• A hiring cost exceeding the loss of profits may be justified where there is other potential future loss of profits such as losing future work or losing regular customers or where the person could not afford not to work. But details of lost profits must be proved.

In this case the taxi driver whose pre-accident vehicle value was £7 450 hired a luxury replacement vehicle at a total cost of £6 596.50 for 18 days (basic hire rates were £975). It was held that the claimant had not acted reasonably in claiming what was almost a full year’s profit as mitigating costs and the damages were limited to the actual loss of profit of £423.

Similar principles will apply in South Africa.

The case is Hussain v EUI Limited.

First published: Financial Institutions Legal Snapshot