Know the Value of your car
The Duty to Mitigate
The Court of Appeal recently considered an innocent party’s duty to mitigate its loss and confirmed that it was for a party in breach of contract to demonstrate that there has been a failure to mitigate but that the duty to mitigate was not a demanding one.
Lombard North Central Plc provided finance for the Defendant (“the Purchaser”) to purchase a Mercedes Benz X600 Pullman with a basic price of £194,000.00. The Purchaser paid a £24,000.00 deposit, and agreed to pay 60 instalments of £3,061.28 with a final instalment of £60,000.00, a total purchase price of £267,678.80.
The Purchaser fell in default and Lombard eventually repossessed the vehicle, which was sold at auction realising a net sale proceeds of £50,829.72. The balance therefore due under the contract was £204,713.31 and proceedings were commenced to recover that amount.
The Purchase argued that there had been a failure to mitigate as the car had not been sold for an appropriate amount. The seller had not appreciated the nature of the car that had been repossessed, it was a rare car and should have been properly marketed with specialist dealers.
The Court rejected the argument because it accepted the evidence of the seller that he was aware of the car he was dealing with and he explained why he was prepared to accept the relatively low offer. Additionally the Purchaser did not adduce any expert evidence regarding the appropriate value that should have been obtained and the Judge properly found that ordinarily in a case that turns on valuation expert evidence as to the inadequacy of the price obtained should be adduced.
The Court of Appeal has accordingly reaffirmed that the duty to mitigate was not a demanding one and that the innocent party merely has to do what is reasonable in the circumstances. It was up to party in breach of contract to prove that this standard has not been met, not an easy task.
