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Case:
BGH NJW 1986, 2037 V. Civil Senate (V ZR 237/84) JZ 1986, 387
Date:
22 November 1985
Judges:
Professor B.S. Markesinis
Copyright:
J.A. Weir

The following questions are submitted to the Great Senate by the Fifth Civil Senate:

1. If the owner of a thing which he uses himself, such as an owner-occupied house, is temporarily unable to use it by reason of a tortious interference with his ownership, does this represent a compensatable economic loss in the absence of any extra expenditure or lost revenue?

2. If such a loss of use is compensatable, how is it to be quantified?

Facts

The plaintiff owns a plot of land on which there is a substantial and well-appointed dwelling, with a living area of about 260 square metres. On the land sloping steeply away from the plaintiff’s property the defendant was building some terraced houses. The excavations were improperly executed and the plaintiff’s house was rendered temporarily unstable. The city issued an evacuation order, prohibiting occupation of the house between 12 August and 16 September 1981. Repairs to the façade and interior of the house cost DM 5851.75 and DM 340 respectively. In addition to these sums and interest, the plaintiff claimed DM 3000 as compensation for the fact that during the validity of the evacuation order she and her husband had had to live in their dormobile nearby.

The Landgericht upheld the claim for repairs of DM 5998.29, but dismissed the rest of the claim. The Oberlandesgericht dismissed the plaintiff’s appeal, but allowed the defendant’s appeal on the ground that the plaintiff had received ‘new for old’ and reduced the damages to DM 3334.90. With the leave of the Oberlandesgericht the plaintiff appealed only as to the claim for DM 3000 for loss of use of the house. The Fifth Civil Senate laid the matter before the Great Senate for Civil Matters.

Reasons

II. As regards the claim in issue the court below found that between 12 August and 16 September 1981 the plaintiff and her husband were unable to occupy their house by reason of the local authority’s evacuation order, and had instead lived in their dormobile which was equipped with all proper conveniences. The court held that the temporary loss of use of their dwelling, though complete, did not constitute an economic loss but only a non-economic loss incapable of compensation.

III. The Fifth Civil Senate was of the same opinion but regarded the question as one of principle and sought a decision from the Great Senate for Civil Matters as being necessary to resolve divergent views in the courts (§ 137 GVG).

IV. There is indeed a divergence of views between five of the senates of the Bundesgerichtshof on the question of damages for loss of use of chattels and realty.

1. At the outset we have decisions of the Third and Sixth Civil Senates on the temporary loss of use of a motor vehicle involved in an accident [references].

(a) Decisions of 1964 and 1966 [references] recognize that the owner of a motor vehicle, including one for private and personal use, which he is unable to use while accident damage is being repaired can claim lump-sum damages for economic loss even when he has not hired a substitute or incurred extra expenditure or lost any income (most recently BGHZ 89, 60 (63) = NJW 1984, 722).

(b) In order to stem the tide of liability numerous limitations have been introduced, as to the basis and quantum of the claim. Money damages (§ 251 BGB) are awarded only if the loss of use is ‘actually felt’ by the victim (ibid.). No compensatable harm thus arises when a purely abstract possibility of use is frustrated (BGHZ 45, 212 (219) = NJW 1966, 1260) or when a power of disposition is affected (BGHZ 55, 146 (150) = NJW 1971, 796—the hunting rights case); the courts require an ability and an intention to use (BGH NJW 1985, 2471—military ambulance). Compensation has even been refused when the reason the owner could not have used his vehicle while under repair was that he himself had been injured (BGH NJW 1968, 1778).

Exceptions to these exceptions are made where the vehicle would have been used by members of the owner’s family or even his fiancée (BGH NJW 1975, 922).

Damages for loss of use were denied in a case in which the victim could reasonably be expected to use a second car which was not needed for other purposes [references]. In other cases damages for the maintenance cost of a vehicle held in reserve have been allowed (BGHZ 32, 280 (284) = NJW 1960, 1339—tram in Bremen; BGHZ 70, 199 (201) = NJW 1978, 812—bus in Bremen; see also BGH NJW 1985, 2471).

A victim who rents a smaller car cannot add to the actual hire costs a sum representing the difference in use-value of the two vehicles (BGH NJW 1967, 552) but instead of claiming the hire for the rented car he may claim a lump sum for the loss of use of his own car (BGH NJW 1970, 1120).

If purely personal reasons prevent the owner from using his vehicle, for example where his driving licence has not been properly safeguarded, the Third Civil Senate finds no compensatable harm (BGHZ 65, 170, 173 ff. = NJW 1975, 2341), but if there is an invasion affecting the thing itself, the loss of use is in principle compensatable, and the courts find such an invasion even where there is no physical damage but use is prevented by some factual or legal obstacle (see BGHZ 85, 11 (15, 16) = NJW 1982, 2304; but note that the Fleet case there mentioned (BGHZ 55, 153 (159) = NJW 1971, 886) was a case of lost profits under § 252 BGB). The Third Civil Senate has occasionally allowed cases where the car’s documents were withheld (BGHZ 40, 345 (351) = NJW 1964, 542) or a garage entry blocked (BGHZ 63, 203 (206) = NJW 1975, 347).

(c) The Bundesgerichtshof has also sought to limit the amount of the lump sum payable for loss of use. In order to avoid any element of profit, the Sixth Civil Senate deducts from the gross hire charges for a comparable substitute all the elements of cost which the commercial hirer adds to the ‘true use value’ (BGHZ 45, 212, 220 = NJW 1966, 1260; BGHZ 56, 214, 218 ff., 222 = NJW 1971, 1692), and makes a further deduction for the plaintiff’s savings, taking the notional rental cost of a similar car as merely an ‘indicator’ (see BGH NJW 1970, 1120). Finally it regarded as sufficient a sum ‘well in excess of the cost of a car not in use’ (BGHZ 56, 214 (215 ff.) = NJW 1971, 1692). In the end result the daily tariff amounts to 25–30 per cent of the hire cost of a comparable vehicle. The details are given in tables prepared for the use of liability-insurers and the courts, and endorsed by the Bundesgerichtshof as legally accurate [references].

2. The Eighth Civil Senate has carried these decisions over into the area of contractual liability and extended them to cases where a debtor is in delay in delivering a car or its documents (BGHZ 88, 11 = NJW 1983, 2139, where the Court of Appeal awarded DM 21.50 per day, a total of DM 1075 for 50 days’ loss of use).

3. In cases involving chattels other than motor cars the Bundesgerichtshof has not yet treated loss of use as a form of economic harm.

In BGHZ 63, 393 (= NJW 1975, 733) the purchaser of a fur coat in a claim for damages for non-performance sought DM 1700 because the coat had been unusable for four years while futile alterations were constantly being made, but the Eighth Civil Senate held that this was not economic harm. The same Senate held likewise in the caravan case (BGHZ 86, 128 (130) = NJW 1983, 444) where a camping site operator who had leased space for the caravan refused access to it for 311 days under the pretext that the rent had not been paid. Here the plaintiff claimed DM 311 ¥ 15 = DM 4665.

In the motor-boat case (BGHZ 89, 60 = NJW 1984, 722) the boat was damaged in a road accident and rendered unavailable for the owner’s holiday and subsequent weekends. He claimed DM 6160 as forty days’ loss of use at DM 154 per day (the daily hire cost for a similar boat being DM 280), but the Sixth Civil Senate saw in the temporary loss of use only a ‘diminution of the individual’s pleasure’ and a ‘non-economic harm’.

4. Divergent decisions have also been rendered in cases involving temporary loss of use or deprivation of enjoyment of real property.

(a) In the case decided by the Third Civil Senate on 11 July 1963 (NJW 1963, 2020) the plaintiff property owner had been badly affected by excessive noise and small emanating from an official military clubhouse, but had remained in occupation and had not had to accept a lower price for the house. The Third Civil Senate did not award damages for economic harm, but awarded compensation for the reduction of the ‘monthly enjoyment-value of the property’. In BGHZ 91, 20 (28) = NJW 1984, 1876 the Third Civil Senate awarded ‘compensation for expropriatory invasion’ to the owner-occupier of a dwelling affected by smells emanating from a communal distillery, and approved the quantum awarded by the trial court with reference to the probable reduction in the monthly rent hypothetically obtainable.

(b) When an owner was temporarily unable to use his house owing to malfunction of the heating due to the fault of the outgoing tenant, the Eighth Civil Senate awarded him damages for the abstract loss of use, and said that it was immaterial if the house had been used for purposes other than occupation (NJW 1967, 1803). Whether the same result would have been reached in tort was left open.

(c) The Fifth Civil Senate has twice denied the existence of economic harm in assessing damages for delay. In BGHZ 66, 277 = NJW 1976, 1630 a person for whom a dwelling was being constructed could not move into it until seven months after the due date, owing to the contractor’s fault, and had to stay in his previous smaller house during that period. The Senate denied that the loss of enjoyment, valued at a monthly rental of DM 2000, constituted economic harm. The decision was the same in BGHZ 71, 234 = NJW 1978, 1805, concerning a claim by the purchaser of an apartment yet to be constructed, where the Senate said that neither the servicing of the capital deployed during the eight month delay (for the price had been paid on time) nor the community taxes assessable during that period constituted economic loss.

(d) In the swimming-pool case (BGHZ 76, 179 = NJW 1980, 1386) the Seventh Civil Senate hesitated to adopt the view of the Fifth Civil Senate that temporary loss of the chance of using a dwelling or apartment does not constitute economic harm, but found no economic harm when a private swimming pool for a housing complex had been badly designed and was unusable for the eight months it took to put it right. By contrast in a decision on 10 October 1985 (NJW 1986, 427) the Seventh Civil Senate, applying the law relating to the contract for work and materials, held that economic harm did exist when an underground garage with six parking places to service an apartment block was unusable for twenty-two months because of inadequate corrective measures.

(e) In a tort case of blast-damage (BGHZ 75, 366 (370 ff.) = NJW 1980, 775) the Fifth Civil Senate held that there was no economic harm where the use of property had been partially obstructed rather than totally prevented. In that case the authorities had temporarily forbidden the use of a house in danger of collapse, but the owner had nevertheless established a bedroom in the cellar and had continued to occupy half of the ground floor despite the prohibition.

V. This divergence of decisions in the Bundesgerichtshof on the question of damages for loss of use is not calculated to advance legal certainty. The decisions contain no clear criterion to distinguish between economic harm and non-economic harm (§ 253 BGB) or to distinguish the different types of case; nor is it clear whether the question should be treated differently in contract and in tort. The variety and incompatibility of the reasoning offered in support of the decisions reflects itself in different tests for the quantum of recovery.

. . .

VI.

1. According to the decisions of the Bundesgerichtshof the question whether compensatable economic harm has occurred is to be answered with reference to the theory of difference: one compares the economic situation produced by the occurrence said to involve liability with the situation which would exist had it not occurred [references] . . .

2. According to the theory of difference no economic harm exists in the present case . . .

3. There do not seem to be any plausible, let alone compelling, reasons for holding that the mere loss of the benefit of use constitutes economic harm calling for compensation . . .

[The Senate discusses invasion of ‘exclusive rights’ and industrial property rights.]

(bb) To recognize as compensatable the harm consisting of loss of use in these cases would conflict with the principle of the law of liability expressed in § 252 BGB. It is true that § 252 sentence 2 BGB modifies the burden of proof in cases of lost profit (BGH NJW 1983, 758) but it permits rebuttal. If the victim intended to profit from the use of the thing (such as a commercial vehicle) during the period it was out of commission he is entitled to the profit presumed by the law unless the defendant proves that that profit would not have been made even if the damage had not occurred. The money damages legally due are payable not for the abstract loss of a possibility of use but because in the particular circumstances the occurrence probably made an economic difference [references]. The loss of the possibility of use is a source of potential harm, not an economic harm in itself [references]. The law allows the defendant to show that the planned used would have been wasteful rather than profitable [references]. Otherwise the law of liability would be preferring consumption to production, and nothing in the positive law justifies such a paradoxical result. Only in certain exceptional cases does the law provide for computation of harm in abstracto in order to facilitate the disposition of certain obligational relationships, usually arising by way of contract (see § 376 II, III HGB).
(ee) In sum, the values implicit in the law afford no basis for saying that in cases of invasion of an absolute right of disposition, damage to use in the abstract should be recognized, let alone at the rate of a hypothetical rental. All the more recent cases avoid adopting such a wide principle which would indeed undermine the effort of all the Senates concerned to restrict the extension of liability for loss of use.

(b) In its decision of 11 July 1963, already cited, the Eighth Civil Senate invoked decisions of the Bundesgerichtshof relating to loss of use of motor vehicles. Even in the special area of motor accidents the reasoning is open to question, and the desirable tendency of several Senates of the Bundesgerichtshof has been not to generalize this principle but to confine it to that particular area (most hesitant, BGHZ 66, 277 (279 ff.) = NJW 1976, 1630; ‘The doctrinal basis for decisions concerning the use-potential of motor cars is insufficiently insecure to justify its extension to other areas’).

(aa) The main argument which already figures in BGHZ 45, 212 (216) = NJW 1966, 1260 was one of fairness, that it is an ‘unsatisfying result’ to allow the tortfeasor (and his liability insurer) to escape all liability for lost use simply by an unjustified refusal to meet the (temporary) claim for natural restitution in the form of provision of, or payment for the hire of, a substitute vehicle under § 249 sentences 1 and 2 respectively BGB. But this is to ignore the basic distinction drawn by the legislator: whereas the primary remedy of restitution in natura is not limited to the replacement of economic losses and provides certain other advantages, the secondary and subsidiary remedy of money damages (§§ 251, 252 BGB) expressly excludes compensation for non-economic harm. Such differences as exist between restitution in natura and compensation in money result from the structure deliberately adopted by the legislator.

A further argument of fairness has appeared since BGHZ 56, 214 (216) = NJW 1971, 1692, namely that it is unfair that the tortfeasor should benefit from the victim’s decision to forgo the convenience of a substitute vehicle. But this is inconsistent with the legislator’s decision that compensation for mere inconvenience and discomfort can be granted only in the exceptional cases of §§ 847, 1300 BGB (see now § 651 BGB). This argument loses its force where liability is strict, as in the case of the guardian of a motor vehicle under § 7 StVG, and is in any case incompatible with the attempt of the courts to grant only the cost of keeping, not using, the car rather than the full cost of a hypothetical rental: for this too confers a deplorable ‘benefit’ on the tortfeasor and his insurer.

(bb) The so-called ‘commercialization’ idea is not convincing either (leading case: BGH NJW 1956, 1234; followed in BGHZ 40, 345 (349 ff.) = NJW 1964, 542). This holds that a pleasure or convenience, far from being uneconomic, constitutes an independent economic value if it is commonly capable of being obtained for money, that is ‘bought’ or ‘commercialized’; to diminish such a pleasure is to depreciate its monetary equivalent. Writers have rightly criticized the baselessness of the premise that economic harm arises every time anything ‘commercialized’ is affected [references]. So many pleasures today are to be had for money that this test hardly serves to distinguish economic from non-economic harm, and recent cases, rather sceptical of the ‘commercialization’ idea, use it as subsidiary, if at all [references]. This Senate shares such reserve [references].

(cc) The prevalent view of the Bundesgerichtshof is that the only valid and decisive touchstone for discerning economic harm as regards compensation for loss of use of vehicles and other things, moveable or not, is ‘public perception’. (The Fifth Civil Senate has stood aloof (BGHZ 66, 277 (279) = NJW 1976, 1630).) The Third Civil Senate [references] and even more the Sixth Civil Senate [references] find it decisive that in the public perception today, the temporary loss of use of a vehicle is seen as economic loss because the availability of a car is apt to save time and effort even outside working hours so that the advantages thereby afforded are regarded as ‘money’ [references].

. . .

As a matter of principle it must be said that ‘public perception’ is not a source of law . . .

One factual objection is that this ‘public perception’ is not usually ascertained empirically but is simply assumed by the judges in the case. Reference to ‘public perception’ not empirically ascertained may often be a shorthand justification for a solution prompted by the value-judgments of the court [references]. This can lead to an unacceptable degree of legal uncertainty, and has actually done so on this very question. Courts that actually wanted to ascertain the relevant ‘public perception’ would be led into an unduly and impractically wide range of related sociological questions.

(ee) In order to limit liability for loss of use several Senates of the Bundesgerichtshof have adopted the test of whether it was ‘actually felt’. This is inconsistent with positive law.

Thus in BGHZ 40, 345 (353) = NJW 1964, 542 the Third Civil Senate said that there were cases ‘in which the temporary loss of possession or potential use of a vehicle was not felt by the victim and so involved, from the economic point of view, no loss’. The Sixth Civil Senate has adopted this test (BGHZ 45, 212 (219) = NJW 1966, 1260), and both Senates have drawn consequences from it, some of which limit its scope.

These limitations may have been necessary as a matter of policy in order to contain the spread of liability in cases of motor accidents, but this is only a further indication that the original decisions on loss of use of a vehicle went too far. The requirement that an economic loss be ‘felt’ in order to be compensatable is foreign to the law of liability. A millionaire who loses a small profit can claim compensation for that loss by the clear terms and obvious intent of § 252 BGB even if the effect of his failure to increase his wealth is imperceptible to him; at the other end, a person hopelessly burdened with debt can claim compensation for a further liability even if it does not perceptibly worsen his economic plight [references]. To limit compensation for harm to such harm as is ‘actually felt’ runs counter to the legal principle of reparation in full [references].

(c) Finally, it is not really a question whether any standards otherwise recognized by law can be found for the evaluation in money terms of a temporary loss of use [references]. The absence of such standards indeed suggests that loss of use is not a separate economic loss [references], but not vice versa. The value of the use of a thing is not a value separate from and independent of the value of the thing itself, but is indiscernibly involved in its market value. A diminution of the value of the use of a thing usually leads to a drop in its market value, and making up the market value automatically compensates for loss of use-value [references].

As a matter of accounting there is an additional loss related to the duration of the loss of use which is not compensated if the loss is subsequently made good, namely periodic costs not related to actual use, which must be incurred if the thing is to be available for use [references]; in the case of a motor vehicle these would include the vehicle licence fee and the liability insurance premium. These are independent of the individual circumstances of the owner and, unlike purchase price where there is no price control, can be compensated without practical difficulties because they are the same for all and are easily ascertained. Nevertheless, there are serious objections to giving damages even in respect of these items.

These costs are not caused by the occurrence which leads to the loss of use [references], and in principle damages are payable only for harm caused by the occurrence which entails liability [references]. To the extent that the basic cost of keeping a vehicle in reserve in order to forestall harm is treated as compensatable [references] this is because of the close connection between preventing harm and mitigating harm (as required by § 254 BGB; see BGHZ 32, 280 (295) = NJW 1960, 1339); these decisions can also be justified on causal grounds if one regards the deployment of the reserve vehicle as an effect of the tortious occurrence [references].

. . .

One can get round these causal problems by concentrating not on the expenditures themselves but on their ‘equivalent’, namely the use of the thing so facilitated, and treating the expenditures as a measure of the monetary value of the loss of use [references]. This does not, however, get us any further forward. It is true that a rule limited to these basic costs (tax, insurance) is not open to the usual objection that a thing does not have value simply because money has been spent on procuring it, much less the value of the expenditure [references]. But it is open to the objection that contrary to the principles of the law of liability it leads to a preference for consumption over production (see above VI. 3(a), (bb)). In the case of a thing put to commercial use, such as an apartment block used for rent, these basic costs reduce the profit and so diminish the damages payable for lost profits, the only compensatable item (§ 252 BGB); thus these costs are at the risk of the owner. It would be inconsistent with this legislative apportionment of risks to make the tortfeasor pay for the ‘frustrated’ basic costs in cases of the loss of consumer use of goods.

. . .

VII. Should the Great Senate decide, on whatever grounds, to hold that damages may be claimed in tort for loss of use of things used by their owner personally, such as an owner-occupied house, there will be the further problem of the quantification of such loss.

. . .

2. In the light of the decided cases the position of the Fifth Civil Senate is as follows:

(a) The Sixth Civil Senate is right to hold that the notional rental value of a substitute (or the reduction in rental value in cases where enjoyment is merely impaired) cannot be used directly as a standard of measurement. The enjoyment of a thing by its owner is not profit-orientated but constitutes consumption of investment in future enjoyment, so no loss of profit is involved in the temporary loss or impairment of enjoyment. Since tort law must not result in enrichment, the notional rental must be purged of all elements of profit. Accordingly the notional rental cannot, contrary to the view of the Seventh Civil Senate, be treated as the ‘decisive’ factor in the computation [references].

(b) The best approach is that of the Sixth Civil Senate, namely to do the sums ‘from the bottom up’, though indeed the basic costs (tax, insurance) are non-compensatable in the light of § 252 BGB, as was shown by the comparison with loss of use of commercial property (above VI. 3(a), (bb)). But the idea of ‘modest addition’ must be rejected as unsupported by any sound doctrine, despite the attempts by Dunz to support it [references]. For Dunz the ‘addition’ is simply ‘a rebuttable lump-sum for typical consequential harm’ [references]. In relating this ‘addition’ to the extra time and effort spent by the victim on the widespread assumption that ‘time means money’ even outside working hours, Dunz is being inconsistent with positive law (above VI. 3(b), (dd)). To the extent that he has in mind extra expenses such as tram tickets and gratuities to courtesy drivers, one would have to set against them the petrol costs, maintenance costs, wear and tear and other, probably higher, expenses, involved in using one’s own vehicle. The ‘modest addition’ is unjustified and unnecessary.

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