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Yes, £40 is enough!

Sep 04, 2018
Peter Gower, from Pickfords, explains why, 26 years after its introduction, the £40/item liability limit for moving companies is probably still about right.
Yes, £40 is enough!

Shortly after publishing the story by Joe Warren in The Mover, July 2018, page 40, Peter Gower, Group Legal Services Manager and Company Secretary at Pickfords in the UK got in touch to offer a different point of view on whether the £40 per item limited liability used by most UK moving companies was appropriate or not as he felt that the article did not tell the whole story.  He also wanted to put forward his response to what he believed was an erroneous reference to Pickfords in the article.

Peter has been with Pickfords for 31 years and was closely involved in choosing £40 as an appropriate figure in 1992, 26 years ago.  The article implied that if £40 was the correct figure then, it probably wasn’t now and suggested that companies relying on this figure might be challenged in the courts.

Peter was concerned that some companies reading the article might have been unnecessarily alarmed by its conclusions.  Firstly, he pointed out that companies were free to offer customers a higher liability if they wished and charge an additional fee for the removal service accordingly.  This principle had been approved by the Office of Fair Trading back in 1992.  He also said that it was essential for companies to protect themselves in some way otherwise they could be at risk of virtually unlimited claims for very high value items that had not been disclosed to them at the survey.

As to whether £40 was an appropriate figure in 2018, Peter pointed out firstly that, were there no limit of liability in place, a court would assess the value of the claim based on an item’s second-hand/ market value, not its replacement as new value, which is a common misconception.  As we now live in a ‘throw-away’ society, with many household items having fallen in price and second-hand items being virtually worthless, £40 per item was probably still valid.  “It’s never going to be replacement as new,” he explained.  “So, for most household items £40 is as good today as it was in 1992 really.”

An important point to make, which is often missed, is that the test as to whether a level of limited liability is fair/reasonable is applied at the time the contract was entered into.  The judgement isn’t made in the light of the loss that’s occurred.  So, a court will look at what documentation was given to the customer at quotation stage, how clear it was, was the limitation clause pointed out at the time and what other alternatives were presented to the client. “If you can demonstrate that you have done all these things I don’t think there is any reason for the court not to uphold that limit of liability, even if it’s £40,” said Peter. “It’s always best for companies to get written confirmation that customers have read and understood the terms and conditions and in particular the liability clause.” 

Pickfords has recently started producing its terms and conditions in large print on multiple pages, not small print on one sheet of A4, and highlighting particular clauses of importance.  The company also offers an explanation as to what the legal position is regarding limited liability.  Peter said that it was too early to tell whether the new format had been successful but Pickfords had not been challenged on their limits of liability since its introduction.

Rather than being a ’game changer’, as suggested in Joe Warren’s story, Peter believes that the Consumer Rights Act 2015 (CRA) has added some clarity to the issue.  It doesn’t say you can’t limit your liability.  It does say that you can’t ‘restrict’ your liability in respect of any loss arising from your failure to carry out services with reasonable care and skill. You can agree a limit in regard to the amount you pay if something goes wrong, but not ‘restrict’ your obligation to pay it. “We have always had that obligation. You can’t say, for example, that we will agree to carry out the work with reasonable care and skill, unless we are really busy or short of time in which case we might do it badly,”

The CRA also says that a term ‘restricting’ the trader’s liability would not be binding on the customer  if it would prevent the customer recovering less than the contract price.  In this respect, for example, if you multiply the sum of £40 by the number of items to be moved, the total overall liability for the remover will, more often than not, exceed the contract price. “That is a very compelling argument for keeping the liability at £40.  It looks beyond the headline figure and puts it into context. I think £40 is a viable starting point. If customers want us to have a higher level of liability they need to tell us what it is, so we can decide the price we want to charge for the service and the additional risk. Alternatively, they can buy additional insurance.”

Peter said that the courts have always approached these things from the point of view of how much you told the customer at the time of booking and how that information was conveyed; how much are you being paid, what’s the risk to you; what alternatives were offered; was the contract fair at the time it was entered into?  “We have had a pretty good record over the years of having limits of liability upheld in the courts,” he explained. He could only think of two cases in the last 30 years when they were not and on both occasions the circumstances were exceptional.  Peter also said that he had been involved in a case two months ago during which limits of liability were discussed and the principles and limits were accepted as fair by the court. 

So, despite the CRA Peter does not believe that moving companies need to fear a challenge from the relatively small proportion of customers who choose not to insure their goods during a household move.  He believes the £40 limit to still be valid as it relates to second-hand values, which have most likely gone down in recent years not up, and inflation has been relatively flat. This is backed up by the CRA’s own test of fairness/reasonableness and that the liability should not be less than the contract price. Customers can request an increased liability if they wish.  Full, new for old insurance is available on request.  And, as long as the mover clearly explained the level of liability to the customer when the contract was signed, it is likely that courts will be sympathetic.

For an alternative view, see AIM's story: Should removals insurance be mandatory? 

Yes, £40 is enough!


The Consumer Rights Act 2015 sets out a framework that consolidates in one place key consumer rights covering contracts for goods, services, digital content and the law relating to unfair terms in consumer contracts.
This framework has recently raised some questions regarding whether the limit on quantum of liability would remain valid within the existing BAR terms and conditions. Both panel brokers have sought legal opinion on this matter and that opinion has confirmed the panel brokers view that the limit on quantum remains both legal and valid and that their approach on claims brought by consumers will remain as it has been, unaffected by the changes to the Act. For the most part this has been confirmed in the consideration of claims since the Act became law. However, the Act has been invoked in claim challenges presented which are currently under consideration. As these challenges proceed to conclusion legal rulings may change the current view.  An issue with the Act at this stage is the absence of any case law with the result that legal opinions vary. This is something that can only be treated on a case by case basis and should the approach of the panel brokers change, due to such a ruling, BAR and its membership will be informed promptly.

Photo: Peter Gower, Group Legal Services Manager and Company Secretary at Pickfords

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