Higher decisions for hire cars: addressing exorbitant claims for replacement vehicles

Key Points
  • mere damage to a vehicle does not automatically entitle a plaintiff to a hire vehicle of similar size, functionality or status.
  • the need for a replacement vehicle is not self-proving - a plaintiff must adduce evidence supporting the requisite need (a relatively low threshold).
  • once a need has been established, the plaintiff is likely to be awarded damages by reference to the market rate for a vehicle that will satisfy the extent of the need.

On 3 September 2019, Basten J of the NSW Supreme Court delivered appeal Judgments in three cases heard concurrently and (for the time being) confirmed the correct approach for assessing damages in claims for hire vehicle costs following an accident.
In summary, each appeal involved the following similar facts:
  1. an appeal of the NSW Local Court’s assessment of damages for hire vehicle costs; 
  2. liability for causing the accident was undisputed; 
  3. the damaged vehicles were not profit-earning vehicles; 
  4. each plaintiff established the requisite need for a replacement vehicle; and 
  5. the plaintiffs hired equivalent ‘prestige’ vehicles whilst their own were being repaired. 

In the first case, Nguyen v Cassim [2019] NSWSC 1130, the defendant appealed against the decision of the NSW Local Court’s award of damages to the plaintiff for the full cost of hiring a replacement vehicle.
In addressing the trend of the Courts in awarding a rate of hire falling ‘within the range,’ the Local Court Magistrate held:
“[17] Apart from a single reference to sporting gear, there was nothing in the plaintiff’s evidence to suggest that other than his personal preference, the things he needed a vehicle for on a day-to-day basis could not have been adequately done using a vehicle like a Toyota Corolla.”
“[51] I accept that the cost of the temporary replacement vehicle the plaintiff has chosen to use is not necessarily the appropriate measure of damages. In my view he is entitled to the market rate of hiring a vehicle of equivalent value to his vehicle for the period during which he has established need for a replacement. I accept that he is not entitled to associated costs of entering into a credit hire contract, in the event that the actual costs exceed the market rate for a vehicle of equivalent value to his vehicle. The market rate for hire can fall within a range.”

Despite these findings, the plaintiff was awarded the full amount invoiced to him for the hire of a Nissan Infinity whilst his 2012 BMW 535i sedan was being repaired.

In appealing against this decision, the defendant essentially argued:
  1. even though the plaintiff established the need for a replacement vehicle and was therefore entitled to the reasonable costs of obtaining same, the replacement vehicle should not be as close as reasonably practical to the damaged vehicle; 
  2. even though a defendant may be liable for higher than average costs for repairing a damaged ‘prestige’ vehicle, the rationale of this basic recovery principle does not extend to the hiring of replacement vehicles; and 
  3. despite the hiring of a replacement vehicle being an act of mitigation in itself, the plaintiff is obliged to go further in reducing the financial burden to the defendant.
After comprehensively considering Australian and UK authorities to date (and noting the lack of any clear guidance from higher Courts addressing this issue), the appeal was upheld on the basis that as the Magistrate made the finding in paragraph 17 above, a Toyota Corolla would have satisfied the plaintiff’s need.  On the evidence, the daily cost of hiring a Toyota Corolla was $89.00 and accordingly, the award of damages was reduced to reflect the 84 days for which the vehicle was required.
In the second and third cases, Rixon v Arsalan [2019] NSWSC 1136 and Souaid v Nahas [2019] NSWSC 1132, each plaintiff established the requisite need for a hire vehicle citing school drop-offs, general errands and visiting friends and family.  However, their claims for the full costs of hiring the vehicles were denied by the NSW Local Court as they failed to establish the link between such need and a vehicle of equivalent value in satisfying same.
In appealing against these decisions, the plaintiffs generally relied on the same arguments as in Nguyen v Cassim above, namely that as a matter of law they were entitled to compensation calculated by reference to the expense of obtaining a vehicle of equivalent value to that which had been damaged, and not by reference to a vehicle of lesser value.
For the same reasons as in Nguyen v Cassim and the authorities discussed therein, each of these appeals were dismissed by Basten J.
Interestingly, had each plaintiff required a prestige vehicle for chauffeuring clients and promoting their business during the week, and off-road driving on the weekend, these cases may have been decided differently.
These appeals conform with the approach taken in the NSW Supreme Court decision of Lee v Strelnicks [2019] NSWSC 526 earlier this year, and confirm that in exercising the discretion to award damages for a replacement hire vehicle, the Court will make an award representing the market rate for a vehicle that accommodates for the need of a plaintiff during the repair period.  This approach is clearly dependent on the facts of each case.
The law relating to recoveries by credit hire companies is still developing.  As the above cases concern only matters of quantum, questions as to the reasonableness of a replacement period remain to be tested in the higher Courts.  However, it appears that the Courts are minded to contain the amounts to be recovered by credit hire companies.

Post by Paul Hendriks, Dr.Tim Channon and Sam Hudson

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