The Credit Hire Disputes remain unresolved with the New South Wales Court of Appeal decisions demonstrating that Judges of the Court have different views on the correct approach to the assessment of damages for temporary loss of use.
Lee v Strelnicks; Souaid v Nahas; Cassim v Nguyen; Rixon v Arsalan [2020] NSWCA 115
Introduction
The Court of Appeal gave reasons for the judgment in the appeal matters on 18 June 2020.
MCK Lawyers were acting for the insurer in two of the decisions. There were four matters before the Court, three matters were appeals from the decision of Justice Basten, who determined the matters as a judge of the Common Law Division. Justice Basten is a Judge of the Court of Appeal.
The decision in Lee v Strelnicks was an appeal from the decision of Wilson J, who determined a review of a decision of the Small Claims Division of the Local Court. The case concerned need and whether the plaintiff had established need. The plaintiff’s case was that need was established by providing general statements that the vehicle was used to attend shopping tasks and to drive children to school. The Court upheld the earlier decisions finding that the plaintiff had not proved need.
There are three judgments; Emmett AJA and White JA form the majority, Meagher JA, delivered a dissenting judgment.
The defendants in the two matters we were instructed in have filed applications in the High Court seeking special leave to appeal the decisions of the Supreme Court.
The Reasons for the Decisions in the Appeals
The majority differs in its view: Justice Emmett views motor vehicles as mutually interchangeable goods whereas Justice White does not agree with that characterisation and believes that there may be compensable intangible values associated with ownership, that goes beyond the inconvenience of not having the use of the vehicle.
The Court found:
that the Claimant must establish a need for a replacement vehicle.
In determining what need entailed, the majority (White JA and Emmett AJA) adverted to the principle of restitutio in integrum such that, where the damaged vehicle would have been used, the relevant need is for replacement of that damaged vehicle in order to put the Claimant in the position he or she would have been in but for the wrongdoing. Accordingly need should be gauged by whether the Claimant had a need for the use of their damaged vehicle, not by exclusively considering if the function of the replacement vehicle meets the Claimant’s inconvenience.
The next inquiry is as to the reasonableness of the Claimant’s hire expenditure. First this involves inquiring whether an equivalent vehicle is available, such as one of the same make, model and year, or if none is available, then what is available in the market that is as close to equivalent as possible (White JA and Emmett AJA).
Secondly, the Claimant’s costs of hiring should be no more than what would be reasonably needed to hire such an equivalent vehicle in the circumstances. The cost of hiring an equivalent vehicle in the market should be the measure of damages.
In dissent, Meagher JA considered that regardless of whether hire costs were regarded as expenditure or incurred as a foreseeable consequence of the tort, the analysis converged on the reasonableness of the expenditure. The Claimant could recover no more than what was reasonably necessary to make good their compensable loss. Meagher JA held that the relevant loss was the use as to which the damaged vehicle was likely to have been put during the period of repair, and ordinarily satisfied by the hire of a vehicle which is sufficiently comparable to the damaged vehicle in terms of functionality and specification to satisfy the use as to which it was capable of being and likely to have been put. To do so it is not necessary that the substitute vehicle be "equivalent” in as many respects as possible to the damaged vehicle.
The appeals have resulted in:
Lee v Strelnicks the decision on need being dismissed; that is the Assessor’s decision that the plaintiff had not proved need was not overturned.
The appeal Souaid v Nahas was dismissed on the basis that the Local Court’s finding that the Applicant was content with any car rendered it appropriate that the measure of the loss was the cost of hiring a replacement vehicle that was not equivalent to his damaged vehicle.
The application for leave and the appeals were allowed in both Cassim v Nguyen and Rixon v Arsalan.
Meagher JA’s Reasons:
7. Meagher JA has stated that where the Claimant has hired a replacement vehicle the cost of doing so may be treated as expenditure incurred in avoiding or mitigating disruption and convenience resulting from loss of use, or more directly as reasonably foreseeable expenditure incurred as a result of the Defendant’s negligence. On either analysis, recovery is subject to a standard of reasonableness. The injured party cannot claim reimbursement for expenditure unreasonably incurred by way of mitigation or as reasonably foreseeable expenditure unless reasonably incurred.
8. Meagher JA’s view of the reasonable substitute depends on the use the vehicle is being put to by the plaintiff. His Honour agrees with Basten J’s statement of principle:
Basten J concluded in Nguyen v Cassim at [53]:
The principle stated does not support the claimants' case; it requires proof of a need based on past usage and assessment of what is reasonably necessary to satisfy that need. The purpose is to provide an appropriate sum in compensation to alleviate, so far as reasonably possible, the inconvenience resulting from the loss of use of the damaged vehicle; not to replace the owner's vehicle with the temporary use of another vehicle of equivalent value or prestige.
9. Meagher JA agrees with Justice Basten and is of the view that it follows that the “compensatory principle" is only engaged with respect to the uses to which the damaged vehicle was capable of being and likely to have been put during the period of its repair, and therefore calls only for its replacement with a vehicle which is able to satisfy those uses. To do so it is not necessary that the substitute vehicle be "equivalent in as many respects as possible to the damaged vehicle”.
10. Meagher JA sets out in paragraph 20 of his decision that it is necessary to identify those uses to which a motor vehicle might be put to assess the reasonableness of the claimant's action in hiring a particular vehicle.
11. In the cases before the Court His Honour found that:
(a)In each of the cases in question that use was as a means of transporting people and things from one place to another. In one, the claimant (Mr Cassim) indicated a preference for a "nice, luxury car" but conceded that any vehicle "that had five seats" would most likely have been suitable.
(b)Another of the claimants (Mr Souaid), who drove a "prestige sedan", accepted that he was not "fussed at all" about the replacement vehicle as long as he had "a car there for my wife, for the kids and stuff”. In each of these cases a replacement vehicle which, although acknowledged not to be of equivalent luxury or prestige, was sufficiently comparable in terms of functionality and specifications to satisfy the uses to which the damaged vehicle was capable of being and likely to have been put, adequately remedied the claimant's loss.
12. His Honour finds that in none of the cases on appeal, the efficacy or enjoyment of any likely use depended on the replacement vehicle having a specific, and perhaps unique, characteristic or feature, in the absence of which the claimant would be deprived of that relevant use and as a result suffer compensable inconvenience or deprivation of some kind.
13. Therefore, His Honour found that in Cassim v Nguyen the Local Court Magistrate proceeded on the basis that Mr Cassim was entitled to the market rate of hiring a vehicle of equivalent value to his vehicle, notwithstanding that the evidence established that the things he needed a vehicle for on a day to day basis could have been adequately done by using a vehicle like a Toyota Corolla. Baston J allowed the appeal in circumstances where there was a sufficiently comparable vehicle available to satisfy the use as to which the replacement vehicle was likely to be put. Meagher JA found that His Honour did not err in so concluding. Accordingly, whilst leave to appeal should be granted, that appeal should be dismissed with costs.
14. In Rixon v Arsalan. Basten J dismissed the appeal from the Magistrate's order to that effect, holding that the Magistrate "was entitled to assess damages for the inconvenience suffered from the damaged vehicle being unavailable by reference to the market value for a vehicle of lesser value which was capable of satisfying all aspects of the plaintiff's needs". Meagher JA agreed with that conclusion. Accordingly, His Honour found that although leave to appeal should be granted, Mr Rixon's appeal also should be dismissed with costs.
White JA’s Reasons
15. White JA was of the view that if the value to the Plaintiff of the damaged vehicle was only the convenience the vehicle provided for moving the Plaintiff or others from A to B, then the loss arising from the loss of use of the vehicle is the inconvenience suffered from that loss of use. His Honour is of the view that it cannot be assumed that the only loss is the convenience.
16. His Honour reasons that having regard to the objective of damages being to put the Plaintiff in the same position as if the tort had not been committed, it would be difficult to say that hiring a commensurate vehicle was not reasonable if the Plaintiff reasonably needed a replacement vehicle whilst the damaged vehicle was under repair.
17. The formulation of principle by White JA is in paragraph 60 where his Honour states:
“I do not accept that it is only ‘inconvenience’ that can be addressed through an award of damages for loss of use of the car. The injured Plaintiff who has suffered actual loss through being denied use of his or her car is to be put in the same position, so far as money can do it, as if the tort had not been committed. In the case of Cassim v Nguyen, had the tort not been committed, the Plaintiff would have had the use of a car that not only did the job required of it, but did so with higher levels of safety and luxury than the Toyota vehicle that, the primary judge held, was adequate to meet the Plaintiff’s needs. There must also be an intangible benefit (to some) in owning, leasing or using a “prestige” vehicle reflected in that word. Just as many people feel better, and feel that they are better regarded, if they wear fine rather than merely serviceable clothes, it may be taken that some people feel better, and feel that they are better regarded, if they drive a prestigious car, rather than a merely serviceable car. The intangible nature of such feelings does not mean that they are unreal or uncompensable. They may largely explain the markets for luxury goods.”
18. His Honour alludes to subjective notions of feeling better, being better regarded which are distinct and different from ones need for the damaged vehicle. However, it appears that if the loss is only the convenience of having the vehicle, then the compensation only needs to be for the inconvenience as it appears to have been held to be the case in Souaid v Nahas.
19. At paragraph 69 of the decision Justice White sets out the relevant principles as:
The overarching principle is that damages in tort are intended to compensate the Plaintiff for the loss actually suffered to put the Plaintiff in the same position as he or she would have been in had the tort not been committed.
The Plaintiff has the onus of establishing that he or she suffered some loss by reason of being deprived of use of the vehicle for a period.
The Plaintiff is entitled to recover as special damages expenses reasonably incurred to mitigate the loss of use in the damaged vehicle.
The Plaintiff will be entitled to recover as special damages for the loss of use of the vehicle whilst it is under repair the reasonable costs of hiring a replacement vehicle, if the Plaintiff reasonably needs to hire the replacement vehicle. If the Plaintiff does not need a replacement vehicle, he or she does not suffer a loss from being temporarily deprived of the use of the vehicle for which special damages for the costs of hiring a replacement vehicle are payable. General damages for any inconvenience suffered may still be recoverable.
A reasonable need for the replacement vehicle is not to be assessed by only considering what vehicle would be adequate to meet the inconvenience to the Plaintiff of his or her vehicle being off the road.
Prima facie, it can be inferred that the Plaintiff will have reasonable need for a commensurate vehicle or a reasonably equivalent vehicle, or a reasonable substitute or a broadly comparable replacement vehicle.
This is because the loss suffered by a Plaintiff who has lost the use of a prestigious vehicle is not merely the inconvenience of not having a vehicle to travel the Plaintiff and his or her family, friends and associates from A to B, but the loss of his or her ability to do so in a vehicle which is the safety, luxury and prestige of the damaged vehicle.
Although the Plaintiff has the onus of establishing a reasonable need for replacement of the vehicle, once that onus is discharged, the onus of establishing that the hire of the particular replacement vehicle is unreasonable lies on the Defendant.
Emmett AJA’s Reasons
20. Emmett AJA did not determine whether the damages being assessed were special or general damages. His Honour sets out his view starting in paragraph 120 of the decision. His Honour states that:
“… if the Claimant would not have had any need to use the damaged vehicle during the period taken for repair, there would be no entitlement to damages. On the other hand, where the Claimant can demonstrate that the damaged vehicle would have been used, then there is use for replacement for the damaged vehicle. To put the Claimant in a position in which he, she or it would have been but for the wrongdoing, the replacement vehicle should be equivalent to the damaged vehicle or as similar to it as reasonably possible.”
121 In the case of fungibles such as most motor vehicles are, there would normally be no difficulty in finding a replacement that is equivalent, such as a vehicle of the same make, model and year. To the extent that there is not available a replacement of the same make, model and year, there may be a question of what reasonable equivalent is available in the market place. For example, if the damaged vehicle is an older model, it may be unreasonable to hire as a replacement a vehicle of a much later model or different specification.
The position may well be different in the case of a claim in respect of a unique vehicle. That is to say, the question as to the manner in which the damages for the loss of use of a unique vehicle should be quantified raises different considerations. In such a case, it may be necessary to have regard to the function of a particular vehicle and the particular use to which that vehicle would have been put during the period of repair. However, that is not the position in any of these proceedings presently under consideration.
123 In the case of a fungible vehicle, having determined that the Claimant would have used a vehicle during the period of repair, and therefore had a relevant need, two further inquiries are necessary. The first is as to the replacement. The second is as to the cost of replacement so identified.
21. Emmett AJA sets out a process which is as follows:
1. It is first necessary to inquire whether there is an equivalent vehicle available, such as a vehicle of the same make, model and year as the damaged vehicle, or a vehicle as similar as possible to the damaged vehicle and specification performance.
Where there is no vehicle available that is capable of being characterised as being sufficiently similar to the damaged vehicle in terms of make, model and year, the inquiry must be as to what is available in the market that is as close to the damaged vehicle as possible in terms of specification and performance.
2. Secondly, it is necessary to determine whether the cost of hiring such a replacement vehicle is reasonable in all the circumstances. The hiring charge that may have to be paid in order to obtain an equivalent vehicle will have a bearing on whether it is reasonable to incur that hiring charge for the replacement.
22. His Honour finds that to put the Claimant in a position in which he, she or it would have been but for the wrongdoing, the replacement vehicle should be equivalent to the damaged vehicle or as similar to it as reasonably possible, but inconsistently in Souaid finds that because Mr Souaid was content with any car, that finding of fact made it open for the Magistrate and Justice Basten to conclude that the appropriate measure of the loss was the cost of hiring a replacement vehicle that was not equivalent to his damaged vehicle.
How has the decision impacted the determination of credit hire claims?
23. The plaintiff will need to address need, which is expected to include how often the vehicle is used, whether other vehicles are available, what distance the vehicle is used to attend to various tasks (attending school, shopping, etc).
24. We note that the replacement vehicle is described in various ways:
Equivalent vehicle;
Commensurate vehicle;
Sufficiently similar;
Reasonably equivalent;
Close to equivalent;
25. The comparability of the vehicle is said to be based on same make, model, year (as per Emmett AJA).
26. The statement of principle from the Emmett AJA is:
To put the Claimant in a position in which he, she or it would have been but for the wrongdoing, the replacement vehicle should be equivalent to the damaged vehicle or as similar to it as reasonably possible.
27. The majority puts a qualification on the replacement vehicle by stating that it is necessary to determine whether the cost of hiring such a replacement vehicle is reasonable in all the circumstances.
28. Justice Meagher the dissenting judge says that you must look at the uses the vehicle was capable and likely to put to and compensate for the use. Justice Meagher’s approach leaves open the possibility to make a different finding for instances where the plaintiff had an intended use for the type of vehicle. The possibilities include using a four-wheel drive to drive off road, or a sports vehicle for a sporting purpose such as a racing. In those instances, Meagher JA could find that a reasonably comparable vehicle was required.
29. Together with Justice Basten’s reasons there are now four different views from New South Wales Court of Appeal Judges on how to determine the award of damages for loss of use of a motor vehicle.
30. There are difficulties with the decision which include the treatment of Souaid. The majority finds that Mr Souaid’s preference or lack of preference for any particular type of vehicle, precludes him from recovering damages based on the hire of an equivalent vehicle. It may be the case that the majority treated the Souaid case as one where the only loss suffered was using the vehicle to drive from A to B (the inconvenience of not having a vehicle).
31. On the face of it, without further explanation, one cannot reconcile the statement of principle with the outcome in Souaid. If the replacement vehicle should be equivalent to the damaged vehicle or as similar to it as reasonably possible, why is the claimant’s personal preference or lack of preference relevant? The answer is not clear, it may be as Justice White states if all that the vehicle provided was a means to get from point A to point B, then the loss is the convenience which is compensated by providing any vehicle.
32. In dealing with claims the approach needs to be:
Has the plaintiff satisfied a need for the damaged vehicle? and
What use did the plaintiff put the vehicle to and would an ordinary vehicle satisfy the plaintiff’s need?
What vehicle would be adequate to meet the inconvenience to the Plaintiff of his or her vehicle being off the road.
Prima facie, it can be inferred that the Plaintiff will have reasonable need for a commensurate vehicle or a reasonably equivalent vehicle, or a reasonable substitute or a broadly comparable replacement vehicle.
Is a reasonably equivalent vehicle available for hire in the rental market?
If a reasonably equivalent vehicle is available for hire in the rental market, Is the cost of hiring that vehicle reasonable? If not, what other reasonable substitute vehicles are available?
33. The approach identified by the majority Emmett AJA and White JA will prevent credit hire companies from claiming exorbitant fees. If a particular vehicle is not available, or not available for a reasonable hire fee, then one looks at what other vehicles are reasonably equivalent vehicles or vehicles which are a reasonable substitute or a broadly comparable replacement vehicle.
34. The decision has also paved the way for further litigation to test what is reasonable conduct by the plaintiff/credit hire providers (when is the rate unreasonable) and in which circumstances is the provision of any vehicle enough to meet the plaintiff’s need.
35. Therefore, the issues that arise in credit hire claims have not yet been resolved.