Mohammad Kashefi, LLB (Hons), GDLP
Mark Johnson, JD (Hons), GDLP
In negligence claims and in particular, motor vehicle collisions, the general presumption is that the negligent party (“at-fault party”) who causes the collision is obliged to place the not at-fault party (“the claimant”) in the position they would have been in but for the at-fault party’s negligent actions; March v Stramere Pty Ltd (1991) 171 CLR 506. The at-fault party is not only liable for the cost of repairs of the claimant party, but also liable for any loss of use suffered by the claimant party as a result of the at-fault party’s negligent actions, regardless of whether the damaged property is an income-generating property or not.
It follows from this that, generally, a claimant who has lost the use of their vehicle whilst they are being repaired may be entitled to a replacement vehicle. It is reasonable for the claimant to hire a replacement vehicle that would reasonably meet the needs of the claimant from a mainstream hire company. This exercise is considered reasonable and generally accepted throughout the insurance industry.
What has caused controversy in recent years is what a plaintiff is entitled to when they hire a replacement vehicle through a non-mainstream hire company of the type referred to as “credit hire” companies. In these types of arrangements, the credit hire company provides the claimant with a replacement vehicle that is (at least theoretically) similar in value to the damaged vehicle at no upfront costs to the claimant, in exchange for the claimant authorising the credit hire company to pursue the at-fault party to pay the amount of the rental as compensation for loss of use of the damaged vehicle. The costs of these arrangements are generally much greater than the cost of hiring a vehicle from a mainstream hire company. This is because the credit hire company is providing credit over the period of hire and until the expense is recouped and taking on the expense and risk of pursuing the claim.
It has been settled law in NSW that, generally, a plaintiff is only entitled to recover the market rate for the hire of a vehicle regardless of the actual rate charged by the individual hiring company. Nguyen v Cassim, a recent Supreme Court of NSW decision, takes this one step further, and says that parties are only entitled to recover the market cost of a vehicle that would satisfy their needs, rather than a vehicle of equivalent value to the damaged vehicle.
In terms of the facts of the case, Nguyen whilst driving a vehicle, collided with a 2012 BMW 535i owned by Cassim. Cassim used his vehicle partly for business, partly for social and domestic purposes. Cassim’s vehicle was in repairs for 143 days. Right2Drive, a credit hire provider, provided Cassim with a Nissan Infiniti Q50 for a period of 84 days. The total amount of the rental hire was $17,158.02. Right2Drive then issued proceedings under Cassim’s name in the local court of NSW claiming for the $17,158.02 as “special damages”, meaning the actual cost of the rental vehicle for the period in question. Nguyen argued that a less expensive replacement vehicle would have met the needs of Cassim. Specifically, hiring a Toyota Corolla for an equivalent period would have cost $7,476. Nguyen’s argument was rejected by the local court and Cassim was awarded compensation for the hire cost of the Nissan Infiniti Q50 and interest, being a total of $18,818.44.
The decision of the local court was appealed by Nguyen to the Supreme Court of New South Wales. On appeal His Honour Basten J, overturned the local court decision, finding that when a motor vehicle is damaged in a collision, whilst being repaired, the Claimant is only entitled to the cost of hiring a replacement vehicle that meets the needs of the Claimant, rather than the cost of an equivalent vehicle of same value.
Key things to note:
- The claimant should only be entitled to damages which represent the market rate of hiring a replacement vehicle which would reasonably meet their needs. Not a vehicle of equivalent value to the damaged vehicle.
- Loss of use is assessed by reference to the inconvenience and need of the Claimant.
- The claimant should establish an actual need for a replacement vehicle. For instance, the need for a vehicle to drive to work, school or driving children to and from school. As a counter-example, the claimant is probably not in actual need of the vehicle if they are in hospital, overseas, or if otherwise not driving for a certain period.
- Where a claimant needs a vehicle to carry out their day to day activities, the most inexpensive vehicle that would satisfy their needs should be hired, not a more expensive vehicle of their choice.
- A Toyota Corolla at a rate of $89 per day was found to adequately meet the needs of the Claimant, not the Nissan Infiniti Q50 at a rate of $204 per day.
- The claimant should take reasonable steps to mitigate their loss. They cannot claim reimbursement for expenditure by way of mitigation that is unreasonable.
- There is obiter dictum in the case (meaning legal reasoning which does not form part of the actual decision, but can be considered by future courts in their reasoning) that a renter is only entitled to a reasonable period of repairs.
Cassim submitted that he used his vehicle for his business for transporting purposes and for social and domestic use. At 53, His Honour stated “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”. His Honour was satisfied that a Toyota Corolla was sufficient to meet the needs of Cassim. The judgment of the local court was therefore, set aside and a new order was made for the at-fault party to pay the costs of a Toyota Corolla at a cost of $7,476.
The decision of Nguyen v Cassim will certainly have an impact on credit hire car claims. Insurers are likely to pay less in claims for replacement hire vehicles as the decision of this case makes it clear that claimants are not entitled to replacement hire vehicles of equivalent value, but one that would reasonably meet their needs and compensate for their inconvenience. Finally, it is worth noting that Right2Drive can still appeal this decision.
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