HCA rules on 'loss of use'
- Published 10.12.2021
- The loss suffered by a plaintiff whose vehicle was used for convenience or pleasure is both 'physical inconvenience' and 'loss of amenity of use', not simply 'loss of use'.
- A plaintiff will not be required to prove a 'need' for a hire car where, having suffered physical inconvenience and loss of amenity due to the negligent damage to their own vehicle, they have hired a 'reasonably equivalent' replacement.
- A plaintiff will usually be able to recover from a negligent defendant the reasonable costs incurred in hiring, for the period of unavailability, a substitute vehicle that is broadly equivalent to their damaged vehicle.
- Once a plaintiff has established the reasonableness of mitigating their loss by hiring a broadly equivalent vehicle, the onus shifts to the defendant to establish the unreasonableness of the plaintiff's conduct.
Mr Rixon and Mr Cassim were owners of 'prestige' vehicles, respectively an Audi A4 and BMW 535i.
Their vehicles were damaged by the negligence of another driver and the owners engaged a credit-hire company to provide them with prestige replacement vehicles. They then sought to recover the hire costs from the at-fault drivers. In the NSWLC, both matters were defended primarily on the basis that the owners were able to satisfy their daily transport needs with a standard passenger vehicle e.g. a Toyota Corolla.
The decision of the HCA handed down on 8 December 2021 followed mixed results in the litigation after both matters were taken on appeal, firstly to the NSWSC where it was held that the relevant 'need' to be taken into consideration was the utility of the vehicle during the period of loss; a decision affirming comment made by Harrison J in Droga v Cannon. This ruling was then overturned on appeal by the NSWCA.
The issue dealt with on the ultimate appeal to the HCA was consideration of whether damages for 'loss of use' ought to compensate owners for their loss of the mere utility of a vehicle – i.e. the bare uses a vehicle was put to. The more generous approach under consideration was whether there were additional elements to be taken into account in support of an award of damages, such that owners might recover damages for the costs incurred in hiring a comparable prestige vehicle.
In a unanimous decision, the HCA extended loss of amenity or enjoyment of use to tortious claims for damages to a chattel resulting from negligence, removed the requirement to establish a specific need for a hire vehicle when the replacement was not provided gratuitously, and reconciled a national divergence in the approaches taken to the question of whether a plaintiff has acted reasonably in hiring a broadly equivalent vehicle.
Having firstly acknowledged that the often described 'loss of use' inadequately captures a plaintiff's loss when a chattel is damaged, the HCA went further and recognised the broader inconvenience suffered. The HCA saw no reason to restrict the recoverable heads of damage for negligent damage to a property right by excluding loss of amenity or enjoyment of use.
When addressing the practical application of principle in credit-hire matters the HCA held:
… it will usually be sufficient for a plaintiff to identify a past suite of purposes for which the damaged vehicle was used in order to justify an inference that the plaintiff would have put the vehicle to the same uses … and would otherwise be inconvenienced.
… it will usually be sufficient to infer that a plaintiff derives amenity from the various functions used in their vehicle, particularly an expensive, prestige vehicle in circumstances in which the plaintiff incurred significant capital or ongoing expenditure on that prestige vehicle.
With such inferences available to plaintiffs, it will then fall to the defendant to establish that either the hire itself, or the amount of the hire, was unreasonable.
Somewhat unusually, the HCA provided comment on the determination of two other cases, Lee v Strelnicks and Souaid v Nahas, which were not before the Court, and which had been heard on appeal by the NSWCA concurrently with these matters.
The HCA observed that both Lee and Souaid had been decided incorrectly by the NSWCA. Ms Lee's physical inconvenience 'should have been established by her general evidence she used her vehicle to visit family and friends and to take her children to and from school.' There was also no basis upon which the defendant could establish that the hiring of a comparable vehicle by Ms Lee was unreasonable. Similarly, Mr Souaid's evidence that he would have been okay with 'any car' and that he 'wasn't fussed at all' was not sufficient to establish the cost of hiring a prestige vehicle to mitigate his loss of amenity and should be refused.
This HCA decision has some rather important implications for the industry as a whole.
With the inferences available from the mere ownership and use of a vehicle prior to it being taken out of action, either as a consequence of repairs or as a total loss, even the Court acknowledged 'it will be difficult for a defendant to prove that the plaintiff acted unreasonably by seeking to hire a replacement vehicle.'
This does however allow focus to be concentrated on the amount that is sought to be recovered. There are a number of avenues that remain available in challenging exorbitant vehicle hire claims, including:
- Whether a replacement vehicle is broadly equivalent (e.g. hiring a Ferrari to replace a Toyota).
- Whether the replacement vehicle was hired for a reasonable period of time.
- Whether the plaintiff ought to have obtained the cost-saving benefit of a multi-day hire in the context of the anticipated repair period (e.g. a weekly rate).
- Whether the credit-hire costs incurred by the owner include any non-compensable benefits.