Miller v McKnight [No2] (WASCA 2025)

Link to decision

Overview

With the increasing volume of credit hire claims, a recurring legal issue has arisen concerning the appropriate assessment of damages in circumstances where a motor vehicle, damaged in a “not-at-fault” collision, is rendered unavailable for use during the period of repair or replacement.

There is no doubt that where a person’s vehicle is damaged they are entitled to something, and the Australian Courts have been flooded with claims where a vehicle is provided on credit to the not-at-fault party and there has been an ongoing question regarding whether the entirety of the credit hire charges were recoverable from an at-fault party.

The business model of the vast majority of credit hire companies focuses on the provision of the replacement vehicle at no up-front cost, or on credit, over the period of hire and also providing the not-at-fault party with the additional benefits of pursuing the recovery of those hire car costs from the at-fault party or their insurer on behalf of their customer. These additional benefits were identified in Miller v McKnight to include:

1.    the benefit of having the cost of hiring a car provided on credit;
2.    the benefit of having the hire car company acting as a 'duly appointed agent’ to manage the claim on behalf of the customer;
3.    the benefit of having the hire car company liaise with repairers and monitor the repairs to the customer’s vehicle;
4.    the benefit of premium roadside assistance; and
5.    the benefit of having the hire car provider bring legal proceedings.

On 29 April 2025, the West Australian Court of Appeal clarified the position that charges that relate to the provision of the range of benefits and services identified above are not recoverable by a not-at-fault party as damages. The case has implications for both insurers and credit hire providers, particularly in Western Australia.
 
Key Takeaways

Mitigation of Loss: Claimants have a duty to mitigate their losses. In this context, hiring a replacement vehicle on credit at a daily rate higher than the mainstream market rate without sufficient justification on how that rate was calculated and/or if that rate is inclusive of non-compensable benefits, constitutes a failure to mitigate.

Reasonableness of Charges: The Court assessed the reasonableness of the hire charges by comparing them to contemporaneous mainstream market rates. The additional non-compensable benefits and/or services provided by credit hire companies do not automatically justify hire charges.

Brief Facts

On 13 May 2019, a collision occurred between Ms. Miller’s vehicle and Ms. McKnight’s vehicle. It was accepted that Ms. Miller was at-fault for the accident.

Ms. McKnight’s vehicle was damaged and while her vehicle was being repaired, she hired a replacement vehicle on a credit arrangement.

Ms. McKnight subsequently brought a claim against Ms. Miller in the West Australian Magistrates’ Court for the cost of the replacement vehicle.

Ms. Miller contested the reasonableness of these charges, arguing that they were excessive compared to the cost of hiring a comparable vehicle from a mainstream hire car provider, and that Ms. McKnight had failed to mitigate her losses by not seeking a more affordable rental option.

History of The Proceedings

1. The West Australian Magistrate's Court ruled in favour of Ms. Miller, finding that Ms. McKnight had failed to mitigate her losses by incurring unreasonable hire charges. The Magistrate’s Court assessed Ms. McKnight’s damages by referencing rates for comparable vehicles from the mainstream hire car market.
2. On appeal, the District Court overturned the Magistrate's decision, holding that Ms. McKnight’s actions in hiring the vehicle on credit were reasonable given her personal circumstances and that all of the hire car costs were therefore reasonably incurred. The Court awarded the full amount of the hire car charges as claimed.
3. Ms. Miller appealed to the Court of Appeal. The Court of Appeal reinstated the original Magistrate's decision, concluding that Ms. McKnight had not adequately mitigated her losses and that the hire charges were unreasonable. The Court emphasised that compensation should reflect mainstream market rates, not inflated credit hire costs, which necessarily include components of additional benefits built into the rates.

Judgment

His Honour concluded that Ms. McKnight had 'failed to mitigate her loss by hiring a vehicle that included credit hire charges which took it outside the market for similar hire vehicles.’

The amount of the credit hire charges exceeded the amount that would have been payable to a mainstream motor vehicle rental company for the hire of a vehicle of the kind hired by Ms. McKnight and included amounts for the provision of benefits to Ms. McKnight in addition to the provision of the replacement vehicle.

Implications

The decision has significant implication for the credit hire industry in Western Australia. It underscores the necessity for Claimants to justify the reasonableness of hire charges and reinforces the principle that damages should correspond to the mainstream market rates in the absence of any evidence and/or claim for impecuniosity. The decision is binding on lower Courts in Western Australia, and may have a persuasive influence on the assessment of credit hire cases in other States such as South Australia.

This is all, of course, subject to a High Court appeal.