ACCIDENT-RELATED CAR HIRE CLAIMS – WHAT DAMAGES ARE PAYABLE?

Legal Directions

Beamish v Kanakis [2017] WADC 33

Background

On 27 November 2010, Mr Kanakis purchased a 2006 Porsche Boxster convertible for $63,636.36 (2006 Porsche). On 4 August 2014, Ms Beamish negligently drove her vehicle into the 2006 Porsche, causing damage. Ms Beamish’s liability insurer was RAC Insurance Pty Ltd (RAC). The odometer reading of the 2006 Porsche at the time of the accident was 39,541km.

Mr Kanakis took the 2006 Porsche to a repair shop for repair. During this time, he entered into a rental agreement with Compass (Corporation) Pty Ltd (Compass) and hired a 2014 Porsche Boxster (odometer reading of 2,470km) (2014 Porsche). The 2014 Porsche was hired at a daily rate of $540.91 or $19,106.03 for 32 days. Mr Kanakis also entered into a ‘Mandate and Authority to Act’ agreement with Compass where he would not be required to make any upfront payments to the company, which would seek to recover the rental costs from Ms Beamish or her liability insurer.

Compass then issued an invoice to RAC for $19,106.03. RAC assessed Mr Kanakis’ loss at $2,288, based on a daily rate of $71.50 for a Nissan Pulsar, and paid this amount to Compass.

Decision at first instance

Compass (subrogating the right of Mr Kanakis) commenced proceedings against Ms Beamish (defended by RAC) in the Magistrates Court, claiming recovery of the balance of the rental cost of the 2014 Porsche, $16,818.03. The Magistrate awarded damages in the amount of $16,813.03 (with an unexplained difference of $5), on the basis that Mr Kanakis was entitled to an award of damages to compensate him for the loss of use of the 2006 Porsche while it was being repaired. The Magistrate further noted that the only Porsche Boxster that was capable of being hired was the 2014 Boxster and, in these circumstances, found that it was a reasonable replacement for the 2006 Porsche. The Magistrate rejected the submissions that the measure of Mr Kanakis’ loss was properly assessed by reference to a vehicle which would merely meet his needs, and that the assessment of use of the 2006 Porsche was irrelevant to assessment of loss.

The Magistrate also held that the value of Mr Kanakis’ 2006 Porsche was not a useful or appropriate mechanism to assess his entitlement to a replacement vehicle, and that as the closest vehicle available to replace the temporary loss of the 2006 Porsche was the 2014 Porsche, he was entitled to compensation calculated by reference to the rate charged for the hire of the 2014 Porsche.

On appeal

His Honour, Judge Derrick, held that if damages for loss of a non-income producing vehicle damaged by the negligence of a third party are to be calculated by reference to the cost of hiring a replacement vehicle, the determination of what constitutes an appropriate replacement vehicle is made by reference to:

  1. the precise need of the person who has lost the use of the damaged vehicle;
  2. the value of the damaged vehicle; and
  3. the value of available replacement vehicles which are capable of meeting the precise need of the person who has lost the use of the damaged vehicle.

Judge Derrick held that the Magistrate erred in holding that the damages payable to Mr Kanakis should not be measured by reference to either the nature of Mr Kanakis’ need for a replacement vehicle or the value of the 2006 Porsche. It was held that in order to establish an entitlement to the cost of the 2014 Porsche, Compass had to establish Mr Kanakis needed to use the 2006 Porsche in order to recover damages compensating him for the cost of hiring a replacement vehicle at all. If so, the relevant question would be whether the vehicle was necessary to meet the needs, and if the comparative value of the damaged and temporary replacement vehicle was an appropriate consideration to avoid over compensation.

RAC argued that the 2006 Porsche was worth substantially less in 2014 than the purchase price paid by Mr Kanakis in 2010, relying on the evidence of an audit assessor employed by RAC. The relevant extract from Glass’s Guide as at August/September 2014 indicated that the average price of a 2006 Porsche Boxster was $25,900, $30,300 and $36,100. Judge Derrick found that, because of the low mileage, the value of the 2006 Porsche more than $36,000, although less than the 2010 purchase price.

There was no dispute that the 2014 Porsche had a substantially higher value than the 2006 Porsche. At trial, Mr Kanakis did not suggest that he required a Porsche Boxster to meet his needs, and accepted in cross examination that a number of other vehicles could have done so, including a Mercedes Benz C-Class, a Holden Calais and Holden Caprice. Given Mr Kanakis did not require the 2014 Porsche to meet his needs and there was a significant difference in value between the 2006 and 2014 Porsche, His Honour found that Compass failed to prove that Mr Kanakis suffered a compensable loss equivalent to the cost of hiring the 2014 Porsche, and was over compensated in the award made of $16,813.03.

His Honour held that the value of the proposed replacement vehicle was relevant to the determination of what constituted an appropriate replacement vehicle. However, he was unable to make a finding as to the precise value of the 2006 Porsche as at August 2014. He noted that the values of a BMW, Holden Caprice and Holden Calais were all above $36,300 but less than $63,636.36.

His Honour essentially found that the onus was on Mr Kanakis to prove his loss, and he did not prove at trial the precise value of the 2006 Porsche as at August 2014. Therefore, His Honour found it appropriate to calculate the damages payable by reference to the cost of hiring the Caprice for the repair period, which was a lower amount than the hire of both the BMW and Holden Calais. Damages were assessed at $442.56, being $2,730.56 less $2,288.00 that had already been paid by RAC.

Conclusion

This decision gives some guidance to insurers faced with accident-related car hire claims and is useful in reducing the exposure to such claims. It is clear that in assessing damages, a court will have regard to the use to which the person who suffered the loss puts their vehicle and the consequential precise nature of their need for a replacement vehicle. It is necessary to consider the nature and value of the damaged vehicle, the nature and value of the replacement vehicle, and the nature and value of other vehicles readily available which are capable of meeting the needs of the person who has lost the use of the damaged vehicle.

Authored by Kerry Wood, Partner and Anna Chacko, Associate, Perth.


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