CLAIMING A REPLACEMENT HIRE CAR: NEED OR PREFERENCE?

Legal Directions

The NSW Supreme Court recently handed down decisions in three matters heard concurrently. The question common to each case was the principles governing the assessment of damages relating to hire car charges when a damaged motor vehicle is unavailable for use while repairs are carried out.

Disputes arise as to the extent to which such charges are recoverable, particularly where a credit hire car company provides ‘like for like’ or prestige replacement vehicles and charge above market rates on the basis that payment to the credit hire company is deferred until recovery from the insurer of the vehicle at fault.

The leading decision (on 3 September 2019) was in Nguyen v Cassim [2019]
NSWSC 1130. The Court confirmed that it is usage rather than the choice of the vehicle which will determine what is a reasonable hire car expense. The claimant has the onus of proof to demonstrate the need for the replacement vehicle, and that the need was reasonably met by the particular vehicle hired. Damages are awarded in response to that, as opposed to the amount paid for hire.

The amount of damages awarded may well be different to the amount actually spent on a hire car, depending on the facts of each case.

Facts in Nguyen v Cassim

On 1 April 2017, a vehicle driven by Mr Nguyen collided with a BMW sedan owned by Mr Cassim. Mr Nguyen was at fault. Mr Cassim’s vehicle was off the road for repair for a period of 143 days after the accident.

Mr Cassim ordinarily used his vehicle partly for business and partly for personal and social use. He travelled approximately 27 km per day. The Court was satisfied that Mr Cassim had a ‘need’ for his vehicle. This was not dependent on any income earning activity.

During the repair period, Mr Cassim sometimes borrowed his wife’s car. He also hired a car through a contract with Right2Drive Pty Ltd for a period of 84 days. The hire car charge for the Nissan Infinity vehicle Mr Cassim selected to hire was $204 per day, and the total cost amounted to $17,158.02.

The dispute

Mr Nguyen’s insurer disputed the recovery of the hire car charge on the basis that it was excessive with reference to the ‘market rate’, and because the claimant could have hired a similar vehicle to his own at much less expense.

At first instance, the Local Court Magistrate awarded the full amount of the claim to
Mr Cassim on the basis that was the amount of his loss or damage arising from the accident.

Mr Nguyen appealed to the NSW Supreme Court.

The decision on appeal

The Supreme Court confirmed that the test for a claim for damages is one of need, not the actual financial loss suffered.

The inconvenience of not having the use of a vehicle gives rise to a compensable loss. A claimant should minimise loss by spending no more on the hire car than necessary to obtain a substitute vehicle to meet the need that would otherwise be met by their own vehicle.

The appeal was allowed. It was held that the Magistrate erred in awarding the full invoiced amount of the hire vehicle, in circumstances where a vehicle was available that met the claimant’s needs at half the cost of the vehicle he hired.

A less expensive vehicle was available to the claimant for hire and would have served the relevant purpose. The use of a more expensive or ‘prestige’ vehicle was not considered necessary or reasonable.

The award in favour of Mr Cassim in the reduced sum of $7,476 was calculated with reference to the cost of hiring a Corolla at $89 per day.

Outcome in concurrent cases

In Souaid v Nahas and Rixon v Arsalan, amounts less than the actual hire car cost were awarded at first instance, on the basis that a replacement prestige vehicle was not required to meet the needs of the claimants. Similarly, the cases were assessed on the facts surrounding the claimants’ actual need for the vehicles, rather than their choice or preference of vehicle. The appeals in those cases were dismissed.

Implications

Appropriate compensation for the loss of use of a vehicle is made with reference to a number of factors, not just the hire car invoice. The precise needs of the individual, the need for a vehicle, the value of the vehicle, the value of available replacement vehicles, and the ‘available market rate’ will all be considered.

To recover the full expense of a hire charge incurred, a claimant must demonstrate:

  • A need for a replacement vehicle, demonstrated with evidence as to their ordinary use of their damaged vehicle, and
  • That the cost of mitigating the loss or meeting the need was reasonable.

The judgment endorsed the approach adopted in a number of Australian authorities. That is, the test of reasonableness should be measured against the actual need for the vehicle, rather than a claimant’s choice or preference for a ‘prestige’ vehicle, even if the hire car is of an equivalent value to the damaged vehicle.

Further information / assistance regarding the issues raised in this article is available from the authors, Nicholas Sullivan, Special Counsel, and Stuart Bryson, Lawyer or your usual contact at Moray & Agnew.


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