New South Wales Court of Appeal clarifies entitlement to claim hire car costs in motor vehicle property damage disputes18 September 2020
In a two-to-one decision, the NSW Court of Appeal in Lee v Strelnicks; Souaid v Nahas; Cassim v Nguyen; Rixon v Arsalan  NSWCA 115 has found that plaintiffs are entitled:
- to hire a vehicle similar to their own damaged vehicle, provided they can show the need to hire a vehicle, and
- if a claimant has a “need” for a replacement vehicle, reasonable expenditure on hiring a replacement vehicle should be no more than what would be reasonably needed to hire an equivalent vehicle in the circumstances.
Hire car claims, particularly credit hire car claims, are a regular feature of motor vehicle property damage disputes. Until recently, the exact nature of a plaintiff’s entitlement had been unclear, especially when the plaintiff’s damaged vehicle was a luxury vehicle.
In June 2020, the NSW Court of Appeal, in four concurrent appeals [i], found that where the plaintiff can demonstrate a need for a vehicle during the time their vehicle is being repaired, they are entitled to claim the cost of hiring a similar vehicle to their own rather than the cost of hiring a standard vehicle.
The majority of cases before the Courts usually originate from credit hire companies who hire out vehicles on “credit hire” terms to the customer. The rate charged is often above market and includes a loading that reflects the credit component of the agreement.
These companies take an assignment of the customer’s right to sue the at-fault driver for the cost of the hire.
In dealing with the merits of these claims, insurers have had to consider issues such as duration, need, rate and comparability with the damaged vehicle in order to arrive at a reasonable settlement amount. The issue of a claimant’s entitlement to the cost of a like for like replacement vehicle has been unclear until now.
Court of Appeal’s decision
In the appeals, the Court was concerned with prestige or specialty vehicles, although the judgment has widespread application.
The appeal challenged two 2019 judgments in the Supreme Court of New South Wales which found that in order to claim the hire costs of a prestige vehicle, a special purpose had to be demonstrated.
The Supreme Court favoured the view that the plaintiff’s loss, where there was no special need, was the mere inconvenience of being without a vehicle and that the inconvenience could be met by hiring a standard vehicle rather than a prestige vehicle at a much higher cost.
On appeal, the majority of the Court of Appeal found that a plaintiff was entitled to hire a vehicle similar to their own, rather than a standard vehicle, regardless of whether a special purpose was proved. The Court found that a plaintiff’s loss was not just of inconvenience, but of being without their vehicle that provided tangible and intangible benefits to the plaintiff, which could not be met by a standard vehicle. These benefits included superior performance and safety.
The Court of Appeal relied on the principle that the plaintiff should be “restored” to the position they were in had their vehicle, which was of a superior quality, not been damaged.
White JA summarised the relevant principles as follows:
- The overarching principle is that damages in tort are intended to compensate the plaintiff for loss actually suffered to put the plaintiff in the same position as he or she would have been in had the tort not been committed.
- The plaintiff has the onus of establishing that he or she suffered some loss by reason of being deprived of use of the vehicle for a period.
- The plaintiff is entitled to recover, as special damages, expenses reasonably incurred to mitigate the loss of use of the damaged vehicle.
- The plaintiff will be entitled to recover, as special damages for the loss of use of the vehicle while it is under repair, the reasonable cost of hiring a replacement vehicle if the plaintiff reasonably needs to hire the replacement vehicle. If the plaintiff does not need a replacement vehicle, he or she does not suffer a loss from being temporarily deprived of the use of the vehicle for which special damages for the cost of hire of a replacement vehicle are payable. General damages for any inconvenience suffered may still be recoverable.
- A reasonable need for the replacement vehicle is not to be assessed by only considering what vehicle would be adequate to meet the inconvenience to the plaintiff of his or her vehicle being off the road.
- Prima facie, it can be inferred that the plaintiff will have a reasonable need for a “commensurate” vehicle, or a “reasonably equivalent” vehicle, or a “reasonable substitute”, or a “broadly comparable” replacement vehicle. This is because the loss suffered by a plaintiff who has lost the use of a prestigious vehicle is not merely the inconvenience of not having a vehicle to transport the plaintiff and his or her family, friends and associates, from A to B, but the loss of his or her ability to do so in a vehicle that has the safety, luxury and prestige of the damaged vehicle.
- Although the plaintiff has the onus of establishing a reasonable need for a replacement vehicle, once that onus is discharged, the onus of establishing that the hire of the particular replacement vehicle was unreasonable lies on the defendant.
Plaintiff must show need and reasonableness of cost of hire
The test for whether a plaintiff has shown a requisite need is a matter of fact and “the bar is not high”.
A plaintiff must show that they had some duties to perform that required the use of their vehicle. This test will be easily satisfied where there was some particular business need for the vehicle. The test will not be satisfied where mere lip service is paid to the issue. Plaintiffs must show that they had some tangible need for the vehicle at the time it was hired.
The court then considered the reasonableness of the cost of the hire car by reference to the following:
- Was an equivalent vehicle (same make, model year) available?
- If not, what is available in the market that is as close to equivalent?
- The cost of hiring should be no more
- The cost of hiring an equivalent vehicle in the market should be the measure of damages.
Indemnity insurers now face greater cost exposure in settling claims for hire car where the claimant’s vehicle was a prestige vehicle.
- Our recommendation for insurance clients when handling hire car claims is:
- Consider whether claimants have shown a tangible need for the hire vehicle over the whole period of the hire. Simply hiring a vehicle is not sufficient to prove an entitlement to claim its cost.
- Consider if the vehicle hired is comparable to the vehicle that was damaged. Claimants are now entitled to like for like if the other elements of the claim are established.
- Confirm the duration of the hire, and if lengthy, the reasons for the delay and whether this was outside the control of the plaintiff.
- Maintain a data base of rates for different vehicle classes, categorised by month and year that can be used in assessing the reasonableness of third party hire car claims.
[i] Lee v Strelnicks; Souaid v Nahas; Cassim v Nguyen; Rixon v Arsalan  NSWCA 115