Author: Raphael Hermiz
Judgment date: 3 September 2019
Citation: Nguyen v Cassim  NSWSC 1130, Rixon v Arsalan  NSWSC 1136, Souaid v Nahas  NSWSC 1132
Jurisdiction: Common Law
- With respect to non-income earning chattels, the loss of use is to be assessed and compensated by reference to the inconvenience and need of the person hiring the replacement vehicle.
- Temporary loss of use of a chattel would be classified as a form of consequential damage, which may be readily described "as inconvenience or loss of amenity". Reasonable compensation for that loss requires the following:
- the establishment of the use to which the vehicle had been put prior to the collision; and
- the assessment of the reasonable cost of meeting the inconvenience caused by the temporary unavailability of the vehicle.
- The value or prestige of the damaged vehicle is not an essential characteristic of what is reasonably necessary in a replacement vehicle. What is considered and the test of reasonable necessity must be applied with reference to the need in question and is to be resolved by applying an objective standard.
- The overriding purpose is to provide an appropriate sum in compensation for the inconvenience caused by the temporary deprivation of an individual's motor vehicle by reference to need and not the value or prestige of that vehicle.
There has been a myriad of loss of use cases in the Local Court where there is great uncertainty as to the proper adjudication and basis for assessing damages, specifically where the owner of the damaged motor vehicle hired a replacement vehicle while repairs were being carried out.
The increase in the number of these claims is related to the growth of businesses providing "accident car hire" or "credit-car hire" arrangements. These companies (i) provide hire cars to the victims of collisions not at fault, (ii) the hire car is of similar value and type to the damage vehicle (iii) the vehicle is provided at no upfront cost to the hirer and (iv) the hire company agrees to pursue the at fault party to pay the amount of the rental as compensation for loss of use of the damaged vehicle. The influx of these cases has resulted in separate proceedings being appealed and having to be heard concurrently.
In the Cassim decision the claimant was the owner of a 2012 BMW 535i sedan. The repairs to the claimant's vehicle took 143 days and in this period of time the claimant hired two vehicles, a Toyota RAV4 for 52 days and a Nissan Infiniti Q50 for 84 days. The remaining days were not taken into consideration as an alternate vehicle was used, or the claimant was overseas. The Magistrate in the Local Court awarded the full amount of the claim to the claimant as it was held that the rental and associated charges by Right2Drive were within the range of market rates readily available. The matter was appealed on a question of law.
The other two matters were also appealed on the basis there was an error of law and both involved prestige vehicles with similar factual scenarios. The two vehicles in question were an Audi A3 sedan and Lexus IS 250F sedan.
Basten J considered the arguments presented by all the parties in these concurrent proceedings and made the following determinations:
- Nguyen v Cassim  NSWSC 1130
- Appeal allowed (it must be noted that the insurance company was the Plaintiff in these proceedings given that judgment was entered in the first occasion in favour of the claimant).
- Judgment and orders in the Local Court set aside and calculation made on a Toyota Corolla rate in the amount of $7,476.00 plus interest.
- No order as to costs of the proceedings in the Local Court.
- Defendant to pay the Plaintiff's costs.
- Rixon v Arsalan  NSWSC 1136
- Appeal dismissed
- Plaintiff to pay Defendant's costs
- Souaid v Nahas  NSWSC 1132
- Appeal dismissed
- Plaintiff to pay Defendant's costs
Basten J's reasoning is explained in the Cassim proceedings. In determining the reasonableness of the expense Basten J states that it is "the usage rather than the choice of vehicle"
as the ultimate test and reinforces the notion that the value or prestige of the damaged vehicle is not an essential characteristic rather damages are calculated by reference to compensation based on an objective test on the need and inconvenience of the Plaintiff hiring the replacement vehicle.
Basten J refers to the decision of Dimond v Lovell  1 AC 384 which addressed the question of how reasonable costs should be assessed. Basten J adopts the principle established in Dimond, namely that inconvenience is a form of loss for which damages are recoverable. By taking into account the precise nature of the need of the Plaintiff and the appropriate compensatory value, Basten J determined that in the Cassim matter the Plaintiff's needs would have been satisfied by the hire of a Toyota Corolla as opposed to a prestige vehicle.
It must be noted that Basten J dismissed both the Rixon and Souaid matter and held that there was no error in law from the Magistrate in the lower Court where a Toyota Corolla and Toyota Camry were awarded when the Plaintiffs owned an Audi A3 sedan and Lexus IS 250F sedan respectively.
Basten J makes particular reference in the Rixon case as to the reasoning in Anthanasopoulos v Moseley (2001) 52 NSWLR 262 where the Magistrate relied on the principle that:
"[t]he measure of damages is based on the need for the replacement vehicle and those damages should be calculated by reference to the market rate of hiring a replacement vehicle".
Why this case is important
The case is significant as it sheds light on an ambiguous area of law and equips insurance companies with greater firepower in their dealings with credit hire companies and credit hire car claims. The three cases highlight and provide the following key determinations:
- The loss of income earning chattels must be assessed with reference to the expected profit for the period in which the good was unavailable.
- Temporary deprivation of non-income earning chattels will be assessed by reference to inconvenience and the needs of the Plaintiff, objectively assessed.
- In practical terms the emphasis will be on identifying the actual need(s) of the Plaintiff in determining what type of replacement vehicle is required. For example, (1) if the Plaintiff has five children, the Plaintiff will be able to establish that a seven-seater vehicle is required (2) if the Plaintiff needs a ute to carry work tools or golf clubs around, the Plaintiff will be able to establish that a replacement ute is required. Plaintiffs will need to provide more specific evidence and greater detail establishing why a replacement vehicle was needed.
- If the vehicle damaged was a prestige vehicle, the Plaintiff will need to provide specific reasons and detail explaining why the Plaintiff required a prestige vehicle replacement while the repairs were being carried out. The need for a prestige vehicle must be classified as more than merely day to day errands which could reasonably be alleviated by way of a standard vehicle.
- The use of a prestige vehicle might be justified by the needs of a "particular business" or "profession" but will not normally qualify as a reasonable expense to meet the inconvenience of domestic or social needs;
- Further it is not enough for a Plaintiff to claim that the need for a prestige vehicle by virtue of the safety reasons afforded by a luxury car rather the overarching need of the motor vehicle will take precedence. For example, if you owned a luxury sedan and the main purpose was to drop your children to school then the reasonable inference would be a Toyota Corolla would suffice for that need.
- Mitigation remains an important aspect in loss of use claims and the Defendant continues to bear the onus to establish that the Plaintiff has not taken reasonable steps to mitigate his or her loss;
- We anticipate that given these decisions, there may be a significant change in the type of vehicles supplied by the hire car businesses. We expect they will reduce the number of prestige vehicles in their fleets and increase the number of more common vehicles, eg a Toyota Corolla; and
- Given there will be less prestige vehicles hired and more Toyota Corollas hired, the overall costs will reduce and the amounts claimed will be substantially less.
The direction from the Court has shifted the momentum in favour of insurance companies dealing with loss of use claims from credit hire companies.
It will remain to be seen what, if anything, the hire car company's do in relation to these recent decisions and whether a further appeal is forthcoming.