End of the road for the credit hire vehicle debate, as the High Court grants special level to consider the principle of ‘like for like’

Since the decision of the NSW Court of Appeal in the credit hire cases, practitioners and professionals working in the area have debated whether the Court's decision of a 'like for like' entitlement to a hire car was in fact the correct decision. Now that special leave has been granted by the High Court the debate is set to reach its apex, and whichever way the High Court finds it will undoubtedly be significant for the industry.

 

On the 12 March 2021, the High Court of Australia granted special leave to consider the well published decisions of Lee v Strelnicks; Souaid v Nahas; Cassim v Nguyen; Rixon v Arsalan [2020] NSWCA 115 or what is commonly referred to as the "credit hire" cases.

The granting of special leave to consider the credit hire cases is undoubtedly significant, given that the decision of the High Court will reverberate throughout the Small Claims and General Division of the Local Court. These jurisdictions are currently dealing with a substantially high volume of these cases and will require clear and practical legal principles to deal with them effectively.

To fully appreciate the significance of the incoming decision, it is necessary to consider the basics of a credit hire case and the implications of the NSWCA decision on the area, which will highlight the issue the High Court needs to address.

What is a credit hire case?

Credit hire cases involve relatively similar fact patterns. That is, an individual who is not at fault and suffers loss due to a motor vehicle collision may recover from the at fault party their cost of repairs, and more importantly for our purposes the cost of a replacement vehicle while their vehicle is in repair.

Credit hire agencies have recognised this entitlement and have begun offering claimants replacement vehicles at no cost, on the basis that they will be entitled to recover the cost of hire as compensation for the loss of use of their damaged vehicle.

However, this entitlement is not automatic and is subject to several constraints. Therefore, when a claim is made for the cost of hire, it is often resisted by the defendant on basis of the need for a replacement vehicle and alternatively, whether the cost of the hire is reasonable (putting aside issues of duration).

As a result, depending on how need is framed, the cost of the hire may either be minimal or some instances substantial. For example, if a claimant owned an Aston Martin will they be entitled to claim the cost of a hiring another Aston Martin during the repair period, or would a Toyota Corolla suffice for two weeks? These questions have a real impact on the quantum of these claims.

What does the current law say?

In the credit hire decision of the NSWCA, the Court all agreed that the claimant must at a minimum establish "need" for a replacement vehicle and agreed that the cost of hire should be assessed at the market rate. However, the Court differed on what constitutes the relevant need (i.e., which vehicle would the claimant need to hire).

In the majority, White JA and Emmet JA found that need should not be gauged by reference to what might perform the same function as the damaged vehicle, but as to whether the claimant needed the use of the damaged vehicle. In other words, the damages should put the claimant in the position, in which he or she would have been but for the wrongdoing, therefore the replacement vehicle should be the equivalent to the damaged vehicle or as similar reasonably possible (restitutio in integrum). This approach was stated to compensate the claimant for the intangible benefit of owning a prestige vehicle or a particular type of vehicle.

In dissent, Meagher JA identified that the relevant loss was the use to which the damaged vehicle was being put to during the repair period, and consequentially a vehicle which is sufficiently comparable in terms of functionality and specifications is sufficient to satisfy that loss.

The Court's conclusion present two differing approaches to the question of need which has a significant flow-on consequence for the cost of hire. The difference being is whether a claimant is entitled for a like for like vehicle (majority) or are they entitled to a similar vehicle by reference to function and specifications (for example the claimant required a five-door car instead of two door car). As it stands, if a claimant owns an Aston Martin and requires repairs, provided he or she has a need for that vehicle, he or she is entitled to hire a similar if not the same vehicle and recover those expenses as reasonably incurred.

The question for the High Court

Therefore, the main issue at hand for the Court is the question of whether a claimant should be entitled to the cost of a "like for like" vehicle or is it the position that a claimant should be entitled to the cost of a reasonably comparable hire vehicle in terms of functionality and utility. The distinction is slight, but it has a significant impact on the many thousands of claims currently on foot.

Particularly, as in the Small Claims Division the claimant is not open to cross-examination therefore the current legal principles seemingly create a presumption that the claimant is automatically entitled to a hire car which is identical or very similar to their own vehicle.

So, what's next?

The High Court has expressed interest in the credit hire cases and the way in which damages are to be assessed. The high volume of cases being heard in the lower courts and the need for clarity and simplicity means the issue warrants some attention.

During argument Chief Justice Kiefel queried; "is the distinction between mere utility and the enjoyment of life?"  We will have to wait and see if the High Court is willing to spoil the car hire party?   Can there be compensation for injured feelings when one is deprived of their beloved vehicle?

These things are always difficult to predict, however as alluded to by Justice Keane "Occam's razor is always a good thing" and we look forward to the High Court's decision.

In the meantime, if you would like to more about the decision or have questions about the area, please feel to reach out to any of our team members.

Contributors

Andrew Gouveia Lawyer