The decision will impact the industry and in particular property insurers of defendants in motor vehicle collisions.

Practically speaking, the decision settles the often conjectured debate as to a plaintiff’s entitlement to a ‘like for like’ vehicle, particularly to that of a prestige vehicle. However, the Court has conveniently settled and set out the correct heads of damage for assessing claims in such litigation, namely ‘physical inconvenience’ and ‘loss of amenity’.

Insurers will now need to shift their focus to the plaintiff’s actions in mitigating the loss, although the Court accepted there may be some cases in which a plaintiff may not be entitled to a replacement hire vehicle, such as in circumstances where the plaintiff is abroad, hospitalised or where the damaged vehicle could have been replaced from idle stock of the plaintiff’s fleet of vehicles.

Whilst the plaintiff is entitled to a ‘like for like’ vehicle, the door is left ajar to question the comparability of the replacement vehicle. However, insurers can and should continue to assess the rate and duration of hire when responding to such claims.

Snapshot

• The categorisation of damages for ‘loss of use’ of a motor vehicle is not a ‘head of damage’. The appropriate heads of damage, where a plaintiff is deprived of their motor vehicle due to the negligence of a defendant, are ‘physical inconvenience’ and ‘loss of amenity’;
• Where the plaintiff has suffered physical inconvenience and loss of amenity there is no requirement to establish a ‘need’ for a replacement vehicle;
• In such circumstances, the plaintiff will be entitled to hire a broadly comparable or equivalent vehicle. What satisfies the ‘broadly comparable or equivalent’ test was not answered and is likely to be subject to conjecture;
• It will not be difficult for a plaintiff to discharge the onus, but there are circumstances in which a plaintiff may not be entitled to a replacement vehicle;
• Once a plaintiff acts to mitigate loss by hiring a replacement vehicle, the onus falls on the defendant to prove that the plaintiff’s acts, in attempting to reduce a loss, were unreasonable;
• A defendant can continue to challenge the plaintiff’s claim for a variety of reasons, including the hire charge rate, the duration of hire, and the comparability of the replacement vehicle provided.

Background

Mr Rixon and Mr Cassim were each involved in separate motor vehicle collisions. Both were owners of ‘prestige vehicles’, being an Audi A3 and BMW 535i respectively. The defendants, by way of their insurers, accepted liability for the collisions.

Mr. Rixon and Mr. Cassim both hired, through a third party credit hire company, an Audi A3 and a Nissan Inifiniti Q50 respectively. The matters were heard separately in the NSW Local Court and eventually appealed. The appeals were heard concurrently. The NSW Supreme Court found that the plaintiff’s usage, rather than the choice of vehicle, was the correct measure in determining the reasonableness of the expense. The decision was appealed to the Court of Appeal, which held that the cost of hiring an equivalent vehicle to the damaged vehicle was the appropriate measurement of damages.

The primary issue before the High Court was whether a plaintiff, whose vehicle was negligently damaged, is entitled to recover the reasonable costs incurred in hiring a vehicle which meets the bare necessities of their requirements, or, in contrast, a replacement vehicle of broadly equivalent value to their damaged vehicle, more colloquially referred to as a ‘like for like’ vehicle.

Judgment

The High Court, in a unanimous joint judgment, dismissed the appeals and held that a plaintiff who has been deprived of their vehicle due to the plaintiff’s negligence, was entitled to damages representing the reasonable costs of hiring a replacement vehicle broadly equivalent to their own damaged vehicle.

Importantly, in doing so, the High Court clarified the correct measure of damages for such claims, the issue which has been at the centre of motor vehicle litigation for many years.
The Court considered that the often cited principle of ‘loss of use’, was both inadequate and insufficient in appropriately reflecting the loss that was suffered by the plaintiff, for the deprivation of their vehicle.

The Court held that, in order to appropriately consider the consequential losses suffered by a plaintiff as a result of the damage to their vehicle, the correct ‘heads of damage’ pertaining to physical inconvenience and loss of amenity of use needed to be considered. These heads were appropriate in identifying the nature of which the loss of use of a chattel adversely impacted a plaintiff and provides recognition that a plaintiff’s deprivation of convenience and enjoyment of the use of a vehicle needed to be factored when assessing the damages to a chattel.

Additionally, and in a significant shift in the consideration of damages, the Court removed the requirement for a plaintiff to establish a ‘need’ for a replacement vehicle. The Court considered that ‘the concept of ‘need’… was a distraction from the proper focus upon the heads of damage identified by the plaintiff’.

The Court recognised that the onus of proof in establishing these heads will not be overly difficult to discharge as it held that ‘it will usually be sufficient for a plaintiff to identify a past suite of purposes for which the damaged vehicle was used’. Additionally and more pertinent to the notion of a loss of amenity of a ‘prestige’ vehicle, the Court held that it was sufficient for a plaintiff to ‘infer that [they] derive amenity from the various functions used in their vehicle, particularly an expensive prestige vehicle’. Upon such establishment, the onus then shifts to the defendant to prove the extent to which a plaintiff has failed to mitigate their loss. A defendant can continue to dispute the plaintiff’s claim, on a variety of reasons, including that of the costs included in the hire charge, the duration of the hire and whether the replacement vehicle is comparable and/or equivalent to the plaintiff’s vehicle.

Lastly, the Court provided commentary on two further matters which were not directly appealed, but were heard concurrently with the original Court of Appeal decisions. The Court found that, in light of this judgment, the matters of Lee v Strelnicks and Souaid v Nahas should be determined differently. In Lee the Court held that there was no basis upon which the defendant could have established that it was unreasonable for Ms. Lee to mitigate her losses by hiring an equivalent vehicle to satisfy her requirements. Similarly, in Souaid, the Court held that Ms. Souaid’s evidence, that he would have been satisfied with ‘any’ replacement vehicle, was not sufficient enough for the defendant to establish that the cost of hiring an equivalent vehicle to his own was unreasonable.

Further information / assistance regarding the issues raised in this article is available from the author, Nicholas Sullivan – Partner, Wayne Perera – Associate or your usual contact at Moray & Agnew.