Thinking | 9 December 2021

High Court, hire cars, higher costs

By Liam Campion and Leigh Parker

The High Court of Australia has provided clarity on the approach to be taken in the assessment of hire car claims where a plaintiff’s vehicle is damaged in an accident.

The question before the Court was: when a plaintiff is involved in a motor vehicle collision caused by the negligence of a defendant, is the plaintiff entitled to hire a replacement vehicle that simply satisfies their ‘needs’, or are they entitled to hire a vehicle that is equivalent to their own?

The High Court unanimously agreed that in such circumstances a plaintiff is entitled to a vehicle that is broadly equivalent to their damaged vehicle.

In the past, defendants have relied on the NSW Court of Appeal decisions in Lee v Strelnicks and Anthanasopoulos v Moseley to argue that a plaintiff must prove they have a ‘need’ for a hire vehicle, as well as a need for a particular type of vehicle, before they can claim the cost of hire.

The High Court has now indicated that this loose concept of ‘need’ ought to be avoided in the assessment of damages. In its place, the loss suffered by a plaintiff who is deprived of the use of their vehicle as a result of damage ought to be measured based on the following heads of damage:

  1. physical inconvenience, being that inconvenience arising from the plaintiff's inability to use their damaged vehicle during the period of repair; and
  2. loss of amenity of use, being the loss of not being able to enjoy the features and functions of that damaged vehicle.

Each of those heads of damage can usually be inferred from the plaintiff's ownership and past usage of the vehicle.

The threshold for a plaintiff to prove such loss will be low. It will usually be sufficient for a plaintiff to identify a past suite of purposes for which the damaged vehicle was used in order to establish that the plaintiff would have, but for the defendant’s negligence, put the vehicle to the same uses during the period of repair and would be otherwise inconvenienced by the vehicle being unavailable. Those purposes include basic domestic, household and family purposes.

Loss of amenity of use of a damaged vehicle causes deprivation of the use of the prestige aspects of a vehicle. This includes the plaintiff’s enjoyment of the safety features, pleasurable functions and other specifications of a motor vehicle. It will usually be accepted that a plaintiff derives amenity from the various functions used in their vehicle, particularly an expensive, prestigious vehicle, in circumstances where the plaintiff incurred significant capital or ongoing expenditure in purchasing or maintaining that vehicle.

Accordingly, where a plaintiff’s luxury or prestige vehicle is damaged in a collision caused by a defendant’s negligence, the plaintiff will be entitled to hire a replacement vehicle of equivalent prestige during the period it takes to repair their vehicle.

Once the plaintiff hires a replacement vehicle, the defendant will have the onus of proving that the plaintiff’s mitigation of loss was unreasonable. It will usually be difficult for a defendant to prove that a plaintiff acted unreasonably by seeking to hire a broadly equivalent replacement vehicle. The exceptional circumstances that might give rise to such consideration include where the plaintiff was hospitalised or overseas during the period of repair, or the damaged vehicle could have been replaced from idle stock from the plaintiff’s fleet of vehicles, or the hire vehicle was unused during the period of repair.

There remains scope for a defendant to contest the sum of hire costs incurred where it was unreasonable for the plaintiff to hire a particular vehicle (for example a superior vehicle to the one that was damaged), or where the period of hire was unreasonable, or where the rate was unreasonable compared to comparable hire vehicles in the market.

While not surprising, and consistent with the longstanding common law principle that damages are to be assessed so as to put an injured plaintiff, as best as money can, back into the position they would have been in but for a defendant’s negligence, this decision is important for motor vehicle insurers.

It will be very difficult to challenge a plaintiff’s entitlement to a hire car following a collision and the threshold for proving an entitlement to an equivalent replacement vehicle is very low. Of concern to motor vehicle insurers will be the scope for ongoing abuse by some hire car companies charging inflated rates, particularly in relation to collisions involving prestige motor vehicles. Scope, however, remains to challenge the quantum of hire car claims based on rate or duration of hire.

A sensible strategy for insurers – where liability is not in dispute – will be to promptly offer not at fault drivers a broadly equivalent hire vehicle. If a plaintiff refuses – and subsequently hires a more expensive vehicle – insurers will be well-placed to argue a failure to reasonably mitigate loss.

The case is Arsalan v Rixon [2021] HCA 40.

This article was written with the assistance of Rhys Davidson, Paralegal.

Contact

Liam Campion

Liam is an insurance lawyer with expertise in mass tort litigation including class actions, indemnity disputes and insurance fraud.

Leigh Parker

Leigh has expertise in general insurance litigation acting for major Australian insurers as well as many English insurers.

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