Gladstone Lazarus Pty Ltd v Tumur

Local Court of NSW|2018-06-12

Agreed facts

In October 2016 William Phillips, director of Gladstone Lazarus Pty Ltd (Gladstone), was driving the company's Tesla (it later sold for $150,000) past Zorigt Tumur's vehicle in Hardie Street Darlinghurst when Mr Tumur opened his car door. The door collided with the Tesla and Mr Tumur admits liability for the collision.
Gladstone operates a real estate business and needed a replacement car while the Tesla was repaired. Mr Philips, a real estate agent who works in the east & inner west of Sydney, used the vehicle to attend properties to make and give appraisals, do property inspections, attend buyer appointments and open homes and put up sold stickers. Sometimes he drove buyers around and also used the vehicle to do letter box drops.
Under a credit hire agreement with Right2Drive Pty Ltd (R2D), Gladstone used the following replacement vehicles:

a Mercedes Benz C200 at $149 per day for 5 days; and then
a Porsche Macan at $349 per day for 36 days, both plus charges.

It was undisputed evidence that the Tesla was a more expensive vehicle than the Mercedes or Porsche and Teslas are not available for hire in NSW.
Gladstone claims the $14,851 hire costs from Mr Tumur.

Mr Tumur's case

Initially Mr Tumur did not admit:

Gladstone's ownership of the Tesla;
its need for a replacement car; or
the duration of the hire, but, at hearing, these were conceded, leaving three issues in dispute:
Has Gladstone proved that a liability to pay the sum claimed is an actual or temporal loss which has, in fact occurred (see Lachaume v Broughton (1903) 3 SR (NSW) 475 at 480.6 - 481.4);
The type of vehicle hired; and
The rate of hire.

Mr Tumur says of Gladstone's claim that the hire car charges do not represent the market value in which mainstream car hire companies operate and Gladstone is only entitled to recover a fair and reasonable market rate from a car rental company such as Europcar or Hertz. Gladstone did not act reasonably as it failed to source and hire an alternative vehicle at a more reasonable cost. In particular, Mr Tumur says:

The daily rate is excessive;
The registration recovery fee is excessive and too remote;
The claim for excess reduction is excessive/ too remote; and
The claim for delivery and relocation is excessive.

Issues

The following issues must be determined in relation to Gladstone's claim:

Has an actual and temporal loss in fact occurred?
What type of replacement should Gladstone have used?
Was the rate R2D charged reflective of the market rate or was it excessive because, amongst other things, it included non-compensable benefits?
Were the other charges such as excess reduction reasonable to meet Gladstone's needs during the loss of use period?

Actual and temporal loss

Mr Tumur says Gladstone cannot show actual and temporal loss because Gladstone has not paid for the replacement car and cannot prove a liability to pay. Mr Phillips said he understood that Gladstone was indemnified and Timothy Warren, Chief Financial Officer of R2D, said he expected that only GST would be sought to be recovered from Gladstone. Gladstone was registered for GST and any GST would therefore be recovered as an input tax credit and not recoverable as damages (see Gagner Pty Ltd t/a Indochine Cafe v Canturi Corporation Pty Ltd (2009) 262 ALR 691 at [135]).
However, the contract between R2D and Gladstone states (Exhibit 1, page 7): R2D will use its best endeavours….. during the credit hire period to have the charges paid by the TP. On receipt of payment from the TP, the hirer will be released from liability for the charges to the value of the payment received from the TP, provided that the hirer has fully complied with the obligations imposed on the hirer under this agreement. After the expiry of the credit period R2D may demand that the hirer pay, and if so demanded the hirer shall pay forthwith, any charges unrecovered from the TP by R2D at that date.
I agree with Gladstone that on the face of the contract there is a legal obligation to pay for at least part of the hire.

Type of vehicle

Mr Warren said the Mercedes Benz C200 was replaced because R2D believed the Macan was a more identical replacement for the Tesla. However, Mr Phillips agreed the Mercedes was used by him to attend open homes, buyer appointments, give appraisals and put up sold stickers. He had no need to drive buyers or do letterbox drops in the period, but could have done this in the Mercedes. He drove approximately 30 kilometres a day in the hire cars.
Gladstone is entitled to recover the cost of hiring a replacement vehicle to the extent, but only to the extent, that it was reasonable for it to incur that expenditure: Lagden v O'Connor [2004] 1 AC 1067.
The parties cited various decisions, from that of an assessor of this Court to a Judge of a District Court (for example, Beamish v Kanakis [2017] WADC 33 and Lowe v Pearce [2016] NSWLC 5). The plaintiff asked me to apply the common law to place Gladstone in the position in which he would have been, except for the collision (see Haines v Bendall (1991) 172 CLR 60 at 63).
The plaintiff asked me to apply the principles set out in Fallon v Johnston [2018] VSC 273, but the issues in that case concern ones of impecuniosity and mitigation - matters not argued in Gladstone's case. I was also asked to apply the principles of Stocovaz v Fung [2007] NSWCA 199, but that case concerned the cost of repairs.

Droga v Cannon

Mr Tumur asked me to apply Harrison J's dicta in Droga v Cannon [2015] NSWSC 1910. Justice Harrison considered a magistrate's refusal to allow Ms Droga leave to reopen her case to adduce evidence as to her need for a replacement vehicle. Ms Droga was unsuccessful in her application before Harrison J.
As an aside, Harrison J noted Ms Droga wanted to adduce evidence of her need to drive 8km to work three days a week, to take her children to and from school and to after-school and weekend activities, as well as for family shopping, saying (at [60]): …the sum required to compensate Ms Droga for the cost of hiring a replacement vehicle with which to conduct the activities she has specified, is not necessarily or automatically co-extensive with the cost of providing a comparable vehicle to the one that was damaged….. a far less sophisticated vehicle could have adequately coped with the activities identified by Ms Droga at what may well have been a considerably reduced tariff. The issue would have been a question of what was reasonable to meet Ms Droga's needs, not what was necessary to compensate her for her choice [emphasis added].
The law seems clear about when higher courts can bind lower courts in that:

Ratio decidendi is binding; and
Obiter dictum is not binding except for seriously considered dicta of the High Court (Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] 230 CLR 89).

So, while dicta is generally not binding, Mr Tumur submits the Droga dicta should be followed in that it was well considered, cogent and intended to guide lower courts. It is my view that Harrison J's dicta sets out what he believes are the applicable principles. Had Ms Droga succeeded on the application to reopen her case it would have been open to Harrison J to determine the appeal by rehearing the matter to assess damages (see Local Court Act 2007 (NSW) s 41(1)(a); Supreme Court Act 1970 (NSW) s 75A(6)(c)). The principles he discussed would then likely have been the basis of his determination of the matter.
Heydon JA (with Mason P & Powell JA agreeing) has commented that intermediate appellate courts shouldn't refuse to follow well considered dicta of an Australian intermediate court in another judicial hierarchy unless it is plainly wrong: Beveridge v Whitton [2001] NSWCA 6 at [30].
Nothing has been put to me to suggest the Droga principles are inconsistent with binding authority in NSW.
I also note the English case of Dennard (aka Clark v Ardington Electrical Services and other appeals) [2002] EWCA Civ 510 at [133] where the Court of Appeal said: Mr Dennard expressed his satisfaction with the Vectra and upon the facts it would not have been reasonable for him to insist upon a replacement sports car. However, if a need for a particular replacement car is established, then the cost incurred of hiring that car is recoverable.
It was suggested on behalf of Mr Tumur that English cases should be carefully applied because the distinction between special and general damages has been maintained, as opposed, perhaps, to the law set out in Anthanasopoulos v Moseley (2001) 52 NSWLR 262 at [83] per Ipp JA's obiter (but with Handley JA's approval): Whatever the nomenclature to be attributed to the nature of damages represented by a plaintiff's need for services, the damages in question are not to be determined by reference to the actual cost to the plaintiff of having the care or services provided…..but generally by reference to the market cost of providing them.
I am not satisfied the Droga principles are plainly wrong. On the contrary, I find Harrison J's comments very persuasive and directly on point in this case. Further, they have been applied in District Court cases of Beamish v Kanakis [2017] WADC 33 and Patterson v Kenny [2017] WADC 58).
It is for the loss of use of its vehicle that Gladstone is being compensated (see further Lagden v O'Connor). Mr Phillips agreed he could do all of the business things he needed to do in the Mercedes Benz and I accept that Gladstone needed a vehicle of that prestige for Mr Phillips to properly reflect a successful company image given the importance of the vehicle to his day-to-day work with current and prospective clients.
I find only the reasonable cost of hiring a Mercedes Benz C class is recoverable to meet Gladstone's temporary need while the Tesla was under repair.

Did R2D charge the market rate?

As noted in Dimond v Lovell [2002] 1 AC 384 a plaintiff obtains more from credit hire agreements than the cost of a replacement vehicle. The additional benefits the plaintiff does not have to pay for include:

the provision of credit;
checking that the collision was not the plaintiff's fault;
bearing the irrecoverable costs of successful litigation; and
bearing any risk of the expense of unsuccessful litigation.

These additional benefits are all built into the hire. As Dimond v Lovell notes, on the face of it, their value is represented by the difference between what the plaintiff would have been willing to pay to an ordinary rental car company for the use of a car. The credit hire company charges more because they offer more. The difference represents the value of the additional services they provide. This means the credit hire rate cannot, of itself, constitute evidence of a market rate for the hire. Mr Phillips agreed Gladstone received credit in the hire agreement and this is a Dimond-type additional, and non-compensable, benefit.
Mr Tumur says that market rate is an entirely objective question of historical fact unrelated to the plaintiff's conduct (Hodson v Boonham, District Court of NSW, Gibbs DCJ, 15 December 2017 pp18-19; Patterson v Kenny [2017] WADC 58 at 71-75). It is, according to Lord Halsbury LC in The Mediana [1900] AC 113 at 117.5 a jury question to be determined on the evidence before it.
Mr Warren said that, as in this case, there is often uncertainty about when a vehicle will be ready after repairs and R2D charges a daily rate due to the indeterminate period of the rental. It does not scale prices down as the period of hire lengthens. Mr Warren said he helps set the rates and charges of R2D's vehicles, regularly searching the internet for pricing information from hire car rental aggregators and hires vehicles from mainstream car rental companies to stay abreast of market rates and trends.
Rosemary Dakin, Pricing & Product Manager of CLA Trading Pty Ltd (trading as Europcar) gave evidence. She has many years of experience in the rental car industry and, as part of her role, Ms Dakin examines competitive analyses prepared by her staff to ensure Europcar's rental rates remain competitive. I find her to have specialised knowledge based on her experience. Her expertise was in the area of pricing of rental car products and I find that she gave opinion based on her expertise.
She was cross-examined on the basis that it would be simplistic to look at daily rates for the same vehicle and conclude R2D is not charging a market rate. Ms Dakin said Europcar's rates vary from day to day depending on supply and demand as well as what is going on in the marketplace. Further, depot managers have some discretion to alter rates depending on what is going on locally. The discretions differ between Europcar's own branches and those owned by franchisees.
Ms Dakin said that at Europcar generally, higher rates apply to shorter hires and lower rates apply to longer hires. She said this information is available on Europcar's website. Ms Dakin said that:

A customer has to specify a return date if they want to hire a car from Europcar. Contracts can be extended, but unless Europcar otherwise agrees, the vehicle must be returned to the nearest branch to pay the additional rental charges and the same vehicle may not be available.
It has long been Europcar's (unadvertised) policy that where an extension is agreed to, the reduced daily rate is applied both prospectively and retrospectively. Equally, a higher rate will be charged if a vehicle is returned before the end of the contracted term.
The customer must pay an excess of up to $6,000 (deducted from the hirer's credit card) if they are involved in a collision during the hire but the excess can only be reduced, but not eliminated, by payment of a fee.
An amount of 200 kilometres a day is included in the hire charge.
Registration recovery fees are charged to cover green slip costs.

Mr Phillips said the repairer told him he did not know how long it would take to repair the Tesla. He didn't check in with the repairer as he trusted them and knew they would contact him when the vehicle was ready. Mr Phillips agreed he had internet facilities at work and on his mobile phone and could have, but did not, make enquiries with any other car hire companies before signing with R2D. But this case is not about Mr Phillips behaviour, it is about Gladstone's reasonable need.
What was the market rate for the Mercedes Benz C200 for 41 days? Mr Warren produced a Europcar advertisement for a Mercedes C class 'at the relevant time' (Exhibit 3, p99) for $153.21 per day. I am not sure what relevant time means. Ms Dakin produced a Europcar hiring invoice for a Mercedes CLA200 for 8 November 2016 (Exhibit 4, p44) where the daily base rate was $105.10. She also produced evidence of Sydney Airport (a non-franchised outlet) advertised rates for a Mercedes CLA 200 on 2 November 2016, the day of the R2D hire. The rates were as follows:

$101.98 per day for one day;
$91.77 per day for three days;
$63.85 per day for seven days; and
$60.91 per day for thirty days or more.

The R2D invoice charged $149 per day for the Mercedes Benz, much more than any of the Europcar rates. This evidence is powerful and I agree with Mr Tumur that the credit hire agreement charges do not represent the market rate. Gladstone is only entitled to recover a fair and reasonable market rate.
Mr Phillips said he asked how long the repairs would take and was told the repairer didn't know "because I don't think they had fixed a Tesla before and they were unsure as to how long".
Given that comment, it was reasonable to expect that the vehicle would not be ready for collection for a while and it would not be reasonable to expect a business to be making extension arrangements every day or having to return the vehicle for it to be checked by a rental car company. Noting Ms Dakin's evidence that Europcar applies a reduced daily rate both prospectively and retrospectively, I find that Europcar's 30 day rate is the applicable market rate for the Mercedes.
I am satisfied that Gladstone's business requirements mean that it was not unreasonable, remote or excessive that the excess reduction and delivery and return fees were incurred and these should be added to the hire costs to a total of $5,769.94: Amount No. of days Total Daily hire rate $60.91 41 $2,497.31 Vehicle registration recovery fee (VRRF) $6.75 41 $276.75 Administration fee (AF) 3.5% x (base rate + VRRF) 41 $97.09 Premium location surcharge (PLS) 29% x (base rate + VRRF + AF) $905.71 Super collision damage waiver (SCDW) $45 41 $1,845 Credit card surcharge 1.3% (base rate + VRRF +AF + PLS + SCDW) $73.08 Delivery & return fee (as per R2D's invoice): $75 $75 $5,769.94

I will hear submissions on interest and costs. Greenwood LCM Downing Centre Local Court 12 June 2018

Amendments 28 September 2018 - Minor amendment to end of decision to attribute to Magistrate Greenwood 24 October 2018 - Corrected error in spelling of representatives name on first page DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 October 2018

Local Court Act 2007(NSW)s 41(1)(a)

Supreme Court Act 1970(NSW)s 75A(6)(c)).

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