[1932] UKHL 1
Bee v Jensen (No 2) [2008] RTR 7
Beechwood Birmingham Limited v Hoyer Group UK Ltd [2011] QB 357
1 WLR 1067
Dimond v Lovell [2002] 1 AC 384
[1993] UKHL 2
Griffiths v Kerkemeyer (1977) 139 CLR 161
[1977] HCA 45
Grincelis v House (2000) 201 CLR 321
Source
Original judgment source is linked above.
Catchwords
[1932] UKHL 1
Bee v Jensen (No 2) [2008] RTR 7
Beechwood Birmingham Limited v Hoyer Group UK Ltd [2011] QB 3571 WLR 1067
Dimond v Lovell [2002] 1 AC 384[1993] UKHL 2
Griffiths v Kerkemeyer (1977) 139 CLR 161[1977] HCA 45
Grincelis v House (2000) 201 CLR 321[1996] HCA 37
Lagden v O'Connor [2004] 1 AC 1067[2003] UKHL 64
McBride v UK Insurance LimitedBent v Highways and Utilities Construction Ltd [2011] EWCA Civ 1384[1992] HCA 54
Watson Norie Ltd v Shaw [1967] 1 Lloyd's Rep 515
Wong v Maroubra Automotive Refinishers Pty Ltd
Judgment (17 paragraphs)
[1]
Introduction
These four applications for leave are concerned with the quantification of the damages that the owner of a motor vehicle that has been damaged by the negligence of a wrongdoer may recover from the wrongdoer. The question is the extent to which the owner is entitled to be compensated for the cost of hiring a replacement vehicle while the damaged vehicle is being repaired. More particularly, the question is whether the owner is entitled to the reasonable cost of hiring a replacement vehicle that is comparable, in terms of make, model and year, to the damaged vehicle while it is being repaired or, alternatively, to the reasonable cost of obtaining a motor vehicle that would suffice to meet the inconvenience caused to the owner by the unavailability of the damaged vehicle while being repaired.
The four proceedings are unrelated except to the extent that the same question arises in each of them. All four are applications for leave to appeal from orders made by judges sitting in the Common Law Division. As a matter of convenience, the four applications for leave were heard together. [3] It is convenient to summarise separately the circumstances concerning each of the four claims and the process whereby the claims came before the Common Law Division.
[2]
The Four Claims
The damaged vehicles involved in the four proceedings and their owners were as follows:
Ms Seung Hyun Lee: Toyota Camry;
Mr Azad Cassim: 2012 BMW 535i sedan;
Mr Alex Rixon: Audi A3 sedan; and
Mr Bilal Souaid: 2014 Lexus IS 250 F Sport Prestige sedan.
In the course of argument, reference was made to a practice whereby hiring companies engage in what was described as "credit hiring". In such a practice, the hiring company agrees to provide a replacement vehicle to the owner "on credit" for a fixed period. The hiring company agrees to use its best endeavours to have the hiring charge specified in the arrangement paid by the wrongdoer (or their insurers) and, on receipt by the hiring company of payment from the wrongdoer, the owner will be released from liability for the charges to the value of the payment received from the third party. After the expiry of the relevant period, the hiring company may demand that the owner pay any charges not recovered from the wrongdoer and the owner must pay the amount demanded forthwith. The hiring company may take an assignment of the owner's claim against the wrongdoer.
Such agreements between Mr Rixon and a hiring company and between Mr Cassim and the same hiring company were in evidence. A similar agreement between Mr Souaid and a different hiring company was also in evidence. No such agreement between Ms Lee and a hiring company was in evidence. However, there was evidence that such an arrangement was made by Ms Lee. [4]
It might be thought, for example, that the charge made by a hiring company under such an arrangement would be higher because of the term that the replacement vehicle was to be provided to the owner during the relevant period "on credit". One would expect that there would be a credit or interest element in the charge made by the hiring company to the owner for the hiring of the replacement vehicle. However, it was not suggested that any such credit or interest element in the hiring charge made the hiring charge unreasonable and the Court's attention was not directed to any evidence that the hiring charge paid by any of the claimants to a hiring company was greater than would be otherwise payable in the market for the hire of vehicles similar to those that were the subject of hiring arrangements with the claimants in the four proceedings. Rather, in the course of oral argument, Senior Counsel for the applicants said the question as to whether the costs attributable to the business model of credit hire, in so far as they exceeded "spot market hire rates", was not before the Court.
[3]
Ms Lee
On 27 May 2017, a motor vehicle driven by Ms Leisa Strelnicks collided with a Toyota Camry motor vehicle owned by Ms Lee, causing damage to Ms Lee's vehicle. The collision was the result of negligence on the part of Ms Strelnicks. Ms Lee's vehicle was unusable for a period of 15 days while it was undergoing repairs and Ms Lee hired a replacement vehicle for that period, the cost of which was $2,340.09. On 3 August 2017, Ms Lee commenced proceedings against Ms Strelnicks in the Small Claims Division of the Local Court. On 14 May 2018, an assessor appointed by the Local Court gave judgment in favour of Ms Lee for what was described as a "nominal amount" of $30.73, representing the interest on the capital value of Ms Lee's vehicle during the period when it was unavailable for use.
In his reasons, the assessor recorded that Ms Lee asserted that she did not have any access to any other vehicle to use and "needed" her vehicle to travel to and from work and for family purposes, such as taking children from place to place and visiting friends and family. She hired the replacement vehicle because the hiring company delivered the vehicle to her home address and she did not have funds available to pay a bond for a replacement vehicle. There was no suggestion that the claim was for special damages based on Ms Lee's impecuniosity making her unable to go into the mainstream car hire market.
The assessor observed that Ms Lee bore the burden of proving "need" as a basis for assessing damages according to the market rate for the replacement and that Ms Strelnicks put Ms Lee to proof on the question of whether she needed a replacement vehicle. In particular, the assessor observed that Ms Lee did not provide any details as to where she worked to and from where she had to travel and that she did not give any details other than "the most general motherhood statements" of needing a replacement vehicle for family purposes and taking children from place to place and visiting friends. The assessor characterised the evidence given by Ms Lee as being "really nothing more than lip service to the question of what needs she had" and as being "really meaningless and opaque in terms of providing any particulars as to what need" Ms Lee had.
The assessor said that, ultimately, neither the court nor Ms Strelnicks knew the basis upon which Ms Lee needed the replacement vehicle and that, while it was not "a high bar to jump over", it was necessary for her to give some evidence as to the particular needs for which she required the replacement vehicle. The assessor did not consider that the mere fact that Ms Lee "went out and hired a replacement vehicle" was, of itself, evidence of a need. The assessor observed further that there was no evidence as to the degree of the use of the replacement vehicle and "nothing, in truth, regarding factual matters of evidence". Accordingly, the assessor concluded that a nominal amount should be awarded in terms of the capital interest on the value of the damaged vehicle.
By amended summons (judicial review) dated 8 February 2019, Ms Lee sought judicial review under s 69 of the Supreme Court Act in respect of the decision of the assessor. On 10 May 2019, for reasons published on that day, Wilson J, sitting in the Common Law Division, ordered that the amended summons be dismissed and that Ms Lee pay Ms Strelnicks' costs. Wilson J concluded that the assessor was not in error in determining the matter as he did and that there was no basis for intervention by the Supreme Court. Her Honour observed that the temporary loss of use of the damaged vehicle was a loss that Ms Strelnicks was liable to compensate Ms Lee for by way of an award of general damages but that Ms Lee's need for a replacement vehicle remained relevant to the assessment of quantum of damages to which she was entitled and had to be proved. [5]
Wilson J accepted that where, by reason of need, a plaintiff in a claim for damages for injury to a non-income producing chattel is required to hire a replacement chattel, the damages are to be measured by reference to the market rate of hiring the replacement. [6] Her Honour observed that there was no evidence from Ms Lee as to her need for a vehicle during the period when the damaged vehicle was being repaired and that there was no evidence as to whether her children were in school in the relevant period, how far away the school was, or whether there was any alternative means of transport conveniently available. [7] Her Honour concluded that the assessor did not err in law.
[4]
Mr Cassim
On 1 April 2017, Mr Cassim was driving his 2012 BMW 535i sedan when it was damaged in a collision with a vehicle driven negligently by Mr Dylan Nguyen. While the damaged vehicle was being repaired, he was not able to use it. Because parts had to come from overseas, a considerable time period was required for the repairs to the damaged vehicle. Between 3 April 2017 and 8 April 2017, Mr Cassim hired a RAV 4 vehicle at a cost of $1038. After that, he shared his wife's car for a while, an arrangement that he described as "extremely inconvenient". He also travelled overseas for 10 days. On 30 May 2017, Mr Cassim hired a Nissan Infiniti Q50 vehicle until the damaged vehicle was returned to him on 22 August 2017. That hiring cost a total of $17,158.02.
Mr Cassim commenced proceedings in the Local Court against Mr Nguyen for recovery of the cost of hiring the replacement vehicles. Mr Nguyen contended that, assuming that Mr Cassim could prove "the need for a vehicle", the ordinary measure of damages was the market rate of hire of the vehicle that Mr Cassim "was required to hire" and not necessarily the vehicle he "chose to hire". Mr Nguyen contended that a Toyota Corolla was an exemplar of a vehicle that could satisfy any ordinary need on the part of Mr Cassim for a vehicle "just to get around" and that the cost of hiring such a replacement vehicle was the appropriate measure of damages.
The Local Court magistrate accepted that Mr Cassim needed a vehicle for the business that he ran from home, which sometimes involved carrying around toilet seat samples, and for ordinary domestic purposes and that that Mr Cassim had proved, on the balance of probabilities, that he needed a vehicle during the whole period when the damaged vehicle was being repaired, except while he was not in Australia. The magistrate accepted the evidence of Mr Cassim that the replacement vehicle he received was of a lower value than the vehicle he ordinarily drove but that it was better than a Toyota Corolla. Mr Cassim said that he did not think he could have used a Corolla because of the need to move his three children and their sporting equipment around but otherwise agreed that samples he carried in the course of use of the vehicle for his business would have been able to be carried on the back seat of a Corolla. Apart from the reference to sporting gear, Mr Cassim gave no evidence to suggest that the things for which he needed a vehicle on a day-to-day basis could not have been adequately satisfied using a vehicle such as a Toyota Corolla. While Mr Cassim had the replacement vehicle, he drove it on an average of 27 km per day.
Mr Cassim gave evidence that he wanted "a nice luxury car" and that is why he had his BMW vehicle. [8] However, he agreed that it was most likely that any vehicle that had five seats would have been feasible although he preferred to have a car similar to his own. The magistrate found that the replacement vehicle hired by Mr Cassim was at a slightly lower value than "the Redbook" [9] value of the damaged vehicle but that otherwise its features were similar to or less than those of the damaged vehicle.
The magistrate concluded that it was reasonable for Mr Cassim to obtain the use of a vehicle of equivalent value to the damaged vehicle and not just of a vehicle that was capable of transporting him and any other people and things he needed to transport. The magistrate considered that a vehicle of equivalent value was an appropriate vehicle for Mr Cassim's need and an appropriate vehicle to compensate him for the loss of use of the damaged vehicle. The magistrate considered that a less expensive vehicle was not the appropriate measure of damages as it would not have put Mr Cassim in the same position as he would have been in had Mr Nguyen not negligently damaged his vehicle. The magistrate considered that Mr Cassim was entitled to the market rate of hiring a vehicle of equivalent value to the damaged vehicle for the period during which he had need for a replacement. The magistrate found that the rental and associated costs paid by Mr Cassim for the replacement vehicles were within the range of market rates for appropriate replacement vehicles and found that the amount claimed for the provision of the replacement vehicle was within the range of market rates of hiring a vehicle that was reasonable to meet Mr Cassim's needs. Accordingly, the magistrate directed the entry of judgment for Mr Cassim in the sum of $17,158.02.
By amended summons dated 27 August 2019, Mr Nguyen appealed to the Supreme Court from the orders made by the Local Court magistrate. The appeal was brought under s 39 of the Local Court Act 2007 (NSW) on the basis of errors of law by the Local Court. On 3 September 2019, for reasons published on that day, Basten J, sitting in the Common Law Division, ordered that the appeal be allowed and set aside the judgment and orders entered in the Local Court on 7 December 2018. In lieu of those orders, Basten J ordered that Mr Nguyen pay Mr Cassim the sum of $7,476 together with interest.
Basten J noted that the following facts were not in dispute or were found in the Local Court and not challenged:
the liability of Mr Nguyen for the collision;
Mr Cassim needed a vehicle for the business that he ran from home;
Mr Cassim needed the vehicle for ordinary domestic purposes, including shopping and taking children to sport;
the replacement vehicle was of a slightly lower value than the damaged vehicle;
the things for which Mr Cassim needed a vehicle on a day-to-day basis could have been adequately done using a vehicle like a Toyota Corolla;
the daily cost of the RAV 4 was $139;
the daily cost of the Nissan Infiniti was in the order of $204 per day including the delivery fee and damage waiver; and
a Toyota Corolla would have met Mr Cassim's needs at a daily cost of $89, which for the 84 days during which he used the Nissan Infiniti was $7,476.
His Honour considered that, given the findings set out above, the magistrate was in error in allowing the full invoiced amount with respect to the hire of the Infiniti Q50. His Honour considered that, having accepted Mr Cassim's needs would have been satisfied by the hire of a Toyota Corolla, at a cost of $7,476, the magistrate should have given judgment for that amount.
[5]
Mr Rixon
On 8 August 2017, an Audi A3 sedan motor vehicle owned by Mr Alex Rixon was damaged in a collision with a motor vehicle driven negligently by Mr Ahya-Ud-Din Arsalan. The repair of the damaged vehicle took a little over two months and for most of that period, Mr Rixon hired a replacement vehicle of the same make and model. The hiring charge for a period of 69 days totalled $12,829.91. Mr Rixon claimed that amount from Mr Arsalan in the Local Court as damages flowing from the loss of the use of the damaged vehicle whilst it was undergoing repairs.
The Local Court magistrate held that Mr Rixon was entitled to be compensated for the loss of use of the damaged vehicle "by a suitable replacement vehicle that met his stated needs" and that the measure of damages was to be assessed at the market rate of hiring such a vehicle. The magistrate was not satisfied that Mr Rixon had a particular need for an Audi A3 or similar vehicle to replace the loss of use of the damaged vehicle while he waited for it to be repaired but was of the view that a four door sedan "of considerably less impressive specifications" could have been hired for less than Mr Rixon paid and found that a Toyota Corolla would have been sufficient to satisfy Mr Rixon's stated needs. The magistrate concluded that the needs of Mr Rixon, as established by the evidence, could have been met by the hire of a Toyota Corolla at a cost of $4,226.25 plus interest and directed the entry of judgment in favour of Mr Rixon in that sum. [10]
By summons filed 20 December 2018, Mr Rixon appealed to the Supreme Court from the orders made by the Local Court. The appeal was brought under s 39 of the Local Court Act 2007 (NSW) on the basis of errors of law by the Local Court. On 3 September 2019, for reasons published on that day, Basten J, sitting in the Common Law Division, ordered that the appeal be dismissed with costs.
Basten J observed that Mr Rixon contended that, as a matter of law, he was entitled to compensation calculated as the expense of obtaining "a vehicle of equivalent value" to the damaged vehicle and not by reference to a vehicle of lesser value that "would have satisfied his needs". Basten J held that there was no basis for concluding that the findings of fact made by the magistrate were not properly made on the evidence. His Honour observed that the real challenge was to the result, namely, that, having found that Mr Rixon had a "need" for a replacement vehicle, the magistrate failed to accept that the need was only adequately satisfied by the hire of a vehicle "of equivalent value to the damaged vehicle". His Honour accepted that the question of whether damages for the inconvenience suffered because the damaged vehicle was unavailable should be assessed by reference to the market value for a vehicle of lesser value, which was capable of satisfying all aspects of Mr Rixon's needs, was a question of law that was challengeable on appeal. However, his Honour rejected that challenge.
[6]
Mr Souaid
On 27 March 2017, a 2014 Lexus IS 250 F Sport Prestige sedan owned by Mr Bilal Souaid collided with a motor vehicle driven negligently by Mr Hanin Nahas, who admitted liability for the costs of the repair to the damaged vehicle. As a result of the collision, the damaged vehicle was unavailable for use while undergoing repairs for the period from 14 August 2017 to 22 September 2017, a period of 40 days. Mr Souaid hired two replacement vehicles during that period, being a Lexus IS 250 sedan from 14 August 2017 to 28 August 2017 and a BMW 318i sedan from 28 August 2017 until 22 September 2017.
Mr Souaid brought proceedings in the Local Court for recovery of damages for the loss of use of the damaged vehicle during the period it was being repaired. He claimed the sum of $11,128.41. The Local Court magistrate observed that it was not disputed that the damaged vehicle was not used for business purposes and was used only for domestic, social and family purposes. The magistrate found that Mr Souaid and his wife used the damaged vehicle for domestic and social purposes, such as shopping, travelling from place to place and visiting friends, and family purposes, such as picking up and dropping off their two children at school and visiting family. When Mr Souaid was asked whether he requested "a luxury car" or just requested "whatever is available", he responded:
"Whatever, you know, I could use for, you know, for my purpose of use sort of thing".
He agreed that he "pretty much asked whatever's available and that's what they gave me" and when asked whether he would have been "okay with just a Holden sedan or a Camry or something like that", he responded "any car, just as long as I have a car there for my wife, for the kids and stuff". He said that he "wasn't fussed at all."
The magistrate was satisfied that Mr Souaid required or needed a replacement vehicle while the damaged vehicle was being repaired. However, the magistrate was not satisfied that Mr Souaid needed "a luxury car" for the period during which the damaged vehicle was being repaired and that "a non-luxury sedan" would have sufficed for his needs. The magistrate referred to Mr Souaid's evidence in cross-examination that he did not need a luxury car for domestic, social and family purposes, that any car could have done those things for him and that he would have been happy with any replacement vehicle that was available. [11] However the magistrate noted that, for domestic, social and family purposes, Mr Souaid chose to hire a vehicle that he said was "comparable" with the damaged vehicle. [12]
The magistrate considered that the cost of a replacement vehicle should be determined by reference to evidence of hire charges that would have been available to Mr Souaid if he had been a participant "in the relevant market at the relevant time". The magistrate was satisfied that the cost of hiring a Toyota Camry sedan, together with the cost of collision damage waiver, was the appropriate measure of damages and directed the entry of judgement in the sum of $2,805.60. The magistrate had regard to advertised single day or "spot" rates for a Toyota Camry or similar vehicle from a number of rental companies.
By summons filed on 23 October 2018, Mr Souaid appealed to the Supreme Court under s 39 of the Local Court Act. On 3 September 2019, for reasons published on that day, Basten J, sitting on the Common Law Division, ordered that the appeal from the Local Court be dismissed with costs. His Honour referred to his reasons for decision in the Cassim appeal and added that, since the test as to the reasonableness of the expense incurred was objective, concessions alleged to have been made by Mr Souaid were not determinative but were merely available as evidence of supportive of the finding that the hire of "prestige vehicle" was not reasonably necessary to meet the established needs. [13]
Basten J considered that, while the magistrate was in error, her Honour's conclusion as to need was consistent with the principles that his Honour accepted. [14] His Honour considered that, because the errors favoured Mr Souaid and did not materially affect the fact-finding, they did not constitute a basis for interference by the Supreme Court. His Honour concluded that no appealable error had been demonstrated according to the legal principles that his Honour set out in his decision in relation to Cassim. [15]
[7]
Applications for leave to appeal
None of the claims exceeded the sum of $100,000. Accordingly, leave to appeal is required by reason of s 101(2) of the Supreme Court Act 1970 (NSW). It appears that there is a significant volume of cases in the Local Court involving the assessment of damages for the loss of use of a non-income producing motor vehicle in circumstances similar to those dealt with in the present four claims.
Applications for leave to appeal have been lodged in relation to the decision of Wilson J in the case of Lee and the decisions of Basten J in the cases of Cassim, Rixon and Souaid. A direction has been given that the appeals be heard concurrently with the applications for leave, on the assumption that leave is granted. Senior counsel for the applicants for leave addressed on all four applications on the basis that the same question of principle was raised. It will be convenient to deal with that principle and then indicate how each of the applications for leave should be disposed of in the light of the conclusions reached.
[8]
The 2001 Proceedings
Much of the argument both in this Court and in the Common Law Division, as well as in the Local Court, was based on obiter dicta of Ipp AJA in a decision of this Court delivered in 2001 (the 2001 Proceedings). [16] As with the present proceedings, the 2001 Proceedings concerned four separate actions brought in the Local Court seeking to recover the cost of hiring a vehicle while the plaintiff's own vehicle was being repaired after a collision as a result of negligence on the part of the defendant. Each of the four cases raised a common point of principle, in that each claim was for the cost of hiring a replacement vehicle while the damaged vehicle was being assessed and repaired and was unavailable for the claimant's use. [17] Each of the claimants had been provided, on a gratuitous basis, with a vehicle by the claimants' motor vehicle insurer (NRMA), the cost of which was not a liability or loss incurred by the claimant. NRMA provided the replacement vehicles under a commercial arrangement between it and a vehicle hiring company (Hertz). The question raised in the 2001 Proceedings was whether the defendants were liable for the costs incurred by NRMA to Hertz in providing to a claimant a replacement vehicle while the claimant's vehicle was being repaired. The defendants contended that the claimants had to demonstrate that they had incurred an actual loss consisting of the cost of hire of the replacement vehicles. [18]
The Local Court found in favour of the four claimants and the defendants appealed from those decisions to the Common Law Division, on a question of law, pursuant to s 69 of the Local Court (Civil Claims) Act 1970 (NSW). The four appeal proceedings came before Sully J, who ordered that the proceedings be removed into the Court of Appeal for the determination of four questions as follows:
(i) whether with the principles in relation to damages needs caused by personal injury are applicable to a claimant's loss of the use of a non-income earning chattel; [19]
(ii) whether the Local Court erred in concluding that the claimants suffered any loss recoverable from the defendants;
(iii) whether the Local Court erred in concluding that, if there was no right of subrogation on the part of NRMA, the subrogation issue was outside the scope of the case; and
(iv) whether, in any event, the decision of the Local Court should be affirmed on grounds propounded in the defendants' notice of contention.
The second and fourth questions were subsidiary to the main issues raised by the first and third questions. The Court of Appeal answered the four questions as follows:
(i) the question does not arise;
(ii) no;
(iii) no; and
(iv) no.
Accordingly, the Court ordered that the summons in the Common Law Division be dismissed with costs.
The Court of Appeal concluded that injury to a chattel that deprives a person of the use of the chattel is compensable, such that the claimants were entitled to damages for the loss of use of their vehicles. [20] The Court concluded that the principle res inter alios acta applied such that it was irrelevant that a third party provided a substitute for the damaged chattel as was the basis upon which the third party provided the replacement. [21]
The Court accepted that the law of negligence recognises a claim for compensation for the expense of incurring hire charges for non-income producing vehicles. [22] The Court said that claims for damages for injury to a non-income producing chattel are based on need and underlying the measure of damages is the owner's need to keep or replace the damaged chattel during the period while it is being repaired and cannot be used. [23] Accordingly, the Court of Appeal concluded that the Local Court did not err in concluding that the claimants suffered a loss that was recoverable from the defendants.
The question of quantum was not in issue in the 2001 Proceedings and any comment as to the principles that would govern the amount of damages in any given case was therefore clearly obiter. [24] Nevertheless, Ipp AJA, with whom Handley JA agreed, addressed the question of quantum. His Honour observed that, in the case of claims for damages for injury to a non-income producing chattel, there is no substantive significance in the distinction between special and general damages. [25] His Honour said that, just as the damages payable for a claimant's need for services are not to be determined by reference to the actual cost to the claimant of having the services provided or by reference to the income foregone by the provider of the services but, generally, by reference to the market cost of providing the services, [26] similarly, where, "by reason of need", the claimant is required to hire a replacement chattel, the damages are to be measured by reference "to the market rate of hiring the replacement". [27] His Honour considered that there was no relevant distinction between a financial benefit, a benefit in the form of services, and a benefit in the form of a replacement vehicle provided to the owner of a vehicle damaged by the negligence of another. [28]
The respondents in the present proceedings contend that the measure of loss articulated by Ipp AJA directs inquiry to "the market rate of hiring" the vehicle that the claimant was "by reason of need … required to hire" (emphasis added). They contend that his Honour, and Handley JA, rejected the notion that the expense incurred by a claimant in the hire of a replacement vehicle is, at least, a measure of loss subject to questions of mitigation. The 2001 Proceedings were not concerned in any sense with identifying the precise "need" for a replacement vehicle or with the determination of the market rate or market cost of providing a replacement vehicle. It follows that the observations made by Ipp AJA do not throw direct light on the question presently before this Court.
[9]
The Relevant Principle
The observations made by Beazley JA as well as Ipp AJA in the 2001 Proceedings make it clear that, where there is a "need" for a replacement vehicle, while a non-income producing vehicle is being repaired following damage caused by the negligence of a wrongdoer, the wrongdoer will be liable to pay damages by reference to the cost of hiring a replacement vehicle while the repairs are underway. That is to say, the object of an award of damages in an action in tort is to put the claimant, so far as money can, in the position that the claimant would have been in but for the loss inflicted by the wrong doing: the dominant rule is the principle of restitutio in integrum. [29]
The first inquiry in such a case is as to the "need". Ipp AJA should not be understood as saying that the "need" is to be gauged by reference to what might perform the same function as the damaged vehicle but to the question of whether the claimant had a need for the use of the damaged vehicle. Thus, if the claimant would not have had any need to use the damaged vehicle during the period taken for repair, there would be no entitlement to damages. On the other hand, where the claimant can demonstrate that the damaged vehicle would have been used, the need is for a replacement for that damaged vehicle. To put the claimant in the position in which he, she or it would have been but for the wrongdoing, the replacement vehicle should be equivalent to the damaged vehicle or as similar to it as is reasonably possible.
In the case of fungibles, such as most motor vehicles are, there will normally be no difficulty in finding a replacement that is equivalent, such as a vehicle of the same make, model and year. To the extent that there is not available a replacement of the same make, model and year, there may be a question of what reasonable equivalent is available in the market place. For example, if the damaged vehicle is an older model, it may be unreasonable to hire, as a replacement, a vehicle of a much later model or different specification.
The position may well be different in the case of a claim in respect of a unique vehicle. That is to say, the question as to the manner in which damages for the loss of the use of a unique vehicle should be quantified raises different considerations. In such a case, it may be necessary to have regard to the function of the particular vehicle and the particular use to which that vehicle would have been put during the period of repair. However, that is not the position in any of the proceedings presently under consideration.
In the case of a fungible vehicle, having determined that the claimant would have used the vehicle during the period of repair and therefore had a relevant "need", two further inquiries are necessary. The first is as to the replacement. The second is as to the cost of the replacement so identified.
Thus, it is first necessary to inquire whether there is an equivalent vehicle available, such as a vehicle of the same make, model and year as the damaged vehicle, or a vehicle as similar as possible to the damaged vehicle in specification and performance. Where there is no vehicle available that is capable of being characterised as being sufficiently similar to the damaged vehicle in terms of make, model and year, the inquiry must be as to what is available in the market that is as close to the damaged vehicle as possible in terms of specification and performance.
Secondly, it is necessary to determine whether the cost of hiring such a replacement vehicle is reasonable in all of the circumstances. The hiring charge that may have to be paid in order to obtain an equivalent vehicle will have a bearing on whether it is reasonable to incur that hiring charge for the replacement.
In the four cases presently before the Court, there was no suggestion that any of the damaged vehicles was other than a fungible. Thus, provided it was established that there was a relevant "need" on the part of the claimant, because of the intention of the claimant to use the damaged vehicle if it had not been damaged, the next inquiry should have been as to the availability of an equivalent vehicle as a replacement, in the sense just outlined. The complaint by the respondents, however, is not concerned with the availability of a replacement but the characterisation of the "need" on the part of each claimant and the underlying question of whether the damaged vehicles should be replaced on a "like for like" basis.
In the case of deprivation of the use of a non-income producing vehicle, the relevant "need" is to use the damaged vehicle as and when desired. That capacity is lost while the vehicle is being repaired. The first question is whether there was a relevant need on the part of a claimant to use a damaged vehicle while it was being repaired. The claimant is entitled to be compensated for the cost of being put in the position of not being able to use the damaged vehicle. The cost of hiring a replacement vehicle that is equivalent in as many respects as possible to the damaged vehicle will be the means whereby the claimant is put in the position in which he, she or it would have been but for the wrongdoing.
One can envisage circumstances where a wrongdoer had available a vehicle that was equivalent to the damaged vehicle. If that equivalent vehicle were made available for use by the claimant while the damaged vehicle of the claimant was being repaired, the relevant "need" of the claimant would be satisfied. To the extent that the wrongdoer has no such equivalent vehicle available, the cost of hiring an equivalent replacement vehicle in the market is the appropriate measure of damages to which the claimant would be entitled, in order to be put in the position that he, she or it would have been in but for the wrongdoing.
The reference to "need" is not to be understood as a reference to a need that would be satisfied by the use of the any other vehicle of similar functionality. The reference to "need" is to be understood as a reference to the loss suffered by the claimant by reason of being deprived of the use of the claimant's damaged vehicle. That loss is not satisfied by the provision of a replacement vehicle that might have the same function, in the sense that it is capable of carrying persons and luggage, but is of different specification and performance. The loss that the claimant suffers, which gives rise to the relevant "need", is the deprivation of the use of the damaged vehicle, not simply deprivation of the use of a means of transportation. The loss will not be compensated by a replacement vehicle that simply provides the same form or means of transport.
[10]
Application of the Principles
It is necessary to consider each case individually for the purposes of determining whether or not the claimant victim had a relevant need to use the particular damaged vehicle of which that claimant victim was deprived during the period taken for repairs. It may not matter whether the damages quantified by reference to the costs of hiring a replacement vehicle are to be characterised as special or general or whether the cost of hiring a replacement vehicle is to be characterised as the cost mitigating the loss that would otherwise be suffered by the claimant victim. [30]
[11]
Ms Lee
In the case of Ms Lee, Wilson J concluded that there was no evidence from Ms Lee as to her need for a vehicle during the period when the damaged vehicle was being repaired. While she said that she used the damaged vehicle to visit family and friends, there was no evidence that any such visits were made or planned during the 15 day period of repairs. While there was also an assertion that Ms Lee needed the damaged vehicle to take children to and from school, there was no evidence as to whether her children were in school at the relevant period, how far away the school was or whether there was any alternative means of transport conveniently available. [31]
In essence, the assessor found that Ms Lee failed to establish that she had a relevant "need" to use the damaged vehicle during the period in question. That is to say, in the absence of evidence as to the use to which she would have put the damaged vehicle or the use to which she in fact put the replacement vehicle, she failed to establish that she would have suffered any loss. That was a finding of fact made by the assessor and Wilson J did not err in concluding that there was no error on the part of the assessor in making that finding. Leave to appeal from the orders made by Wilson J should be refused.
[12]
Mr Cassim
In the case of Mr Cassim, the Local Court found that he had established a relevant need for a replacement vehicle. The magistrate accepted that Mr Cassim needed his vehicle for the business that he ran from home and for ordinary domestic purposes. He actually drove the replacement vehicle on an average distance of 27 kilometres per day. It is clear that the Local Court found that Mr Cassim was deprived of the use of his damaged vehicle. The evidence indicates that Mr Cassim paid no more than the market rate for the replacement vehicle that he chose to hire and that the replacement vehicle was an appropriate replacement vehicle.
No complaint was made about the hiring charge paid for the replacement vehicle. The only complaint was that Mr Cassim should have hired a vehicle of lower value than the vehicle that he hired. There was no error of law on the part of the Local Court. It follows that the summons in the Common Law Division should have been dismissed with costs. Leave to appeal from the orders made by Basten J should be granted. The appeal should be allowed and the orders made by Basten J should be set aside. In lieu thereof, the appeal to the Common Law Division should be dismissed.
[13]
Mr Rixon
In the case of Mr Rixon, the Local Court appears to have accepted that Mr Rixon had a relevant need to use his damaged vehicle, in the sense that he would have used it had it not been damaged and he did in fact use the replacement vehicle that he hired. The only question that was before the Local Court was whether Mr Rixon was entitled to damages assessed by reference to the costs of hiring a vehicle equivalent to the damaged vehicle. There was no suggestion that the hire charge paid for the replacement vehicle was unreasonable or excessive. The magistrate was not satisfied that Mr Rixon had "a particular need" for a vehicle similar to the damaged vehicle and that a Toyota Corolla would have been sufficient replacement for his Audi A3. That entailed an error of law on the part of the magistrate in so far as it entailed a conclusion that a desire to use an equivalent vehicle while the damaged vehicle was being repaired that Mr Rixon was not entitled to be put in the position he would have been in had his vehicle not been damaged by the defendant.
The appeal to the Common Law Division should have been allowed and the orders of the Local Court should have been set aside. Leave to appeal should be granted to Mr Rixon. The appeal should be allowed and the orders made by Basten J should be set aside. In lieu of those orders there should be an order that the appeal from the Local Court be allowed and the orders of the Local Court be set aside.
[14]
Mr Souaid
In the case of Mr Souaid, the Local Court was satisfied that Mr Souaid required or needed a replacement vehicle while his damaged vehicle was being repaired. There was no suggestion that the hire charge paid for the replacement vehicle was unreasonable or excessive. However, the Local Court found that Mr Souaid was content with any car, just as long as he had a car there "for my wife, for the kids and stuff". That was a finding of fact and, on that basis, the magistrate concluded that the appropriate measure of the loss suffered by Mr Souaid was the cost of hiring a replacement vehicle that was not equivalent to his damaged vehicle. There was no error of law. Basten J did not err in dismissing the appeal to the Common Law Division. Leave to appeal to this Court should be refused.
[15]
Costs
Ms Lee and Mr Souaid should be ordered to pay the costs of their respective applications for leave. In relation to the application by Mr Cassim, the respondent should pay his costs of the appeal including the application for leave. The respondent should also pay Mr Cassim's costs of the appeal to the Common Law Division. In the case of Mr Rixon, the respondent should pay the costs of the appeals including the applications for leave. The respondent should pay the costs of the appeal to the Common Law Division and there should be orders for costs in the Local Court.
The applicants should be directed to bring in short minutes to give effect to these conclusions. To the extent that any party is entitled to a certificate under the Suitors' Fund Act 1951 (NSW), a certificate should be given.
[16]
Endnotes
His Honour was sitting in his capacity as a Judge of the Court, and not in his capacity as a Judge of Appeal and so described himself.
The Greta Home; Owners of No. 1 Steam Sand, Pump Dredger v The Owners of SS Greta Home [1897] AC 596; The Mediana [1900] AC 113; The Marpessa [1907] AC 241; The Susquehana [1926] AC 655.
Three of the proceedings were heard concurrently by Basten J in the Common Law Division. The applicant in Rixon v Arsalan then sought for Rixon v Arsalan, Cassim v Nguyen and Souaid v Nahas to be heard together alongside Lee v Strelnicks, by notice of motion signed 4 October 2019, pursuant to r 28.5 and/or r 2.1 of the Uniform Civil Procedure Rules 2005 (NSW).
See [2019] NSWSC 526 at [7]. It may also be noted that the hiring company used by Ms Lee was the same company used by Mr Souaid, whose hiring agreement is in evidence.
See [2019] NSWSC 526 at [43] and [46].
Anthanasopoulos v Moseley (2001) 52 NSWLR 262; [2001] NSWCA 266 (Anthanasopoulos) at [84] citing Kars v Kars (1996) 187 CLR 354 at 359.
See [2019] NSWSC 526 at [59].
Azad Cassim v Dylan Nguyen (Local Court (NSW), Farnan LCM, 6 December 2018, unrep) at [16].
"RedBook.com.au" being a vehicle valuation and information website.
Alex Rixon v Ahya Ud Din Arsalan (Local Court (NSW), Keogh LCM, 23 October 2018, unrep) at [64].
Bilal Souaid v Hanin Nahas (Local Court (NSW), Freund LCM, 25 September 2018, unrep) at [22].
Bilal Souaid v Hanin Nahas (Local Court (NSW), Freund LCM, 25 September 2018, unrep) at [4(d)].
[2019] NSWSC 1132 at [8].
Being that which follows from adopting the approach set out in dicta in Anthanasopoulos and in three decision of the NSW Supreme Court discussed in Nguyen v Cassim [2019] NSWSC 1130.
See Nguyen v Cassim [2019] NSWSC 1130.
See Anthanasopoulos.
See ibid at [2]-[3].
See ibid at [13]-[14].
See Griffiths v Kerkemeyer (1977) 139 CLR 161.
See Anthanasopoulos at [37].
See ibid at [58].
See ibid at [74]-[75].
See ibid at [80].
See ibid at [59].
See ibid at [82] citing Griffiths v Kerkemeyer (1977) 139 CLR 161 at 179.
See ibid at [83].
See ibid at [84].
See ibid at [87].
See Hoad and Anor v Scone Motors Pty Ltd (1977) 1 NSWLR 88 at 99.
See James Edelman, McGregor on Damages (20th ed, 2018, Sweet & Maxwell Ltd) at 256-258.
See [2019] NSWSC 526 at [59].
[17]
Amendments
18 June 2020 - Coversheet - under "Representation", "SR Law" amended to read "Martin P Board & Associates; and SR Law from 26 May 2020"; and
Headnote "The principle issues before the Court were:" amended to read "The principal issues before the Court were:"
19 June 2020 - At [20], the words "adequately remedied the claimant's loss" added to the last sentence.
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: 19 June 2020
of SS "Greta Home" [1897] AC 596
The Owners of Steamship "Mediana" v The Owners, Master and Crew of Lightship "Comet" [1900] AC 113
Van Gervan v Fenton (1992) 175 CLR 327; [1992] HCA 54
Watson Norie Ltd v Shaw [1967] 1 Lloyd's Rep 515
Wong v Maroubra Automotive Refinishers Pty Ltd; Ayres v Maroubra Automotive Refinishers Pty Ltd [2015] NSWSC 222
Texts Cited: Andrew Burrows, Remedies for Torts, Breach of Contract, and Equitable Wrongs (4th Ed, Oxford University Press, 2019)
James Edelman, McGregor on Damages (20th ed, 2018, Sweet & Maxwell Ltd)
Category: Principal judgment
Parties: 2019/173246
Seung Hyun Lee (Applicant)
Leisa Strelnicks (First Respondent)
Local Court of New South Wales (Second Respondent)
2019/306634; 2019/306670
Martin P Board & Associates; and SR Law from 26 May 2020 (Applicants)
MCK Lawyers (Respondents)
File Number(s): 2019/173246; 2019/306508; 2019/306634; 2019/306670
Decision under appeal Court or tribunal: Supreme Court of NSW
Jurisdiction: Common Law
Citation: [2019] NSWSC 526 (2019/173246)
[2019] NSWSC 1132 (2019/306508)
[2019] NSWSC 1130 (2019/306634)
[2019] NSWSC 1136 (2019/306670)
Date of Decision: 10 May 2019 (2019/173246)
3 September 2019 (2019/306508; 2019/306634; 2019/306670)
Before: Wilson J (2019/173246)Basten J (2019/306508; 2019/306634; 2019/306670)
File Number(s): 2018/25002 (2019/173246)
2018/324684 (2019/306508)
2018/391682 (2019/306634)
2018/391931 (2019/306670)
Judgment
MEAGHER JA: These four applications for leave to appeal involve claims for damages for loss of use of essentially private use motor vehicles by reason of another driver's negligence where the claimant owner has hired a replacement vehicle for all or part of the period during which the damaged vehicle was being repaired. The circumstances in which those claims were made and dealt with in the courts below are summarized in the judgment of Emmett AJA.
It is well established that loss of use is a compensable head of injury or damage, notwithstanding that the damaged vehicle may have been used for family or social purposes unconnected with the conduct of any business, in other words notwithstanding that it was a non-income producing chattel. See Dimond v Lovell [2002] 1 AC 384; Anthanasopoulos v Moseley (2001) 52 NSWLR 262; [2001] NSWCA 266 and Lagden v O'Connor [2004] 1 AC 1067; [2003] UKHL 64. In Lagden v O'Connor the compensable loss or injury was described as "inconvenience" as a result of being unable to use the vehicle (Lord Hope at [27]) and as deprivation of the benefit of having the "car available for whatever use [the owner] might from time to time decide upon" (Lord Scott at [76]).
None of the claims of the four plaintiffs in the Local Court (Ms Lee, Mr Cassim, Mr Rixon and Mr Souaid) was for general damages for not having a vehicle available for use during the relevant period. That such claims may be made in circumstances where no substitute vehicle has been hired or otherwise made available is unquestionable. In Alexander v Rolls Royce Motor Cars Ltd [1996] RTR 95, the Court of Appeal (Beldam LJ, Peter Gibson and Staughton LJJ agreeing) noted at 102:
In cases of private motor cars the approach has generally been different. Notwithstanding that no substitute vehicle had been hired, judges have awarded compensation for loss of use of a vehicle while it is being repaired where it has been shown that inconvenience has been caused or, for example, that the owner has had to use public transport, or walk or that a family have been deprived of the advantage of a family car where otherwise they would have used the car which had been damaged.
There is no rule or principle that where no replacement vehicle has been hired or made available to the claimant the ordinary or fair measure of general damages should nevertheless be "a sum based upon the spot rate hire charge for a comparable vehicle": cf Lagden v O'Connor at [77]. That statement of Lord Scott, for the reasons given in the judgment of Sir Mark Potter P in Beechwood Birmingham Limited v Hoyer Group UK Ltd [2011] QB 357 at [35]-[46], is to be "read in and limited to the context in which it was uttered namely that of a private motorist claiming in respect of a substitute vehicle hired by him during the period of repair". See also Bee v Jensen (No 2) [2008] RTR 7 at [19]-[21] per Longmore LJ.
In making a claim for general damages where no replacement vehicle has been hired the claimant, no doubt after the event, must prove the disruption and inconvenience which resulted from the deprivation of use, as well as any travel or other related expenses reasonably incurred. In Beechwood Birmingham v Hoyer Group the position was summarised at [48]-[49]:
… albeit the court may be concerned with a degree of compensation for fares by way of special damage in a case where the owner has been obliged to use public transport rather than his damaged vehicle, the primary element of the award is that of compensation for non-pecuniary loss, i.e. the lack of advantage and inconvenience caused by not having the use of a car ready at hand and at all hours for personal and/or family use… [citations omitted]
In that respect perusal of the Current Law Year Books yields references to awards in county courts up and down the country of conventional weekly sums based not upon car hire rates but on a modest rising scale from £40 or £50 per week in 1995 to £100 in 2005 in respect of disruption and inconvenience caused to individual claimants for loss of use of their private motor car during periods of repair in cases where, for reasons of impecuniosity or otherwise, no substitute vehicle has been hired by, or otherwise made available to the claimant: [CLY Book citations omitted].
Where the claimant has hired a replacement vehicle the cost of doing so may be treated as expenditure incurred in avoiding or mitigating the disruption and inconvenience resulting from the loss of use, or more directly as reasonably foreseeable expenditure incurred as a result of the defendant's negligence. Thus the observation in McGregor on Damages (20th Ed, Thompson Reuters, 2018) at [4-059] that expenses of this kind "may be considered as examples of steps taken in mitigation of damage, but some of them are so common, such as medical expenses in relation to personal injury cases, that they do not tend to be thought of specifically from this angle". To similar effect in Compania Financiera v Hamoor Tanker Corporation [1981] 1 WLR 274 at 281 Lord Denning MR said of the difference between expenditure recoverable as damages for a wrongful act and money expended by way of mitigation:
I can understand that in some cases that distinction may be useful and valuable: but for myself, when expenditure is incurred as a result of a wrongful act, the common law has always looked upon it as damages. I need not go through all the cases. In a personal injury case the medical expenditure incurred is regarded as damages. In damage to property, if you have a lorry or motor car which has been damaged and put out of action, the cost of providing a substitute is not regarded as sums expended in mitigation. It is always regarded as sums recoverable by way of damages for the wrongful act.
Immediately thereafter his Lordship notes that "the distinction fades into nothingness in most cases" and, citing Oliver J in Radford v De Froberville [1977] 1 WLR 1262, that "often there is nothing in it: it is virtually the same inquiry": see also Shaw LJ at 282-283 and Templeman LJ at 283-284.
In the former treatment the expenditure in mitigation becomes the measure of the loss sustained for loss of use and is "substituted for the claim for loss of use by way of general damages" on the basis that the relevant loss has been avoided: Lagden v O'Connor at [27] (Lord Hope). Whereas the latter treats the claim to recover the car hire charges as one for special damages representing expenditure incurred as a reasonably foreseeable consequence of the tort (Lord Scott at [77], [81]). On either analysis recovery is subject to a standard of reasonableness: Compania Financiera v Hamoor Tanker Corp at 285 (Templeman J). The injured party cannot claim reimbursement for expenditure unreasonably incurred by way of mitigation or as reasonably foreseeable expenditure unless reasonably incurred (Lagden v O'Connor at [27], [81]). The fact that the analyses converge on a question of reasonableness is consistent with the shared principled basis of the rules concerning mitigation and those concerning remoteness: see A Burrows, Remedies for Torts, Breach of Contract, and Equitable Wrongs (4th Ed, Oxford University Press, 2019) pp 84-85.
The treatment of the cost of hire as expenditure in mitigation was assumed by the Court of Appeal (Sir Richard Scott V.C., Thorpe and Judge LJJ agreeing) in Dimond v Lovell [2000] 1 QB 216 at [93], [97], [99]; similarly adopted by Lord Hoffman (Lord Browne-Wilkinson agreeing) and Lord Hobhouse in the House of Lords [2002] 1 AC 384 at 401-402, 406; and applied by Lord Hope in Lagden v O'Connor, but rejected by Lord Scott. Subsequent decisions of the Court of Appeal have applied Aikens LJ's summary of the "established" principles in Pattni v First Leicester Buses Limited; Bent v Highways and Utilities Construction [2011] EWCA Civ 1384; [2012] RTR 17 at [30] ff. They include that if the "loss of use of a car can be mitigated or avoided by the hire of a replacement car, the cost of that replacement car will be the measure of damages recoverable for the loss of use of the car". However the injured party "cannot claim reimbursement for expenditure that is unreasonable". The later cases include Beechwood Birmingham v Hoyer Group at [25], [26], [50]; Stevens v Equity Syndicate Management Limited [2015] EWCA Civ 93 at [20]; [2015] 4 All ER 458; and McBride v UK Insurance Limited; Clayton v EUI Limited [2017] EWCA Civ 144 at [43].
The same analysis was applied by Basten J (sitting as a judge in the common law division) in Nguyen v Cassim at [53], Rixon v Arsalan at [7] and Souaid v Nahas at [8]. Although in Anthanasopoulos at [84] Ipp AJA refers to Lord Hobhouse's reasoning in Dimond v Lovell at 406-407, he does so only for the proposition that the measure of damages is "the market rate of hiring the replacement" where there is a requirement that the claimant do so.
Before any question of mitigation (or recoverable expenditure) arises it must be reasonable for the injured party to hire any substitute or replacement vehicle. As Lord Mustill emphasised in Giles v Thompson [1994] 1 AC 142 at 167:
The need for a replacement car is not self-proving. The motorist may have been in hospital through the accident for longer than his vehicle was off the road; or he may have been planning to go abroad for a holiday leaving his car behind; and so on. Thus, although I agree that it is not hard to infer that a motorist who incurs the considerable expense of running a private car does so because he has a need for it, and consequently has a need to replace it if, as a result of a wrongful act it is put out of commission, there remains ample scope for the defendant in an individual case to displace the inference which might otherwise arise.
Thus in Beechwood Birmingham v Hoyer Group (at [28]) there was held to be no need for the hire of a replacement vehicle because the claimant motor dealer had ample capacity within its own stock of cars to absorb the loss of use without any extra expenditure or loss of profit to its business. And in Singh v Yaqubi [2013] EWCA Civ 23 (at [33], [39]) the claimant partnership had a fleet of vehicles from which it was held that a replacement could have been provided.
Having emphasised that the motorist "cannot claim for the cost of hiring another vehicle if he had no reason to use a car while his own car was being repaired", Lord Hope continued in Lagden v O'Connor at [27]:
… If it is reasonable for him to hire a substitute he must minimise his cost by spending no more on the hire than he needs to in order to obtain a substitute vehicle. If the defendant can show that the cost that was incurred was more than was reasonable - if, for example, a larger or more powerful car was hired although vehicles equivalent to the damaged car were reasonably available at less cost - the amount expended on the hire must be reduced to the amount that would have been needed to hire the equivalent.
Many expressions have been used to describe the reasonable "substitute" vehicle, although not by reference to the loss of use which the hire of that vehicle is directed to alleviate or remedy: cf Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 at 506 (per Lord Macmillan). They include "a reasonably equivalent replacement vehicle", "a reasonable substitute" and "a broadly comparable car". These descriptions, taken from the judgment in Pattni v First Leicester Buses, are collected by the Court of Appeal in Frucor Beverages Limited v Blumberg [2019] NZCA 547 at [92]. Each to some extent begs the question as to the considerations by reference to which reasonable equivalence or comparability is to be assessed.
Expressed at a level of generality, the question of principle arising in the proposed appeals from the decisions of Basten J (Nguyen v Cassim, Rixon v Arsalan and Souaid v Nahas) is whether the "need" for a replacement vehicle, once established, is to be satisfied by a vehicle which is the same as, or so far as is possible equivalent to, the damaged vehicle in terms of make, model, age and specifications - as the applicants contend - or by a vehicle which is sufficiently comparable to the damaged vehicle in terms of functionality and specifications to satisfy the uses to which that vehicle was capable of being and likely to have been put during the period of repair - as the respondents submit.
In each of these cases the damaged vehicle was described (without further elaboration) as a high value or prestige vehicle and the question which arose was whether the expense of obtaining a replacement vehicle of similar value or prestige was recoverable as reasonable expenditure where a cheaper alternative would overcome the inconvenience arising from the temporary unavailability of the damaged vehicle (Nguyen v Cassim [2019] NSWSC 1130 at [6]).
Referring to Lord Hope's statement in Lagden v O'Connor at [27] that the claimant "must minimise his cost by spending no more on the hire than he needs to in order to obtain a substitute vehicle" Basten J concluded in Nguyen v Cassim at [53]:
The principle stated does not support the claimants' case; it requires proof of a need based on past usage and assessment of what is reasonably necessary to satisfy that need. The purpose is to provide an appropriate sum in compensation to alleviate, so far as reasonably possible, the inconvenience resulting from the loss of use of the damaged vehicle; not to replace the owner's vehicle with the temporary use of another vehicle of equivalent value or prestige.
I agree. The so-called "duty to mitigate" means that the claimant "is not entitled to charge the defendant by way of damages with any greater sum than that which he reasonably needs to expend for the purpose of making good the loss": Darbishire v Warran [1963] 1 WLR 1067 at 1075 per Pearson LJ. This rule focusses on the compensable head of loss and what is reasonably required to be expended to remedy that loss. It follows that the "compensatory principle" is only engaged with respect to the uses to which the damaged vehicle was capable of being and likely to have been put during the period of its repair, and therefore calls only for its replacement with a vehicle which is able to satisfy those uses. To do so it is not necessary that the substitute vehicle be "equivalent in as many respects as possible to the damaged vehicle" (cf Emmett AJA at [127]).
The focus of the reasonableness inquiry is upon the uses for which the claimant "needs" the substitute vehicle and how, as between the claimant and tortfeasor, they might adequately and fairly be satisfied during the period of repair: Darbishire v Warran at 1077. In Singh v Yaqubi the Court of Appeal considered it to be a "sound" proposition that "courts ought to investigate rather carefully, whether it is right that [the] other, who is bearing the expense, ought properly bear that expense" (see Pill LJ at [19], Black LJ and Sir Stanley Burton agreeing). And in Watson Norie v Shaw [1967] 1 Lloyd's Rep 515 at 518 Russell LJ said:
In a case like this, where hire is necessary for a short period, I do not think it is correct to say that the plaintiff is entitled, as an axiom, to put upon the defendants the burden of the cost of hiring a car equal or substantially equal in quality, value and prestige to the damaged car. The test is whether the hiring cost is no more than reasonably necessary to fill the time gap, having regard to the purposes for which the plaintiff company needed to hire the car.
More recently, in Frucor Beverages Limited v Blumberg at [93] the Court cited with tacit approval the following statement of Harrison J in Droga v Cannon [2015] NSWSC 1910 at [60] directed to the reasonableness of the hire of a high value prestige vehicle:
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.
Furthermore the descriptors quality, value and prestige are themselves relative in their application to different vehicles and do not necessarily bear any direct relationship to functionality or specifications or define the uses to which a motor vehicle might be put. Accordingly it is necessary in each case to identify those uses to assess the reasonableness of the claimant's action in hiring a particular vehicle. In each of the cases in question that use was as a means of transporting people and things from one place to another. In one, the claimant (Mr Cassim) indicated a preference for a "nice, luxury car" but conceded that any vehicle "that had five seats" would most likely have been suitable. Another of the claimants (Mr Souaid), who drove a "prestige sedan", accepted that he was not "fussed at all" about the replacement vehicle as long as he had "a car there for my wife, for the kids and stuff". In each of these cases a replacement vehicle which, although acknowledged not to be of equivalent luxury or prestige, was sufficiently comparable in terms of functionality and specifications to satisfy the uses to which the damaged vehicle was capable of being and likely to have been put adequately remedied the claimant's loss.
In none of these cases did the efficacy or enjoyment of any likely use depend on the replacement vehicle having a specific, and perhaps unique, characteristic or feature, in the absence of which the claimant would be deprived of that relevant use and as a result suffer compensable inconvenience or deprivation of some kind. For example it was not suggested that any vehicle was used solely or principally for the owner's "pleasure and to drive on social occasions [so as to] enjoy the exceptional experience of … a prestigious car" as was the case in Alexander v Rolls Royce Motor Cars (at 101), where the damaged vehicle was used only for that purpose.
Turning then to the four applications before this Court, in Lee v Strelnicks the Assessor appointed to determine a claim in the Small Claims Division of the Local Court dismissed the claim for damages based on the cost of hiring a replacement vehicle because Ms Lee had not established her need to do so. In dismissing proceedings to quash that decision brought in the exercise of this Court's supervisory jurisdiction, Wilson J concluded that the Assessor did not err in law in holding that there was no entitlement to damages for loss of use ([2019] NSWSC 526 at [59]-[62]). Her Honour did not err in so holding in view of the Assessor's finding of fact. Accordingly leave to appeal from her Honour's decision should be refused.
In Cassim v Nguyen the Local Court Magistrate proceeded on the basis that Mr Cassim was entitled to the "market rate of hiring a vehicle of equivalent value to his vehicle" notwithstanding that the evidence established that "the things he needed a vehicle for on a day to day basis could … have been adequately done by using a vehicle like a Toyota Corolla" ([2019] NSWSC 1130 at [15], [16]). Basten J allowed the appeal in circumstances where there was a sufficiently comparable vehicle available to satisfy the uses to which the replaced vehicle was likely to be put. His Honour did not err in so concluding. Accordingly, whilst leave to appeal should be granted, that appeal should be dismissed with costs.
In Souaid v Nahas, although Mr Souaid sought damages calculated by reference to the hire of equivalent "luxury" vehicles to that which had been damaged, the Local Court Magistrate rejected that claim in the face of Mr Souaid's evidence that he did not need such a car and that he would have been "happy with any replacement vehicle that was available, [a Holden] or anything like that". Basten J dismissed the appeal on the basis that the Magistrate's conclusion as to Mr Souaid not needing a "luxury car" was consistent with the question of reasonableness being measured against the actual use of the damaged vehicle [2019] NSWSC 1130 at [53]. Again in my view, his Honour did not err in so concluding. Accordingly whilst leave to appeal should be granted, the appeal in Souaid v Nahas should be dismissed with costs.
In Rixon v Arsalan, Mr Rixon's claim to the full amount of the hire costs was reduced to an amount representing "a reasonable rate of hire for a suitable replacement vehicle that he… demonstrated a need for" ([2019] NSWSC 1136 at [5], [12], [13]). Basten J dismissed the appeal from the Magistrate's order to that effect, holding that the Magistrate "was entitled to assess damages for the inconvenience suffered from the damaged vehicle being unavailable by reference to the market value for a vehicle of lesser value which was capable of satisfying all aspects of the plaintiff's needs". I agree with that conclusion. Accordingly although leave to appeal should be granted, Mr Rixon's appeal also should be dismissed with costs.
WHITE JA: The circumstances giving rise to the applications for leave to appeal in these four matters are set out in the reasons of Emmett AJA which I have had the advantage of reading in draft.
I agree with the orders proposed by Emmett AJA and generally with his Honour's reasons (although I would not describe the vehicles as fungibles). I add these additional reasons.
The matters of principle arise from the judgments of Basten J [1] in Nguyen v Cassim [2019] NSWSC 1130; Souaid v Nahas [2019] NSWSC 1132 and Rixon v Arsalan [2019] NSWSC 1136. In the latter cases the primary judge adopted and applied his reasoning in Nguyen v Cassim. Early in his reasons in Nguyen v Cassim (at [2]) the primary judge stated as a relevant principle of law that:
"As explained in McGregor on Damages, "[w]here the claimant's goods have been damaged, the basic pecuniary loss is the diminution in their value which is normally measured by the reasonable cost of repair". [J Edelman, McGregor on Damages (20th ed, Thomson Reuters, 2018) at [4-051]] Further, a claimant who has lost the use of goods whilst they are repaired may be awarded damages for general loss of use or, in the absence of evidence of inconvenience, interest on the capital value of the goods. [McGregor at [4-054]] Different principles are applied with respect to profit earning and non-profit earning goods. With the former, loss of use may be assessed by reference to the expected profit over the period when the goods were unavailable. That provides an appropriate monetary measure of the loss. Where the goods fall into the non-profit earning category the claimant must establish a need for the goods during the period they were unavailable. Compensation will be payable for the inconvenience caused by the loss of use. Just as the diminution in value of the goods may conveniently be measured by the reasonable cost of repairs, so the inconvenience caused by the goods being unavailable may be measured by the reasonable cost of a replacement."
The primary judge's statement that where non-profit earning goods have been damaged and the claimant establishes a need for the goods during the period they were unavailable, compensation will be payable for "the inconvenience" caused by the loss of use, is true. But nothing in the passages cited by the primary judge from McGregor on Damages establishes that it is only inconvenience caused by the loss of use which is compensable.
Mr Habib SC for the respondents, submitted that what underpinned the need for the damaged vehicle (or the replacement vehicle taken on hire) for which damages for loss of use were payable was the inconvenience suffered by the plaintiff. He submitted (correctly) that the primary judge conceptualised the loss arising from the loss of use of the vehicle as being the inconvenience suffered from that loss of use (T45, T48).
If the value to the plaintiff of the damaged vehicle was only the convenience the vehicle provided for moving the plaintiff or others from A to B, then this would follow. In the case of Souaid v Nahas, that fact was established by evidence (Souaid v Nahas [2019] NSWSC 1132 at [6]). But it cannot be assumed.
The primary judge held (at [53]) that the purpose of the award of damages for loss of use of the damaged vehicle is to:
"...provide an appropriate sum in compensation to alleviate, so far as reasonably possible, the inconvenience resulting from the loss of use of the damaged vehicle; not to replace the owner's vehicle with the temporary use of another vehicle of equivalent value or prestige. Reasonable expenditure for that purpose provides a mechanism for assessing general damages resulting from the inconvenience."
In reaching this conclusion the primary judge relied upon observations of Ipp AJA in Anthanasopoulos v Moseley (2001) 52 NSWLR 262; [2001] NSWCA 266 at [80], [83] and [84], which had been cited by McCallum J in Wong v Maroubra Automotive Refinishers Pty Ltd [2015] NSWSC 222 and by Harrison J in Droga v Cannon [2015] NSWSC 1910.
In Anthanasopoulos Ipp AJA said:
"80 In my opinion, the true basis of claims for damages for injury to a non-income producing chattel is also based on need. In the Greta Holme line of cases, the plaintiffs were held, generally, to be entitled to damages based on the cost (including the capital cost) of keeping and maintaining the damaged vessels while they were being repaired. Underlying the measure of damages so adopted is the owner's need to keep (or replace) the damaged chattel during the period while it is being repaired and cannot be used.
81 Accordingly, in my view, as claims for damages to a non-income producing chattel and claims of the Griffiths v Kerkemeyer category are both based on need, the latter category of cases provides additional support for the proposition that the respondents are entitled to damages against the appellants.
...
83 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, or by reference to the income foregone by the provider of the services, but, generally, by reference to the market cost of providing them: Grincelis v House (2001) 201 CLR 321 at 327 per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; Van Gervan v Fenton (1992) 175 CLR 327.
84 Similarly, in my opinion, in the case of claims for damages for injury to a non-income producing chattel, there is also no substantive significance in the distinction between special and general damages. Where, by reason of need, the plaintiff is required to hire a replacement chattel, the damages are to be measured by reference to the market rate of hiring the replacement: cf The Greta Holme at 605 per Lord Herschell; Dimond v Lovell at 1140 per Lord Hobhouse."
The issue in Anthanasopoulos v Moseley was whether plaintiffs, whose vehicles were damaged by the fault of others, could recover damages for the cost of renting alternative vehicles whilst the plaintiffs' vehicles were being assessed and repaired and unavailable for the plaintiffs' use. The plaintiffs had each been provided with a courtesy vehicle by their insurer notwithstanding that the insurance policy did not provide cover for the cost of hiring a vehicle whilst the damaged vehicle was being repaired. Beazley JA, with whom Handley JA agreed, observed (at [7]) that each plaintiff had demonstrated a need for the replacement vehicle during the repair period.
In the Greta Holme line of cases [2] to which Beazley JA and Ipp AJA referred, public authorities recovered general damages for the inconvenience of vessels being out of use owing to collision by negligent defendants. The vessels damaged were not profit-earning, but were devoted to public service such as dredging, lighting or supplying oil to Navy ships. No replacement vessels were hired. (In the Greta Holme Lord Herschell (at 605) stated that if the dredger that was damaged had been hired by the harbour authority, then the cost of hire whilst the dredger was out of action would be recoverable as special damage. His Lordship was not referring to the hire of a replacement.)
The reference by Ipp AJA in [80] quoted above to damages being awarded in the Greta Holme line of cases because of the owners' need was a reference to the owners' need for the vessels that were damaged.
Ipp AJA also held that the Griffiths v Kerkemeyer (1977) 139 CLR 161) category of cases provided additional support for the respondents being entitled to damages. The need for which Griffiths v Kerkemeyer damages is awarded is the need for services occasioned by the tort. Ipp AJA reasoned by analogy to Griffiths v Kerkemeyer that where, by reason of need, the plaintiff is required to hire a replacement chattel, the damages are to be measured by reference to the market rate of hiring the replacement (at [84]). His Honour expressed no opinion about the nature of the replacement chattel, the cost of hire of which would be recoverable as damages. The issue did not arise. The need referred to was not identified any more specifically than a need to use the car that was damaged and a replacement. Anthanasopoulos does not support the contention that damages for loss of use of the damaged vehicle are confined to meeting the necessities for which the damaged vehicle was used. That was not the sense in which Ipp AJA used the term "need".
In McGregor on Damages at [4-059] the author states that:
"The claimant many incur many types of expenses as a result of the tort. Often the expenditure is made in order to keep the damage within reasonable bounds. This is so where money is laid out in acquiring or hiring a substitute where the claimant's property is damaged, destroyed or misappropriated."
In a footnote the author observes that "the substitute must be a commensurate one contrast: Watson Norie v Shaw (1967) 111 SJ 117 CA with HL Motorworks v Alwahbi [1977] RTR 276 and Brain v Yorkshire Rider Ltd [2007] Lloyd's Rep IR 564".
The learned author also observes at [4-060]) that:
"These various expenses may be considered as examples of steps taken in mitigation of damage.
The respondents disputed this characterisation but in my view it is correct (Dimond v Lovell [2002] 1 AC 384; [2000] UKHL 27 at 401-402 (Lord Hoffmann); 406-407 (Lord Hobhouse); Lagden v O'Connor [2004] 1 AC 1067; [2004] UKHL 64 at [27] (Lord Hope); Pattni v First Leicester Buses Ltd; Bent v Highways and Utilities Construction Ltd [2011] EWCA Civ 1384; [2012] RTR 17 at [30(1)] (Aikens LJ)). The question is whether the incurring of hiring charges for a replacement vehicle whilst the damaged vehicle is under repair was reasonable. Having regard to the object of damages as being to put the plaintiff in the same position as if the tort had not been committed, it would be difficult to say that hiring a "commensurate vehicle" was not reasonable if the plaintiff reasonably needed a replacement vehicle whilst the damaged vehicle was under repair.
In Wong v Maroubra Automotive Refinishers Pty Ltd McCallum J applied Anthanasopoulos in circumstances similar to those in Anthanasopoulos, namely, where the NRMA provided a courtesy car whilst the plaintiff's car was under repair.
In Droga v Cannon, Harrison J dismissed an appeal from the Local Court when the plaintiff failed to adduce evidence that she had a need for a replacement vehicle whilst the damaged vehicle was under repair. Harrison J added, by way of obiter:
"59 The disputed issue in these proceedings has centred on Ms Droga's need for a replacement vehicle. It seems to me that little attention was given in the court below, or in the context of assessing the commercial wisdom of the proceedings in this court, to the distinction between Ms Droga's need for a replacement vehicle on the one hand and her desire for a particular vehicle on the other hand. The activities specified by Ms Droga as those to which she originally directed her BMW X5 do not appear obviously or even possibly to have mandated the need for a BMW 520D or its equivalent. Although I have no evidence about it, and accepting that the issue is not relevant to my conclusions in these proceedings, it does seem likely that a far less expensive vehicle could have adequately operated to fulfil her identified needs. Once again without evidence about it, it would surprise me if four door sedans of considerably less impressive specifications could not have been hired for less than $100 per day and even less on a contract written for a longer period.
60 It should not go unremarked that 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. The defendants would only ever be liable to compensate Ms Droga to the extent necessary to put her in the position she would have been but for the defendants' tortious act. 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."
The second sentence of para [60] states the general principle of the object of an award of damages in tort. It does not support the reasoning in the balance of the paragraph.
The primary judge rightly observed that the shipping cases did not support the adoption of the market rate of calculation for the replacement of a non-profit-earning chattel (at [39]). That question did not arise in those cases because a replacement chattel was not hired. The primary judge then considered English cases dealing with the hire of replacement vehicles. Watson Norie Ltd v Shaw [1967] 1 Lloyd's Rep 515 is support for the approach adopted by the primary judge. There it was held that plaintiffs had not acted reasonably in hiring for £400 for seven weeks two prestigious cars whilst the damaged car (a Jensen) was under repair. The County Court Judge found that the plaintiffs made no inquiry as to the hiring charge for the vehicles that replaced the damaged vehicle. He found that the plaintiffs did nothing to mitigate their damages but "recklessly and considerably aggravated their claim for damages" and had not gone carefully about the hire by querying the price or making further investigations (at 516-517). Sellers LJ said (at 516), apparently summarising the judge's reasons:
"The Judge seems to have negatived the view that the plaintiffs were justified in getting a vehicle of the type of the Jaguar, even the Rover, if it was going to cost as much as the plaintiffs were asking the defendants to pay. They might have hired such vehicles at a more reasonable price and the Judge would not have found that the defendants could have complained."
Sellers LJ concluded that the Judge was entitled to think that the plaintiff company had not acted reasonably when:
"... they took over these two vehicles in the way they did without querying the price and enquiring what it would be, and, since it was as high as it was without making any further investigations."
He concluded that once the judge concluded that the claim was extravagant and he had to ascertain what expense would be reasonable, he was entitled to proceed on the basis that the plaintiffs ought to have found a medium car as a replacement.
Diplock LJ also said (at 517) that:
"The only question for the learned judge was what was a reasonable hire to pay for a car reasonably suitable for use by their managing director for the purposes of their business for seven weeks instead of the damaged Jensen.
I think there was material upon which the learned judge could come to the conclusion that a figure of about £25 per week was a figure at which a reasonable substitute car could be obtained."
It is the reasons of Russell LJ that provide the highest support for the respondents' argument. His Lordship said (at 518):
"In a case like this, where hire is necessary for a short period, I do not think it is correct to say that the plaintiff is entitled, as an axiom, to put upon the defendants the burden of the cost of hiring a car equal or substantially equal in quality, value and prestige to the damaged car. The test is whether the hiring cost is no more than reasonably necessary to fill the time gap, having regard to the purposes for which the plaintiff company needed to hire a car. I think that the County Court Judge was entitled to conclude that a Zephyr would have, quite adequately for the plaintiff company's purposes, filled the gap." (My emphasis.)
Watson Norie Ltd v Shaw was distinguished in HL Motorworks (Willesden) Ltd v Alwahbi [1977] RTR 276. There a car repairer who had repaired its customer's Rolls Royce took it for a test drive where it was damaged by the defendant's negligence. The car repairer was the plaintiff and it claimed damages for the charges the customer had incurred in hiring a replacement Rolls Royce which it reimbursed. A distinguishing feature from Watson Norie Ltd v Shaw was that it was reasonable for the car repair company to meet the charge incurred by its customer to preserve goodwill. But the Court of Appeal also held that the customer prima facie would have been entitled to have recovered the cost of hiring the replacement Rolls Royce for the 11 days he was deprived of its use. Cairns LJ said (at 280-281):
"On the face of it, the customer was entitled to have, during the 11 days for which he was deprived of his Rolls Royce, another Rolls Royce to take its place. If it could have been shown that the amount of use he wished to make of the car in those 11 days was very small or that some other car would have been equally suitable for his purpose, then it may well be that the plaintiff company should not have met his full claim, or, if they did, would not have been entitled to pass on the claim to the defendant. But those matters, I apprehend, would be for the defendant to establish."
Roskill LJ said (at 282)
"It seems to me that the defendant has not shown that the plaintiff company did not mitigate their damages. What Mr Goldie, the owner of the Rolls Royce, did in hiring another Rolls Royce, he was well entitled to do. Mr Goldie was without his Rolls Royce. He hired another one and he looked to the plaintiff company to indemnify him for the cost, which we are told was £467.65. For that sum I think the plaintiff company should have judgment, and not merely for the £160 which the judge awarded."
In Giles v Thompson [1993] 3 All ER 321 Steyn LJ said (at 337-338):
"... for my part I readily accept that a plaintiff must show a reasonable need for a replacement car in order to recover special damages. If it turns out that a plaintiff hired the car for a period when he always intended to be abroad, and was abroad, leaving the car idle in his garage, he will not be able to recover special damages for the hire for that period. It is therefore right to say that a plaintiff must show a reasonable need for a replacement car. On the other hand, it seems to me that in the cases under consideration, where the plaintiffs owned cars which were damaged and therefore unavailable, the burden of showing reasonable need is relatively easily discharged. The need must be assessed in the light of the fact that the particular plaintiff previously had a car available, which was during the repair period not available. It is clearly not necessary in such a case to prove that it was essential for a plaintiff to hire a replacement car. It is sufficient to show that he acted reasonably. And he will be assisted by the commonsense inference that a person who regularly uses a car, which is then damaged, does not act unreasonably in hiring a car of the same type for the period during which he is deprived of his own car."
In this passage Steyn LJ addresses two matters. The first is the need for proof (the burden of which lies on the plaintiff) of a reasonable need for a replacement car. The second is that as a matter of common sense it can be inferred that a person who regularly uses a car does not act unreasonably in hiring a car of the same type as that which is damaged during the period he is deprived of the use of his or her own car.
On appeal to the House of Lords (Giles v Thompson [1994] 1 AC 142) Lord Mustill (with whom Lords Keith of Kinkel, Ackner, Jauncey of Tullichettle, and Lowry agreed) addressed the first matter as follows (at 167):
"In the Devlin v Baslington appeal it has been questioned whether, even if all the issues of law are decided in favour of the motorist, there is sufficient proof that the motorist acted reasonably in hiring a replacement vehicle to justify an award in full of the company's hire charges-or, indeed, it would seem, any award at all. The question is before the House because the county court judge held:
'As a matter of principle … if you deprive me of an article of use to me, you have no complaint whatever if I hire another to replace it … If I have a car simply for my own pleasure, I regard it, in principle, [as] wrong that I should be required, before being able to hire a car and charge it to the wrongdoer, to prove that I need it as opposed to merely desire the use of it.'
Whilst I have sympathy with this point of view I think it too broad. The need for a replacement car is not self-proving. The motorist may have been in hospital through the accident for longer than his vehicle was off the road; or he may have been planning to go abroad for a holiday leaving his car behind; and so on. Thus, although I agree with the judgments in the Court of Appeal that it is not hard to infer that a motorist who incurs the considerable expense of running a private car does so because he has a need for it, and consequently has a need to replace it if, as the result of a wrongful act, it is put out of commission, there remains ample scope for the defendant in an individual case to displace the inference which might otherwise arise."
Lord Mustill here was addressing the first of the matters addressed in the reasons of Steyn LJ which I have quoted. His Lordship did not address the second (which did not arise in Giles v Thompson).
In Dimond v Lovell one of the issues addressed was the assessment of damages where the replacement vehicle was hired from a credit hire company whose charges were higher than a spot rate (in later cases called a basic hire rate) quoted by other hire car companies because of the credit terms and other benefits offered to the customer. That issue does not arise on the present appeal.
A sequel to Dimond v Lovell was Lagden v O'Connor where the plaintiff did not have the means to hire a replacement vehicle during the period his damaged vehicle was under repair, except through a credit hire company. The majority of the House of Lords held that in those circumstances it was reasonable for the plaintiff to mitigate his loss by hiring another vehicle whilst his own car was unavailable and it was not unreasonable for him to do so by paying the hiring charge of the credit company. Lord Hope of Craighead, who was one of the majority, stated:
"27. Mr Lagden's claim was, in essence, a claim for the loss of use of his car while it was in the garage undergoing the repairs which needed to be done as result of the accident. There was no evidence that he would have suffered financial loss as a result of being unable to use his car during this period. But inconvenience is another form of loss for which, in principle, damages are recoverable. So it was open to him, as it is to any other motorist, to avoid or mitigate that loss by hiring another vehicle while his own car was unavailable to him. The expense of doing so will then become the measure of the loss which he has sustained under this head of his claim. It will be substituted for his claim for loss of use by way of general damages. But the principle is that he must take reasonable steps to mitigate his loss. The injured party cannot claim reimbursement for expenditure by way of mitigation that is unreasonable. So the motorist cannot claim for the cost of hiring another vehicle if he had no reason to use a car while his own car was being repaired - if, for example, he was in hospital during the relevant period or out of the country on a package holiday. If it is reasonable for him to hire a substitute, he must minimise his loss by spending no more on the hire than he needs to do in order to obtain a substitute vehicle. If the defendant can show that the cost that was incurred was more than was reasonable - if, for example, a larger or more powerful car was hired although vehicles equivalent to the damaged car were reasonably available at less cost - the amount expended on the hire must be reduced to the amount that would have been needed to hire the equivalent."
The primary judge rightly noted that Lord Hope's statement of principle simply provided an example as to when a cost of hire could be regarded as unreasonable. It did not purport to limit those circumstances to a case where a larger or more powerful car than the car damaged was hired (at [53]). The primary judge continued:
"[53] ... The principle stated does not support the claimants' case; it requires proof of a need based on past usage and assessment of what is reasonably necessary to satisfy that need. The purpose is to provide an appropriate sum in compensation to alleviate, so far as reasonably possible, the inconvenience resulting from the loss of use of the damaged vehicle; not to replace the owner's vehicle with the temporary use of another vehicle of equivalent value or prestige."
I do not accept that it is only "inconvenience" that can be addressed through an award of damages for loss of use of the car. The injured plaintiff who has suffered actual loss through being denied use of his or her car is to be put in the same position, so far as money can do it, as if the tort had not been committed. In the case of Cassim v Nguyen, had the tort not been committed, the plaintiff would have had the use of a car that not only did the job required of it, but did so with higher levels of safety and luxury than the Toyota vehicle that the primary judge held was adequate to meet the plaintiff's needs. There must also be an intangible benefit (to some) in owning, leasing or using a "prestige" vehicle reflected in that word. Just as many people feel better, and feel that they are better regarded, if they wear fine rather than merely serviceable clothes, it may be taken that some people feel better, and feel that they are better regarded, if they drive a prestigious car rather than a merely serviceable car. The intangible nature of such feelings does not mean that they are unreal or uncompensable. They may largely explain the markets for luxury goods.
In Brain v Yorkshire Rider Ltd [2007] Lloyd's Rep IR 564 at 565 [12], a County Court Judge (his Honour Judge Grenfell) characterised Russell LJ's judgment in Watson Norie v Shaw as being that where it is necessary for a claimant to hire a car for a short period, the claimant is not entitled as of right to hire a car of equivalent value and prestige. His Honour characterised Watson Norie v Shaw as turning on the first of the issues addressed by Steyn LJ in Giles v Thompson and also addressed by Lord Mustill in Giles v Thompson that the need for a replacement car is not self-proving. The primary judge (at [52]) considered that the judge had not demonstrated that a sufficient basis for distinguishing Watson Norie v Shaw. But the underlined words from the judgment of Russell LJ which I have emphasised (at [50] above) support Judge Grenfell's analysis. Judge Grenfell adopted what was said by Lord Hope in Lagden v O'Connor (having referred to the judgment of Steyn LJ in Giles v Thompson) as indicating a clear assumption that the starting point is establishing the need to hire the "equivalent" vehicle. His Honour concluded that once the plaintiff's need for a replacement vehicle was established (as it was), there was no principle that required the plaintiff to put up with a car that was of a different and less expensive type (at [22], 566). The plaintiff's hire of a sports car which had a retail value less than his own, was not unreasonable (at [26], 566).
By 2010, this appears to have been the settled approach in England and Wales (Bent v Highways and Utilities Construction Ltd [2010] EWCA Civ 292 at [2] and [9]). There Jacobs LJ (with whom Leveson and Briggs LJJ agreed) said:
"9. I would add further that one must not be hypnotised by any supposed need to find an exact spot rate for an almost exactly comparable car. Normally, the replacement need be no more than in the same broad range of quality and nature as the damaged car. There may be a bracket of spot rates for cars rather 'better' and rather 'worse'. A Judge who considered that bracket and aimed for some sort of reasonable average would not be going wrong."
Pattni v First Leicester Buses Ltd; Bent v Highways and Utilities Construction Ltd [2011] EWCA Civ 1384; [2012] RTR 17 concerned the hire of replacement vehicles on credit hire terms where the claimants could have afforded to hire replacement cars without credit terms. That is not an issue in this appeal. But it is significant that Aikens LJ (with whom Moore-Bick, and Pill LJJ agreed) treated the plaintiff's cost of hiring a substitute through the prism of a plaintiff's being required to act reasonably to mitigate his loss, and being entitled to recover as damages costs reasonably incurred in so doing. The onus of proof of establishing that expenses incurred by a plaintiff in mitigation of his loss were not reasonably incurred lies on the defendant. Aiken LJ said (at [30]):
"30. (1)... It is the duty of the innocent claimant to mitigate his loss. If the loss of use of a car can be mitigated or avoided by the hire of a replacement car, the cost of that replacement car will be the measure of damages recoverable for the loss of use of the car [citing Dimond v Lovell at 406 per Lord Hobhouse and at 401 per Lord Hoffmann, Lords Browne-Wilkinson and Nicholls agreeing and Lord Hope in Lagden v O'Connor at [27]].
...
(2) The injured party cannot claim reimbursement for expenditure that is unreasonable. If the defendant can show that the cost that was incurred was more than was reasonable, either by proving that the claimant had no use for a replacement car in part or at all, or because the car hired was bigger or better than was reasonable in the circumstances, the amount expended on the hire must be reduced to the amount that would have been needed to hire the equivalent to the damaged car [citing Lagden v O'Connor at [27] per Lord Hope]. As Lord Mustill put it in Giles v Thompson, 'The need for a replacement car is not self-proving'. [at 167]"
In dealing with the second appeal (a further appeal in Bent) Aiken LJ recapitulated his reasons as follows (at [65]):
"To summarise, the questions are: (i) did the claimant need to hire a replacement car at all; if so, (ii) was it reasonable, in all the circumstances, to hire the particular type of car actually hired at the rate agreed; if it was, (iii) was the claimant 'impecunious'; if not, (iv) has the defendant proved a difference between the credit hire rate actually paid for the car hired and what, in the same broad geographical area, would have been the BHR for the model of car actually hired and if so what is it; if so, (v) what is the difference between the credit hire rate and the BHR?"
Issues concerning the reasonableness of paying a credit hire rate rather than a basic hire rate, and the reasonableness of the hire rate paid were further considered in Stevens v Equity Syndicate Management [2015] EWCA Civ 93; [2015] 4 All ER 458 and McBride v UK Insurance Ltd [2017] EWCA Civ 144. In none of these cases is it suggested that the reasonableness of the plaintiff's decision to hire a particular replacement vehicle is to be assessed only having regard to remedying the inconvenience the plaintiff suffers from being without the use of his or her damaged vehicle for a short period of time.
Pattni was considered by the New Zealand Court of Appeal in Frucor Beverages v Blumberg [2019] NZCA 547. At the outset of the judgment the Court recognised that implicit in the claim for damages for loss of use was that the plaintiff "needed a car". The Court added (footnote 4):
"This may not have been the case if, for example, Mr Blumberg was overseas or in hospital during the repair period: Giles v Thompson [1994] 1 AC 142 (HL) at 167 per Lord Mustill. But, as the Judge recorded at [42] of his judgment, Frucor conceded that it was reasonable for Mr Blumberg to obtain a replacement car while his own was being repaired."
The Court observed (at [92]):
"Throughout the judgment in Pattni phrases including 'a reasonably equivalent replacement vehicle' [at [24]] 'a reasonable substitute' [at [74]] and 'a broadly comparable car' [at [81]] are used. We consider those descriptions in Pattni appropriately define what is a comparable or equivalent vehicle, and are satisfied that the Mitsubishi ASX comes within those descriptions."
This approach is consistent with the English authorities that the reference to a "need" for a car is for a reasonable need. "Reasonable need" need not be confined to the satisfaction of bare necessities. The question is whether it is reasonable for the plaintiff to hire a replacement vehicle whilst the damaged vehicle is off the road. A further question is whether it is reasonable in the circumstances for the plaintiff to hire a "commensurate vehicle" (McGregor). In Frucor Beverages Ltd v Blumberg the New Zealand Court of Appeal adopted the reasoning in Pattni that the hire charges that could be claimed should be no more than would be needed to hire a car reasonably equivalent or comparable to the damaged car (Pattni at [32]; Frucor Beverages at [92], [94]).
Drawing these threads together the relevant principles are:
1. The overarching principle is that damages in tort are intended to compensate the plaintiff for loss actually suffered to put the plaintiff in the same position as he or she would have been in had the tort not been committed.
2. The plaintiff has the onus of establishing that he or she suffered some loss by reason of being deprived of use of the vehicle for a period.
3. The plaintiff is entitled to recover as special damages expenses reasonably incurred to mitigate the loss of use of the damaged vehicle.
4. The plaintiff will be entitled to recover as special damages for the loss of use of the vehicle while it is under repair the reasonable cost of hiring a replacement vehicle, if the plaintiff reasonably needs to hire the replacement vehicle. If the plaintiff does not need a replacement vehicle, he or she does not suffer a loss from being temporarily deprived of the use of the vehicle for which special damages for the cost of hire of a replacement vehicle are payable. General damages for any inconvenience suffered may still be recoverable.
5. A reasonable need for the replacement vehicle is not to be assessed by only considering what vehicle would be adequate to meet the inconvenience to the plaintiff of his or her vehicle being off the road.
6. Prima facie, it can be inferred that the plaintiff will have a reasonable need for a "commensurate" vehicle, or a "reasonably equivalent" vehicle, or a "reasonable substitute", or a "broadly comparable" replacement vehicle.
7. This is because the loss suffered by a plaintiff who has lost the use of a prestigious vehicle is not merely the inconvenience of not having a vehicle to transport the plaintiff and his or her family, friends and associates, from A to B, but the loss of his or her ability to do so in a vehicle which has the safety, luxury and prestige of the damaged vehicle.
8. Although the plaintiff has the onus of establishing a reasonable need for a replacement vehicle, once that onus is discharged, the onus of establishing that the hire of the particular replacement vehicle was unreasonable lies on the defendant.
This analysis is supported by consideration of the position if the damaged vehicle is not replaced, and either general damages are awarded, in the case of a vehicle owned by the plaintiff, or the vehicle was held by the plaintiff on lease.
In the former case, general damages could be awarded reflecting the inconvenience to the plaintiff of not having the damaged car available, even if no special damages by way of additional costs incurred could be identified. Such damages could properly be awarded by applying an interest or depreciation rate to the damaged vehicle while it was out of use (the Greta Holme line of cases). (This was the basis for the assessment of damages in Lee v Strelnicks where the magistrate found that the plaintiff had not demonstrated a need for a replacement vehicle.) Such an assessment will reflect the capital value of the prestigious vehicle damaged.
If the plaintiff were leasing a prestigious vehicle, the plaintiff would be entitled to recover the cost of the lease payments whilst he or she was deprived of the use of the vehicle (The 'Greta Holme' per Lord Herschell at 605). The damages payable by the defendant would reflect the fact that the defendant negligently damaged an expensive vehicle. The defendant could avoid the plaintiff's loss by providing a comparable prestigious vehicle. The defendant could not avoid (although it might partially reduce) the plaintiff's loss by providing an inferior vehicle because the plaintiff would not have the use of what he or she had lost or something equivalent thereto.
By parity of reasoning, the same principle should apply where the damaged vehicle was owned by the plaintiff but the plaintiff had to hire a replacement. The hire of a commensurate or comparable replacement should be recoverable as damages if it is reasonable for the plaintiff to hire such a vehicle.
The primary judge assessed the reasonableness of such a hire only through the lens of the inconvenience resulting from the loss of use of the damaged vehicle.
In Cassim v Nguyen the learned magistrate said:
"16. The plaintiff's evidence about the type of vehicle that he wanted was 'I wanted a nice, luxury car. That's why I had the Mercedes and that's why I had the BMW.' (TP49.15). He was asked 'Any vehicle that had five seats would have been feasible, wouldn't it? A: Most likely but I preferred to have a car similar to mine.' (TP49.40)
17. The unchallenged evidence is that the vehicle actually provided to Mr Cassim by Right2Drive was of a slightly lower value than the Redbook value of his BMW. Otherwise, its features were similar to or lesser than those of the BMW. Apart from the single reference to sporting gear, there was nothing in Mr Cassim's evidence to suggest that other than his personal preference, the things he needed a vehicle for on a day-to-day basis could not have been adequately done using a vehicle like a Toyota Corolla.
...
49. I consider that it was reasonable for the plaintiff in this case to obtain the use of a vehicle of equivalent value to his vehicle, not just of a vehicle that is capable of transporting him and any other people or things he needed to transport. To put it another way, a vehicle of equivalent value was an appropriate vehicle to his need, and an appropriate vehicle to compensate him for the loss of use of his vehicle. A more expensive vehicle was not required, although it may have been if need could have been proved. A less expensive vehicle is not the appropriate measure of damages in this case, as it would not have put the plaintiff in the same position as he would have been in had the defendant not negligently damaged his car."
In the appeal in Cassim v Nguyen, I agree with Emmett AJA (at [133] and [134]) that the magistrate made no error of law in concluding that Mr Cassim was entitled to damages for the market rate of the replacement vehicle that he chose to hire which was an appropriate replacement vehicle.
In the case of Rixon v Arsalan the magistrate found that the plaintiff's need was only to meet his and his family's daily transport requirements, and that those requirements could be met by a less expensive vehicle than his Audi A3. The magistrate found that "a 4-door sedan of considerably less impressive specifications could have been hired for less than what the plaintiff seeks" and that his Honour was not satisfied that the plaintiff had a "particular need for an Audi A3 or similar vehicle to replace the loss of use of his vehicle while he waited for his Audi A3 to be repaired."
This judgment disclosed an error of law, or at least a question of mixed law and fact, as to the magistrate's assessment of what was relevant to the reasonableness of the plaintiff's decision to hire a similar vehicle to his Audi A3. I agree with the conclusion of Emmett AJA that the appeal to the Common Law Division from the orders of the Local Court in this case should have been allowed.
I agree with Emmett AJA that leave to appeal in Souaid v Nahas should be refused because there was no error of law in the magistrate's finding that Mr Souaid did not reasonably need to hire a replacement vehicle comparable to his damaged vehicle.
I also agree with Emmett AJA that the application for leave to appeal in Lee v Strelnicks should be dismissed because the magistrate found as a fact that the plaintiff in that case did not demonstrate a need for the use of a replacement vehicle at all.