Lowe v Pearce

2. Plaintiff's Need for an Equivalent Replacement Vehicle
3. The second issue to be determined is whether the market rate should be determined by reference to the market rate for a motor vehicle similar in nature to the plaintiff's damaged motor vehicle or by reference to a cheaper alternative replacement. This question was the subject of judicial comment in the recent decision of Droga v Cannon [2015] NSWSC 1910 (the Droga case). In that case Harrison J was dealing with an appeal from the Local Court relating to damages for loss of use of a damaged motor vehicle. The appellant submitted that the magistrate erred in law on a number of grounds including by finding that the plaintiff had to prove that she "needed" the use of a hire car as this was a compensable loss. Harrison J dismissed the appeal finding that the plaintiff bore the onus of proving the issue of need. His Honour went on to express further views regarding the plaintiff's "need" for a comparable replacement. At paragraphs [58]-[59] his Honour stated: The vehicle that was damaged in the subject accident was a BMW X5 Sports Utility Vehicle. Ms Droga chose to replace that vehicle for the period when it was being repaired with a BMW 520D sedan. The base daily rate for the hire of that vehicle was $480, plus incidental costs. She was charged the total amount of $19,685.05 for that car by City Motor Transport Pty Ltd trading as CMT Insurance Services, CMT Luxury Replacement Vehicles and City Car BMW Rentals. That company's representative was cross- examined as some length before his Honour about the specifications and characteristics of the replacement vehicle and whether or not it was or was not comparable to certain other vehicles. 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 520D 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.
4. Harrison J stated at [60] that, had the plaintiff established a need for a replacement motor vehicle, then "[t]he issue would have been a question of what was reasonable to meet [the plaintiff's] needs, not what was necessary to compensate her for her choice." The defendant asserts that this principle requires the Court to assess damages on the basis of the cost of a replacement vehicle that meets the identified needs of the plaintiff.
5. The defendant submits that this Court should apply the principles referred to by Harrison J by assessing a market rate for a more modest vehicle that met the plaintiff's modest needs, such as the market rate for hiring a smaller and cheaper Nissan Micra.
6. The comments made by Harrison J raise issues that have not been the subject of direct consideration in the Local Court sitting in its Small Claims Division.
7. The parties were invited to provide written submissions on whether the Local Court is bound by the comments of Harrison J as a matter of precedent or, if not bound, whether the Local Court should nonetheless follow the principles referred to in those comments. The Court has been assisted by those written submissions.

Submissions by the Parties

1. The plaintiff submits that it is arguable that the Small Claims Division of the Local Court is not bound by the decisions of a single judge of the Supreme Court due to the absence of a right of appeal to the Supreme Court from the decisions of the Local Court sitting in its Small Claims Division. The existence of an appellate hierarchy is fundamental to the doctrine of precedent (see Bone v Commissioner of Stamp Duties [1972] 2 NSWLR 651 and section 39(2), Local Court Act 2007). Nonetheless, the plaintiff acknowledges that Small Claims Division would be required to follow the decisions of the Supreme Court noting the comments of French J in Federal Commissioner of Taxation v Salenger (1988) 19 FCR 378 concerning the failure of a member of the AAT to follow a decision of the Supreme Court of Tasmania: …it is difficult to see how it is open to a senior member to form the view that a decision of the Supreme Court of a state which is on the very point before the Tribunal is incorrect and not to be followed.
2. The plaintiff further submits that while this Court is obliged to follow the ratio decidendi of the Supreme Court it is not obliged to follow the obiter dictum comments of Superior Courts. An exception to this rule is the requirement to follow the "seriously considered" dicta of the High Court (see Farah Constructions v Say-Dee Pty Ltd [2007] 230 CLR 89). The plaintiff argues that, to the extent that the comments of Harrison J may be persuasive, then the ratios of superior courts in other superior courts in other hierarchies ought to be followed in preference to the obiter dicta aside in Droga.
3. The defendant submits that the Local Court sitting in its Small Claims Division is bound to follow the decision of the Supreme Court. In Viro v R (1978) 141 CLR 88 Barwick CJ at 93.5 states: The essential basis for the observance of a tribunal by way of binding precedent is that the tribunal can correct the decisions of the court which is said to be bound.
4. The defendant submits that the Local Court whether sitting in its General Division or Small Claims Division, is still the Local Court of New South Wales which is an inferior court within the judicial hierarchy in which decisions of the Supreme Court are binding upon it (Local Court Act 2007, ss 7, 10). Furthermore the Supreme Court retains a supervisory jurisdiction in respect of judgments of the Local Court sitting in either of its Divisions: Supreme Court Act 1970, s 69.
5. The defendant submits that the right of appeal to the District Court from the Local Court Small Claims Division does not diminish the precedent setting role of the Supreme Court. In Valentine v Eid (1992) 27 NSWLR 615 (at 621G-622D) Grove J held that the doctrine of stare decisis is derived from the decisions of superior courts. Since the District Court is not a superior court a judgment of the District Court given in the exercise of its limited jurisdiction to determine appeals from the Local Court, while highly persuasive, is not a precedent strictly binding on the Local Court.
6. The defendant acknowledges that the statements made by Harrison J were not ratio decidendi. They were obiter dicta, and the Local Court is accordingly not strictly bound to apply them.
7. Notwithstanding that, the defendant argues that the principles states by Harrison J should be followed by this Court as they are consistent with both ratio decidendi and obiter dicta of earlier decisions of the Supreme Court. In particular the plaintiff submits that the comments by Harrison J are consistent with previous authorities of Anthanasopoulos v Moseley [2001] 52 NSWLR 262 at [84] per Ipp AJA (with whom Handley JA agreed at [1]) and Wong v Maroubra Automotive Refinishers Pty Ltd [2015] NSWSC 222 at [68]-[69]. Those authorities support the proposition that damages will be assessed on the basis of the cost of a replacement motor vehicle where the plaintiff demonstrates a need for a replacement vehicle. The plaintiff submits that the principles in Droga suggest that the cost of the replacement vehicle should be determined by what is necessary to meet the identified needs.
8. The defendant submits that the comments by Harrison J in Droga have been applied by Grogin LCM in Omar Metleg v Tariq Sheikh (Local Court unreported decision dated 6 November 2015) [1] . The defendant states that in that case the plaintiff had access to a Mercedes motor vehicle as an alternative replacement and the Local Court concluded at [56] there was no evidence that the Mercedes would not have satisfied the plaintiff's provide need, which was merely for a vehicle "to drive to and from work and for domestic purposes".
9. The defendant submits that, for reasons of judicial comity, this Court should follow the approach adopted by Grogin LCM.
10. Finally, the defendant asserts that the principles referred to by Harrison J were made in a context where it was intended to operate as a guide to both litigants and the Local Court of the relevant considerations that should be applied in future similar matters. The defendant asserts that the comments reflect what his Honour considers a correct approach to the issue if the matter was raised in any future appeal before him.

Analysis

1. The Local Court when sitting in its Small Claims Division is bound by the doctrine of precedent. The requirement to adhere to procedural fairness requires the Local Court in the Small Claims Division to "act judicially" (see O'Keefe J in Wakim v Mathiew Pty Ltd t/as Dove Migration Services [2002] NSWSC 405 at [21]). The Local Court sitting in its Small Claims Division makes judicial determinations of facts and law that are capable of giving rise to issue estoppel (see Charafeddine v Morgan [2014] NSWCA 74 at [19]-[20]). The Small Claims Division is not a separate tribunal but is a Division within the Local Court which is a court of law within the judicial hierarchy of the Supreme Court.
2. Although there is no direct appeal from the decisions of the Local Court sitting in the Small Claims Division to the Supreme Court and rights of appeal are limited to issues of want of jurisdiction and denial of natural justice proceedings in the Small Claims Division may be transferred to the General Division of the Local Court from which a right of appeal on question of law lies to the Supreme Court. In Fang v Koumekelis [2013] NSWLC 5 proceedings were transferred to the General Division solely on the basis that a party wished to preserve the right of appeal on a complex question of law.
3. The obligation to follow the decision of a superior court extends to the ratio decidendi of the case. In McBride v Monzie Pty Ltd [2007] FCA 1947 Finkelstein J said at [6]: The ratio of a case is the ruling on a point of law upon which the judge acts to reach his (or her) conclusion: Cross & Harris, Precedent in English Law (4th ed.1990) at 72. … There may be some cases where the judge gives additional reasons but indicates that he does not wish them to be part of the ratio and is merely wanting to have his views recorded for the benefit of those who may later be required to consider the point. In that event, what the judge says is not part of the ratio: Behrens v Bertram Mills Circus Ltd [1957] 2 QB 1, 25.
4. The comments made by Harrison J were obiter. His Honour makes this clear by prefacing his views as an aside.
5. The weight accorded to obiter comments will vary depending upon the context in which they are given. In Brunner v Greenslade [1971] Ch 993 at 1002-1003 Megarry J said: A mere passing remark or a statement or assumption on a matter that has not been argued is one thing, a considered judgment on a point fully argued is another, especially where, had the facts been otherwise, it would have formed part of the ratio.
6. Justice Heydon in an article "Limits to the Powers of Ultimate Appellate Courts" (2006) 122 LQR 399 at 415 referred to the factors to be considered when assessing the weight to be accorded to the dicta of a single judge of the Supreme Court: The attention to be paid to a statement on a point of law by an unquestionably great judge will vary with the circumstances in which it was made - whether it was made in the course of argument in open court while dealing with an example far removed from the case in hand; or made during an application for leave or special leave to appeal; or made in argument to counsel during an application for ex parte relief; or made in an interlocutory unreserved judgment; or made in a judgment in a case in which the loser was not represented, or argued by a litigant in person, or argued by very incompetent counsel; or made in an obiter dictum very far removed from either the core of the case or the arguments of the parties; or made in a case in which no party argued that the proposition was wrong.
7. The obiter comments of Harrison J in Droga at [56]-[61] regarding the principles applying to the assessment of damages for loss of use were outside the core matters in dispute in the appeal. The proposition that damages are to be assessed by reference to what was reasonably necessary to meet the plaintiff's need was not the subject of submissions by the parties. His Honour does not quote any other authority to support the proposition. It is expressly referred to as an aside that is separate to the reasons for the decision.
8. In my view His Honour did not intend to lay down new principles relating to the assessment of damages for loss of use of a motor vehicle. Rather, His Honour was making observations in the context of the facts of the particular case before him. His Honour noted that Ms Droga chose to replace her BMW X5 Sports Utility Vehicle with a BMW 520D sedan at a significant cost of $480 per day. His Honour expressed the view that it is likely that Ms Droga's daily transport needs could have been met during the repair period by reliance on a lesser quality and cheaper replacement. His Honour questions the utility of costly litigation both in the Local Court and then on appeal before him in circumstances where a common sense approach taken by the plaintiff might have resulted in the plaintiff hiring a less extravagant substitute. Had this course been taken it is likely that litigation would have been avoided altogether. His Honour views are fundamentally a criticism of the parties adopting intractable legal positions instead of a pragmatic approach to resolve the dispute.
9. Nevertheless, it remains necessary for this Court to consider whether what was said by Harrison J is consistent with other authorities, particularly in light of submissions that it has been applied in one recent Local Court decision and there is the potential that others may be similarly persuaded to follow his Honour's comments.
10. The proposition that a plaintiff's damages are to be assessed according to the cost of a lesser quality replacement unless the plaintiff proves a need for an equivalent quality replacement is not supported by other authority. The proposition should not be followed reasons.
11. Firstly, there is nothing contained within the decisions of either Anthanasopoulos v Moseley [2001] 52 NSWLR 262 or Wong v Maroubra Automotive Refinishers Pty Ltd [2015] NSWSC 222 that supports the proposition that damages should be assessed according to a lesser quality replacement motor vehicle absent proof of the need for an equivalent replacement.
12. In Anthanasopoulos the Court of Appeal was dealing with the question of entitlement to damages for loss of use of a private motor vehicle rather than the assessment of those damages. Beazley JA at [59] stated: … the question of quantum is not in issue here and it is thus unnecessary for any comment to be made as to the principles which would govern the amount of damages in any given case. Ipp AJA made additional comments regarding the right to damages for loss of use of non-income producing chatters, concluding at [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.
13. While the defendant submits what was said by Ipp AJA supports the assessment principles in Droga it is worthy to note that in Yates v Mobile Marine Repairs Pty Ltd and Anor [2007] NSWSC 1463, Palmer J, in a case dealing with assessment for the loss of use of a fishing vessel used for leisure, rejected a submission that Ipp AJA in Anthanasopoulos introduced to the law a new test for damages, that of "need" of the particular chattel. Palmer J said at [84]: I do not agree. Read in context, all his Honour was doing in this passage was explaining the rationale behind the principle as laid down in The Greta Holme. His Honour would have been surprised to find himself quoted as the authority for reversing what Lord Halsbury LC had said in The Mediana.
14. In Wong v Maroubra Automotive Refinishers Pty Ltd [2015] NSWSC 222 McCallum J, in dealing with a claim for wrongful detention of the plaintiff's motor vehicle, followed what was said by Ipp AJA in Anthansopoulos and concluded at [69]: Where, by reason of that need, they were required to hire a replacement chattel, the damages were to be measured by reference to the market rate of hiring a replacement chattel.
15. Her Honour was dealing with damages in claims by two plaintiffs who were deprived of the use of a Toyota and a Mazda vehicle. Her Honour did not embark on any inquiry as to what size, make or model motor vehicle would be sufficient to replace those vehicles to meet the plaintiffs' daily transport needs.
16. Secondly, the proposition that damages for loss of use are to be assessed by reference to a lesser quality replacement is inconsistent with ordinary principles of assessment of damages. In this regard it is worthwhile returning to the fundamental principles that govern the assessment of damages in negligence claims. The general rule was stated by Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 39: That sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.
17. The principle of restitutio in integrum applies to claims for loss of use of a motor vehicle (per Lord Hope in Lagden v O'Connor [2004] 1 AC 1067 at [30]).
18. The proposition that a plaintiff, whose chattel is damaged by the negligence of a defendant and who arranges an equivalent substitute chattel to restore their position is not entitled to recover that cost as damages is, on its face, inconsistent with the objective of damages to put the party in the position as if he or she had not sustained the wrong. The imposition of an addition element of proof of need of an equivalent replacement proposition suggests that a plaintiff is, in the absence of an identifiable "need" for an equivalent replacement, is not entitled to be restored to the position that they would have been had the wrong not occurred. This would effectively introduce a new test of need, something which was expressly rejected by Palmer J in Yates.
19. The application of such a test could lead to clearly absurd results. To take the hypothetical removal of a chair from a room referred to by the Earl of Halsbury LC in "The Mediana" at [117] the additional test of need would allow a defendant to argue that the plaintiff did not need a similar chair as a temporary replacement. If the "need" is only to sit upon something then an upturned milk crate could satisfy the identified "need".
20. In a claim for loss of use of property it is not the "need" for a replacement vehicle that is being compensated, rather it is the interference with the plaintiff's right to use particular property that is being compensated. While the plaintiff's need for the chattel will be relevant to determining the proper basis for assessment of damages the fundamental issue is what award reasonably restores a plaintiff to the position they were in if the deprivation did not occur. If restoration is best achieved by a temporary replacement chattel then it is most appropriately achieved by reference to a similar replacement chattel.
21. Thirdly, there is persuasive authority within the United Kingdom to the effect that a plaintiff is entitled to damages assessed by reference to a reasonably equivalent substitute. A similar legal battle has been played out in the United Kingdom between insurers and credit hire companies. Courts have determined that a plaintiff who needs a substitute vehicle damages should be assessed accordingly the cost of a "reasonably equivalent replacement".
22. In Lagden v O'Connor [2004] 1 AC 1067 at [27] per Lord Hope of Craighead stated: 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.
23. Further in Lagden v O'Connor Lord Scott of Foscote at [76] considered that a claim for loss of use may be considered as a claim for general damages to which "a fair approach to quantum would be to award a sum based upon the spot hire charge for a comparable vehicle".
24. Fourthly, there is a substantial body of reported decisions within the Local Court over the past decade that have consistently applied the principle that loss of use is to be determined by reference to an equivalent substitute. In Chong v Berry [2007] NSWLC 33 Dillon LCM stated at [49]: It is accepted by both parties that the true measure of damages, where a replacement vehicle has been hired, is the market rate or "spot rate" of hire for the relevant reasonable substitute vehicle in the nearest market. [citations omitted]
25. Dillon LCM at [50] cites the principle referred to in the English Court of Appeal decision in J & E Hall Ltd v Barclay [1937] 3 All ER 620 that a plaintiff who has lost or damaged goods due to the fault of another, and where such goods are available in the market, he or she is never entitled to more than the cost in the market of an item similar to the lost or damaged chattel.
26. In Masrour v Danzey [2013] NSWLC 9 Schurr LCM said at [24] "the innocent driver cannot claim for "unreasonable" expenditure by hiring a bigger and better car than was reasonable". In this case Schurr LCM held that Mr Masrour acted reasonably, in that he hired a "like-for-like vehicle".
27. In the Small Claims Division of the Local Court there is a plethora of decisions by this Court which consistently determined that damages are to be assessed by reference to the market rate for the hire of a similar replacement vehicle. See, for example, Anwar Harb v John Marchbank [2011] NSWLC 9 at [35], Fang v Koumoukelis [2013] NSWLC 5 at [88], Rizk v Chen and National Apollo Bathrooms Pty Ltd [2014] NSWLC 8 at [39].
28. If an approach is to be taken having regard to judicial comity then the weight of decisions in the Local Court consistently apply the approach that once need for a replacement is established the market rate for the replacement is based on the market rate for a reasonable equivalent replacement.
29. The comments made by Harrison J in Droga show that, in his Honour's view, the plaintiff in the case before him acted unreasonably in hiring a high end luxury replacement vehicle at a substantial cost of $480 per day. While the comments made in Droga do not alter the law relating to the assessment of damages in loss of use claims it is a reminder that a plaintiff's right to recover damages is qualified by the fact that the court will only award damages that are reasonable. In Bee v Jenson [2007] EWCA Civ 923 Lord Justice Longmore noted at [22]-[23] that a plaintiff who had not paid any hire charges remained entitled to recover "general damages" based on the spot rate for a comparable vehicle, however, "the tortfeasor is always protected by the requirement that the claimant can recover no more than the reasonable cost of hiring the necessary replacement". In Darren Bent v Highways and Utilities Construction Ltd [2010] EWCA Civ 292 Lord Justice Jacob at [9] noted 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". The obiter comments of Harrison J are a cautionary statement that a plaintiff should not blindly focus on obtaining a like for like replacement irrespective of the cost particularly when dealing with high end expensive luxury vehicles.
30. Turning to the present case, the plaintiff was the owner of a 2009 Holden Commodore. She hired a replacement vehicle with Right2Drive at a daily cost of $137.66 per day. Internet printouts from the website VroomVroom show that Avis and Budget offered similar full-size vehicles for a daily rate, inclusive of excess reduction, that is no cheaper than Right2Drive. The Court will allow the daily rate of $137.66 per day for an 11 day period. The Court will enter a verdict and judgment in favour of the plaintiff in the sum of $1,580.26 together with interest pursuant to section 100 from 13 February 2015.
31. Costs reserved. Assessor S Olischlager 4 March 2016

Endnote

1. This decision has since been published on NSW Caselaw: Metleg v Sheikh [2016] NSWLC 6

Amendments 09 June 2016 - Endnote [1] added 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: 09 June 2016