Australian CoA decision

In November 2019, judgment was given by the New South Wales Supreme Court in the case of Lee v Strelnicks [2020] NSWCA 115 and several other joined cases.

It was a decision which was appealed by the CHO to the Court of Appeal and the judgment was handed down today (18th June 2020).

The cases were relevant to the UK credit hire industry because the High Court in New South Wales had decided to depart from UK principles in terms of determining the reasonableness of hiring a suitable vehicle when a prestige vehicle was involved. The most recent judgment is now available in The Library.


The principle issues before the Court of Appeal were:

  1. Where a claimant has a "need" for a replacement vehicle, what constitutes reasonable expenditure on hiring that replacement vehicle for the purpose of determining recoverable damages.

  2. The application of those principles to the four cases before the Court.


The majority of the Court held, granting leave in part and allowing the appeal in part:

Issue 1

  • The Court agreed that claimant must establish a "need" for a replacement vehicle.

  • In determining what "need" entailed, the majority adverted to the principle of restitutio in integrum such that, where a damaged vehicle would have been used, the relevant need is for a replacement of that damaged vehicle in order to put the claimant in the position he or she would have been in but for the wrongdoing. Accordingly, "need" should be gauged by whether the claimant had a need for the use of their damaged vehicle, not by exclusively considering if the function of the replacement vehicle meets a claimant's inconvenience:

  • The next inquiry is as to reasonableness of the claimant's hire expenditure in light of the previous conclusion. First, this involves inquiring whether an equivalent vehicle is available such as one of the same make, model and year, or if none is available, then what is available in the market that is as close to equivalent as possible. Secondly, the claimant's cost of hiring should be no more than would be reasonably needed to hire such an equivalent vehicle in the circumstances. The cost of hiring an equivalent vehicle in the market should be the measure of damages.

  • In dissent, Meagher JA considered that regardless of whether hire costs were regarded as expenditure in mitigation or incurred as a foreseeable consequence of the tort, the analyses converged on the reasonableness of the expenditure. The claimant could recover no more than was reasonably necessary to make good their compensable loss. Meagher JA held the relevant loss was the uses to which the damaged vehicle was likely to have been put during the period of repair, and ordinarily satisfied by the hire of a vehicle which is sufficiently comparable to the damaged vehicle in terms of functionality and specifications to satisfy the uses to which it was capable of being and likely to have been put).

Issue 2

  • [Lee v Strelnicks - 2019/173246]: The Local Court did not err in holding that there was no entitlement to damages for loss of use because the applicant had not established a relevant "need" for a vehicle. The Court unanimously refused leave to appeal.

  • [Souaid v Nahas - 2019/306508]. The Local Court's finding that the applicant was content with any car rendered it appropriate that the measure of the loss was the cost of hiring a replacement vehicle that was not equivalent to his damaged vehicle. The majority of the Court refused leave to appeal with costs.

  • [Cassim v Nguyen - 2019/306634]: The Court unanimously granted leave to appeal. The Court allowed the appeal by majority and awarded the costs of the appeal, the application for leave and the appeal in the Common Law Division against the respondent.

  • [Rixon v Arsalan - 2019/306670]: The Court unanimously granted leave to appeal and allowed the appeal by majority and awarded the costs of the appeal, the application for leave, the appeal in the Common Law Division and in the Local Court proceedings against the respondent.

COMMENTS:

The decisions in these Australian cases in the High Court were important because they represented a departure from UK principles in respect of the hire of a like for like vehicle.

They were initially included in the Library (and are still there) for that reason and were mentioned in my book on Credit Hire for two reasons.


The first was the concern was that that the Australian market for credit-hire was likely to become more challenging as the UK and Australian markets aligned in terms of their maturity. More importantly, there was another consequence I was concerned with at the prospect of the credit-hire model evolving in two different jurisdictions, and the risk that recent adverse judicial decisions in Australia might come to penetrate thinking by regulators and the judiciary in the UK.


After the High Court decision, and prior to these recent appeals, it was law that if the damaged vehicle was a prestige vehicle, the Claimant would need to give specific reasons to explain why they required a prestige vehicle replacement for the period that the repairs were carried out.


The need for a prestige vehicle had to be classified as more than just day to day errands which could reasonably be satisfied by hiring a standard vehicle.


The High Court offered guidance that the use of a prestige vehicle might be justified by the needs of a particular business or profession but held that it would not normally qualify as a reasonable expense to meet the inconvenience of domestic or social needs.


In addition, it was deemed not enough for a Claimant to claim the need for a prestige vehicle because of the safety afforded by a luxury car. If the Claimant owned a BMW X5 and the main use was dropping children at school and shopping, then the reasonable inference would be that a Toyota Corolla would suffice for that need.


All of that said, in Australia the Defendant continued to bear the onus to prove that the Plaintiff has not taken reasonable steps to mitigate his or her loss. They just appeared, as at November 2019, to have the benefit of a favourable judicial tailwind, the likely effect of which would lead to CHOs supplying a different type of vehicle, reducing the number of prestige vehicles in their fleets, increasing the number of mainstream vehicles and reducing their profit.


Clearly, these appeals had specific significance in the Australian market. However, they were also potentially unhelpful if the UK judiciary started to depart further from established principles. With gratitude to James Frape at Compass Corporation who sent the judgments overnight and Primus Law, their Australian solicitors, I can report the three-line summary of the outcome, for those that prefer a headline, is that:


“if a person says they would have been happy with any car it may be unreasonable to hire a luxury car. However, if a person expresses a preference for a vehicle similar to their own then that is ok.”

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