Challenging the reasonableness of hire car charges

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By Pailin Harris, Paralegal

McKnight v Miller [2023] WADC 107

The appellant appealed a decision dismissing the claim made against the respondent.

The claim was for car rental charges relating to a temporary replacement vehicle that the appellant hired from Compass Corp Pty Ltd (Compass) after a motor vehicle accident involving both parties on 13 May 2019. The disputed amount was $1,930.81. The main issue was whether the replacement vehicle costs were unreasonable.

At the time of the accident, the appellant was pregnant and living approximately 40km from Perth city centre.

At first instance the learned Magistrate’s decision ultimately hinged on his finding that the appellant had failed to mitigate her losses by hiring a vehicle from Compass, which incurred credit hire charges that were outside of the range of market rates for similar vehicles.

The appellant claimed that the learned Magistrate had made factual and legal errors in his decision and appealed to the District Court on nine separate grounds of appeal.

Successful grounds of appeal

The fact the learned Magistrate had ‘chosen’ a median rate did not of itself amount to an error as he was obliged to consider all of the relevant evidence as to market rates.

However, as noted in Stocovaz v Fung, [1] acceptable evidence that a lower cost would be fair and reasonable cannot of itself establish that a higher cost was outside the range and not fair and reasonable. The true question for determination is whether the cost incurred was outside the range (ie. whether the cost incurred was extravagant or unreasonable).[2]

The Court held that there was no proper basis for the learned Magistrate to conclude that the respondent had proved that the appellant, by hiring a vehicle with costs that included credit hire charges, had breached her duty to mitigate her loss. Levy DCJ stated:

“On the available evidence, a conclusion that what RAC had paid represented the median rate, could not of itself lead to the conclusion that the amount charged by Compass, albeit it may have been high or even the highest rates evidenced, was nonetheless unreasonable.”

As a result, the first ground of appeal was successful.

The second ground of appeal questioned the 15% discount applied by the learned Magistrate to the daily rate. The appellant argued that this discount was arbitrary, and no explanation was provided as to how this figure was arrived at. The discount was intended to reflect a decrease in rates between 28 days and 35 days and a premium location surcharge seemingly consistent with McBride v UK Insurance Ltd.[3]

However, the Court queried the uncertainty as to why learned Magistrate applied and took account of a premium surcharge. It was concluded that there was no proper basis for the learned Magistrate to apply a discount of 15% to the rates and this ground of appeal succeeded.

Under the seventh ground of appeal, the appellant claimed that the learned Magistrate erred in finding that the appellant should have availed herself of a cheaper vehicle rental option than the one provided by Compass. In determining what a reasonable rate of hire was the Court held that the Magistrate had failed to take into account the appellant’s personal circumstances. In particular, the appellant was pregnant at the time of the crash and it made good sense for her hire a car from Compass who not only delivered the vehicle to her, but also provided it at no cost until her vehicle was returned. Some car hire companies would have provided cheaper rates, but these companies were located more than 50 kilometres from where she lived. As a result, this ground of appeal was successful.

Decision

The District Court found in favour of the appellant, upholding three of the nine grounds of appeal, with judgment awarded in favour of the appellant in the sum of $1,930.81.

It is settled law that it is no longer the case that before a plaintiff can succeed in recovering hire costs for a substitute vehicle, there is a requirement to prove a ‘need’ for the substitute vehicle. Instead, the High Court has recognised in Arsalan v Rixon[4] that there is a head of damage of loss of amenity of use of a chattel (such as a motor vehicle).

The case illustrates the difficulties insurers face in challenge hire car charges at trial on the basis of reasonableness, especially in the case of credit hire where some charges are unquantified.

[1] Stocovaz v Fung [2007] NSWCA 199 (Handley JA) [37] – [38].

[2] Stocovaz v Fung [37] – [38].

[3] [2017] EWCA Civ 144 [100].

[4] [2021] HCA 40; (2021) 395 ALR 390; (2021) 96 ALJR 1.

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