Entitlement to Damages for Loss of Use Clarified by Court of Appeal

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Lee v Strelnicks; Souaid v Nahas; Cassim v Nguyen; Rixon v Arsalan [2020] NSWCA 115

By Daren Curry, Partner

On 18 June 2020 the NSW Court of Appeal handed down a decision in three related matters which established that when a claimant loses the use of their property (in this case a vehicle) as a result of it being damaged, proved they can show that they needed the use of a vehicle, they are entitled to the cost of an equivalent replacement that (in the case of a motor vehicle) is the same make, model and year of their damaged vehicle in order to put the claimant in the position he or she would have been in but for the wrongdoing.

In doing so the Court overturned a series of earlier Supreme Court decisions that had found that claimants were only entitled to the market rate of hiring a vehicle that met their actual needs based on their past usage of their own vehicles and where those needs could be satisfied by hiring a cheaper non prestige vehicle, that was what the claimants were entitled to.

Background

In September last year the NSW Supreme Court decided in three related cases concerning the question of how damages are calculated in claims for loss of use / credit hire claims, that, where a claimant had temporarily lost the use of a prestige vehicle, they were not automatically entitled to go out and hire another prestige vehicle to replace it.

The Court had held that they were only entitled to the cost of hiring a vehicle that meets his or her particular needs which are to be determined by looking at what the claimant actually used their vehicle for.

These decisions had an obvious and immediate impact on claims for loss of use where the claimant’s vehicle is a prestige vehicle as those claimants needed to show that they used their vehicle for specific purposes that reasonably required a prestige vehicle, failing which they will only be entitled to the rate of hiring a non prestige vehicle that met their demonstrated needs.

Court of Appeal

In related decisions of Lee v Srtrelnicks; Souaid v Nahas; Cassim v Nguyen; Rixon v Arsalan [2020] NSWCA 115 the NSW Court of Appeal found that the approach taken by the Supreme Court was wrong.

In a nutshell, the court held that;

  1. where a damaged vehicle would have been used, there is a presumption that 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.
  2. 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”; and
  3. the 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.

The following statements in the decision help understand the Court’s reasoning:

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 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

The Court also provided some guidance as to what would be appropriate where a vehicle of the same make, model and year was not available, stating that:

  • 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; and
  • If an equivalent vehicle of the same make, model and year as the damaged vehicle is not available, a vehicle as similar as possible to the damaged vehicle in specification and performance would be reasonable.

The reference of a vehicle of a similar specification and performance as being appropriate where the same make, model and year is not available is interesting and may open the door to arguments that, in cases where European vehicles are damaged, if the same make and model vehicle is not available, a vehicle of another make (including non European vehicles) may be considered a suitable replacement, provided it has similar specification and performance to the claimant’s vehicle.

A (Narrow) Exception To The Rule

Interestingly, in one of the three cases decided by the Court of Appeal (Souaid v Nahas) the Court found that the claimant was not entitled to a prestige hire car even though his damaged car was a prestige car. The reason the Court found that a prestige hire car was not reasonable was that the claimant had conceded in evidence that he did not care what type of vehicle he hired.

When the claimant 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 Court found that the fact the claimant 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.

This aspect of the decision suggests that whilst all the claimant need to is show that they needed a vehicle, at which point the court will infer that the claimant will have a reasonable need for a “reasonably equivalent” replacement vehicle, if the claimant concedes that they would have been content with any vehicle, it will not be reasonable for the claimant to hire a prestige vehicle.

Proving Specific Needs Is Still Required

The final aspect of the decision worth noting concerned the previous Supreme Court decision in the matter of (Lee v Streinwick).

The facts in that case were 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.

The Court upheld the Supreme Court’s prior ruling that Ms Lee had not proven need as her evidence had not been specific enough.

The Court found that Ms Lee did not provide:

  • 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;
  • any details as to where she worked to and from where she had to travel;
  • any 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

This aspect of the decision simply reaffirms the previous position that evidence of need must be specific and that general statements will not suffice.

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