Written by Spencer Pascal
What has been described as an area which continues to grow new heads of argument, much like the mythical hydra1, has proven to be a rather apt description for the litigious nature of the credit hire industry. Whilst the High Court’s decisions in Arsalan v Rixon [2021] HCA 40 resolved many of these arguments, many remain.
In its latest iteration, Justice Kirk’s Supreme Court decision of Lazicic v Rossi [2024] NSWSC 777 provides guidance on one of these outstanding arguments; the assessment of the reasonableness of a claimant’s conduct by incurring the amount claimed for rental charges and in particular, the rate of hire for the vehicle hired. This has proven to be one of, if not the most, vexed questions concerning credit hire claims. Justice Kirk’s decision is therefore both timely and helpful.
Background
As is usual in cases of this type, the claimant, Mr Rossi, was involved in a motor vehicle collision on 21 December 2023, whilst driving his Honda Civic. Mr Rossi was not at fault for the collision.
Right2Drive subsequently provided a replacement vehicle, a Hyundai i30, on credit to the claimant for a period of 86 days at a rate of $343.31 per day plus further one-off charges. Right2Drive’s invoice came to $29,684.16.
The matter proceeded to a hearing in the Local Court before Magistrate Barko. The primary issue in dispute being the reasonableness of the rate claimed in the Right2Drive invoice.
The evidence from the Claimant revealed there was no discussion between the Claimant and Right2Drive over payment or anything to do with discount, about rates or otherwise and it appeared the Claimant did not in fact know what rate he was being charged. Further, the Claimant also made no inquiries about the availability of cars from, or the rates charged by, other rental car companies.
As part of the legal proceedings, evidence was provided by both sides as to the rates of hire for reasonably comparable vehicles to the claimant’s damaged Honda Civic. The rates for such vehicles ranged from $84.00 – $398.10.
Right2Drive also led evidence from one of its employees, Havva Lachmann. Under cross-examination, Ms Lachmann was asked “why didn’t the pricing analyst charge $99.96 a day like Budget at Wollongong for a Corolla?” She answered: “I can’t comment on why not. I don’t set the rate your Honour. The pricing analyst will look at the range of rates for the area.” Justice Kirk later commented this evidence might be taken to suggest that Right2Drive “offers claimants a vehicle at a rate somewhat below the highest figure it can identify on the relevant day in the relevant region (where here that region was taken to encompass Wollongong and Greater Sydney).”
The Appeal
Magistrate Barko ultimately awarded the claimant’s claim in full, which lead to the decision being appealed.
There were four grounds of appeal; three of those grounds largely centred around a failure by the Magistrate to provide adequate reasons for the finding he reached. The appeal on these grounds succeeded. For the purposes of this article, we do not intend to consider this aspect of the decision in detail.
Whilst the fourth ground of appeal, being the failure of the Magistrate to address the evidence in relation to whether the claimant acted reasonably in mitigating his loss by hiring a vehicle at a cost of $343.31, was not required to be decided by his Honour, his Honour still provided some helpful analysis of the legal principles and their application when considering this question.
His Honour considered “the issue of whether the claimant acted unreasonably in incurring the charges that he did was not one of great difficulty” as, amongst other things:
- “(1) The claimant undertook no market research. He simply accepted the offer of a car when made to him by R2D. He made no inquiry whatsoever as to what rate or charges he would be paying, and R2D’s representative did not volunteer that information.
- (2) The rate charged by R2D was, on any view, very high and well above what could readily have been obtained from a range of other car rental companies for the same type of car. It was some four times higher than rates for equivalent available cars on each party’s evidence. When the claimant belatedly learnt of the rate – in the course of the proceedings below – he himself acknowledged that the rate was expensive. Ms Lachmann of R2D accepted in her evidence that the amount nominally charged to the claimant, for the 86 days hire, was more than it would have cost to buy an equivalent new car.’
- (3) There was no evidence indicating that he needed a car so urgently that it was reasonable for him to take the first offer that came along. Even if there had been such evidence, it would have been appropriate to consider whether it was reasonable to continue hiring the car at R2D’s very high rate once the immediate urgency had passed.
- (4) There was no evidence indicating the claimant’s financial position was such that the only way he could obtain a replacement was on credit: cf Burns v Man Automotive (Aust) Pty Ltd [1986] HCA 81 (1986) 161 clr 653 AT 658-660. Even if there had been such evidence, it would then have been appropriate to consider whether there were other options reasonably open to him other than accepting R2D’s very high rates.
- (5) The mere fact that there was one or more higher rates charged by someone somewhere in the Greater Sydney region for car hire on or around the day he first hired the car did not establish that the claimant had acted reasonably.”
His Honour was not required to determine the reasonableness of the damages claim himself as the case was remitted to the Local Court to be redetermined. However, given his Honour’s findings, the Claimant would likely only be awarded a rate towards the bottom of the range.
Implications
Justice Kirk stated that “the test is whether or not the claimant acted reasonably in acting as they did such as to incur the cost for which they are claiming reimbursement.” This will require an assessment of all the circumstances, which will include looking at any inquiries made in fulfilling their need for a replacement vehicle and the availability of other cheaper rates.
It is an all too common occurrence that claimants who hire vehicles on credit from Right2Drive or other similar hire providers undertake no market research before accepting the rental vehicle and in many cases also do not even now know the rate they are being charged from the credit hire provider. A failure to make such basic enquiries will constitute a failure to act reasonably in mitigating a loss.
Should you wish to discuss the decision and its implications, please contact Spencer Pascal on 02 8047 2870 or any member of our dedicated Credit Hire Team.
- Olivo v Tran [2018] NSWLC at [4] ↩︎
