Credit Hire Car Actions, the Western Australian Approach

Written by Kirsty Henshall

On 1 July 2022 Magistrate Darge delivered a decision in the Magistrates Court of Western Australia case of McKnight v Miller.

This case study will examine that decision and two subsequent judgments of superior Western Australian courts which have been delivered as a consequence of the original determination.

The matter is ongoing and therefore it does beg the question: how will the matter end?

Magistrates Court

The Magistrates Court proceeding arose as a consequence of a motor vehicle collision which occurred on 13 May 2019 involving a motor vehicle owned by Melanie McKnight (the Claimant) and a motor vehicle being driven by Elaina Miller (the Defendant).

Following the collision, the Claimant hired a vehicle from Compass Corp Pty Ltd (Compass). The total hire cost was $3,928.53 and the Defendant’s insurer, RAC Insurance Pty Ltd, made a part payment of $1,901.85, leaving a balance of $2,026.68.

The Claimant owned an Opel Astra and the hire period of 39 days was agreed. For the first nine days, the Claimant hired a Toyota Camry Hybrid and for the remainder of the hire period, the Claimant hired a Toyota Corolla. The part payment made by the Defendant’s insurer was based on its calculation of the reasonable rate of hire.

The issues in dispute at first instance were identified as follows:

  1. The Toyota Camry Hybrid was not a like for like vehicle with the Opal.
  2. The method of calculating the hire car charges resulted in a claim which was not fair and reasonable.

Magistrate Darge examined the background to credit hire car decisions in the United Kingdom and Australia and made the following observations:

“At last count there were almost 1,000 cases involving credit hire car claims before this Court.” (at paragraph 17 of the judgment).

“In fact, the last trial conducted in this Court to its conclusion was in 2016.” (at paragraph 18 of the judgment).

Magistrate Darge noted credit hire car matters “move through the system at a glacial pace.” (at paragraph 19 of the judgment) and whilst “the position has been static in Western Australia, since two decisions were delivered in the District Court in 2017, the credit hire car companies and the insurers have been active on the east coast, taking a test case on appeal to the High Court” (at paragraph 20 of the judgment).

The Magistrate commented “the mechanics of determining the core issues needed to assess damages were not defined by the High Court and remain open for determination.” (at paragraph 21 of the judgment).

After analysing the evidence, the presiding Magistrate held as follows:

“The Claimant had a small hatchback. In my view, it would not have been appropriate to have replaced that with a mid-sized sedan such as a Toyota Camry.” (at paragraph 106 of the judgment).

The Magistrate held he was not required to decide the question of the variance in values of the two vehicles as “the Claimant stands or falls on the rate charged for the replacement Corolla.” (at paragraph 116 of the judgment).

At paragraph 123 of the judgment, the Magistrate noted the following:

“Two things are equally clear;

  • The High Court recognised that credit hire car charges may be a factor in determining the failure to mitigate; and
  • At no stage did they provide guidance as to how those costs should be considered or applied in practical terms.”

The Magistrate then held the approach to adopt is to “look at the costs and, by comparison with the mainstream market, to try to determine what amount represents the credit hire component of the invoice.” (at paragraph 140 of the judgment.)

The Learned Magistrate then held as follows:

  1. The Claimant had failed to mitigate her loss by hiring a Camry for 9 days but accepted that it was at the same rate as the Corolla (at paragraph 170 of the judgment).
  2. The Claimant failed to mitigate her loss by hiring a vehicle that included credit hire car charges which took it outside the market for similar hire vehicles (at paragraph 170 of the judgment).
  3. The payment made by the Defendant’s insurer represented the median hire rate and therefore there is “nothing further to be claimed by Compass” (at paragraph 171 of the judgment).
  4. The delivery charge of $88.00 is reasonable.
  5. The Claim is dismissed with no order as to costs.

District Court

The decision was then appealed to the District Court of Western Australia. Levy DCJ handed down his decision on 15 September 2023 (McKnight v Miller [2023] WADC 107).

Levy DCJ granted the appeal on three grounds, set aside the decision of Magistrate Darge and awarded judgment in favour of the Appellant in the sum of $1,930.81. Levy DCJ indicated the Court was required to consider the objective circumstances in which the Appellant found herself (including that she had a daughter, was pregnant and worked full time) as whether the Respondent proved in the lower Court the Appellant’s actions were unreasonable is a question of fact.

Levy DCJ set out the facts in the matter and granted the appeal on the following grounds:

Ground 1: The appellant’s day rate evidence

  1. “The Learned Magistrate erred in law and in fact in identifying a ‘reasonable’ day rate between the day rates identified by the Appellant and the day rates identified by the Respondent.
  2. Having concluded that he could not decide which of the Appellant’s and Respondent’s day rates he could rely on, the Learned Magistrate should have concluded that the Respondent had failed to prove the Appellant had not mitigated her loss to the extent of the Appellant’s day rates.” (at paragraph 57 of the judgment).

The Court noted the issue is not what is a reasonable amount, but rather whether what was claimed by the Appellant was unreasonable. (at paragraph 70 of the judgment).

Levy DCJ noted “there was no proper basis for the learned Magistrate to conclude that the respondent had proved on the balance of probabilities that the appellant, by hiring a vehicle the cost of which included credit hire car charges, she had therefore breached her duty to mitigate her damages.” (at paragraph 73 of the judgment).

The Court made the following further remarks:

”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 evidence, was nonetheless unreasonable.

The appellant has made Ground 1 and for that reason alone the appeal must succeed.” (at paragraphs 74 and 75 of the judgment).

Ground 2: The ‘15% discount’ applied by the learned Magistrate

The Court held the “approach adopted by the learned Magistrate demonstrates that the application of a 15% discount was, in all the circumstances, arbitrary. I am satisfied that, on the evidence before the learned Magistrate, there was no proper basis to apply a discount of 15% to the rates and Ground 2 has been made out.” (at paragraphs 100 and 101 of the judgment).

Ground 3: ‘Incorrect mathematic application of the 15% discount’

The Court held nothing turned on this issue and dismissed this Ground.

Ground 4: Delivery charge

Even if the learned Magistrate did err in this regard, this ground should be dismissed.

Ground 5: Consideration of non-contemporaneous rates evidence

This ground was dismissed.

Ground 6: The appellant’s entitlement to damages

This ground dealt with the issue of roadside assistance package and the zero excess.

The Court dismissed this ground holding “even if the appellant was entitled to a roadside assistance package or other benefits such as zero excess, there was no evidence of what the appellant’s insurance arrangements were at the time of the collision.” (at paragraph 162 of the judgment).

Ground 7: Mitigation of loss

The Court held the learned Magistrate focused on trying to determine what a reasonable rate of hire was which then resulted in his Honour “failing to properly determine the real issue, namely whether the amount actually claimed was unreasonable.” (at paragraph 170 of the judgment).

The District Court held as a result the learned Magistrate failed to take into account the appellant’s personal circumstances. (at paragraph 173 of the judgment).

The Court held the learned Magistrate was required to:

  1. Consider the objective circumstances in which the appellant found herself; and
  2. Consider the reasonableness of any steps taken by the appellant to mitigate her loss, including taking into account the appellant’s particular factual circumstances. (at paragraph 174 of the judgment).

The Court then held Ground 7 had been made out as the Magistrate erred by failing to take into account the appellant’s particular circumstances.

Ground 8: ‘Credit hire car charges’ or additional benefits

The Court held this ground was not made out as it was “satisfied that there was no error in the circumstances of the case in concluding that the rates did include a component of credit hire car charges.” (at paragraph 188 of the judgment).

Ground 9: Tiered or daily rates

The Court held the Magistrate was bound to follow the decision of Patterson v Kenny [2017] WADC 58 and therefore did not err by basing the calculation of rates on the entire period of hire rather than on daily rate.

The Court then set aside the Magistrate’s decision and delivered a judgment in favour of the appellant in the sum of $1,930.81.

The District Court then noted it would hear the parties in relation to final orders and costs.

Court of Appeal of the Supreme Court

The decision of the District Court was then appealed to the Court of Appeal of the Supreme Court of Western Australia.

Whilst that appeal has yet to be determined, the Court, constituted on this occasion by Mitchell JA and Vaughan JA noted in a judgment delivered on 14 December 2023 (Miller v McKnight [2023] WASCA 182 and which judgment will be examined below), the appellant lodged an appeal notice on 3 October 2023 and the single ground of the appeal is as follows:

“The primary judge erred in law by applying the wrong legal principle in determining, at reason [73] – [74] and [173] – [176], that the respondent was entitled to recover the costs of hiring a replacement vehicle on credit.” (at paragraph 16 of the judgment).

The Court of Appeal was determining an amended registrar’s notice to attend to consider whether the appeal should be struck out pursuant to Section 43(3) of the Magistrates Court (Civil Proceedings) Act 2004 (WA) which indicates the Court may strike out an appeal “if the likely cost of the appeal to the parties would be disproportionate to the amount of the claim in, or the nature of, the case which is the subject of the appeal.”

The Court of Appeal noted an appeal court may strike out an appeal on its own initiative.

The Court of Appeal of the Supreme Court declined to exercise the power to strike out the appeal and held it should proceed to hearing and determination in what it determined were unusual circumstances. As there was no formal application before the Court, the Court held there was no need for any orders to be made. The costs of and incidental to this issue were then reserved.

The Court estimated the likely cost of the appeal to the parties to exceed $30,000 by what it considered to be a considerable margin and such was disproportionate to the amount of the claim the subject of the appeal.

However, the Court then identified a number of what it described to be countervailing factors in the appeal, being the following:

  1. The parties to the appeal are the insurer and the credit hire car provider.
  2. “The risk of the disproportionate and even crippling expense of an appeal is not objectively likely to deter a person in the position of the respondent from litigating a modest claim of his kind in the Magistrates Court”.
  3. The appeal raises the question of legal principle of general application.
  4. There “are many such claims between insurers and credit hire car providers on an annual basis and that the aggregate value of those claims is sizeable.” (at paragraphs 43 – 47 of the judgment).

After weighing up all of the factors, the Court indicated it was not persuaded the appeal should be struck out. The Court stated that this “is not an ordinary case. There are wider benefits that may accrue to the benefit of the administration of justice in the court hearing and determining the appeal. The principles applying to the recovery of credit hire car charges ought to be the subject of a considered decision by this court.” (at paragraph 50 of the judgment).

As a consequence, whilst the District Court of Western Australia granted the appeal on three grounds, being Grounds 1, 2 and 7, the appeal to the Court of Appeal of the Supreme Court of Western Australia is only proceeding on ground 1 (being the day rate evidence ground) and ground 7 (being the mitigation of loss ground). Ground 2, being the 15% discount ground, was not appealed.

The Court of Appeal of the Supreme Court of Western Australia has recognised the need to make a decision which will provide guidance to the lower courts hearing credit hire car disputes.

It is also hoped the decision of the Court of Appeal of the Supreme Court will provide assistance to insurers and credit hire car companies in determining how to approach credit hire car disputes so as to foster and encourage their resolution.

If you have any questions in regards to this article, please contact Kirsty Henshall on 03 9947 4554 or the Ligeti Partners team on 03 9947 4500.

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Kirsty Henshall

Principal Lawyer