Written by James Mulcahy and Spencer Pascal
Souaid v Nahas; Cassim v Nguyen; Rixon v Arsalan; Lee v Strelnicks [2020] NSWCA 115] – Do You Really Need That Car?
[2020] NSWCA 115
The NSW Court of Appeal today refused leave in the matters of Souaid v Nahas and Lee v Strelnicks, and allowed leave and subsequently upheld two appeals in the matters of Cassim v Nguyen and Rixon v Arsalan.
All of the appeals dealt with issues relating to credit hire car claims, and the legal approach to assessing damages in those claims.
In reaching the various decisions, the Court found that claimants are entitled to recover the cost of hiring reasonable replacement vehicles, and the market rate for such vehicles should be the measure of damages. The Court was split in relation to whether a vehicle owner was entitled to recover damages based on the cost of hiring an equivalent vehicle to the damaged vehicle. The majority found they were, but a dissenting judgment held any replacement vehicle which satisfies the owner’s use of the the damaged vehicle is sufficient.
Ligeti Partners acted for Lisa Strelnicks and Hanin Nahas, and their respective insurers, both of whom were successful in opposing the appeals brought in those proceedings.
Background
Souaid, Cassim and Rixon initially involved appeals to the Supreme Court from decisions of the General Division of the Local Court. Lee, however, involved a Summons seeking Judicial Review by the Supreme Court of a decision in the Small Claims Division of the Local Court.
Each of the appeals involved circumstances where credit hire car companies provided rental vehicles on credit to the not-at-fault drivers involved in motor vehicle collisions. The credit hire car companies in turn sought to recover those rental charges from the at-fault drivers. The appeals raised common questions relating to the assessment of damages where a motor vehicle is unavailable for use.
Two of the central questions requiring determination were:
- Are the rental charges billed by the credit hire car company recoverable in full?
- Is the expense of obtaining a replacement car of similar value or prestige recoverable?
The Original Supreme Court Proceedings
The Supreme Court in dealing with the original appeals confirmed a market-based approach to find the rental charges billed by the credit hire car company are ignored. Instead, consideration is only given to the relevant market rate, which is typically determined by the rates charged by mainstream hire car companies (i.e. Hertz). Such an approach is beneficial for insurers, given rates claimed by credit hire companies typically exceed those offered by mainstreams rental vehicle companies.
The next and perhaps more contentious question of whether the expense of obtaining a replacement vehicle of similar value or prestige was recoverable was only considered in the Souaid, Cassim and Rixon appeals. In Souaid, for example, the not-at-fault driver hired a Lexus IS250 for 14 days followed by a BMW 318 for a further 26 days.
The Court stated the purpose of compensation was to alleviate the inconvenience suffered by the owner of the damaged vehicle, rather than replace the damaged vehicle with a vehicle similar in value and prestige. The owner’s use of the vehicle was the relevant consideration, meaning the not-at-fault party did not have an automatic right to a replacement vehicle of equivalent value or prestige. The Court instead endorsed an approach that considers how the not-at fault party used their vehicle prior to the collision.
Consequently, the appeals were dismissed. The matters were then appealed further to the NSW Court of Appeal.
The Court of Appeal Proceedings
The NSW Court of Appeal comprising Justices Emmett, White and Meagher heard the appeals on 14 November 2020. In their judgment handed down today, leave to appeal brought by the hirers of replacement vehicles in the Souaid and Lee matters was refused. In the Cassim and Rixon matters, the appeals were allowed.
Three separate judgments were delivered in respect ofthe appeals. White JA and Emmett JA formed the majority and held that a person is entitled to recover the reasonable cost of hiring a replacement vehicle where a need for a replacement vehicle existed. White JA also noted that, in the case of a luxury or prestige vehicle, a plaintiff is not only inconvenienced in “not having a vehicle to transport the plaintiff…from A to B, but the loss of his or her ability to do so in a vehicle which has the safety, luxury and prestige of the damaged vehicle.”
However, in the matter of Souaid, evidence had been put before the Local Court that the hirer had conceded he was content with any car. As a consequence, the Magistrate had determined that the appropriate measure of loss was the cost of hiring an ordinary vehicle, rather than a prestige vehicle. The Court of Appeal held there was no error of law in making such a determination.
In dissent, Meagher JA held that the reasonableness of the type of replacement vehicle depends on the uses for which a claimant needs such a vehicle. In the cases before the Court, his Honour found the “use” of each of the four vehicles was a means of transporting people and things from one place to another.
In relation to the Lee matter, the Court found there was no error of law on the part of the Local Court in finding the hirer had failed to demonstrate a need for a replacement vehicle, and consequently could not recover the cost of hiring a replacement vehicle. The Court unanimously dismissed leave to appeal.
Implications
The decision is likely to have a significant effect upon the litigation of credit hire claims between credit hire providers and motor vehicle insurers. Generally speaking, the Court endorsed an approach which essentially points to the market rate of hiring a replacement vehicle in determining compensation.
However, the Court was divided as to the type of vehicle upon which such an assessment should take place, and specifically whether owners of prestige vehicles are entitled to damages based upon the cost of hiring similar replacements. It remains to be seen whether any parties will seek leave to appeal to the High Court on this or any other aspect of the Court’s decisions.
Further, the decision in the Souaid matter demonstrated the critical importance of information gathering and the evidence before the Court. In circumstances where there is evidence a claimant was satisfied with an “ordinary” vehicle (rather than a prestige vehicle), it appears they will not be entitled to recover rental charges based upon a more luxurious vehicle.
Ligeti Partners have developed strategies for their insurer clients following the decision, which we would recommend be implemented moving forward.
Should you wish to discuss the decision and its implications, please contact Spencer Pascal on 02 8047 2870, James Mulcahy on 03 9947 4530, or any member of our Credit Hire Team.
