Written by James Mulcahy
On 29 April 2025, the Western Australian Court of Appeal handed down its decision in McKnight v Miller.1 The case was an appeal of a decision of the Western Australian District Court, which had earlier overturned a Magistrates’ Court decision. At the heart of the litigation was the correct method for determining whether rental vehicle credit hire charges could reasonably be claimed against the party responsible for a motor vehicle collision where those charges exceeded what would have been incurred through a mainstream rental company.
In the Magistrates’ Court, the defendant (i.e. the insurer) was successful (our summary of which can be found here: Credit Hire Car Actions, the Western Australian Approach – Ligeti Partners). On appeal, the appellant (i.e. the credit hire provider – Compass Claims) won.
In this significant decision, the Court of Appeal found in favour of the insurer, and determined the Magistrate’s original decision was correct.
What Was in Dispute?
It is usually accepted that credit hire providers supply various ‘benefits’ to people who rent vehicles through them over and above what would normally be experienced through a ‘mainstream’ rental company. These benefits include things like not having to pay ‘up front’ for the cost of the rental vehicle (because it has been provided on credit), having the rental company liaise with the repairer of the damaged vehicle about the repair progress, and having the rental company pursue the recovery of the rental costs from the at-fault party or their insurer. These benefits are at the heart of the credit hire business model, and the costs associated with their provision explains why credit hire charges are typically much higher than ‘mainstream’ rental rates.
At issue in this matter was whether a claimant is entitled to be compensated for the costs they notionally incur in obtaining those benefits. The respondent (Compass Claims) argued it was reasonable for the claimant to obtain those benefits and be compensated for them. The appellant (insurer) disagreed.
For insureds and their insurers, the question of whether they are liable for these additional costs has a substantial bearing on their exposure to credit hire claims generally. It is these costs which make credit hire expensive. Removing them from what is claimable essentially limits the cost of rental to that which would be obtained through a mainstream rental company. Put simply, insureds and insurers face much lower rates of hire without the inclusion of the costs associated with the additional benefits.
The Court’s Decision
The Court held the respondent (the renter) had suffered a loss through physical inconvenience and loss of amenity because she could not use her vehicle during the repair period, and that avoiding that loss (i.e. acting in mitigation) usually involves hiring another vehicle. Critically, though, the Court said avoiding that loss “…does not ordinarily involve the acquisition of additional benefits with associated additional charges.” 2
The Court found the evidence at trial (which included that the renter was pregnant at the relevant time) did not justify acquiring the additional benefits and incurring the associated charges.3 Further, the Court noted the renter had not made enquiries with any other rental vehicle companies, and that she had “skimmed over” the rental agreements before signing them.4
The Court found, having regard to the above matters, that the renter had acted unreasonably through hiring a vehicle through Compass Claims, for two connected reasons:
- The rental charges through Compass “substantially exceeded the amount that would have been payable to mainstream motor vehicle rental companies” for similar vehicles; and
- The proper inference is that Compass’ charges included amounts for additional benefits.5
In addition, the Court found that even if the renter had acted reasonably, the appellant (i.e. the original defendant (and, effectively, their insurer)) was entitled to an allowance to account for the value of the benefits received that were additional to obtaining the use of the rental vehicle itself. The Court identified those additional benefits as being:
- Not needing to outlay any money to hire the vehicle;6
- Compass Claims acting on the renter’s behalf to liaise with repairers and monitor repair progress, and to bring legal proceedings, meaning she did not need to personally handle those matters.7
Whilst the Court considered whether a premium roadside assistance package (supplied by Compass, was a further additional benefit) it was not prepared to make that finding based on the evidence.8
The Court then considered how to calculate the value of those additional benefits, so that this amount could be reduced from the claim. There was no formal analysis in the evidence of Compass’s charges and how they might be broken down into the costs relating to the vehicle rental and the additional benefits, and the Court found that the cost of producing that evidence would not have been justified. However, the Court was prepared to accept the approach taken by the Magistrate, which was to subtract the median market rate (from the available evidence) from the total Compass charges.9 Using this calculation, the amount originally paid by the relevant insurer exceeded the value of the claim. As a result, the Court did not award any further amount to the renter, and upheld the Appeal.
Implications
What it means for Western Australian matters
In Western Australia, it will be very difficult for credit hire companies to recover charges beyond the median mainstream rental market rate. If anything, the personal circumstances of the renter (who was pregnant) might perhaps have been viewed as a reason to allow the additional benefits (and credit hire rate), but the Court was not prepared to do so.
Further, from our experience the renter’s lack of enquiries and minimal appreciation of the rental agreements is commonplace in these matters, and where the evidence reflects that, Courts are likely to find the renter did not act reasonably where mainstream market rates are for cheaper amounts.
What it means for other States and Territories
In jurisdictions other than Western Australia, it is likely insurers will seek to rely upon this decision in arguing credit hire charges typically include non-compensable benefits, and that ordinarily those charges should not be allowed. Of course, that position is already regularly argued, and inconsistent approaches are taken by Courts around the country. A Court of Appeal decision, whilst not binding outside Western Australia, should be given proper regard by Courts in other jurisdictions.
‘Median’ rate?
One aspect of the decision that may be troubling is the use of a median market rate. By its nature, a median figure (as distinct from an average) is determined by reference to the other figures in the sample provided, which in this case was the evidence before the Court. In other words, the breadth of the rate evidence being supplied (by both insurers and credit hire providers) may influence where the Court ultimately lands on what is the ‘median’.
In practice, the application of this principle may prove difficult. The Court did not elaborate in its reasoning on why a ‘median’ was the correct figure versus, for example, the lowest available mainstream rate (as adopted in the UK and some Australian jurisdictions), and this may be the subject of further litigation.
Time to (re)visit Canberra?
It is likely the respondent will be considering the decision and whether to seek leave to appeal to the High Court. If such an application was made, it would be the first credit hire matter to reach the High Court since Arsalan v Rixon in 2021, and likely to have far wider implications given its focus on issues of credit hire rates.
Should you wish to discuss any of the above, please contact James Mulcahy on 03 9947 4530 or any member of the Credit Hire Team.
