The Supreme Court of NSW has recently overturned a lower Court decision which had allowed the full cost of a luxury replacement vehicle, with the Court finding that the insured’s needs would have satisfied by the hire of a less expensive Toyota Corolla.
When your vehicle is damaged in a collision and you are required to hire a replacement vehicle, the costs of this replacement vehicle is normally recoverable. However, over the years, various credit car hire companies emerged, some with special features, which have overtaken the conventional means of hiring a replacement vehicle.
Nguyen v Cassim  NSWSC 1130
The case involved a vehicle driven by Mr Nguyen, who collided with a 2012 BMW 535i sedan owned by the claimant, Mr Cassim. Mr Nguyen was at fault. The vehicle was a non-income earning vehicle and was used partly for business and partly for social/domestic purposes.
The BMW was off the road for approximately 143 days, as parts had to be imported from overseas. Mr Cassim entered into an agreement with Right2Drive Pty Ltd for a replacement car which his vehicle was being repaired. Right2Drive’s business is centred on providing substitute vehicles to owners of cars that had been damaged in accidents in which they were not at fault.
The cost of providing a replacement vehicle (a Nissan Q50) by Right2Drive was $17,158.
Mr Cassim commenced proceedings in the Local Court with Right2Drive having carriage of the proceedings, for the sum of $17,158 plus interest. On 6 December 2018, Magistrate Farnan awarded the full amount of the claim to Mr Cassim with interest.
Mr Nguyen appealed the Local Court’s decision.
The Appeal presented two primary questions (where the damaged vehicle was a high value or prestige car):
- Is the expense of obtaining a replacement car of similar value or prestige recoverable, where a cheaper alternative would overcome the inconvenience arising from the temporary unavailability of the damaged vehicle?
- If so, was the whole of the rental charges billed by Right2Drive recoverable?
In coming to the decision, His Honour Basten J noted that the reasonableness of the expense (the rental fees charged) was not to be assessed by the value of the damaged vehicle. His Honour stated, “it is the usage rather than the choice of vehicle which must ultimately determine the reasonableness of the expense.”
It was instead, to be assessed by reference to the extent of the inconvenience caused by the loss of use of that damaged vehicle. His Honour found that the Magistrate was in error in allowing the full invoiced account provided by Right2Drive with respect to hire of the Infinity Q50, as Mr Cassim’s needs would have been satisfied by the hire of a Toyota Corolla at a cost of $7,476, and judgment should have been given for that amount only.
What does this decision mean?
This case highlights the following important factors when assessing the loss of use claim involving motor vehicles:
- Loss of use of a non-income producing vehicle will be assessed by the inconvenience and the needs of the owner;
- The focus will be on identifying the actual needs of the owner in determining the type of replacement vehicle;
- The owner will need to provide evidence that a particular type of vehicle was necessary to satisfy his particular needs (for example, a prestige/luxury vehicle may be required by a certain professional or the needs of a type of business, whereas or a 7 seater would be required by a somebody who has five children).
In light of this decision, it is likely that the types of vehicles being offered by credit hire companies will change, resulting in these companies offering standard vehicles as opposed to luxury vehicles (despite the damaged vehicle being a luxury vehicle) unless the owner is able to prove his needs for that specific type of vehicle.