Where prestige vehicles negligently damaged and unavailable during periods of repair, can victims of negligence recover costs of hiring replacement vehicles of equivalent value during the period that their vehicles are being repaired?

Arsalan v Rixon; Nguyen v Cassim [2021] HCA 40 (8 December 2021)

Intro:-

Mr Rixon and Mr Cassim, the respondents, were involved in car accidents. The appellants, by their insurers, admitted liability for the accidents. The appellants are liable for the costs of repairing Mr Rixon's and Mr Cassim's damaged cars, respectively an Audi A3 sedan and a 2012 BMW 535i sedan. These appeals concern further liability of the appellants for Mr Rixon's and Mr Cassim's costs of hiring substitute cars while their damaged cars were being repaired. The question is one that has arisen many times in a variety of different circumstances in local courts across Australia. For which, if any, substitute vehicles can victims of negligence recover hire costs incurred during the period that their vehicles are being repaired?

Facts:-

Mr Rixon's case

Mr Rixon owned an Audi A3 sedan which was damaged in a collision with a car driven negligently by Mr Arsalan. The repair of Mr Rixon's car took around two months. During that period of repair, Mr Rixon hired a replacement car of the same make and model. The hiring charge was $12,829.91.

In the Local Court of New South Wales, the magistrate found that Mr Rixon needed a replacement car to travel to work, to drop off and collect a child at school, and for general errands. Mr Rixon also gave evidence that he needed a European car for reasons of safety but the magistrate found that Mr Rixon's safety concerns were a preference rather than a need. The magistrate also held that the hire costs incurred by Mr Rixon were based upon a credit hire rate which, it was said, did not represent the market rate of hire of the car. Mr Rixon was held to be entitled only to recover a hire charge of $4,226.25, which was the market rate of hiring a Toyota Corolla.

An appeal by Mr Rixon to the Supreme Court of New South Wales was dismissed by Basten J. A majority of the Court of Appeal of the Supreme Court of New South Wales (White JA and Emmett A‑JA; Meagher JA dissenting) allowed a further appeal by Mr Rixon, concluding that Mr Rixon was entitled to the reasonable hire charges that he incurred. The matter was remitted to the Local Court for assessment of the reasonable hire charge in accordance with the reasons of the Court of Appeal.

Mr Cassim's case

Mr Cassim owned a BMW 535i sedan which was damaged in an accident caused by the negligence of Mr Nguyen. Mr Cassim's case was treated as involving a non‑income‑earning car, although in addition to the use of his car for social and domestic purposes he used it for his home business, which included transporting toilet seat samples. The repair of Mr Cassim's car took 143 days. For 84 days of that period, Mr Cassim hired a Nissan Infiniti Q50 car for $17,158.02.

The magistrate found that Mr Cassim needed his car for ordinary domestic purposes, including shopping and taking his children to sporting engagements, and that the Nissan car he had hired was of slightly lower value than his BMW. Mr Cassim also gave evidence that he "wanted a nice, luxury car". He accepted that any car with five seats would likely have been "feasible" but said that he "preferred to have a car similar to [his own]". The magistrate also found that a Toyota Corolla would have met Mr Cassim's needs for a total hire cost of $7,476, but rejected the contention that Mr Cassim's claim for recovery should be limited to the market rate of hire for a Toyota Corolla on the basis that it was not a car of "equivalent value" to Mr Cassim's BMW. The magistrate awarded Mr Cassim as damages the full amount of hire costs that he had incurred.

An appeal by Mr Nguyen to the Supreme Court of New South Wales was allowed by Basten J. His Honour substituted an award of damages for the hire costs of $7,476, representing the hire costs of a Toyota Corolla for the relevant period. A further appeal by Mr Cassim to the Court of Appeal was allowed by a majority (White JA and Emmett A‑JA; Meagher JA dissenting), who reinstated the award of hire costs determined by the magistrate.

Issues:-

1) Did Mr Rixon and Mr Cassim suffer heads of damage of physical inconvenience and loss of amenity: and

2) was it unreasonable for them to take steps to mitigate both aspects of their loss by the hire, at a reasonable rate, of an equivalent car for a reasonable period of repair?

Consideration:-

Ground 1

"Loss of use" is not a head of damage

Where a plaintiff's chattel is damaged as a result of the negligence of a defendant, the plaintiff will generally be entitled to damages for the costs of repair and for consequential loss. Some of the authorities in this field speak of "loss of use" as if that were, by itself, a head of damage. But, putting aside the different considerations raised by cases where a defendant has obtained the benefit of the use of the plaintiff's chattel, the mere reference to the loss of use of a vehicle, or the loss of the availability of a vehicle for use, is inadequate because it does not identify the manner or extent of any loss to a plaintiff. An assessment of consequential loss always requires the identification of the manner in which the loss of use of a chattel has adversely affected the plaintiff.

A decision relied upon by the parties to these appeals was The "Mediana". In that case, damages were claimed for "loss of use" of the plaintiffs' damaged lightship during a period of repair in which the plaintiffs deployed a spare lightship. Although Lord Halsbury referred to the "loss of the use" of the vesse, he also relied upon the principle that he had articulated in an earlier decision, in which he had focused upon the detriment to the plaintiffs arising from the loss of use, being the delay or impairment of the progress of the works. In The "Mediana", the loss was the inconvenience of no longer having a spare lightship available during the period of repair, the "margin of safety" which should be valued at the "expense of having [the spare] ready".

The loss or detriment to owners from being without a chattel, for which damages were awarded in The "Mediana", can obviously also arise where no substitute or spare is available. As Meagher JA said in the Court of Appeal in these proceedings, even where no substitute chattel is available or is hired, it is unquestionable that damages can still be awarded. But, in those circumstances, the damages are not quantified by reference to the costs of hiring an alternative vehicle or the costs of maintaining a spare, since they were not incurred and do not reflect the loss or detriment which the owner sustained[. In older cases involving the loss of use of a ship where a substitute was not available or hired and no other loss was established, one approach was to award interest on the depreciated capital value of the ship for the period of repair because the detriment from the loss of use was the damaged ship's "capital value [being] infructuous for the time being, even though by special effort more benefit was got out of other ships, in which other capital was invested, than would otherwise have been the case". That older approach has been refined in some modern cases where the value to the owner is not confined to the "money tied up in the chattel" as interest on the capital value but can include expenses thrown away and an allowance for depreciation.

Physical inconvenience and loss of amenity of use of a chattel

In the extremely common circumstances that gave rise to these appeals, involving negligent damage to a plaintiff's vehicle which is used for convenience and pleasure, it has been suggested that underlying the extensive case law recognising compensation for the consequences of the loss of use of a vehicle is that the plaintiff has been "deprived of the convenience or pleasure" that they would derive from that use. That simple proposition was, in part, disputed on these appeals. But, for the reasons given below, it should be accepted.

It was rightly common ground on these appeals that the consequential loss suffered by Mr Rixon and Mr Cassim included the "inconvenience" of not having access to their cars during the period of repair. A large body of case law supports the recognition of this type of loss, although it is commonly described as "physical inconvenience" to contrast it with "mere inconvenience, such as annoyance and loss of temper, or vexation, or for being disappointed in a particular thing which you have set your mind upon". For property torts, this "mere inconvenience" is generally treated as the basis for damages under the different head of loss of amenity of use of property although the boundary between these heads of "physical inconvenience" and loss of amenity of use is neither clear nor precise because "all inconvenience has to include some mental element".

The appellants also accepted that loss of amenity might be available for some torts but they denied that the law recognises loss of amenity as recoverable loss for torts generally, even where that loss is within the scope of the duty and is not too remote. The appellants submitted that loss of amenity of use was not a recoverable type of loss where the plaintiff's chattel was damaged as a result of the defendant's negligence.

The appellants' submission should not be accepted. There is no justification to restrict the recoverable heads of damage for consequential loss caused by the negligent infringement of a person's property right so that the lost amenity of use is excluded. In its concern with the consequences of a tortious act, the compensatory principle aims to provide the injured party with "compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if ... the tort had not been committed". This general principle has the basic goal to undo, by monetary equivalent, the consequences of the wrong experienced by the plaintiff so far as is reasonable. The lost amenity of use of a negligently damaged chattel can be experienced as a consequence of a wrong. The course of precedent and the close relationship between the heads of damage of physical inconvenience and loss of amenity also support the principled basis for recognition of loss of amenity of use as a head of damage for negligent damage to a property right.

As a matter of precedent, loss of amenity of use of property has been recognised for negligent damage to land, where damages for physical inconvenience have been coupled with damages for the loss of amenity where the wrong caused the plaintiffs' lives to be "disrupted and their enjoyment of their home significantly reduced". The same principle has been recognised in damages for conversion involving loss of enjoyment of a hobby. Further, in a decision subsequently followed in Australia, the House of Lords recognised that, for the tort of nuisance, the loss of the amenity value of use of land to a plaintiff was recoverable separately from the diminution in market value of the land.

Although no clear authority has recognised loss of amenity of use consequent upon negligent damage to the plaintiff's chattel as a head of damage in addition to physical inconvenience, such recognition is consistent with the broad recognition of loss of amenity of use in other instances of damage to property. Indeed, the lack of any clear boundary between the heads of damage for physical inconvenience and loss of amenity means that it is often convenient to quantify physical inconvenience and the loss of amenity of use of property together as part of a single award of general damages.

The irrelevance to these heads of damage of any concept of "need"

The magistrate in Mr Rixon's case focused upon whether the plaintiff had a "need" for a replacement car. The magistrate did not identify Mr Rixon's heads of damage as physical inconvenience and loss of amenity of use of the car. Instead, the magistrate's focus on Mr Rixon's "need" naturally directed attention away from loss of amenity of use as a head of damage.

The primary judge in these appeals, Basten J, also followed that approach from the Court of Appeal in Anthanasopoulos. But the principles of damages concerned with the "need" for services in circumstances in which services have been provided gratuitously by another cannot be transplanted to replace an analysis of the real loss that has been suffered as a result of damage to a chattel, especially in circumstances in which a gratuitous replacement is not available. Indeed, in a case in which a plaintiff obtained an equivalent replacement vehicle from a hire company without any costs, it was held that the plaintiff was not entitled to damages for the notional hire costs.

The scope of the concept of "need" is also highly uncertain. Does a plaintiff have a "need" to drive to work if leaving earlier to walk to work could make them healthier and happier? Or, to use the example given by senior counsel for the respondents, does a "need" extend to having a radio in the hire car? Or power steering, ABS brakes, and air‑conditioning? Would a tiny car with three wheels suffice for the convenience of transport for a week? The import of this loose concept of "need" into questions of recovery of the hire costs incurred is a distraction from the proper focus upon the heads of damage identified by the plaintiff – such as physical inconvenience and loss of amenity of use – and the onus upon the defendant to establish the unreasonableness of the plaintiff's steps to attempt to mitigate that damage by the hire of a substitute vehicle.

Ground 2

Mitigation of loss

Where a plaintiff acts in an attempt to reduce a loss, the onus shifts to the defendant to show that the acts actually taken by the plaintiff were unreasonable acts of mitigation. Unless the plaintiff's actions are shown to be unreasonable, costs that are incurred in an attempt to mitigate loss caused by wrongdoing become, themselves, a head of damage that can be recovered. Even if the costs incurred by the plaintiff are greater than the loss that was attempted to be mitigated, those costs will be recoverable other than to the extent that they are shown to be unreasonable[30].

Proof of loss and proof of unreasonable steps in mitigation

Legal principles for proof of loss and mitigation

Although a plaintiff must prove their loss, it will not usually be difficult for a plaintiff to establish heads of damage of physical inconvenience and loss of amenity of use consequential upon their lost ability to use their vehicle. There will, however, be exceptional cases where such loss to the plaintiff will be non‑existent or so slight that the hire of a replacement vehicle will not be accepted to be a step in mitigation. Such exceptional cases might include where the plaintiff was hospitalised or abroad during the relevant period of repair, or where the damaged vehicle could have been replaced from idle stock within the plaintiff's fleet of vehicles.

Apart from such cases, it will usually be sufficient for a plaintiff to identify a past suite of purposes for which the damaged vehicle was used in order to justify an inference that the plaintiff would have put the vehicle to the same uses during the period of repair and would be otherwise inconvenienced. As Lord Mustill recognised in Giles v Thompson, it will not be hard to infer that a plaintiff who incurs the considerable expense of running a private vehicle does so for reasons of convenience. Similarly, it will usually be sufficient to infer that a plaintiff derives amenity from the various functions used in their vehicle, particularly an expensive, prestige vehicle in circumstances in which the plaintiff incurred significant capital or ongoing expenditure on that prestige vehicle.

The usual ease with which a plaintiff may establish heads of damage of physical inconvenience and loss of amenity of use explains why in Dimond v Lovell and in Lagden v O'Connor their Lordships assumed that it would generally be reasonable for a plaintiff to hire an equivalent vehicle, subject to any dispute about the unreasonableness of the quantum of the hire costs. For instance, in Lagden v O'Connor, Lord Hope assumed that a plaintiff would generally be able to recover as damages the costs of hire of an equivalent vehicle, but if "a larger or more powerful car was hired although vehicles equivalent to the damaged car were reasonably available at less cost – the amount expended on the hire must be reduced to the amount that would have been needed to hire the equivalent".

Conclusion

In the Nguyen v Cassim appeal, the appeal should be dismissed with costs. In the Arsalan v Rixon appeal, order 6 of the orders of the Court of Appeal made on 17 August 2020 in relation to remittal of the matter to the Local Court should be varied to replace the words "plaintiff's damages to be assessed in accordance with the reasons for judgment of the Court of Appeal" with "plaintiff's damages to be assessed in accordance with the reasons for judgment of the High Court of Australia and with the magistrate's reasons as to the credit hire costs", and otherwise the appeal should be dismissed with costs.