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'Implications for insurers': High Court backs prestige car like-for-like hire

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The High Court has clarified that drivers of a BMW and an Audi A3 who were involved in accidents where they weren’t at fault were entitled to recover costs for the hire of equivalent prestige vehicles while repairs were completed.

The insurer of the at-fault parties had argued the drivers of the Audi and BMW 535i didn’t need similar cars and costs paid should be based on the rental of a Toyota Corolla.

The High Court decision says loss of amenity and the physical inconvenience should be recognised in looking at damages but “need” is a highly uncertain concept and to be avoided.

“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,” the judgment says. “Would a tiny car with three wheels suffice for the convenience of transport for a week.”

Physical inconvenience resulted from not having a car for household and other uses, while loss of amenity was experienced when drivers were deprived “their enjoyment of the safety features, pleasurable functions and other specifications” of the prestige cars, the judgment says.

“A plaintiff will usually be able to recover from a negligent defendant the reasonable costs incurred in hiring, for the period of repair, a substitute vehicle that is broadly equivalent to their damaged vehicle,” the High Court says.

Spectre Law, which represented the not-at-fault drivers, says the decision will have wide-reaching implications for insurers and car hire companies.

“The decision correctly reassigns the losses arising from car accidents from innocent drivers to at-fault parties and their insurers,” Lawyer Director Sam Ghassani said. “No longer will motorists have to ‘make do’ in the interests of saving negligent motorists and their insurers money.”

The Local Court of NSW had initially found that the Audi driver, who had hired a replacement car of the same make and model for $12,829.91, was only entitled to recover $4226.25, which was the market rate for a Toyota Corolla.

In the other dispute, legal action looked at whether the BMW driver was entitled to claim $17,158.02 for the hire of a Nissan Infiniti Q50, or if the claim should be limited to a Corolla market hire rate.

The cases went to the NSW Court of Appeal and were then taken to the High Court. Two other disputes that involved similar issues were also heard by the courts.

MCK Lawyers, which acted for the appellants in the High Court, says the decision clarifies that damages can be awarded for loss of physical convenience and loss of amenity but it’s not a “carte blanche for credit hire companies to charge exorbitant fees”.

“The decision will be embraced by insurers for clarifying the issue and also confirming that the claimant is required to act reasonably, which includes taking up discounts, paying up front if he is in a position to do so and being mindful of other broadly comparable/ equivalent vehicles for hire in the market place and not paying more than what is reasonable,” Solicitor Director Candan Koyuncu told insuranceNEWS.com.au.

Insurers have long been critical of credit hire firms, arguing they often charge excessive rates in offering replacement vehicles to not-at-fault drivers, with the promise of recouping the cost from the at-fault party’s insurer.

Ligeti Partners Lawyers says while the decision largely ends the debate on the like-for-like issue, the court found it wouldn’t be reasonable to cover prestige car costs in some situations. That could include when a person is hospitalised or overseas while the vehicle is repaired, or if it could be replaced “from idle stock” within the party’s fleet of vehicles.

Principal lawyers James Mulcahy and Spencer Pascal say the like-for-like issue has been rarely litigated since the NSW appeal decision last year and most disputes pertain to rate of hire, and duration of hire.

“The court did not lay down detailed principles for assessing either of these issues, as it was not required to do so, but did note they remained potentially valid grounds of defence.” they say in an article.

The High Court decision is available here.