You damaged my Ferrari - I want a replacement Ferrari

14 December 2021

HCA confirms the head of damages to be relied upon in cases of damages relating to the costs of replacement vehicles as loss of enjoyment/loss of amenity rather than the plaintiff’s “need” for the car.

In issue

  • Whether a motor vehicle insurer is liable to cover the costs of a prestige hire car to replace the insured’s car damaged in a collision.

The background

In each case, the respondents were involved in car accidents for which the appellants admitted liability through their insurers. The High Court of Australia had to decide if the appellants were liable for the costs of replacement prestige cars whilst the respondents’ cars were being repaired.

The decision at trial

The first respondent hired a prestige European car at a cost of $12,829 to replace his own for a period of two months and was awarded in the Local Court of NSW, approximately one third of the total costs ($4,226.25). The Supreme Court of NSW overturned the decision and remitted the matter back to the Local Court for redetermination as to the reasonable costs associated with the hire car.

The second respondent was without a car for 143 days and hired a prestige car for 84 days of that period. In a ruling inconsistent with the first respondent’s, a different NSW Magistrate found that, whilst a standard five-seater car would have met the requirements, the respondent’s claim should not be capped by the market rate of hire and instead should allow the hire of a car of “equivalent value”. The full amount claimed was awarded.

The issues on appeal

In the lower courts, the different basis for assessment of damages was either upon the inconvenience faced by the respondents (Basten J and Meagher JA) or the intangible benefits in addition to the inconvenience faced (White JA and Emmett A-JA). The question on appeal was which of these tests ought to be applied.

The High Court decision

The High Court upheld the rationale applied by White JA and Emmett A-JA and stated “the head of damage of loss of amenity of use of a chattel should be recognised and the loose concept of ‘need’ should be eschewed”. Thus, loss of amenity of use of a chattel is a recoverable head of damage for negligent damage to a chattel, consistent with the compensatory principle. A plaintiff's loss of amenity of use includes the loss of convenience or pleasure derived from the use of their car, and it may be inferred that a plaintiff who incurs significant expenditure on a prestige car derives amenity from its functions.

The High Court observed that it will usually be sufficient for a plaintiff to identify a past suite of uses where the damaged car was relied upon. Once identified, this should infer the replacement vehicle will be put to the same uses and will justify the inconvenience/loss of amenity head of damages. In this regard, the High Court specifically noted observations in previous decisions that 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. This is particularly evident in cases where the damaged vehicle is an expensive prestige vehicle, as the circumstances likely suggest the plaintiff incurred significant capital or ongoing expenditure on its purchase.

The High Court found the focus on “need” as a foundation for recovering damages misleading. The term “need” was found to be too subjective. It was argued to be a distraction from the real head of damage and to direct decision-making away from the onus resting with the defendant to establish the claim for damage as unreasonable.

Unreasonable costs are more likely to occur in circumstances where there was clearly no need for a replacement car. The High Court raised and discussed the following examples: where the period of time for repair was unreasonable, the period of hire was longer than required, the costs of hire were much higher than should reasonably be incurred for similar hire arrangements for similar vehicles, etc.

The decision squarely places the responsibility back on the defendant to prove costs incurred are unreasonable. For example: when ‘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’.

Implications for you

This case indicates insurers are more likely to be found liable for costs associated with hiring prestige cars and that the test for “unreasonable” costs in hiring a replacement car has shifted to place a higher burden of proof upon the party defending claims for costs in relation to replacement vehicles.

Arsalan v Rixon; Nguyen v Cassim [2021] HCA 40

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