Fang v Koumoukelis
[2013] NSWLC 5
•13 May 2013
Local Court
New South Wales
Medium Neutral Citation: Fang v Koumoukelis [2013] NSWLC 5 Hearing dates: 22/04/2013 Decision date: 13 May 2013 Jurisdiction: Civil Before: Assessor Olischlager Decision: 1.Verdict and Judgment in favour of the plaintiff in the sum of $3,702.45 payable within 28 days.
2.Pre judgment interest not allowed.
3.Costs reserved.
Catchwords: CIVIL PROCEEDINGS - motor vehicle collision - assessment of damages - loss of use - hire of replacement motor vehicle - special damages - general damages Legislation Cited: Civil Procedure Act 2005
Local Court Rules 2009
Road Transport (Vehicle Registration) Act 1997Cases Cited: Admiralty Commissioners v S.S. Chekiang [1926] AC 637
Anthanasopoulos v Moseley [2001] NSWCA 266
Bent v Highways and Utilities Construction Ltd [2011] EWCA Civ 1384
BHP Coal Ltd and Ors v O & K Orenstein & Koppel AG and Orenstein & Koppel AG and Ors [2008] QSC 141
Chong v Berry [2007] NSWLC33
Dimond v Lovell [2000] 2 WLR 1121
Dutt v Ridout [2009] NSWLC 23
Fang v Koumoukelis (Local Court, unreported, 28/7/2012)
Griffiths v Kerkemeyer [1977] HCA 45; (1977) 139 CLR 161
Harb v Marchbank [2011] NSWLC 9
Lagden v O'Connor [2004] 1 AC 1067
Marchbank v Harb [2011] NSWDC 110
Masrour v Danzey (Local Court, unreported, 12/04/2013)
Mersey Docks & Harbour Board v Owners of the SS Marpessa (The Marpessa) [1907] AC 241
Miller v Walker [2011] NSWLC 10
Paff v Speed (1961) 105 CLR 549
Quach v Huntof Pty Ltd [2000] NSWSC 932
Reid v Brown (1952) WN (NSW) 131
Solar v Elkim [2011] NSWLC 34
Tang v Driden [2010] NSWLC 17
The Greta Holme [1897] AC 596
The Mediana [1900] AC 113
The Susquehanna [1926] AC 655
Yates v Mobile Marine Repairs Pty Ltd and Anor [2007] NSWSC 1463Category: Principal judgment Parties: Yan Fang (plaintiff)
Maria Koumoukelis (defendant)Representation: Mr Livingston (for plaintiff)
Mr Oliver (for defendant)
File Number(s): 2011/00209701
Judgment
The plaintiff, Yan Fang, claims damages arising from a motor vehicle collision that occurred on 12 December 2010. There is no dispute that the collision was caused by the negligence of the defendant, Maria Koumoukelis. Ms Fang states her motor vehicle was being driven by her partner Jian Zhang along Forest Road Hurstville when Ms Koumoukelis struck the back of the plaintiff's vehicle in what might be commonly described as a rear end collision. The motor vehicle sustained damages as a consequence of the collision and required repairs.
The motor vehicle that was damaged by the defendant and is the subject of this claim is a 2008 BMW X5 registration [xxxxxx]. The motor vehicle was taken to a smash repairer, Alto Body Shop Artarmon on 4 January 2011. A quote for repairs was rendered in the sum of $9,871.74. The quotation was assessed by a motor vehicle loss assessor. Repairs were completed by 31 January 2011.
The cost of repairs does not form part of the plaintiff's claim. The motor vehicle was insured and the repair cost was presumably settled by the insurer.
The claim by Ms Fang relates to the loss of use of the motor vehicle whilst it was undergoing repairs. The motor vehicle was used for private purposes. On 4 January 2011, Ms Fang states that her partner arranged to hire a replacement motor vehicle on her behalf. A Mercedes ML300 was obtained as a replacement vehicle from Compass Corp Pty Ltd trading as 1Car1 Car and Van Rental. The rental continued for 27 days at a base rate of $400 per day. The total cost including delivery fee and vehicle registration recovery fee and GST was $12,091.20. The plaintiff has not yet paid those hire costs. Compass Corp Pty Ltd offer the hire of a motor vehicle on credit terms that are outlined in a document titled "Mandate and Authority to Act". The "Mandate and Authority to Act" also requires the plaintiff as the hirer to authorise Compass Corp Pty Ltd to initiate debt recovery processes, including the institution of legal proceedings, to recover the hire charges from the at fault driver or their insurer.
The cost of the hire of the replacement vehicle forms the basis of the plaintiff's claim for loss of use of her vehicle. A part payment was made on behalf of the defendant in the sum of $7,275.75 in March 2011 reducing the claim to $4,815.45. These proceedings were then commenced in June 2011.
The defendant disputes liability on two grounds. Firstly, the defendant asserts that the plaintiff has failed to establish standing to bring these proceedings as the owner or bailee of the motor vehicle. Secondly, the defendant asserts that the claim for loss of use of the motor vehicle is excessive in terms of the rate for the hire of the replacement vehicle.
Question of the Plaintiff's Standing
The first issue necessary for determination by the Court is the question as to whether Ms Fang has standing to bring a claim for loss of use of the motor vehicle. The plaintiff pleads in paragraph 1 of the Statement of Claim that the plaintiff is the owner of the motor vehicle damaged in the collision or, alternatively, had the use and benefit as bailee of the vehicle.
The defendant by its defence put the plaintiff to proof on the issue.
Ms Fang fails to give direct evidence that she is the owner of the motor vehicle. Instead she states that she was the registered operator of the motor vehicle and attaches a copy of the certificate of registration in her name. At paragraph 11 of her states "I need and use my vehicle for work purposes, to pick up my children and to go shopping". She states that she requested Mr Zhang to attend to arranging repairs and hiring a vehicle on her behalf. Mr Zhang in his statement gives consistent evidence that he was acting on Ms Fang's behalf. Mr Zhang does not purport to have any personal interest in the motor vehicle. In a deed of confirmation both Ms Fang and Mr Zhang acknowledge that Mr Zhang executed the hire documents as agent for Ms Fang.
The defendant correctly notes that only an owner or a bailee may have standing to bring a claim for loss of use of a motor vehicle. The defendant submits that evidence of vehicle registration does not provide evidence of title to the vehicle by reason of section 10(2) of the Road Transport (Vehicle Registration) Act 1997. The defendant further submits that the evidentiary burden is not a difficult one to overcome yet the plaintiff has failed to put on evidence that directly addresses the issue.
Notwithstanding that the evidence provided by the plaintiff regarding her interest in the motor vehicle is not expressly stated, the Court is satisfied on the balance of probabilities that she is the owner of the vehicle. While a certificate of registration is not proof of ownership, it does provide evidence that Ms Fang is responsible for the motor vehicle. Section 4 of the Road Transport (Vehicle Registration) Act 1997 defines a registered operator of a registrable vehicle to mean a person recorded in the Register as a person responsible for the vehicle. It is open to the Court to infer, particularly with a vehicle registered for general private use, that Ms Fang's responsibility is derived from ownership. Ms Fang refers to the motor vehicle using the possessive pronoun "my". Mr Zhang does not assert any interest in the vehicle. There is no evidence that challenges the contention that Ms Fang is the owner of the vehicle. There is no evidence to suggest someone other than Ms Fang is the owner of the vehicle. Having regard to these matters the Court is satisfied that the plaintiff is the owner and therefore has standing to bring these proceedings.
Background to these Proceedings
Before considering the primary issue in dispute regarding the method for assessment of damages for loss of use it is appropriate to provide some comment on the background to these proceedings. The claim brought by the plaintiff is one that commonly comes before the Local Court to determine. While the parties named in the proceedings are individuals, these proceedings are, in truth, a dispute between the credit car hire company representing the plaintiff and the subrogated insurer for the defendant. This dispute is the latest in the ongoing battle between car hire companies and insurers over the question of assessment of damages arising from the loss of use of a motor vehicle consequent to a collision.
The battle is one that has continued before the Local Court since the late 1990's. Initially it was argued that commencement and funding of legal proceedings by credit hire companies or related entities to recover hire charges on behalf of plaintiffs was illegal by reason of champerty. In Quach v Huntof Pty Ltd [2000] NSWSC 932 the Supreme Court dismissed an appeal against the finding of her Honour Magistrate Madgwick in 1998 that the champertous nature of such arrangements did not afford a defence to a claim for damages.
In the period between September 1999 and 2002 a very large number of proceedings were commenced in the Local Court for the recovery of hiring costs incurred by NRMA pursuant to its "Courtesy Car Programme" against the at-fault driver. Four Local Court proceedings were subject to appeal. Sully J ordered that the proceedings be removed to the Court of Appeal for determination of various issues including whether the principle enunciated in Griffiths v Kerkemeyer [1977] HCA 45; (1977) 139 CLR 161 in relation to the entitlement to recover damages for gratuitously provided services in a personal injury case were applicable in relation to loss of use of a non-income producing chattel. In the Court of Appeal in the decision of Anthanasopoulos v Moseley [2001] NSWCA 266 the courtesy car programme was described by Beazley JA at [5] - [6] in the following terms:
Under this scheme, an insured was entitled to a courtesy car either at no cost to the insured for up to fourteen days if the insured was not at fault, or at a preferential rate if the insured was at fault. Where the insured was not at fault the NRMA bore the cost of the hire for the fourteen day "courtesy" period. In either case, the scheme required the insured to have the damaged vehicle repaired by a "NRMA approved" repairer.
The "courtesy car" was a car hired from Hertz Australia Pty Limited. The insured entered into the Hertz Rental Agreement directly with Hertz but the NRMA was billed for the hire for the first fourteen day period.
The Court of Appeal held that there was no need to consider the application of the Griffiths v Kerkemeyer principle as it was well established, pursuant to the line of authority commencing with The Greta Holme [1897] AC 596 that injury to property which deprives a party of the use of a non-income earning chattel is compensable.
I will further consider the significance of the decision of Anthanasopoulos later in this judgment. Suffice it to say that Anthanasopoulos affirmed the availability of claims for loss of use of a private motor vehicle being assessed as a claim for general damages. As the Court of Appeal did not expressly deal with quantum the question of how general damages were to be assessed remained a matter for the Local Court to resolve.
In the case of Chong v Berry [2007] NSWLC 33 his Honour Magistrate Dillon gave judgment on the assessment of damages for loss of use of a motor vehicle in circumstances where the plaintiff had obtained a replacement vehicle on a credit hire basis. Magistrate Dillon noted at [3]:
Despite the relatively small sums involved, the matter has been transferred to the General Division because it raises a number of questions in what is, effectively, a test case. The wider commercial implications for plaintiffs and insurers in the Small Claims Division of the Local Court are considerable.
Although the decision in Chong v Berry was intended to provide guidance to litigants in the Small Claims Division, it did little to stem the tide of defended claims involving credit hire companies and insurers. In October 2009 a one week special fixture at North Sydney was allocated by the Small Claims Division to hear and determine over two hundred defended cases involving disputes over claims for loss of use between the credit car hire company Avitmyway Pty Ltd and the NRMA. The Court gave a number of judgments that formed precedents upon which the balance of cases were ultimately settled.
Given the continued proliferation of these claims before the Small Claims Division the Court published a number of decisions that illustrate the approach taken by this Court in assessing damages for loss of use. Those decisions include Dutt v Ridout [2009] NSWLC 23, Tang v Driden [2010] NSWLC 17, Miller v Walker [2011] NSWLC 10, Solar v Elkim [2011] NSWLC 34 and perhaps most notably, Harb v Marchbank [2011] NSWLC 9.
An appeal against the decision in Harb v Marchbank was subsequently dismissed by his Honour Judge Johnston in John Marchbank v Anwar Harb [2011] NSWDC 110, however, it must be noted that an appeal against a decision of the Local Court sitting in its Small Claims Division does not extend to grounds of questions of law.
The Court experienced a significant decrease in the number of these types of claims proceeding to trial after the decision in Harb v Marchbank. The Court concedes that this is not necessarily reflective of satisfaction on the part of insurers and credit hire companies with the approach taken by this Court in assessing damages. Rather it may be simply an acceptance by litigants that there was little opportunity to re-agitate these matters given the limited rights of appeal.
It was in this context that the current proceedings were commenced on 28 June 2011. It has taken almost two years to bring the matter to a final determination and both parties have expended costs far greater than the amount in dispute. The preparedness of the parties to brief experienced counsel and spare no cost in prosecuting and defending the claim, notwithstanding the very limited costs that might be awarded, is indicative of the view undoubtedly held by both parties that the questions of principle involved have broader significance than the amount in dispute in the present proceedings.
The proceedings first came before this Court on 17 November 2011 for consideration of a motion by the defendant to transfer the proceedings to the General Division of the Local Court. The essence of the defendant's argument was that there was a divergence between the approach taken by this Court in Harb v Marchbank and the approach of Magistrate Dillon in Chong v Berry. It was said that referral to the General Division would allow consideration of these issues in a forum where broader appellate rights were available. Rule 2.3 of the Local Court Rules 2009 allows the Court to transfer proceedings to the General Division if the Court is of the opinion "that the matters in dispute are so complex or difficult, or are of such importance, that the proceedings ought more properly to be heard in the Court's General Division". Having regard to the matters raised the Court directed the transfer of the proceedings to the General Division.
The proceedings came before his Honour Magistrate Townsden who dealt with the question of the approach taken by the Small Claims Division on an interlocutory basis. In an unreported decision of 18 July 2012 Magistrate Townsden concluded:
The procedures adopted by the Small Claims Division in my view properly set out an appropriate method of determining a market rate in such circumstances where there is evidence of a non-compensable benefit. Where there is no such question, the production of the actual invoice would ordinarily suffice as evidence of the market rate.
The proceedings were then transferred back to the Small Claims Division for determination.
Notwithstanding the apparent endorsement by Magistrate Townsden the defendant invites this Court to reconsider its approach with respect to assessment of damages. In support of its submission the defendant has drawn attention to a recent decision of her Honour Magistrate Schurr in Masrour v Danzey (unreported, 12 April 2013).
In Masrour v Danzey Mr Masrour hired a replacement motor vehicle on credit for $400 per day from Compass Corp (also trading as Compass Claims). Compass Corp offered additional benefits of assisting in the recovery of hire costs from the at fault driver. Magistrate Schurr noted the interlocutory decision of Magistrate Townsden in Fang v Koumoukelis and the contention by the defendant that Magistrates Townsden's decision was based on a misquotation from Chong v Berry. It is not clear whether Magistrate Schurr accepted the contention that Magistrate Townsden led himself into error as a result of this incorrect quotation or whether it was simply a typographical omission.
Magistrate Schurr noted at [26] that "the issue of non-compensable benefits was not addressed in Harb v Marchbank." Magistrate Schurr relied on the following English authorities as outlining the principles of assessing damages in credit car hire cases: Bent v Highways and Utilities Construction Ltd [2011] EWCA Civ 1384, Dimond v Lovell [2000] 2 WLR 1121 and Lagden v O'Connor [2004] 1 AC 1067.
Magistrate Schurr concluded that Mr Masrour had hired a vehicle that included additional benefits that were non-compensable and assessed the damages based on basic hire rates of similar cars. In that case the only other evidence of a market rate was for Hertz cars and damages were awarded having regard to that rate.
Given at least the perceived divergence of views expressed by different judicial officers within the Local Court it is appropriate that some attempt be made to reconcile the approaches taken.
Loss of Use - General or Special Damages
An award of damages for loss of use of property seeks to compensate a plaintiff who has been wrongfully deprived of the use of the property by a tortfeasor.
Damages for loss of use of property can be assessed on the basis of either special or general damages (see, for example, BHP Coal Ltd and Ors v O & K Orenstein & Koppel AG and Orenstein & Koppel AG and Ors [2008] QSC 141 and Lord Hobhouse at 1140 in Dimond v Lovell [2000] 2 WLR 1121.
The distinction between a special damages and general damages was described by Fullagher J in Paff v Speed (1961) 105 CLR 549 in the following terms:
Special damages are awarded in such cases in respect of monetary loss actually suffered and expenditure actually incurred. Their two characteristics are (1) that they are assessed only up to the date of verdict, and (2) that they are capable of precise arithmetical calculation or at least of being estimated with a close approximation to accuracy.... "General damages" on the other hand, are of their very nature incapable of mathematical calculation, and (although the expression is apt to be misleading) commonly very much "at large". They are at large in the sense that a jury has, in serious cases, a wide discretion in assessing them.
In the context of claims for loss of use of property the distinction between special damages and general damages was perhaps best stated by the Earl of Halsbury LC in The Mediana [1900] AC 113 at 117:
Now, in the particular case before us, apart from a circumstance which I will refer to immediately, the broad proposition seems to me to be that by wrongful act of the defendants the plaintiffs were deprived of their vessel. When I say deprived of their vessel, I will not use the phrase "the use of the vessel". What right has a wrongdoer to consider what use you are going to make of your vessel? ...Here, as I say, the broad principle seems to me to be quite independent of the particular use of the plaintiffs were going to make of the thing that was taken, except - and this I think has been the fallacy running through the arguments at the bar - when you are endeavouring to establish the specific loss of profit, or of something that you otherwise would have got which the law recognises as special damage. In that case you must shew it, and by precise evidence, so much so that in the old system of pleading you could not recover damages unless you had made a specific allegation in your pleading so as to give the persons responsible for making good the loss an opportunity of inquiring into it before they came into court. But when we are speaking of general damages no such principle applies at all, and the jury might give whatever they thought would be the proper equivalent for the unlawful withdrawal of the subject-matter then in question. It seems to me that that broad principle comprehends within it many other things.
The assessment of damages for loss of use on the basis of either special damages or general damages can have practical consequences and potentially give rise to different outcomes.
In BHP Coal Ltd and Ors v O & K Orenstein & Koppel AG and Ors [2008] QSC 141 McMurdo J considered a claim for the loss of use of a bucket wheel excavator (BWE) used in an open cut mine. The excavator collapsed as a consequence of negligent repairs carried out by the defendant. The plaintiff claimed special damages for loss of use or, alternatively, general damages for loss of use of the excavator.
McMurdo J accepted that loss of use could be assessed on the basis of either special or general damages. In respect of the claim for special damages the evidence failed to establish a compensable loss. McMurdo J indicated at [898]:
The claim is for the loss of use of the BWE within a period, but the plaintiffs must demonstrate that they have a compensable loss, in that there is something which they should be paid now in order to put them in the position they would enjoy had the BWE not collapsed. Had the plaintiffs used trucks and shovels where the BWE would have worked in that period, and had the trucks and shovels been more costly than the BWE, the difference would be a loss for which the plaintiffs should be compensated.
As the plaintiff had not employed resources to undertake the work that the BWE would have done there was no basis to allow special damages.
Notwithstanding this, the Court allowed damages for loss of use on the alternative basis of general damages. The Court relied on the line of authority commencing with The Greta Holme, The Mediana and The Marpessa. General damages were assessed by reference to interest calculated on the residual value of the BWE for the period during which it remained out of service.
The distinction between special and general damages is not merely one of ascertainable and unascertainable loss. Whenever the court is assessing special damages it brings into play ordinary compensatory principles such as mitigation of loss, questions of "betterment" and whether the loss claimed is compensable. In contrast, when the court is assessing general damages the court is attempting to award a reasonable sum for the interference with the plaintiff's property notwithstanding that the plaintiff might not have incurred a pecuniary loss or that pecuniary loss may not be ascertained.
While it is clearly open to a Court to assess damages for loss of use on the basis of either special or general damages it is relevant for the Court to bear in mind the distinction between the two given the different considerations that apply.
How are General Damages for Loss of Use Assessed?
As general damages are "at large" and involve the exercise of discretion on the part of the Court it is unsurprising that the authorities reveal differing methods for assessing damages.
Many of the authorities involve shipping cases in the United Kingdom.
In The Greta Holme [1897] AC 596 the Court awarded general damages for the loss of the use of a dredger calculated by reference to a figure of 100 pounds per week for the 15 weeks of the repair period. That amount being the rent that would have been paid on a similar dredger to the one that was damaged.
In The Marpessa [1907] AC 241 the Court allowed the cost of maintaining the dredger and interest on its depreciated value.
In Admiralty Commissioners v S.S. Chekiang [1926] AC 637 interest on the depreciated value of the non-profit earning vessels was awarded.
In The Susquehanna [1926] AC 655 Viscount Dunedin assessed damages by reference to the capital and maintenance cost of keeping a stand in vessel available to replace the damaged vessel.
Apart from The Greta Holme decision general damages had not ordinarily been determined by reference of a replacement cost where no replacement was in fact hired. Indeed Viscount Dunedin in The Susquehanna was critical of such an approach suggesting (at 659-660) that the Court in The Greta Holme decision had "really acted as a jury" in assessing damages suggesting that there was no principled approach to the assessment.
Given the reluctance of Courts in the United Kingdom to embrace the method of assessing general damages adopted in The Greta Holme decision, it is unsurprising that the law relating to claims for hire costs to replace the loss of use of private motor vehicles developed on the basis of an assessment of special damages.
United Kingdom Authorities - Loss of Use of Private Motor Vehicles
In both Masrour v Danzey and Chong v Berry the Local Court placed considerable weight on the decisions of Courts dealing with similar issues in the United Kingdom. For this reason it is important to understand the approach taken by Courts in the United Kingdom.
The legal history in the United Kingdom bears a striking similarity to that experienced in New South Wales. In the decision of Bent and Highways and Utilities Construction v Allianz Insurance [2011] EWCA Civ 1384 Lord Aikens commented:
These appeals are fought on two new fronts in the secular war that has now been conducted for over 20 years between the motor insurance market and credit car hire companies who provide an innocent victim of a motor accident ("an RTA") with a replacement vehicle while his is being repaired... In all these cases involving the hire of a replacement cars on credit terms, although the nominal claimant is the innocent victim of the negligent driving of the nominal defendant, the real parties behind the actions are always, on the claimant's side, a credit hire company which is seeking to recover the car hire costs involved; and on the defendant's side, a motor insurance company which is at risk of having to pay out on behalf of its insurer, the negligent driver.
The legal principles applied in the United Kingdom were described by Lord Hope in the House of Lords decision of Lagden v O'Connor [2003] UKHL 64 at [27]:
Mr Lagden's claim was, in essence, a claim for the loss of use of his car while it was in the garage undergoing the repairs which needed to be done as a result of the accident. There was no evidence that he would have suffered financial loss as a result of being unable to use his car during this period. But inconvenience is another form of loss for which, in principle, damages are recoverable. So it was open to him, as it is to any other motorist, to avoid or mitigate that loss by hiring another vehicle while his own car was unavailable to him. The expense of doing so will then become the measure of the loss which he has sustained under this head of his claim. It will be substituted for his claim for loss of use by way of general damages. But the principle is that he must take reasonable steps to mitigate his loss. The injured party cannot claim reimbursement by way of mitigation that is unreasonable. So the motorist cannot claim for the cost of hiring another vehicle if he had no reason to use a car while his own car was being repaired - if, for example, he was in hospital during the relevant period or out of the country on a package holiday. If it is reasonable for him to hire a substitute, he must minimise his loss by spending no more on the hire than he needs to do in order to obtain a substitute vehicle. If the defendant can show that the cost that was incurred was more than was reasonable - if, for example, a larger or more powerful car was hired although vehicles equivalent to the 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.
The principle to be applied is one of restitutio in integrum in that "the purpose of an award of damages is to place the injured party in the same position as he was before the accident as nearly as possible" (Lord Hope at paragraph [30]).
What is important to note from this summary of the principles applied in the United Kingdom is that a claim for hire costs is in lieu of the claim for general damages for loss of use that would otherwise be available. In other words, where a plaintiff does hire a replacement vehicle it is to be treated as a claim for special damages.
The decision in Lagden v O'Connor followed an earlier decision in Dimond v Lovell. In that case Ms Dimond had hired a replacement vehicle on hire on a credit agreement that was found to be unenforceable as it was a regulated agreement under the Consumer Credit Act 1974. As she had effectively received the vehicle for free the Court did not award damages as she suffered no loss. The Court approached the assessment of loss as special damages. Although no damages were awarded Lord Hobhouse acknowledged at 1140 that "there may still be scope for awarding general damages for loss of use" and referred to principles in The Mediana.
It is clear from Lord Hobhouse's comment that Ms Dimond's claim was determined not on a basis of general damages but rather as special damages.
Anthanasopoulos v Moseley
The decision of the Court of Appeal in Anthanasopoulos v Moseley is significant in two respects. Firstly, it affirms that damages for loss of use of a private motor vehicle may be assessed as general damages. Secondly, and perhaps more importantly, it follows the method of assessment of general damages referred to in The Greta Holme decision.
Having observed the fact that services that are provided gratuitously do not affect the characterisation of the damages in question Ipp AJA states at paragraph [83]-[84]:
Whatever the nomenclature to be attributed to the nature of damages represented by a plaintiff's need for services, the damages in question are not to be determined by reference to the actual cost to the plaintiff of having the care or services provided, or by reference to the income foregone by the provider of the services, but, generally, by reference to the market cost of providing them: Grincelis v House [2000] HCA 42; (2001) 201 CLR 321 at 327 per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; Van Gervan v Fenton[1992] HCA 54; (1992) 175 CLR 327.
Similarly, in my opinion, in the case of claims for damages for injury to a non-income producing chattel, there is also no substantive significance in the distinction between special and general damages. Where, by reason of need, the plaintiff is required to hire a replacement chattel, the damages are to be measured by reference to the market rate of hiring the replacement: cf The Greta Holme at 605 per Lord Herschell; Dimond v Lovell at 1140 per Lord Hobhouse. (emphasis added).
The comments by Ipp AJA in Anthanasopoulos v Moseley left some uncertainty regarding the necessity of a plaintiff to establish "need" for a replacement vehicle to establish an entitlement for general damages. This uncertainty was resolved in Yates v Mobile Marine Repairs Pty Ltd and Anor [2007] NSWSC 1463. In that case the Court was dealing with a general damages claim for loss of use of a yacht that was used exclusively for pleasure. The owner claimed for loss of use of the vessel although no replacement had been hired. Counsel for the defendant submitted that comments made by Ipp JA at [78]-[79] introduced a test of "need' on the part of the particular chattel. Palmer J rejected this submission stating at [84]:
I do not agree. Read in context, all that his Honour was doing in this passage was explaining the rationale behind the principle as laid down in The Greta Holme. His Honour would have been surprised to find himself quoted as the authority for reversing what Lord Halsbury LC had said in The Mediana.
In Yates the parties accepted that following Anthanasopoulos there were two methods available for the assessment of general damages being either interest on the capital value of the vessel or alternatively, the reasonable cost of chartering a replacement vessel.
While it remains entirely open for a Court to determine loss of use as a claim for special damages following the authorities in the United Kingdom, Anthanasopoulos v Moseley presents an alternative avenue for assessment based on general damages. It is this alternative that this Court has attempted to follow in the series of decisions that culminated in the decision in Harb v Marchbank.
Contrast between Chong v Berry and Harb v Marchbank
In Chong v Berry Mr Chong claimed damages for the loss of use of his vehicle while it was under repair. The claim included an amount for seven days when he was without his vehicle and a further amount representing the cost of the credit hire of a replacement vehicle. Magistrate Dillon states at paragraph 2:
These proceedings concern a claim by Mr Chong for compensation for loss of the use of his car while it was under repair. Although the statement of claim was pleaded as if this was a liquidated claim, it is, in fact, a claim for general damages.
Damages were assessed separately for the period before he hired a replacement vehicle and the hire period.
In relation to the pre hire period Magistrate Dillon noted the various methods for quantification of general damages in The Marpessa, The Greta Holme and The Susequehanna.
Magistrate Dillon then stated at [29]:
Another approach might be to calculate the market price of a replacement hire vehicle and discount it by a certain amount to take into account owner's profit.
Magistrates Dillon then referred to comments by Ipp AJA in Anthanasopoulos that damages were to be determined by reference to the market cost of providing them. Magistrate Dillon determined a "market cost" of $55 per day and discounted that by 25% representing owner's profit.
In relation to the hire period Magistrate Dillon was satisfied that the provision of the replacement vehicle on hire terms was a non-compensable benefit. At paragraph [74] Magistrate Dillon said:
Where non-compensable benefits have been obtained or are in issue the practical problems of proof become significantly more difficult, especially in the Small Claims Division of this court. In principle, it seems to me that, once the issue of non-compensable benefits has been raised by evidence, the burden of proof must lie on plaintiffs to quantify their true losses by bringing into account the additional benefits received. Lord Hoffman, in Dimond v Lovell (2002) 1AC 384 (at 402), referred to the House of Lords decision in British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673.
At paragraph [76] Magistrate Dillon resolved the issue of quantifying the "additional, non-compensable benefits" by following the approach of Lord Hoffman in Dimond v Lovell. Non-compensable benefits were quantified by subtracting the market rate from the sum paid by the plaintiff.
The approach of the Court in assessing general damages in Harb v Marchbank [2011] NSWLC 9 can be summarised as follows:
(1) In New South Wales a person is entitled to claim for loss of use of a motor vehicle which is not used for profit (Anthanasopoulos v Moseley [2001] NSWCA 266).
(2) Damages for loss of use of a vehicle are not to be determined by reference to the actual cost to the plaintiff, but generally, by reference to the market cost of supplying a replacement vehicle (Anthanasopoulos v Moseley [2001] 52 NSWLR 262 (at 276-277)).
(3) In assessing damages the Court will determine a reasonable sum for the wrongful interference with the plaintiff's property (Stoke-on-Trent City Council v Wass Ltd [1988] 3 All ER 394 per Nicholls LJ at 402).
(4) In relation to the hire of a motor vehicle there is no single market or "spot rate". Rather there will exist a range of rates available within the market at any time.
(5) Provided that the actual cost incurred by the plaintiff represents a market rate or falls within the range of market rates the Court will accept that rate as a reasonable basis for the assessment of damages.
(6) If the actual cost incurred is not a market rate and the cost falls outside the range of market rates the court will nominate a reasonable rate.
(7) Considerations of whether the plaintiff failed to mitigate damage or is in an improved position are irrelevant when assessing general damages for loss of use of a non-income producing chattel.
A number of observations should be made when contrasting the approaches taken in Chong v Berry and Harb v Marchbank.
Firstly, while Magistrate Dillon purports to treat the claim for loss of use as general damages, it is clear that the approach taken with respect to the hire period was on the basis of special damages. It is one that is consistent with the approach of Dimond v Lovell. The Court was attempting to identify the actual expenditure incurred by Mr Chong that was compensable.
Secondly, while it is true to say that "the issue of non-compensable benefits was not addressed in Harb v Marchbank", the facts in that case rendered the consideration of that issue unnecessary. The Court at [17]-[18] had found that the credit hire agreement itself did not provide any fixed hire rate. On that basis alone it could not be relied upon as evidence of a market rate. Had the hire agreement contained a fixed hire rate then the Court would still disregard the agreement as evidence of a market rate on the grounds that it contains non-compensable benefits. This is implicit from what the Court said at paragraph [12]:
"The actual rate that a plaintiff hires a replacement vehicle will often be the best evidence of the market cost for a replacement vehicle. Where the hire is for a similar model vehicle, arranged at arms length on a commercial basis and the charge is fixed and does not include additional features such as the provision of credit then it will reflect the market cost for the replacement vehicle." (emphasis added)
Thirdly, it has to be said that irrespective of whether the Chong v Berry or the Harb v Marchbank approach is taken, the outcome is likely to be the same. In both cases the Court attempts to determine the market rate or range of market rates. In both cases the Court will consider whether a credit hire is higher than the range of market rates and, if it is, the Court will make an adjustment to ensure that what is allowed is within the market range or a market rate. This appears to have been accepted by Magistrate Townsden when he expressed the view that "the procedure adopted by the Assessor is not, in my view, at odds with the decision in Chong v Berry". It is also wholly consistent with the opinion expressed by Ipp AJA that "in the case of claims for damages for injury to a non-income producing chattel, there is also no substantive significance in the distinction between special and general damages".
A further issue that needs to be addressed in the comparison of the approaches in Chong v Berry and Harb v Marchbank is the submission by the defendant that when assessing general damages for loss of use of a motor vehicle it is necessary for the Court to discount the hire rate to take account of the "owner's profit".
In Chong v Berry Magistrate Dillon accepted submissions made on behalf of the defendant that such an allowance was necessary. A reduction of a nominal rate of 25% was allowed although Magistrate Dillon acknowledged that this figure was not based on any evidence. The Court relied on the authorities Reid v Brown (1952) WN (NSW) 131 and Mersey Docks & Harbour Board v Owners of the SS Marpessa (The Marpessa) [1907] AC 241.
Such a proposition seems to out of place in the context of private motor vehicle owners who hire replacement vehicles to avoid the personal inconvenience and difficulties that arise when they are deprived the use of their vehicle. Private vehicle owners do not make any profit out of obtaining a replacement vehicle that is similar to their own. All car companies presumably earn profit from the hire of their vehicles, however, it is not clear why such profit should be accounted for by the hirer when determining market rates given that the profit margin is an inextricable component of the hire cost.
In the case of Reid v Brown (1952) WN (NSW) 131 the Court was assessing special damages arising from the deprivation of use of a vehicle in business. The plaintiff purchased a replacement vehicle and resold it when his vehicle was repaired. The vehicle was used in the course of the plaintiff's employment. While Street CJ noted that the plaintiff is not entitled to make a profit out of the accident, and the defendant is not to be called upon to pay damages which do not flow directly from the accident, that is nothing more than a restatement of the ordinary compensatory principles. It does not support the contention that some discount should be made of a transaction to account for profit, particularly where the plaintiff derives no profit.
In The Marpessa the plaintiff claimed loss of use for a dredger based on what the dredger's services cost the plaintiff as well as an additional amount for "owner's profit". The Court allowed a sum for the cost of the daily supplies required for the dredger but did not allow a sum for owner's profit. While the decision is not entirely clear on the point it appears that the Court was assessing damages on the basis of the costs of the dredger and that a profit component had no relevance to those costs. Again it does not appear to support the proposition contended for by the defendant in Chong v Berry.
In both The Greta Holme and more recently the Yates decisions the Court accepted that general damages could be calculated by reference to the cost of hiring a replacement yet no reference was made to an allowance for "owner's profit". Whatever relevance of the reference to "owner's profit" in The Marpessa it applies only in circumstances where there was no replacement hire. In Harb v Marchbank a motor vehicle was hired as a replacement.
A final comment might be made regarding the process adopted in Chong v Berry for the pre hire period. Although this issue was not raised in Harb v Marchbank it is at least open to argument whether general damages are best calculated by reference to the market rate of hire vehicles in circumstances where no hire has taken place. The comments made by Ipp AJA in Anthanasopoulos at [84] regarding assessment by reference to the market cost of replacement are predicated on the understanding that there has been a hire of a replacement vehicle. Where there has been no hire it may be preferable to assess general damages on an alternative basis, for example, interest on the capital value of the plaintiff's vehicle. It is an issue that does not require any fixed view for the purposes of determining the current proceedings.
The Court is satisfied that there is no need to depart from the general principles outlined in Harb v Marchbank.
Assessment of General Damages in the Present Case
Returning to the facts in the present case Ms Fang, through her partner, hired a Mercedes ML 300 from Compass Corp Pty Ltd trading as 1car1. The rental agreement discloses a 14 day hire period commencing 4 January 2011 at a daily rate of $400 per day together with a $6.60 vehicle registration recovery fee and a delivery fee of $33.00. The daily fee included an insurance reduction from $5,000 to $1,550 at a rate of $25 per day. The rental agreement provided that the daily rate would apply beyond the fourteen day period until the vehicle was returned.
A tax invoice was issued on 11 February 2011 to Ms Fang for the total cost of the hire, however, there is no evidence to the effect that this has been paid.
There is an amended copy of the tax invoice dated 11 February 2011 attached to the evidence of Ms Henshall. That invoice contains a daily hire charge of $363.64 (exclusive of GST) per day. While there is no evidence explaining the discrepancy in the amounts charged it appears that the amended invoice provides that the GST inclusive rate was $400 whereas the original tax invoice expressed this as the GST exclusive rate. This is consistent with the rates contained in the rental agreement.
The terms of the hire agreement must be read in conjunction with the terms contained in the Mandate and Authority to Act. Point five of the Mandate and Authority to Act provides that Compass agrees to provide the hire vehicle to the hirer on credit for a period of up to 180 days from the issue of the tax invoice. Compass will endeavour to recover the hire charges from the third party involved in the collision or their insurer. After the expiry of the credit period Compass may demand that the hirer pay.
There is no evidence to the effect that any demand has been made upon Ms Fang after the 180 day credit period. Accordingly, the credit hire arrangement has been continued and Ms Fang appears not to be under any present liability to pay the hire charges.
Point 8 of the Mandate and Authority to Act provides that the full hire cost or charges are unknown because the hire period is estimated and the total amount may differ when the hire period is known.
It is clear that Compass Claims provides additional benefits beyond the hire of a motor vehicle. The hirer receives the hire on credit for a minimum period of 180 days and the assistance of Compass Claims in attempting to recover the hire charges from the at fault driver involved in the collision. These benefits together with the absence of fixed hire charges mean that the hire charges on the tax invoice are not representative of a market rate.
It is necessary then to consider other evidence of the market rate or range of market rates that existed on or about the time of the collision for the hire of a vehicle that is similar to the plaintiff's BMW.
The plaintiff's evidence of market rates is contained in the evidence of Daryl Adams, the Senior Recoveries Specialist employed by Compass Corp Pty Ltd.
The critical aspects of Mr Adams evidence are that Compass monitors several competitor's sites on a weekly basis. Compass undertook a website survey of hire rates on 16 December 2010. Copies of website print outs show the offer for hire of a BMW X5 through City Car Rentals for $511.28 together with $28 per day insurance excess reduction. City Car Rentals also offered a Mercedes ML300 at $423. 28 per day together with $28 per day insurance excess reduction. Luxury Car Hire in Sydney offered a daily hire charge of $450 together with insurance excess reduction of $50 per day in respect to a Lexus RX350.
The defendant's evidence of market rates is contained in the evidence of Kirsty Balfour. She attaches 227 tax invoices produced by Hertz Rental company under subpoena. The invoices relate to the hire of Mercedes Benz C200 from Hertz Sydney Downtown and Sydney Airport during the period of, or including, January 2011.
The charges contained in those invoices vary in terms of daily base rate from $24 per day to $170 per day. The daily total costs including insurance excess reduction and vehicle registration recovery range from $52.01 per day to $260.41 per day.
In both Chong v Berry and Harb v Marchbank it was accepted that insurance excess reduction should be included when considering market rates.
The evidence of market rates provided by both parties is contemporaneous with the time of the collision.
There is, however, an issue as to whether the evidence regarding vehicles of different makes and models can be accepted as evidence of a market rate for the replacement of the plaintiff's vehicle.
The plaintiff has provided evidence of hire rates in relation to a BMW X5, the same make and model of the plaintiff's vehicle. Rates are also relied on in respect to the hire of a Mercedes Benz ML300 and Lexus RX 350. While not purporting to exercise any expertise on the comparative features, these two makes and models appear to have similar new price ranges, engine capacity and number of cylinders to the plaintiff's vehicle.
The evidence of the defendant pertains to the hire of a Mercedes-Benz C200. The Court notes that a review of both the Mercedes-Benz C200 contained and the BMW X5 in from the website "The Motor Report" identifies a number of differing features and specifications. Whereas the Mercedes Benz C200 is classed as a passenger vehicle, the BMW X5 is classed as a SUV. The new price of a Mercedes-Benz C200 is $65,150 whereas the new price of the BMW X5 is $92,100. The Mercedes-Benz C200 has a 1.8 litre capacity whereas the BMW X5 has a 3 litre capacity.
Ultimately, it appears that the Mercedes-Benz C200 is of a materially different quality to and lesser value than the BMW X5.
The question of what is the market rate or range of market rates must be determined by reference to the make and model of the plaintiff's damaged vehicle. It is the plaintiff's damaged vehicle that is the subject to the claim for loss of use and accordingly, it is appropriate to measure that loss by reference to a replacement vehicle that is similar to that of the plaintiff.
The Court does not accept the defendant's evidence relating to the Mercedes-Benz C200 to be reflective of a market rate for the replacement of the plaintiff's vehicle. Even if it did accept the defendant's evidence on market rate, that evidence would only have the effect of broadening the range of market rates that the Court could have regard to when determining a reasonable market rate to be applied in respect to the plaintiff.
The defendant has submitted that the evidence of the plaintiff relating to market rates obtained from Luxury Car Hire and City Car Rentals should be disregarded by the Court as those companies appear to have commercial ties to entities that operate accident replacement vehicles on a credit hire basis. Those commercial ties are sought to be established by reference to website links contained on the Luxury Care Hire and City Car Rentals to accident replacement credit hire schemes and company searches that show connections between company officers to accident replacement credit hire schemes.
Assuming that such associations do exist, it does not follow that the internet based rate offers obtained by Mr Adams on behalf of the plaintiff are credit hires. The website rental prices attached to Mr Adams evidence make no reference to credit hire arrangements.
A copy of the City Rentals rental vehicle agreement terms and conditions contains no provision relating to an option to credit hire.
A printout from Luxury Car Hire Sydney confirms that vehicles are offered to the community at large on an ordinary hire basis. It states:
"Luxury Car Hire provides quality, sporty and classic cars for hire. With over 60 cars in our fleet, we offer the broadest range of luxury cars for rental in Sydney. Surprise someone special on their birthday. Celebrate a milestone wedding anniversary. Arrive at your wedding in style. Go away for a weekend or simply indulge yourself."
Accordingly, the Court accepts the plaintiff's evidence regarding market rates that range $406.60 to $564.84 per day.
The daily rate of credit hire obtained by Ms Fang through Compass Corp is less than the non-credit daily rate applicable to similar vehicles from other car hire companies. While it might seem counter intuitive that a credit hire might be cheaper than a non credit hire the car rental market is, like all other markets where there are multiple suppliers, a competitive industry. In any competitive industry it would not be unusual for a commercial enterprise to seek to secure an edge over competitors by offering additional benefits while maintaining comparative price levels.
Ms Fang remains at least potentially liable to Compass Corp in relation to the cost of the hire of the motor vehicle. As the rate of hire that she obtained is a rate that is within the range of non credit market rates available at that time the Court is satisfied that it is a rate that should be accepted as the basis for the assessment of her loss of use.
Based on the amount contained in the amended tax invoice issued by Compass Corp the Court enter a verdict and judgment in favour of the plaintiff for unpaid balance of the hire charges being the sum of $3,702.45.
Interest
The plaintiff claims pre judgment interest under the terms of the contract or alternatively, pursuant to section 100 of the Civil Procedure Act 2005. The question of pre judgment interest was dealt with in Harb v Marchbank and the terms of the hire agreement and Mandate and Authority to Act in this case are substantially the same. As the plaintiff is not out of pocket or under a present liability in respect of the credit hire the Court is of the view that pre judgment interest under the contract is not payable nor is it appropriate for the Court to allow interest under section 100 of the Act.
Costs
In Harb v Marchbank the Court did not allow the plaintiff costs on the basis that the plaintiff did not demonstrate that it might incur a liability with respect to costs in light of the mandate that provides that Compass Claim assists in the recovery of hire charges. In a number of subsequent matters involving credit hires a copy of a cost agreement has been produced between plaintiffs and their legal representatives. Where the Court has been satisfied that a costs agreement exists the Court has allowed costs on the same basis as it might if the successful litigant was represented by a legal practitioner on a pro bono basis or through a community legal centre.
In respect to the present matter the Court reserves the question of costs.
Assessor Olischlager
13 May 2013
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Decision last updated: 09 August 2013
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