Fato v Ogorman
[2022] VMC 14
•9 June 2022
IN THE MAGISTRATES’ COURT OF VICTORIA
AT BROADMEADOWS
CIVIL DIVISION
Case No. M11334460
| ADRIAN FATO | Plaintiff |
| v | |
| DANIEL OGORMAN | Defendant |
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| JUDICIAL REGISTRAR: | G GREEN |
| WHERE HELD: | Broadmeadows |
| DATE OF HEARING: | 21 March 2022 and 4 April 2022 |
| DATE OF DECISION: | 9 June 2022 |
| CASE MAY BE CITED AS: | Fato v Ogorman |
| MEDIUM NEUTRAL CITATION: | [2022] VMC 14 |
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MOTOR VEHICLE COLLISION – Claim for cost of repairs, assessment fee and hire of replacement vehicle – Whether plaintiff acted reasonably by not accepting offer of ‘free’ hire vehicle from defendant’s insurer – Whether plaintiff’s lawyer told plaintiff about the offer of a ‘free’ hire vehicle - Whether plaintiff was aware that civil proceedings had commenced – Whether plaintiff’s lawyer had an interest in the plaintiff not accepting the offer of a ‘free’ hire vehicle - Whether exorbitant cost of collision hire vehicle that was delivered without a security bond means that a plaintiff would not be acting reasonably by refusing a ‘free’ hire car, taking into account the additional inconvenience of collecting it and paying a security bond.
APPEARANCES: | Counsel | Solicitors |
| For Plaintiff | Mr C Banasic | MVAA Legal Pty Ltd |
| For Defendant | Mr S Lowry | Suncorp Legal Pty Ltd |
HIS HONOUR:
Background
On 7 May 2021, Mr Adrian Fato was driving a 2015 Hilux ute (Hilux) when it was damaged due to the negligent driving of the defendant, Mr Daniel Ogorman. Mr Ogorman’s vehicle hit Mr Fato’s Hilux from behind. The Hilux was still safe to drive.
The Hilux was owned by Mr Fato’s father. Mr Fato lived with his parents. Mr Fato owned a Mustang but used the Hilux to carry tools for his work. Mr Fato’s mother would also drive his Mustang when she cared for her own mother.
On 24 June 2021, Mr Fato took the Hilux to Allied Collision Specialists Pty Ltd (Allied Collision Specialists) who assessed the damage and prepared a quote. Mr Fato then continued to use the Hilux until Allied Collision Specialists were ready to start the repairs. The repairer told Mr Fato they would arrange a hire car for him while the repairs were being done and that he would not have to pay anything for the hire car.
On 7 September 2021, Mr Fato’s father drove the Hilux to Allied Collision Specialists and collected a MG ZS Crossover SUV (hire car) that was supplied by OurCar, a collision hire car provider.
Mr Fato then used the hire car, including for work. His tools fitted in the hire car, but not in his Mustang.
On 21 September 2021, Mr Fato returned the hire car to Allied Collision Specialists and collected his Hilux that had been repaired.
These matters are not in dispute. At the start of this hearing, Mr Ogorman did not dispute liability for $4,501.44 being the agreed reasonable cost of repairs and $440.00 for an independent assessment report.
The issue in dispute is whether Mr Ogorman should also pay for the hire car and, if so, how much.
Mr Fato’s claim
Mr Fato claims that Mr Ogorman should pay him $3,767.00 for the cost of the hire car that he rented for 16 days. Mr Fato contends that he acted reasonably in using the hire car at the rate charged by OurCar.
Mr Ogorman’s defence
10. Mr Ogorman contends that he should not have to pay for the hire car because Mr Fato should have instead used a ‘free’ hire car that was offered to him by Mr Ogorman’s insurer.
11. Mr Ogorman’s primary argument is that he should not have to pay for the hire car at all because Mr Fato did not act reasonably by refusing the ‘free’ hire car from Mr Ogorman’s insurer.
12. In the alternative, Mr Ogorman argues that if he is liable to pay for the hire car, he should only be liable for the lower cost of the ‘free’ hire car that was available to Mr Fato through Mr Ogorman’s insurer (those prospective hire costs to be borne by Mr Ogorman’s insurer, not Mr Fato).
13. Failing that, Mr Ogorman argues that if he was liable to pay for a hire car, he should only be liable for the lower cost of a hire car available at the rate conceded by Mr Fato’s counsel to be the market rate available from a mainstream hire company.
14. Mr Ogorman also disputes Mr Fato’s claim that he needed a replacement vehicle, although acknowledges that the threshold is low in this regard. Mr Ogorman accepts the 16 days hire period as reasonable.
The initial complaint
15. This proceeding started when Express Legal Services (Aust) Pty Ltd (Express & Co Lawyers) filed a complaint (initial complaint) on Mr Fato’s behalf on 29 June 2021. On that day Express & Co Lawyers filed an Overarching Obligations Certificate purportedly signed by Mr Fato and a Proper Basis Certificate signed by Mr Marinos Arapis, the principal lawyer of Express & Co Lawyers.
16. The initial complaint claimed damages of $3,791.30 for repairs and ‘reserve[d] the right to rent a replacement vehicle and claim the costs of such rental to be determined at a later stage’. The initial complaint also reserved the right to later claim the costs of an expert report on the cost of repairs.
17. The initial complaint was issued before Mr Fato entered the hire car agreement with OurCar on 7 September 2021.
Email correspondence between the lawyers
18. On 19 August 2021, Mr Ogorman’s lawyers, Suncorp Legal Pty Ltd (Suncorp Legal) started email discussions with Express & Co Lawyers in response to the initial complaint. The email correspondence described below was between Mr Damien Christmas of Suncorp Legal and Mr Lindsay Sudiro of Express & Co Lawyers.
Offer of a ‘free’ hire car by Mr Ogorman’s insurer
19. On 27 August 2021, Suncorp Legal wrote to Express & Co Lawyers as follows:
…we are instructed that APIA [Mr Ogorman’s insurer] is prepared to arrange for a hire car to be provided to the party who normally utilises [the Hilux] whilst it is being repaired, to mitigate any additional cost that may be incurred. The hire car would be provided at APIA’s cost.
The hire car would be provided on the basis that no further claims are made for hire car from your client or the party utilising [the Hilux] or the replacement hire car relating to the damage caused to [the Hilux] in the collision on 7 May 2021.
Please confirm whether the hire car is required and if so, who the hiring party will be. Please also confirm whether you are content for APIA’s hire car company, Hertz, to make contact with that party direct to make arrangements. If not, please provide preferred communication details.
Please provide us with 7 days’ notice of the repairs commencing in order for APIA to make the necessary hire car arrangements.
18. It was Mr Fato’s evidence that he was not told about this offer of a ‘free’ hire car from Mr Ogorman’s insurer before or during the time he hired the car from OurCar.
Initial notice of defence
19. On 30 August 2021, Suncorp Legal filed a notice of defence on behalf of Mr Ogorman.
20. In essence, the notice of defence admitted liability, but disputed quantum. The notice of defence also contended that the proceeding was premature because:
a)no demand for payment had been made of Mr Ogorman or his insurer
b)only an estimated cost of repairs had been provided, and
c)the hire car cost and assessment fee had not been quantified.
Further discussions about the offer of a ‘free’ hire car by Mr Ogorman’s insurer
21. On 2 September 2021, Express & Co Lawyers wrote to Suncorp Legal as follows:
With reference to the hire car, we note our client has engaged their own hire car provider.
22. This cannot be accurate if I accept Mr Fato’s evidence that, as of 2 September 2021, he had not engaged his own hire car provider. While it is possible that Allied Collision Specialists or Express & Co Lawyers had informed OurCar of Mr Fato’s desire for a hire car at this point, even if this was the case, he had not ‘engaged’ a hire car provider.
23. On 3 September 2021, Suncorp Legal wrote to Express & Co Lawyers as follows:
In relation to your client’s hire car can you please confirm the date the contract was entered into and provide us with a copy of the contract?
We note that our client’s insurer Apia is prepared to provide the hire car to the party utilising your client’s vehicle free of charge. Should your client be proposing to claim the hire car in the proceeding, your client is obliged to mitigate their loss. We therefore propose that your client return the existing hire and obtain the free hire car (which will be a Toyota Hilux, or like for like with your client’s existing vehicle) proposed through Apia on the terms proposed in our email dated 27 August 2021. Please confirm whether your client agrees to do this within 7 days.
24. At 8.55am on 7 September 2021, Express & Co Lawyers replied to Suncorp Legal as follows:
We are currently seeking instructions as to our client’s hire car agreement.
25. This also cannot be accurate if I accept Mr Fato’s evidence that, around 7.00 to 8.00am that day, his father drove the Hilux to the Allied Collision Specialists, signed the rental agreement and collected the hire car provided by OurCar. Mr Fato’s evidence was that on 7 September 2021 he had not been asked by Express & Co Lawyers to give instructions about a hire car provider.
26. On 10 September 2021, Suncorp Legal wrote to Express & Co Lawyers as follows:
Can you please confirm whether you have received instructions in relation to your client’s hire car.
27. On 13 September 2021, Express & Co Lawyers wrote to Suncorp Legal as follows:
We are instructed that our client engaged a hire car provider of their choice in the first week of September.
28. While Mr Fato did obtain the hire car on 7 September 2021, being the last day of the first week of September, his evidence was that all he recalled was going through Allied Collision Specialists to obtain the hire car and that he did not provide any instructions to Express & Co Lawyers about this before or during the hire period.
29. Mr Fato also said his lawyer did not inform him of the option of using the ‘free’ hire car offered by Mr Ogorman’s insurer at any time.
Mr Fato’s evidence about the hire car arrangements
30. Mr Fato’s evidence was he took his damaged Hilux to Allied Collision Specialists on 24 June 2021. He chose this repairer because he had used them before. He said that Allied Collision Specialists told him they would organise a hire car while the Hilux was being repaired and that he would not have to pay anything for it. Mr Fato wanted a car that was big enough to carry his tools, was not concerned about the price of the hire car, did not shop around for other hire cars and said he would have sourced a cheaper option if he needed to pay for the hire car.
31. On 7 September 2021, Mr Fato’s father took the Hilux to Allied Collision Specialists and signed an OurCar rental agreement for the hire car on his son’s behalf. Mr Fato recalled that his father was not working that day and agreed to do this for him because Mr Fato needed to work.
32. The ‘rates & fees’ box on the rental agreement was blank, that is, the rental agreement did not include the cost of the fees that were later included in an OurCar tax invoice for daily rental, insurance excess reduction, administration, delivery, pick up and registration recovery.
33. The rental agreement relevantly provided as follows:
You authorise OurCar to recover all costs associated with this vehicle on your behalf including rental cost, legal proceeding costs and if required appoint an agent to act on your behalf to recover all such costs.
You also agree to facilitate and fully cooperate with OurCar or its appointed agent to recover all the cost associated with this car hire.
You acknowledge that you have been provide this rental vehicle on the basis that you are ‘NOT AT FAULT’ and you have been truthful & honest in disclosing all the relevant facts regarding this accident.
You acknowledge that this is not a ‘FREE OR Courtesy Car’. OurCar will not recover the rental cost from you as long as you abide by all your obligations to OurCar.
34. Mr Fato’s father did not give evidence and Mr Fato agreed that he was bound by the rental agreement that his father had entered with OurCar on his behalf.
35. Mr Fato said that when his father collected the hire car on 7 September 2021, he was not aware of the offer of a ‘free’ hire car from Mr Ogorman’s insurer that had been made by Suncorp Legal to Express & Co Lawyers on 27 August 2021.
36. Mr Fato said that he had not seen the OurCar tax invoice for $3,767.00 dated 22 September 2021 and was not aware of the various fees in that invoice.
37. Mr Fato’s evidence was that all he knew was that Allied Collision Specialists had sourced the hire car for him and he was not aware that lawyers may have been acting on his behalf before or during the hire car period.
38. In my view Mr Fato was a credible witness and I accept all his evidence, which was cogent and consistent.
The amended Complaint
39. On 4 October 2021 Express & Co Lawyers filed an amended Complaint that claimed $9,078.81 being:
a) $4,871.81 for the cost of repairs (revised up from the $3,791.30 estimated in the initial complaint)
b) $3,767.00 for the hire car, and
c) $440.00 being the independent assessment fees.
40. The amended Complaint included a copy of a tax invoice from OurCar with the following details:
OurCar address: 4 Rahnston Court, Vermont VIC 3133
Pickup: 7 September 2021, Mulgrave
Dropoff: 22 September 2021, Mulgrave
Rental fees: 16 days @ $180.00 per day $2,880.00 Insurance excess reduction 16 days @ $35.00 per day $560.00 Admin fee $49.00 Delivery fee $75.00 Pickup fee $75.00 Registration recovery fee 16 days @ $8.00 per day $128.00 Total cost of rental
(Including GST of $342.45)$3,767.00
The amended Notice of Defence
41. On 19 October 2021, Suncorp Legal filed an amended Notice of Defence on behalf of Mr Ogorman that claimed that Mr Fato had acted unreasonably in refusing the offer from Mr Ogorman’s insurer for a free hire car for the duration of the repairs.
Mr Fato’s evidence about the engagement of Express & Co Lawyers
42. Mr Fato’s evidence was that he could not recall appointing a lawyer to act on his behalf in the middle of 2021. He said that ‘wasn’t me’, that he ‘left it all in the hands of Allied Collisions’ and that ‘they were going to fix my car and they were going to source me a hire car’.
43. Nonetheless, Mr Fato agreed that he signed a ‘motor vehicle claim’ form on 9 May 2021. This form had the Express & Co Lawyers’ logo and contact details in the header. The form also included handwritten details about Mr Fato and Mr Ogorman’s vehicles, details and a diagram of the collision, confirmation of the referral from Allied Collision Specialists and Mr Fato’s authority for Express & Co Lawyers to act on his behalf to recover the costs associated with his motor vehicle collision.
44. Mr Fato recognised the handwriting on the body of the motor vehicle claim form as being his mother’s and the diagram and signature as being his own.
45. Mr Fato thought that the motor vehicle claim form had been emailed to him. The proceeding was stood down for Mr Fato to check his email records. Mr Fato then gave evidence that on searching his email records, including his deleted items and junk folders, there was no record of him being emailed the motor vehicle claim form.
46. Mr Fato was shown an electronic copy of a letter addressed to him from Express & Co Lawyers dated 11 May 2021. This letter began:
We have been referred your matter from Allied Collision Specialists Pty. Ltd., who have forwarded a copy of your Claim Form so that we may assist you with the recovery of the costs associated with your car accident, and we are working diligently to settle this claim.
47. The letter referred to enclosing the Express & Co Lawyers’ terms of engagement. The letter included a ‘retainer & authority to act’ section where Mr Fato was able to acknowledge that he had read and understood the terms of engagement and authorised Express & Co Lawyers to act on his behalf. There was no signature or date on the ‘retainer & authority to act’ section.
48. Mr Fato said that he did not remember whether he had seen the letter from Express & Co Lawyers, their terms of engagement and the ‘retainer and authority to act’. Mr Fato said that he did not sign the ‘retainer and authority to act’.
49. Mr Fato was shown a copy of an Overarching Obligations Certificate dated 11 May 2021 and signed 14 May 2021. This certificate was filed, purportedly on Mr Fato’s behalf, by Express & Co Lawyers on 29 June 2021. Mr Fato said that he had not seen the certificate before, that the signature on the certificate was not his and that he had not seen the signature before.
50. Counsel for Mr Fato submitted that the signature was produced by electronic document signing software ‘HelloSign’ that had been used by Express & Co Lawyers.
51. Mr Fato was shown an audit trail document from ‘HelloSign’. Mr Fato agreed that the email address on the audit trail document was his. The audit trail showed that a ‘Welcome Pack.pdf’ was sent to Mr Fato’s email address on 11 May 2021, that the documents were viewed the same day, then electronically signed on 14 May 2021. These dates match the dates on the Overarching Obligation Certificate. Mr Fato gave evidence that he had a ‘vague memory’ of being sent and electronically signing some documents. He could not recall whether he had been sent a ‘Welcome Pack’.
52. The hearing was stood down for Mr Fato to check his email account for any record of having been sent documents from ‘HelloSign’. Mr Fato was unable to find any record of such documents, including in his deleted and junk mail folders.
53. The Overarching Obligations Certificate purportedly signed by Mr Fato certified that he had:
…read and understood the overarching obligations…and the paramount duty…
54. Mr Fato said that the overarching obligations had not been verbally explained to him and he could not recall receiving any written information about those obligations.
55. For the reasons set out in paragraph 38 above, I accept Mr Fato’s evidence about his engagement of Express & Co Lawyers.
The evidence about the relationship between Mr Fato’s lawyers and OurCar
56. Mr Fato’s initial and amended complaints were filed by Express & Co Lawyers. Mr Arapis, the principal lawyer, signed the Proper Basis Certificate and Mr Sudiro was the lawyer from Express and Co Lawyers who wrote to Suncorp Legal in August and September 2021.
57. On 18 March 2022, three days before the start of this case, Mr Sudiro filed documents with the Court. Mr Sudiro’s email signature indicated that he then worked for MVAA Legal.
58. It became apparent that Mr Sudiro worked for Express & Co Lawyers and then later MVAA Legal. Both are business names registered by MVAA Legal Pty Ltd. Express & Co Lawyers purported to represent Mr Fato at the start of these proceedings and MVAA Legal were the solicitors representing him at the hearing. Counsel for Mr Fato confirmed that Express & Co Lawyers had been ‘re-branded’ as MVAA Legal.
59. Mr Ogorman tendered an extract from the Australian Securities and Investments Commission (ASIC) database. This showed that MVAA Legal Pty Ltd is registered with ASIC as follows:
a.Business names: Drak Partners, Express & Co Lawyers, MVAA Legal
b.Current address: C/- VS Associates Pty Ltd, 4 Rahnston Court, Vermont VIC 3133
c.Principal place of business: Unit 14, 35 Dunlop Road, Mulgrave VIC 3070
d.Directors: Marinos Arapis, Shivam Arora and Vikrant Guranath Kelkar
e.Secretary: Marinos Arapis, Shivam Arora and Vikrant Guranath Kelkar
f.100 ordinary shares, of which 80 are held by VS Associates Pty Ltd and 20 are held by Louise Keisoglu.
60. Mr Ogorman also tendered an extract from the Australian Government Australian Business Register (AGABR). This showed that VS Associates Pty Ltd (VS Associates), an Australian private company, registered the business name MVAA from 20 September 2021.
61. Mr Ogorman tendered a further extract from the AGABR. This showed that the trustee for OurCar Unit Trust, a fixed unit trust, registered the business name MVAA Rentals on the AGABR from 20 September 2021.
62. The defendant tendered a further extract from the ASIC database that showed that MVAA Rentals is a business registered with the following details:
a.Principal place of business: 14 35 Dunlop Rd Mulgrave VIC 3170
b.Holder name: the trustee for OurCar Unit Trust
c.Organisational representative: VS Associates Pty Ltd.
63. Mr Shivam Arora, the general manager of OurCar, gave evidence about his business, its hire car rates, and the rates charged to Mr Fato.
64. Mr Arora said that:
a. VS Associates is the parent company of both OurCar and MVAA Legal
b.VS Associates, the trustee of the OurCar Unit Trust, holds 80 per cent of the shares of MVAA Legal Pty Ltd.
c. VS Associates and MVAA Legal share the same office in Vermont
d. MVAA Legal and OurCar have the same place of business in Mulgrave
e.MVAA Rentals is a business owned by the OurCar Unit Trust, although MVAA Rentals is not operational.
f. He is a director and secretary of MVAA Legal Pty Ltd
g. Marinos Arapis is also a director and secretary of MVAA Legal Pty Ltd
h. Mr Arapis is also the Principal Lawyer of MVAA Legal
65. It appears from the documents tendered by Mr Ogorman and the evidence of Mr Arora that the law firm acting for Mr Fato is closely connected to OurCar. For example, Mr Arora is both the general manager of Our Car and a director and secretary of MVAA Legal Pty Ltd, and both businesses appear to be controlled by the same parent company.
The evidence about the ‘free’ hire car
66. Mr Mario Lazaro, a claims consultant for Suncorp Insurance, gave evidence. Suncorp Insurance is Mr Ogorman’s insurer. Mr Lazaro worked for the ‘motor third party team’ who would contact third parties who had motor vehicle collisions with customers of Suncorp or the related AAMI or APIA insurance companies.
67. Mr Lazaro and his team would offer repairs and hire cars to third parties to ‘minimise their inconvenience’.
68. Mr Lazaro said that if a third party accepted the offer of a hire car, they would book a hire car through Hertz. He said the Suncorp system was linked to the Hertz booking system. If a third party accepted the offer of a hire car, his team would book a hire car for the time that the repairs were expected to take, usually starting at two or three weeks, and they would extend the hire period for as long as needed. If a third party returned a hire car early, then Hertz would only invoice the insurer to the date the car was returned.
69. Under this arrangement, a third party would collect the car from a Hertz location after paying a $200.00 refundable security bond. Hertz vehicles would not be delivered to a third party’s location. A $385.00 insurance excess applied in the event of a collision.
70. Mr Lazaro said that if Mr Fato had accepted the offer of the ‘free’ hire car then his team would have made the necessary arrangements.
71. Mr Lazaro referred to an internal document that showed that Hertz would hire a small SUV, such as a Nissan Qashqui or similar, to a third party for up to 21 days at $40.48 per day, inclusive of GST. This daily rate was all inclusive and there were no other fees or charges beyond the refundable bond.
72. Mr Fato and Mr Arora agreed that a Nissan Qashqui was in the same class as the MG ZS Crossover SUV hired to Mr Fato by OurCar.
73. Mr Lazaro agreed that the $40.48 daily rate available through Hertz applied to a small SUV, not a larger ute equivalent to Mr Fato’s Hilux. Mr Lazaro said that his team could have sourced a ute through Hertz if required. Nothing turns on the market rate for a ute given Mr Fato’s claim is for the cost of hiring a small SUV.
The evidence about the cost and convenience of the OurCar hire car compared with a ‘mainstream’ hire car
74. Mr Arora explained the hire car fees in the OurCar tax invoice were as follows:
Rental fee: $180.00 per day
Insurance excess reduction: $35.00 per day
Registration recovery fee: $8.00 per day
Admin fee: $49.00
Delivery fee: $75.00
Pickup fee: $75.00
75. Mr Arora said the OurCar insurance excess reduction fee reduced the excess from $5,000.00 to $800.00. He agreed that the insurance excess fees charged by mainstream hire companies were in the range of $35.00 to $45.00 per day.
76. Mr Arora said that the OurCar rates were fixed in 2020 and had not changed since, regardless of market fluctuations.
77. Mr Arora said that, until recently, OurCar kept a database of mainstream hire car rates to refer to if the OurCar rates were ever queried. Mr Fato tendered a bundle of eleven such rates for hire of a small SUV. Mr Arora said these rates included insurance excess reduction charges. He agreed that all these rates, except for one, were between $152.00 and $211.00 per day, which was less than the combined daily rate of $223.00 charged by Our Car (not including the fixed administrative, delivery and pickup fees). The only comparative rate that was above the OurCar daily rates was a Europcar rate of $308.25 per day.
78. Mr Arora acknowledged that the comparative mainstream rates, except for the Europcar vehicle, were obtained for cars available at the Tullamarine Airport and that hire cars collected from the airport attract a ‘premium location fee’ of around 30 per cent of the standard rate. The Europcar vehicle was available from Moorabbin. Mr Fato lived in Dandenong and Allied Collision Specialists were in Tullamarine, although not at the airport.
79. Most of the comparative rates tendered through Mr Arora did not include the name of the mainstream hire car company, and some did not include the date of potential hire. None of the documents included the terms and conditions of hire.
80. Mr Arora agreed that a range of comparative rates obtained under subpoena by Mr Ogorman from Hertz were also likely to be lower than the OurCar rates charged to Mr Fato.
81. Based on the evidence of Mr Arora and Mr Lazaro, I am satisfied that Mr Fato could have hired an equivalent vehicle at a lower rate than that charged by OurCar. This would have involved some inconvenience to Mr Fato as, unlike the OurCar vehicle, it would not have been delivered to Allied Collision Specialists and he would not be required to pay a refundable security bond.
Discussion and findings – physical inconvenience and loss of amenity of use
82. I am satisfied that, because of Mr Ogorman’s negligence, Mr Fato experienced the physical inconvenience and loss of amenity of use of his father’s Hilux while it was being repaired. During this time, he was without a car that he needed to get to work and carry his tools.
83. The High Court in Arsalan v Rixon, Nguyen v Cassim[1] unanimously held:
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
[1]Arsalan v Rixon, Nguyen v Cassim [2021] HCA 40, paragraph 34
84. There was nothing exceptional about Mr Fato’s case. He continued to work while his Hilux was being repaired and did not have a suitable replacement. Mr Fato needed a car big enough to carry his work tools and these did not fit in his Mustang. His mother also used the Mustang to care for her own mother. In my view, the physical inconvenience of being without the Hilux and loss of amenity of its use justified Mr Fato hiring a replacement vehicle.
Discussion and findings – Mr Fato’s instructions to start legal proceedings
85. Mr Fato’s evidence was that he was not aware that he had instructed lawyers to act, at least not before his initial and amended complaints were filed.
86. This is despite Mr Fato acknowledging that he first signed a ‘motor vehicle claim’ form. This form included his authority for Express & Co Lawyers to act on his behalf to recover the costs associated with his motor vehicle collision. Given Mr Fato’s evidence was that he left everything in the hands of Allied Collision Specialists, it follows that Allied Collision Specialists gave him this form. There was no evidence about what Mr Fato was told about this form, if anything.
87. The signed motor vehicle claim form seems to have triggered Express & Co Lawyers to send Mr Fato an electronic letter of engagement, a welcome pack and ‘retainer and authority to act’. Counsel for Mr Fato relied on an audit trail from the ‘HelloSign’ software to demonstrate that these documents were sent to him. Nonetheless, Mr Fato had no records of receiving this email.
88. Counsel for Mr Fato contended that Mr Fato had properly instructed Express & Co lawyers based on the initial ‘motor vehicle claim’ form and his electronic acceptance of their terms of engagement. This electronic acceptance also appears to have generated Mr Fato’s signature on the Overarching Obligations Certificate that was filed with Mr Fato’s initial complaint.
89. I am not satisfied that at the time the initial complaint was filed, Mr Fato was aware that legal proceedings had been started on his behalf. It is also clear that he had not read, had explained, or understood the overarching obligations and paramount duty set out in Part 2.3 of the Civil Procedure Act 2010 (CPA). I make this finding despite it being unclear on the evidence whether Mr Fato used the ‘HelloSign’ software to sign the overarching obligations Certificate. While the audit trial suggested he did sign electronically, Mr Fato only had a ‘vague memory’ of this and was not able to find any email records to confirm it.
90. To be satisfied that Mr Fato’s lawyers had acted without instructions, including by starting this proceeding and filing an Overarching Obligations Certificate in circumstances where Mr Fato had not read, had explained, or understood the overarching obligations or paramount duty, the Court must make findings of fact on the balance of probabilities.
91. Section 140(2) of the Evidence Act 2008 provides that the Court, in a civil proceeding, in deciding whether it is satisfied that the case has been proved on the balance of probabilities, is to consider:
(a) the nature of the cause of action or defence; and
(b) the nature of the subject-matter of the proceeding; and
(c) the gravity of the matters alleged.
92. This provision reflects the principle expressed by Dixon J in Briginshaw v Briginshaw[2] that:
…reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony or indirect inferences.
[2]Briginshaw v Briginshaw (1938) 60 CLR 336, paragraph 362
While Mr Fato was clear throughout his evidence that he knew nothing about having engaged lawyers until at least after an amended complaint was filed, nonetheless he agreed his signature was on the initial ‘motor vehicle claim’ form that included an authority for Express & Co Lawyers to act.
Mr Fato was also surprised to see an electronic rendition of his signature on the Overarching Obligations Certificate, although when pressed had a ‘vague memory’ of being sent legal documents by email despite not finding any such records in his account.
While the amount of money in dispute in this case is modest, the allegation that Mr Fato’s lawyers acted without proper instructions is a significant one.
Mr Fato had no idea that he was authorising potential legal proceedings when he signed the ‘motor vehicle claim’ form or his father signed the OurCar rental agreement. These proceedings were started in reliance on Mr Fato’s written authority alone. It is not the case that the proceedings started after Mr Fato was given legal advice and provided proper verbal instructions.
Express & Co Lawyers’ business practices leave a lot to be desired. Their use of emails and the ‘HelloSign’ software to formalise Mr Fato’s instructions to act and to obtain his signature on the overarching obligations Certificate without having spoken to him, let alone met with him, appears to be unprofessional at best and a possible breach of their ethical obligations as legal practitioners at worst.
Discussion and findings – whether Mr Fato’s lawyers had a conflict of interest
It appears that Mr Fato’s law firm was closely connected to OurCar. For example, they were owned by the same parent company. Mr Ogorman alleged that those with interests in the parent company stood to benefit from Mr Fato hiring an OurCar vehicle.
Mr Ogorman submitted that these mutual interests meant that Mr Fato’s lawyers had a conflict of interest. Mr Ogorman further submitted that it was due to this conflict of interest that Mr Fato’s lawyers did not tell him about the offer of a ‘free’ hire car.
Again, while the amount of money in dispute in this case is modest, the allegation that Mr Fato’s lawyers acted where there was a conflict between Mr Fato’s best interests and their own interests is a significant one.
To be satisfied that Mr Fato’s lawyers had an undeclared conflict of interest, I must again consider the matters in section 140(2) of the Evidence Act and apply the Briginshaw principle.
Beyond the evidence of Mr Arora and the evidence of various government records, I did not hear comprehensive evidence about the alleged conflict from, for example, representatives of VS Associates, or from either Mr Arapis, the principal lawyer of MVAA Lawyers / Express & Co Lawyers or Mr Sudiro, the lawyer from Express & Co Lawyers. The evidence about the alleged conflict was somewhat lacking, for example, it was unclear who in particular was benefiting from Mr Fato hiring the vehicle from OurCar.
Nonetheless, I am satisfied on the evidence of Mr Arora that those with interests in Mr Fato’s law firm also stood to benefit from Mr Fato hiring an OurCar vehicle. It would appear, on this basis, that Mr Fato’s lawyers had a conflict of interest. Mr Fato said he was not made aware of his law firm’s relationship with OurCar and there was no evidence to the contrary.
Discussion and findings – not telling Mr Fato about the offer of a ‘free’ hire car
Mr Fato’s lawyers failed to act in Mr Fato’s best interest by not telling him that Mr Ogorman’s insurer had offered him the use of a ‘free’ hire car, particularly as this offer was made before Mr Fato hired the car through OurCar.
There was no evidence as to why this was not passed onto Mr Fato. It is open to me to infer that it was due to Mr Fato’s lawyers having a conflict of interest.
Discussion and analysis – Mr Fato’s lawyer being misleading or deceptive about the hire car
On 2 September 2021, prior to Mr Fato entering the hire agreement with OurCar on 7 September 2021, his lawyer told Mr Ogorman’s lawyer that ‘our client has engaged their own hire car provider’. This was not accurate. While Mr Fato spoke to Allied Collision Specialists about a hire car and they may have contacted OurCar, it was not accurate for Mr Fato’s lawyer to suggest that OurCar had been ‘engaged’ by Mr Fato.
When pressed for details about Mr Fato’s engagement of a hire car provider, on 7 September 2021 Mr Fato’s lawyer obfuscated to maintain he was ‘seeking instructions’. This was also not accurate given Mr Fato’s evidence that his lawyer had not sought such instructions.
While Mr Fato collected the OurCar vehicle on 7 September 2021, it was only on 10 September 2021 that the Mr Fato’s lawyer told Mr Ogorman’s lawyer that Mr Fato had ‘engaged a hire car provider of their choice in the first week of September’. While technically accurate, in that the agreement with OurCar was made on the last day of the first week of September, this disclosure was made well after Mr Fato’s lawyer should have made it.
For these reasons, it appears that the conduct by Mr Fato’s lawyer may have been misleading or deceptive. This is relevant to the question of whether Mr Fato acted reasonably.
Discussion and findings – was this an unconscionable scheme?
Mr Ogorman submitted that the relationship between Mr Fato’s lawyers and OurCar resulted in Mr Fato entering into a hire agreement that was well above the market price and not in his best interests. Mr Ogorman also submitted that Mr Fato’s lawyers and OurCar used systems and processes to enable them to act on his behalf and pursue litigation to recover the hire car costs without his knowledge or informed consent.
Mr Ogorman urged me to consider the judgement in Bolitho v Banksia Securities Ltd (no 18)(remitter) (Bolitho remitter).[3] In that ruling, Justice Dixon found that a litigation funder and five lawyers had engaged in ‘egregious conduct that betrayed the solemn trust fundamental to the civil justice system’.[4] This conduct occurred in connection with a fraudulent scheme set up to claim more than $19 million in purported legal costs and funding commission from the settlement sum in a group proceeding.
[3]Bolitho v Banksia Securities Ltd (no 18)(remitter) [2021] VSC 666
[4] Ibid, paragraph 2122
Justice Dixon made various orders against the contraveners, including payment of $11.7 million in damages, costs of the remitter on an indemnity basis, that two of the lawyers are removed from the legal practice roll, that two other lawyers show cause as to whether they are fit and proper to remain on the roll, and that the case is referred to the Director of Public Prosecutions.
Mr Ogorman submitted that the current case was analogous to the Bolitho remitter, despite involving a relatively small amount of money and a far less sophisticated scheme. The scheme that was the subject of the Bolitho remitter involved lawyers controlling litigation with gross disregard to the interests of their clients. Mr Ogorman argued that Mr Fato’s lawyers had similarly pushed him to a hire car entity controlled by them for their own benefit, then started costs recovery proceedings without his knowledge, also for their own benefit.
Mr Fato submitted that the judgement in the Bolitho remitter was handed down after a significant and rigorous investigative process and that similar findings were not warranted in the context of this hearing where the evidence was incomplete and not closely scrutinised or vigorously tested.
While the evidence in this case proceeded over about four hours across two days, as opposed to the many months of evidence in the Bolitho remitter, both parties were represented by competent counsel and the evidence of each witness was appropriately tested. At the outset of the hearing, counsel for Mr Ogorman put counsel for Mr Fato on notice that he would submit that Mr Fato’s lawyers had a conflict of interest given the corporate arrangements between OurCar and Mr Fato’s lawyers. Despite this notice, counsel for Mr Fato did not call or tender evidence to rebut this allegation.
In my view, the arrangements between OurCar and Mr Fato’s lawyers are designed to steer not at fault drivers into court proceedings, that they may not properly understand, to seek to recover collision hire car costs that are well above the market rate.
Finding – whether Mr Fato acted reasonably to minimise his loss
Justice Bell in Fallon v Johnston[5] adopted the following ‘Portbury’[6] principles relating to mitigation of damage:
(a)There is in fact no duty to mitigate loss – rather, damages are reduced to the extent that the plaintiff has not acted reasonably;
(b)The onus of proof is on the defendant to show that the plaintiff has not acted reasonably in minimising loss arising from the defendant’s breach of contract;
(c)The defendant must prove the extent of the plaintiff’s failure to minimise loss, ie, the amount of the plaintiff’s loss that was occasioned by the plaintiff’s failure to act reasonably;
(d)A high standard of conduct is not required of the plaintiff, because the defendant is a wrongdoer; and
(e)A plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct, so long as it was reasonable for the plaintiff to act in the way that he did.
[5]Fallon v Johnston [2018] VSC 273, paragraph 21
[6] Justice Bell cited Garde J in Portbury Development Company Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57 at 158.
In assessing whether Mr Fato failed to act reasonably, I take into account the conduct of the lawyers who purported to act on his behalf. These lawyers did not tell Mr Fato about the ‘free’ hire car in circumstances where it was their professional obligation to do so. The expectations on a plaintiff to act reasonably must extend to their lawyers who act on their behalf. The fact that Mr Fato’s lawyers did not tell him about the ‘free’ hire car bears on my assessment of whether Mr Fato has acted reasonably.
I am satisfied that Mr Fato failed to act reasonably by refusing the offer of a ‘free’ car by Mr Ogorman’s insurer. The conduct of Mr Fato’s lawyers fell well short of their professional obligations as already discussed. In these circumstances, I am satisfied Mr Fato has not acted reasonably.
While a high standard of conduct is not required of Mr Fato, if the offer of a ‘free’ hire car had been passed onto him, it is my view that a reasonable plaintiff would have accepted that offer. It is not too much to expect Mr Fato to collect such a car from a Hertz location and pay a $200.00 security bond. Mr Fato was working, living with his parents and I heard no evidence that Mr Fato did not have $200.00 available or funds to pay for a taxi or Uber between the repairer and a Hertz location.
Mr Fato’s father swapped the Hilux with the OurCar hire car at Allied Collision Specialists. This was a convenient arrangement. If Mr Fato had instead accepted the ‘free’ hire car from Mr Fato’s insurer, he would have had to collect it from a Hertz location. This would involve some inconvenience, in addition to the payment of the security bond. In considering the question of reasonableness, I have weighed the additional inconvenience against the cost of the OurCar hire car relative to the market rate.
If the OurCar hire rate was at or close to the market rate, then it may not be reasonable to expect Mr Fato, who was not the wrongdoer, to go through the inconvenience of collecting a vehicle from a Hertz location and paying a security bond. But this was not the case. The OurCar rates were significantly above the market rate.
The rate for the OurCar hire car was $223.00 (excluding the fixed delivery and pickup charges) per day whereas the equivalent Hertz hire car would have been $40.48 per day. The OurCar daily rate charged to Mr Fato was around five and a half times more than the Hertz daily rate available to Mr Ogorman’s insurer.
There was also a significant difference between the OurCar rate and the rates available from mainstream hire car companies as tendered by Mr Fato. In closing submissions, counsel for Mr Fato conceded that the market rate for an equivalent vehicle from a mainstream provider was $116.00 per day (inclusive of registration recovery and administrative fees). Once insurance excess reduction of $38.50 per day was added, this came to a total daily rate of $154.50.
The OurCar daily rate of $223.00 was $68.50 higher than the daily market rate (including insurance excess reduction) conceded by Mr Fato’s counsel. Put another way, the OurCar daily rate charged to Mr Fato was 45 per cent higher than the market rate conceded by his counsel.
Given the vast differences between the Hertz rate, the market rate conceded by Mr Fato’s counsel and the OurCar rate, I consider the OurCar charges to be exorbitant.
Given the exorbitant additional cost of the OurCar hire car relative to the conceded market rate and the Hertz rate, it is reasonable to expect that Mr Fato would have accepted the additional inconvenience of collecting a ‘free’ Hertz hire car and paying a refundable security bond rather than being delivered an OurCar vehicle.
Finding – to what extent did Mr Fato fail to minimise his loss
In applying the third ‘Portbury’ principle, it is for Mr Ogorman to prove the extent of Mr Fato’s failure to minimise loss, that is, the amount of Mr Fato’s loss that was occasioned by his failure to accept the ‘free’ hire car.
If Mr Fato had accepted the ‘free’ hire car, the cost of $40.48 per day would have been borne by Mr Ogorman’s insurer. While Mr Lazaro said ‘free’ hire cars were to ‘minimise the inconvenience’ of third parties, the insurer may also have been aiming to avoid the more expensive hire rates charged by collision hire companies such as OurCar.
It is immaterial that the hire vehicle was a small SUV rather than a ute. Mr Fato accepted a small SUV from OurCar which was adequate for his needs.
The judgement of the New South Wales Court of Appeal in Anthanasopoulos v Moseley[7] is authority for the proposition that a plaintiff in Mr Fato’s position, who has been provided a ‘free’ replacement car by their own insurer, can recover damages ‘measured by reference to the market rate of hiring the replacement’.[8].
[7]Anthanasopoulos v Moseley [2001] NSWCA 226, 52 NSWLR 262
[8] Ibid, paragraph 84, per Ipp AJA, with whom Beazley JA and Handley JA agreed.
Beazley JA in Anthanasopoulos added that, in this context:
‘it is irrelevant if a third party provides a substitute for the thing damaged and the principle res inter alios acta applies so as to make it irrelevant as to the basis upon which the third party provides the replacement’.[9]
[9]Ibid, paragraph 58, per Beazley JA.
It follows that it does not matter that, in Mr Fato’s case, the offer of a ‘free’ hire car came from Mr Ogorman’s insurer, not his own. What is relevant is that the offer came from a third party. Accordingly, Mr Fato is entitled to damages with reference to the market rate.
While counsel for Mr Fato conceded that that the daily market rate from a mainstream provider was $154.50 per day, in my view the measure of damages should be the lowest available reasonable rate from a mainstream supplier. In this regard, I refer to the decision of the English Court of Appeal in Stevens v Equity Syndicate Management Ltd.[10]
[10]Stevens v Equity Syndicate Management Ltd [2015] EWCA Civ 93, [2015] 4 All ER 458
A vehicle equivalent to that which was accepted by Mr Fato was available, via Mr Ogorman’s insurer, from Hertz, a mainstream supplier, at a rate of $40.48 per day. In my view, this is rate against which Mr Fato’s damages should be calculated. This amounts to $647.68 over 16 days.
Mr Fato is also entitled to damages for the inconvenience and expense of travelling between Allied Collision Specialists and a Hertz location to collect and drop off the ‘free’ hire car, had he accepted it.
I heard no evidence about whether Mr Fato would have asked others to give him a lift, or paid for a taxi or Uber. I also heard no evidence about the distance between the two locations. Nonetheless, I consider the OurCar delivery and collection fees of $75.00 each to be an appropriate amount of compensation and accordingly make a total award of $150.00 in this regard.
Accordingly, Mr Ogorman is ordered to pay Mr Fato a total of $797.68 for the physical inconvenience and loss of amenity of use of his Hilux while it was being repaired.
Mr Ogorman is also ordered to pay Mr Fato $4,941.44, being the agreed reasonable cost of repairs to the Hilux and the independent assessment report.
Order on the claim
Mr Ogorman is ordered to pay Mr Fato a total of $5,739.12. I will hear from the parties about any claim for interest and request for a stay.
The obligations of the parties and their lawyers under the Civil Procedure Act
I have discussed matters that raise the possibility that Mr Fato’s lawyers (excluding counsel) may have contravened their overarching obligations under the CPA.
I am concerned that Mr Fato’s lawyers may have contravened their obligations to act honestly at all times in relation to a civil proceeding, to cooperate in the conduct of a civil proceeding and to not mislead or deceive. I am also concerned that Mr Fato’s lawyers may have failed to comply with their professional obligations to act in their client’s best interests.
Section 28 of the CPA allows a court to take into account any contravention of the overarching obligations in exercising its discretion as to costs. Section 29 of the CPA enables the Court to make any order it considers appropriate in the interests of justice if satisfied that, on the balance of probabilities, a person has contravened any overarching obligation. Such orders can include an order that the person pay some or all the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation.
The parties have not had an opportunity to address me about the apparent contravention of overarching obligations and their potential impact on any costs order. Once the parties have read these reasons, they have liberty to apply for costs and make submissions.
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