Harb v Marchbank

Anwar Harb v John Marchbank [2011] NSWLC 9
Decision Date: 24/03/2011
Before: Assessor Olischlager
Decision: Verdict and Judgment for the Plaintiff in the sum of $4,441.80. No order as to costs.
Catchwords: CIVIL – motor vehicle negligence, DAMAGES – assessment – loss of use of vehicle – pre judgment interest, COSTS – litigation funded by third party
Legislation Cited: Civil Procedure Act 2005, s100
Cases Cited: Anthanasopolous v Moseley [2001] NSWCA 266, British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co Ltd [1912] AC 673, Chong v Berry [2007] NSWLC 33
Dimond v Lovell [2002] 1 AC 384, H.L. Motorworks (Willesden) Ltd v Alwahbi [1977] RTR 276, Mersey Docks & Harbour Board v Owners of the SS Marpessa “The Marpessa” [1907] AC 241, Stoke-on-Trent City Council v Wass Limited [1988] 3 All ER 394, Screenco Pty Limited v R L Dew Pty Ltd & Anor [2003] NSWCA 319, Tang v Driden [2010] NSWLC 17, “The Mediana”, Owners of the Steamship v Owners, Master & Crew of the Lightship “Comet” [1900] AC 113, The Owners of No 7 Steam Sand Pump Dredger v The Owners SS “Greta Holme” [1897] AC 596, The Solholt [1983] 1 Lloyd’s Rep 605, Watson Norie Ltd v Shaw (1967) 111 SJ 117, Yates v Mobile Marine Repairs and Anor [2007] NSWSC 1463

Category: Principal judgment
Parties: Anwar Harb (Plaintiff), John Marchbank (Defendant)
Representation: Mr Raffell (Plaintiff), Mr Oliver (Defendant)
File Number(s): 2010/00373186
Publication Restriction: Nil

JUDGMENT

1 Mr Harb is the owner of a 2003 Lexus RX330 motor vehicle. It was damaged as a result of a collision caused by Mr Marchbank on 24 July 2010. These proceedings have been initiated by Mr Harb to recover general damages based on the cost of hire of a replacement vehicle while his vehicle was being repaired and unavailable to him.

2 The defendant accepts that the cost of the hire of a replacement vehicle is compensable and does not take issue with the period of hire of a replacement vehicle. The defendant disputes the quantum claimed for the hire car costs on the basis that the hire rate is unreasonable and excessive.

3 Mr Harb took his damaged vehicle to ESR Prestige smash repairers. He inquired with the smash repairer as to the availability of a replacement vehicle and was advised to contact Compass Corp Pty Ltd (formerly operating under the name 1Car1 Car Rentals). Mr Harb subsequently entered into an agreement with Compass Corp to hire a Lexus RX350. The hire period commenced on 16 August 2010 and ended on 3 September 2010 when his vehicle was returned. At the commencement of the hire period Mr Harb signed a preliminary tax invoice that outlined nominal charges based on15 days hire. The vehicle was ultimately hired for 18 days and a final tax invoice was issued for $8071.80 based on a daily hire rate of $440 per inclusive of GST, a daily insurance fee of $6.60 and a delivery fee of $33.00. On 25 October 2010 the defendant made part payment in the sum of $3630 reducing the amount of the claim to $4,441.80.

4 The right to claim general damages for loss of use of a motor vehicle, which is not used for profit, was confirmed by the Court of Appeal in Anthanasopolous v Moseley [2001] NSWCA 266. In that case the Court of Appeal allowed motor vehicle owners to recover the cost of hire of a substitute vehicle while their vehicle was being repaired. The decision in Anthanasopolous v Moseley applied the line of authority established by The Owners of No 7 Steam Sand Pump Dredger v The Owners SS “Greta Holme” [1897] AC 596 . In that case the House of Lords held that general damages could be awarded for the loss of use of a non profit earning shipping vessel. The right to recover general damages was not contingent upon an actual loss being established. In a following case, “The Mediana”, Owners of the Steamship v Owners, Master & Crew of the Lightship “Comet” [1900] AC 113, the Earl of Halsbury LC stated the principle in the following terms:
“where by the wrongful act of one man something belonging to another is either itself so injured as not to be capable of being used or is taken away so that it cannot be used at all, that of itself is a ground for damages.”

5 Counsel for the defendant asserts that the right to recover damages for loss of use of personal property is dependent upon the plaintiff establishing a need for the use of his vehicle. Although no authority for this proposition was cited, some support for this view may be found in the comments of Ipp AJA in Anthanasopoulos at [80]. However, Palmer J in Yates v Mobile Marine Repairs and Anor [2007] NSWSC 1463 rejected the view that comments made by Ipp AJA introduced a test of “need” as a prerequisite for a claim for loss of use of property. In that case Palmer J was dealing with a claim for loss of use of a boat used exclusively for pleasure. As stated by Palmer J the requirement to show “need” would be inconsistent with the principle stated by the Earl of Halsbury LC in “The Mediana” which was illustrated by the following analogy at 117:
“Supposing a person took away a chair out of my room and kept it for twelve months, could anybody say you had a right to diminish the damages by shewing that I did not usually sit in that chair, or that there were plenty of other chairs in the room? The proposition so nakedly stated appears to me to be absurd.”

6 Having established an entitlement to claim general damages for loss of use of a damaged motor vehicle the Court must consider the basis upon which Mr Harb’s claim for damages should be assessed.

7 An award of general damages for loss of use of non income earning property attempts to place a monetary value for a plaintiff being deprived of the item. The entitlement to damages irrespective of actual pecuniary loss represents a departure from the ordinary principles of compensatory damages in tort. While the Court has a wider discretion in relation to determining general damages as opposed to special damages, the touchstone for assessing damages for loss of use is reasonableness.

8 In Stoke-on-Trent City Council v Wass Limited [1988] 3 All ER 394 Nicholls LJ described the approach for determining damages for loss of use in the following terms [at 402]:
“It is an established principle concerning the assessment of damages that a person who has wrongfully used another’s property without causing the latter any pecuniary loss may still be liable to that other for more than nominal damages. In general, he is liable to pay, as damages, a reasonable sum for the wrongful use he has made of the other’s property [emphasis added]. The law has reached this conclusion by giving to the concept of loss or damage in such a case a wider meaning than merely financial loss calculated by comparing the property owner’s financial position after the wrongdoing with what it would have been had the wrongdoing never occurred.”

9 This approach has been applied in earlier decisions in this Court, for example, in Tang v Driden [2010] NSWLC17 and also by Magistrate Dillon in Chong v Berry [2007] NSWLC 33 at [19].

10 Courts have adopted various methodologies to measure damages for loss of use. Damages have been assessed by calculating interest upon the capital value of the property (see for example Yates v Mobile Marine), or the expenses of maintaining the property together with depreciation (see for example, Mersey Docks & Harbour Board v Owners of the SS Marpessa “The Marpessa” [1907] AC 241) or the cost of the hire of a replacement. In relation to claims for loss of use of a motor vehicle Ipp AJA in Anthanasopoulos v Moseley (2001) 52 NSWLR 262 (at 276-277) said;
“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… but, generally, by reference to the market cost of providing them”.

11 The phrase “by reference to the market cost of providing them” appears to be a straightforward statement of the approach to be taken in assessing damages. However, as demonstrated by these current proceedings and the multitude of similar disputes involving insurance companies acting under subrogation and hire companies that come before this Court, the ability to identify the market cost or rate is problematic.

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. Where a plaintiff obtains a replacement vehicle in other circumstances, it will be necessary for the Court to consider extraneous evidence to ascertain the market cost of providing a replacement vehicle.

13 In Chong v Berry Magistrate Dillon was required to determine the market cost of providing a replacement vehicle. Magistrate Dillon at [49] had regard to the “spot rate” quoted by hirers when determining a market rate. This was consistent with the approach in Dimond v Lovell [2002] 1 AC 384.

14 The nature of the car hire industry is such that there will be a range of different “spot rates” available in the market at any given time. There will be different rates between competitors in relation to similar vehicles and hire companies will often offer different rates for the same vehicle depending upon how the hire is arranged. For example, hire rates offered over the internet may differ from rates available by walking into the hire company office or over the telephone. As noted by this Court in Tang v Driden , the rates for hire vary significant based on a range of factors. These include seasonal demands, the location of the hire, whether the hire is for a short period or a longer period, how far in advance the hire booking is made or whether the hire is for a fixed period or a continuing daily rate.

15 In view of the factors that influence hire car rates this Court considers that it is an artificial process to determine a single market rate. The reality is that there will be a range of market rates available from various hire car companies.

16 The approach then of this Court in determining the market cost of a replacement motor vehicle is as follows. Firstly, the Court will consider whether the cost incurred by the plaintiff represents a market cost for the replacement vehicle. If it is a market cost then that figure will be accepted as a proper basis for assessing loss of use. If it is not, the Court will endeavour to ascertain the range of rates that existed within the hire car market at that time. If the actual cost incurred by the plaintiff falls within that range then it will again be accepted as a proper basis for assessing loss of use. If the actual cost is outside that range then the Court will select a rate that is within the determined range. When selecting a market rate the Court is mindful of the particular circumstances of plaintiffs who are required to arrange for the hire of a motor vehicle to replace their damaged vehicle. They often do so at short notice and with little certainty as to the anticipated period of hire. Accordingly, plaintiffs are less likely to be able to avail themselves of a hire rate that is in the lower range of the available market rates. As a consequence, this Court will often select a rate at the upper range of the accepted market rates to more accurately reflect the reasonable cost to a plaintiff to obtain a replacement vehicle.

17 I return to the present proceedings for the application of this approach. Mr Harb hired a Lexus RX350 on 16 August 2010 through 1Car1. At the time of taking possession of the vehicle he signed a document headed tax invoice. While it is headed tax invoice it is a document which contains the terms and conditions of the hire car arrangement. It provides daily rate of $495 for 15 days. The terms and conditions attached to the invoice include the following provision: “As at the date of this Mandate, the full hire cost, or charges, are unknown because the hire period is estimated (being based on a repairer’s estimate of the length of time the hirer’s own vehicle will be off the road). The total amount may differ when the actual hire period is known.”

18 Counsel for the defendant submits that the signed tax invoice cannot be accepted as a true market rate as when the plaintiff took possession of the vehicle no actual rate had been determined. The actual hire charge was not determined until the conclusion of the hire period. The Court accepts that a transaction of this nature cannot be accepted as evidence of a market rate.

19 It is therefore necessary for the Court to consider what was the range of hire rates that existed in the market at the relevant time. The plaintiff has tendered a statement by Mr Adams, a recoveries officer employed by Compass Corp. Mr Adams has annexed to his statement printouts from the websites of several other hire car companies showing the hire rates offered by those companies for the hire of a vehicle similar to that of the plaintiff. Those printouts are dated 3 August 2010 and include hire rates ranging from $380 per day with Mercedes Benz Rentals, $450 per day with Luxury Car Hire and $460 per day with BMW Rentals (for a BMW X5).

20 The defendant has attached two tax invoices from CityCar Mercedes Benz Rentals dated 19 July 2010 and 6 September 2010. Both invoices show charges determined by a base daily rate of $200 per day.

21 Counsel for the defendant submits that the Court should prefer the defendant’s evidence as to the market rate for the following reason. The tax invoices provided by the defendant are evidence of actual hire rates agreed upon within the market whereas the evidence by the plaintiff from car hire website is evidence only of the rates at which vehicles are offered rather than rates that were accepted and in fact hired.

22 The Court rejects this submission. The rates of hire contained on the websites of hire car companies are not merely an aspirational pricing of the rates of hire. It is not analogous, for example, to the listing of property prices on Domain or the listing of prices for the private sale of motor vehicles on various websites where pricing is no more than an invitation to treat. The rates of hire on the websites of car hire companies represent a fixed offer upon which hirers may, and no doubt do, accept by online communication to give rise to a binding over the internet without further negotiation between the parties.

23 Accordingly, the Court is of the view that evidence establishes a range of market rates at the relevant time that extended from $200 per day up to $460 per day. The agreement entered into between Mr Harb and 1Car1 was that the nominal rate of $495 per day was subject to variation. At the end of the hire period the rate determined by 1Car1 was a daily rate of $400 per day exclusive of GST and ancillary charges. By signing the initial document at the commencement of the hire Mr Harb agreed to accept liability for the charges finally determined by 1Car1. As the adjusted rate of $400 per day for which Mr Harb is liable is within the range of market rates the Court is satisfied that this rate should be accepted as the basis for the assessment of loss of use.

24 The claim for loss of use also includes additional ancillary costs associated with the hire of a replacement vehicle. A daily collision excess waiver fee of $6.60 has been charged to reduce liability for any insurance excess arising from a collision while the plaintiff is in possession of the vehicle. A delivery fee of $33 has also been charged for the collection of the replacement vehicle from the Smash Repairers place of business.

25 In relation to the collision excess waiver fee Magistrate Dillon in Chong v Berry [2007] NSWLC 33 at [143] formed the view that such a fee was compensable as it was “a foreseeable consequence of the defendant’s negligence, it had a close nexus with the need for a replacement vehicle and it was reasonable for Mr Chong to pay it as he was exposed to a material risk.” I agree with those comments although it is not on the basis of the reasonableness of the conduct of the plaintiff that I would allow these charges. This Court allows charges such as insurance fees, administration fees and delivery fees on the basis that they are so inexorably linked to the normal costs of hiring a vehicle that they should not be distinguished from being a component of the market cost of providing a replacement vehicle.

26 Counsel for the defendant has raised alternative submissions that if the rate of hire is found to be a market rate the Court should find that it was a market rate for a choice of a temporary replacement vehicle that, in the circumstances, was not a reasonable temporary substitute. Mr Harb was the owner of a 2003 Lexus RX330. He hired a replacement vehicle which no more than three years old. Counsel for the defendant submits that the hire of a newer model vehicle was unreasonable, that it placed the plaintiff in an improved position and that the Court should discount damages based on what it reasonably assesses for a substantially older vehicle of the same type.

27 A number of authorities were raised in support of this submission.

28 Counsel for the defendant referred to the following comments by Sir John Donaldson MR on the requirement to mitigate loss in The Solholt [1983] 1 Lloyd’s Rep 605 at 608:
“A plaintiff is under no duty to mitigate his loss, despite the habitual use by the lawyers of the phrase ‘duty to mitigate’. He is completely free to act as he judges to be in his best interests. On the other hand, a defendant is not liable for all loss suffered by the plaintiff in consequence of his so acting. A defendant is only liable for such part of the plaintiff’s loss as is properly to be regarded as caused by the defendants’ breach of duty. As Viscount Haldane LC put it [in British Westinghouse Electric and Manufacturing] at 689; The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach, but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.”

29 Under the principle of ‘betterment’ the defendant submitted that the plaintiff was obliged to account for hiring a new model vehicle. In British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co Ltd [1912] AC 673 it was accepted that when assessing damages it will be appropriate to deduct from the costs incurred in seeking to make good the consequences of some particular wrong.

30 The authorities on mitigation of damages and betterment that have been referred to the Court all relate to cases involving compensatory damages for a pecuniary loss. No authority has been has been provided to suggest that principles of mitigation and betterment also have application to claims for general damages for loss of use of property. The Court itself is not aware of any case where these principles have been applied in a claim for general damages for loss of use of non income producing property. The decision in Dimond v Lovell [2002] 1 AC 384 might be advanced as an instance where the Court required the plaintiff to account for benefits which the hirer received over and above the hire of a replacement vehicle, however, the Court in this case approached the claim for hire costs as a claim for special damages.

31 The Court is of the view that mitigation of loss and betterment of position have no application in the present proceedings. These are principles relevant when assessing damages for pecuniary loss where the objective is to determine a monetary amount to restore a plaintiff to the position that the plaintiff would have been had the tort not been committed. These principles are inconsistent with the notion of general damages that are not confined to whatever actual loss might be suffered.

32 Counsel for the defendant further submits that the conduct of the plaintiff in hiring a newer model vehicle was unreasonable. The defendant relies on the United Kingdom decision of Watson Norie Ltd v Shaw (1967) 111 SJ 117. In that matter the plaintiff company provided its managing director with a prestige vehicle, a Jenson, which was damaged in a collision caused by the defendant. The plaintiff hired a replacement, firstly a Rover 100 and subsequently, a Jaguar and brought proceedings to recover 400 pounds for the actual cost of hire. Judge Maddocks awarded an amount of 175 pounds on the basis that the plaintiff could have hired a suitable vehicle for this lesser amount. On appeal Sellers LJ said that the judge considered that the plaintiff company had not acted reasonably to mitigate its damages by failing to inquire what the cost of hiring a Jaguar would be and failing to see if it could hire one elsewhere at a cheaper rate. The Court of Appeal did not dissent from the judge’s finding that the plaintiff had not acted reasonably.

33 While the case of Watson Norie Ltd v Shaw appears to be factually similar to the current proceedings it is again distinguishable on the basis that Courts in the United Kingdom approach car hire cases as a claim for special damages as opposed to general damages. It is a significant distinction that is often lost, particularly when United Kingdom cases are referred to before this Court in claims for loss of use.

34 Even if this Court were to accept that the decision in Watson Norie Ltd v Shaw has relevance to the assessment of general damages for loss of use it would appear that the approach taken by the trial judge in this case does not reflect a consistent convention in the United Kingdom. In the case of H.L. Motorworks (Willesden) Ltd v Alwahbi [1977] RTR 276 the Court allowed the entire cost for the hire of a vehicle of equal quality.

35 The proposition that a plaintiff acting reasonable should hire some cheaper but functionally similar substitute is inconsistent with the way in which damages for loss of use are measured. The Court is attempting to place a value on the loss of use of the plaintiff’s vehicle. The best measure of that is the market cost of hiring a similar model vehicle.

36 The argument put forward by the defendant is that there are circumstances surrounding the hire of the replacement vehicle that mean that the Court should not rely on the rate of hire as a measure of the cost of replacement. That will always be a relevant concern. The issue of whether the replacement vehicle is a proper substitute for the plaintiff’s vehicle is relevant to the Court’s consideration of what is a reasonable amount to award for loss of use of property.

37 If the replacement vehicle hired by the plaintiff is substantially different from the vehicle that is damaged, then the market rate for the hire of the replacement vehicle may not provide an accurate basis for assessing the damages suffered by the plaintiff for the deprivation of his vehicle. By way of example, the Court would not accept the cost of hire of a prestige vehicle as a proper basis for assessing the loss of use of a small economy vehicle.

38 In this instance, however, the Court is satisfied that there is no material difference between the plaintiff’s damaged vehicle and the replacement vehicle. The replacement vehicle is the same make and is a similar model to the plaintiff’s vehicle. There is no evidence that there is any difference between the two vehicles in terms of features or performance. Even if the Court were to accept the maximum age difference on the available evidence, being seven years, it would not warrant the Court reassessing the value of the cost of replacement.

39 Major car hire companies almost exclusively operate car fleets with the latest or very recent model vehicles. A plaintiff who owns an older model vehicle cannot readily hire a similar aged vehicle. In relation to Mr Harb, who owns a seven year old vehicle, the market cost of hiring a replacement vehicle is no different to a plaintiff who is replacing a new vehicle. There is no basis to discount the market rate relative to the age of the vehicle.

40 Accordingly, the Court is satisfied that market cost for Mr Harb to obtain a replacement vehicle was $8,071.80 and damages for loss of use are assessed on that basis. Having regard to the part payment made on 25 October 2010 the court will enter a verdict and judgment in favour of the plaintiff for the balance of $4,441.80.

41 There is a final issue raised by Counsel on behalf of the plaintiff. In addition to damages of loss of use, the plaintiff claims pre judgment interest under section 100 of the Civil Procedure Act 2005 from 6 September 2010 until the date of judgment. In previous cases involving damages for loss of use of a motor vehicle this Court declined to award costs where the hire of the replacement vehicle was provided on credit and the plaintiff was not out of pocket for the cost of the hire.

42 The plaintiff has pressed the claim for interest based on the decision in Screenco Pty Limited v R L Dew Pty Ltd & Anor [2003] NSWCA 319. Counsel for the plaintiff asserts that interest should be available not only where a plaintiff is out of pocket but also where the plaintiff has incurred a liability in respect to the loss.

43 An award of pre judgment interest is compensatory in nature. It compensates a plaintiff who is deprived of moneys to which he or she is entitled. The Court accepts that the Screenco decision is also authority that interest is allowable where a plaintiff is under a liability that has yet to be met. In the present case, however, the Court is not satisfied that Mr Harb is under any present liability. The agreement between Mr Harb and Compass Corp Ltd provides:
“The hirer agrees to pay interest on any outstanding hire fees at the rate of ten per cent per annum in monthly rests. Subject to the terms & conditions contained on the front and reverse hereof of which the hirer(s) acknowledges that they are aware, the hirer agrees to rent the above vehicle and elects to pay all amounts payable under this agreement by the method of payment of which details are given on this document including extensions of rental”

44 The mandate and authority to act document that is signed in conjunction with the agreement provides that 1Car1 will provide the hire of the vehicle to the hirer on credit for a period of up to 180 days from the date of the mandate. The declaration and authority signed by the hirer provides:
“All accounts are payable within 30 days of issue of invoice. In the event that accounts are not met in full within that 30 days then interest will be charged on all such accounts at the rate of 10% per month or part month that they remain outstanding”.

45 The hire agreement operates subject to the mandate and authority. Once the mandate and authority is signed and the credit arrangement in place there is no moneys outstanding which might attract interest. Liability then only arises when, and if, Compass Corp issues a tax invoice as referred to in the declaration and authority after the 180 day credit period. Although there is a tax invoice issued in the name of Mr Harb dated 6 September 2010 there was no obligation upon him to pay upon that invoice given that it was issued within the 180 day credit period. Liability could have only arisen if an invoice was issued to Mr Harb after that period. This did not occur and therefore there was no liability. Under the arrangement between Compass Corp and Mr Harb no interest accrues on the hire costs until 30 days elapses from the issue of a tax invoice. As no tax invoice has issued after the 180 day period no liability to pay has crystallised. Accordingly, the Court will not allow interest under section 100.

46 The Court has sought submissions from the parties in relation to the issue of costs. One issue that is apparent on the evidence is that the mandate and authority signed by the plaintiff authorises Compass Corp to take action in relation to recovering the hire charges. That action includes the possibility of legal action. The authority signed by the plaintiff passes exclusive power to Compass Corp to manage any litigation including the appointment of legal representatives. The plaintiff is required by the authority to give such assistance as is necessary in relation to that litigation.

47 The plaintiff enters into no cost agreement, makes no financial contribution to the litigation nor is he under any liability within the terms of the mandate and authority to pay the costs of the litigation. The arrangement is distinct from rights of subrogation as those rights arise only by reason of the contract of insurance. The arrangement between the plaintiff and Compass Corp could be characterised as a litigation funding arrangement. While there may be a lack of legal certainty regarding the status of litigation funding arrangements in general civil litigation, I do not regard the arrangement as contrary to any legal principle.

48 It does, however, raise a question as to how the Court should exercise its discretion on costs. These are proceedings that are brought in the name of the plaintiff, Mr Harb, not Compass Corp. When Courts make orders for costs arising from litigation they do so in favour of the parties to the proceedings to compensate them for the legal costs that they incur. In the present case the plaintiff suffers no loss. One of the benefits of hiring a vehicle with Compass Corp would appear to be that the plaintiff is relieved of the stress and financial pressure of bringing legal proceedings. As the plaintiff incurs no costs in the proceedings there is no basis upon which this Court should allow costs.

49 Accordingly, the Court makes no order as to costs. The Court will enter a verdict and judgment for the plaintiff.

S Olischlager
Local Court Assessor