Loss of Luxury Update: High Court Clarifies Where Compensation Should Be Extended To For Hiring Replacement Vehicles

The High Court has delivered judgment on the foreshadowed appeals we previously discussed here. This concludes the journey of determining the liability for costs of replacement vehicles.

The decision

Unsurprisingly, the High Court unanimously found an entitlement to the reasonable costs incurred in hiring a substitute vehicle that is 'broadly equivalent' to a damaged vehicle to be put in the same position, but for the negligence of the other party (as inferred from the ownership and past usage of the vehicle).

The reasoning

In previous determinations, the concept of 'loss of use' was broadly used to evaluate 'reasonableness'. However, the High Court preferred to not engage 'loss of use' as a head of damage, stating that simply considering the 'use' lost does not encapsulate the 'manner or extent' of the loss. And instead, damages should be evaluated through the identification of other consequential loss or losses suffered.

The High Court defined the correct heads of damage as 'physical inconvenience' and 'loss of amenity'. This has some consequence to onus and existence of loss. For example, there is no compensable loss if the owner in the period of repair was: 

• abroad
• hospitalised; or
• if the damaged vehicle could have been replaced from idle stock within a fleet of vehicles.  

On the other hand, the requirement to prove a 'need' for a replacement vehicle was decisively removed. The 'need' requirement was a key concentration in the Courts below, where it was considered only reasonable for damages equivalent to the cost of hiring a vehicle that could simply fulfil the basic functions (for example, a Toyota Corolla). The High Court found an entitlement to "the loss of the availability of the vehicle for the suite of purposes or uses for which it was likely to be put during the repair period "… [including] domestic, household, and family purposes… [and] deprivation of the use of their prestige cars, including their enjoyment of the safety features, pleasurable functions, and other specifications of those cars" [40].

The High Court stated that the idea of 'need' should be recalibrated to 'physical inconvenience' and 'loss of amenity', with the onus on the defendant to establish that the mitigation steps were unreasonable. For example, the duration of hire, the amount of the hire charge (industry range, etc), or the broad comparable/equivalence of the vehicle hired.