Are credit hire charges incurred by car accident victims while their vehicles are being repaired recoverable in full from negligent drivers and their insurers?
That was a question identified but left unanswered in Arsalan v Rixon (2021) 274 CLR 606, in which the High Court otherwise decided that plaintiffs will usually be able to recover from negligent defendants the reasonable costs incurred in hiring, for the period of repair, a substitute vehicle that is broadly equivalent to their damaged car.
However, that issue — whether the heads of loss of physical inconvenience and of amenity of use extend to credit hire charges additional to the reasonable costs of hiring a car — was central to the Court of Appeal’s decision in Miller v McKnight [No 2] [2025] WASCA 61.
In allowing the appeal, the Court set out:
- Amounts the respondent, who was not impecunious, incurred above the reasonable cost of hiring a replacement car from an ordinary car hire company were not recoverable consequential losses.
- That was because, firstly, those additional costs were incurred for benefits that the respondent was not in the circumstances justified in receiving in mitigation of her loss, and so were to that extent unreasonably incurred.
- And secondly, because the appellant would in any event have been entitled to an allowance for those additional benefits gained by the respondent as a consequence of her contracting with the credit hire company, so that the compensation due to the respondent should have been reduced by the amount of the benefits.
- Where determining the precise amount charged by the credit hire company for those additional benefits would have required detailed disclosure and analysis of its financial model, the value was instead properly estimated by comparing the rate of the credit hire charge with the median rate charged to hire cars of the same kind by mainstream car hire companies in the relevant area. The difference between those rates represented the value of those additional benefits.
That result may well have an immediate effect on the business model of credit hire companies, and on the practical ability of many car accident victims to hire — and not have to pay the costs of hiring — cars while their vehicles are being repaired.
How did a claim for less than $2,000 make it this far?
In 2019, the appellant ran into the respondent’s car. There was no issue that the appellant’s negligence caused the crash.
But, while the respondent’s car was being repaired, she hired a replacement car through a credit hire business — Compass — that a tow-truck driver had recommended.
Compass didn’t just rent out cars at a daily rate. It provided to no-fault victims of accidents a car plus a range of benefits and services, and endeavoured to recover its price directly from the negligent driver’s insurer.
That price was quite a bit higher than the daily rental fees charged by ordinary car hire companies.
The appellant’s insurer decided to pay to Compass only what it considered would have been a reasonable price to pay for ordinary car hire.
Compass, through the respondent, brought proceedings to recover the $1,930 balance of its fees.
At first instance, the Magistrate dismissed the claim for that additional amount. That was reversed on appeal to the District Court, so that, in effect, Compass would have been allowed to recover all its charges.
The next contest, in the Court of Appeal, turned on one ground — whether the primary appeal judge erred by applying the wrong legal principle in determining that the respondent was entitled to recover the whole of Compass’ charges, including the credit hire charges.
Despite the small claim, that was a matter of general importance to Compass and to the appellant’s insurer, who fought the proceedings on her behalf.
What will be recoverable out of credit hire charges, and how can the amount be proved?
The Court of Appeal was unanimous in reinstating the Magistrate’s decision, holding that the amounts the respondent incurred above the reasonable cost of hiring a replacement car were not recoverable.
The Court would have reached that conclusion on either of two bases.
The first focused on the reasonableness of the respondent entering the rental agreement with Compass in attempting to reduce her consequential loss.
Where the respondent’s relevant consequential loss was the loss of physical convenience and amenity from the availability and use of her car while it was being repaired, avoiding that loss would ordinarily involve acquiring a replacement car. It would not ordinarily involve acquiring additional benefits at an extra cost.
While the cars hired by the respondent were broadly equivalent to her car, Compass’ charges substantially exceeded the amount that would have been payable to mainstream car hire companies for cars of the same kind.
The proper inference to be drawn from that fact was that Compass’ total charges included amounts for benefits additional to simply providing the respondent with a car.
There was nothing about the circumstances, including the respondent’s personal circumstances, that justified her receiving those additional benefits at a further cost in mitigation of her loss.
Accordingly, by hiring a car through Compass, the respondent’s conduct in mitigation was unreasonable to the extent it incurred costs additional to the reasonable costs of hiring a broadly equivalent car from an ordinary car hire company.
The second basis on which the appeal would, in any event, have been allowed turned on the appellant’s entitlement to an allowance for any benefit, additional to the acquisition of a replacement car, which the respondent gained from entering the rental agreements with Compass.
That issue arose because where an injured party takes action to mitigate their loss and in so doing secures a benefit, the defendant is generally entitled to an allowance for that benefit as a deduction from the amount of compensation they are obliged to pay.
The hire agreements entered by the respondent included various benefits that the respondent received in addition to the use of a hire car —
- the provision of the hire car on credit, and of a premium roadside assistance package.
- Compass acting on the respondent’s behalf in dealing with repairers, and in bringing proceedings against the appellant and meeting the respondent’s related out-of-pocket expenses.
The appellant bore the onus of establishing the value of those benefits to the respondent.
The Court found that in the absence of evidence about whether the respondent already had a roadside assistance package, and whether it applied to the hire car, the appellant had not established that the premium roadside assistance package was in fact a benefit for which the appellant was entitled to an allowance.
However, the Court concluded that providing a hire car on credit conferred a benefit on the respondent, in that it was unnecessary for her to outlay any money to hire the car. That was the case where there was no evidence the respondent was unable to pay to hire a car without making sacrifices she could not reasonably be expected to make. That is, because of her impecuniosity.
Compass’ agreement to act on the respondent’s behalf in liaising with the repairer, and in bringing legal proceedings also conferred benefits on the respondent. That alleviated the necessity for the respondent to deal with those issues, or to engage other people to do so.
Those benefits arose out of the respondent’s actions in attempting to reduce her loss caused by the appellant’s negligence. The benefits were not independent of, collateral to or disconnected from the respondent’s action in attempting to mitigate. They arose out of a single transaction.
The value of those benefits was therefore to be brought to account in determining the amount of damages due to the respondent.
While the car hire agreements did not differentiate between the amounts attributable to the car hire and the additional benefits, and no attempt was made at trial to do so by requiring detailed disclosure from Compass of financial and related details of its business model, the alternative approach of putting before the Court evidence as to the rates charged by mainstream car rental companies for the hire of broadly equivalent cars allowed a reasonable and appropriate estimate of the value of the relevant benefits to be made.
That is, the respondent’s entitlement to compensation for consequential loss should have been reduced by the difference between the total charges payable by the respondent to Compass (after deducting the cost of roadside assistance package), and the cost that the respondent would have incurred in hiring a car of the same kind from a mainstream car rental company at the median of the relevant market rates.
On either basis, the amount already paid by the appellant’s insurer to Compass — which was the equivalent of the median rate for the hire of a car of the same kind from a mainstream car rental company — equalled or exceeded the amount claimable by the respondent. Accordingly, the respondent’s claim was properly dismissed.
The possible impact on the credit hire business model and car accident victims
Miller seems likely to have consequences for the business model of credit hire companies, echoing the impact of the House of Lords’ earlier decision in Dimond v Lovell[2002] 1 AC 384.
Without the ability to recover their full charges from negligent drivers’ insurers — including charges for the benefit of providing credit, and the work done in dealing with repairers and pursuing legal proceedings — it seems plaintiffs will have to bear that expense, or credit hire companies will have to absorb those costs.
While an apparent win for insurers, the practical effect of the decision in Miller may be to reduce the ability of car accident victims to access car hire either at all, or at least without taking on the cost of upfront payments and the expense and risk of then pursuing litigation against insurers.
As Lord Nicholls put it in his dissent in Dimond:
‘Under an ordinary car hiring arrangement, the hirer has to produce the hire charge up front. Usually the amount of money involved is not large, but for many people it is still a considerable sum to have to find. Further, there is no certainty the money will ever be recovered from the insurers of the car whose driver was at fault. The innocent motorist has no clout when it comes to seeking payment from someone else’s insurers. And no one would wish to become involved in court proceedings to recover the money from the insurers. So there are many cases where innocent motorists make do as best they can. They manage somehow without a car, or borrow one from a relation, or get lifts from friends. Either that, or they hire a car and write off the hire charge as just one of those things’.
It seems that will now be the reality for car accident victims in Australia as well.
