NSW Court of Appeal clarifies how to work out damages for loss of use of a motor vehicle


If your motor vehicle is damaged and you are not at fault, it is generally accepted that you can recover damages for the loss of use of your motor vehicle from the person who is at fault. 

How much those damages are worth has been the focus of much debate in the insurance and hire car industries, and different treatment in Courts and Tribunals across Australia.  

That difference led to uncertainty about how much these kinds of claims were really worth.

Usually, you could look to a judgment of a Court of Appeal or the High Court to clear up any confusion.  Unfortunately, that clarity was simply not available - until now.

The confirmed approach

The NSW Court of Appeal recently handed down its long awaited judgment in Lee v Strelnicks; Souaid v Nahas; Cassim v Nguyen; Rixon v Arsalan [2020] NSWCA 115.

The judgment dealt with appeals in 4 separate cases, and all related to a common issue concerning whether or not each plaintiff was entitled to damages for loss of use of their vehicle, and if so how much. Ultimately, it was not a unanimous decision, but a majority decision – 2:1 (Emmett JA and White JA : Meagher JA).

We think that the common principles arising from the majority about how to approach claims for damages for the loss of use of a motor vehicle are as follows:

The general need of the plaintiff

The question of whether a plaintiff needs a replacement vehicle is not self-proving and must be supported by actual evidence from the plaintiff of that need. The threshold is, however, a very low one.

This was the crux of the appeal in Lee. Need could not be proved. In turn, it was unanimously dismissed by the Court of Appeal.

The plaintiff is presumed to have a need for a ‘like for like’ replacement vehicle

Should need be established, it can be presumed that a plaintiff will be entitled to a “like for like” vehicle (that is a vehicle that is substantially similar to the damaged vehicle) as they should be placed in the position they were in prior to the negligent act occurring.

This presumption can be displaced by evidence from the Plaintiff that they did not need or want a “like for like” vehicle.

The replacement vehicle the plaintiff is entitled to

In assessing whether the plaintiff is entitled to be compensated for the cost of hiring a replacement vehicle they selected, the assessment really centres on whether it is “like for like” and if it is not, what kind of vehicle would be “like for like”. The following principles apply:

  • It is to be assessed on a mixture of subjective and objective factors.
  • From an objective perspective, you would consider the ‘bare functionality’ the plaintiff required of a vehicle, but that is not enough. You would also need to consider the characteristics of a replacement vehicle, in what was termed ‘general equivalence’. Here you would consider make, model, year, specifications and value.
  • From a subjective perspective, the Plaintiff’s desire is a factor that will need to be considered, particularly for luxury vehicles.

How much the plaintiff is entitled to recover for that replacement vehicle

Once you have confirmed the kind of replacement vehicle the plaintiff was entitled to, the cost of hiring an equivalent vehicle in the market is the measure of damages.

The best evidence would be evidence:

  • that a vehicle with identical or as close to as identical characteristics (make, model, year, specifications and value) was available for hire; and
  • the rates that vehicle was hired out at.

It remains to be seen how much weight a Court puts on the value of the damaged vehicle as against the value of the hired vehicle when considering whether the hired vehicle was equivalent.

For example, if a plaintiff had a luxury 2012 4-door sedan, its value would probably be equivalent to or less than a late model Toyota Camry, whereas a late model luxury sedan would have a far greater value. The Toyota Camry will probably cost much less to hire than the late model luxury sedan. In that circumstance, a defendant would argue that the Toyota Camry would be the equivalent. The ultimate question is whether the “luxury” factor will trump the actual value of the vehicle. That remains to be seen.

Whilst it is only a comment that was made by one of the majority (White JA), it was said that blind acceptance of ‘credit hire’ rates may be sufficient to assert that a plaintiff has behaved unreasonably; however, that would also probably be subject to the Court finding the rate claimed was excessive or beyond the market rate.

Credit hire is where a motor vehicle is provided to a plaintiff at no upfront cost, on the condition that they participate in recovering that cost at the direction of the “credit hire” car provider.

For now, this appears to be the way that all States and Territories will have to approach claims for damages for loss of use, including ‘credit hire’ claims.  Any Court below the Court of Appeal in each state and territory will ordinarily be bound to follow a judgment of a Court of Appeal (regardless of the State or Territory). In short, we think this will become the Australia-wide approach.


Defendants to claims for damages for loss of use of a motor vehicle will want to consider the following:

  • Obtain evidence to challenge the plaintiff’s asserted need – generally and for the replacement vehicle they took.
  • Obtain evidence to challenge the plaintiff’s assertion that the replacement vehicle they took (and claim the cost of) is “like for like”, and to prove that a cheaper vehicle is actually more “like for like”.
  • Obtain evidence that the cost the plaintiff claims for the replacement vehicle is excessive or greater than the market rate for hiring a vehicle that is of the same make, model, or specifications as the replacement vehicle.

There is a chance that the judgment could be appealed to the High Court of Australia. If so, it will have the final word; but only if an application for special leave (permission to appeal) is granted. Whether that application is or has been made will be known soon.  

Contact us

We would be delighted to connect with you in relation to any queries you may have about these issues.

Special credit goes to Stuart Proposch of our Melbourne office for his work in preparing this note.