Medium Neutral Citation: Solar v Elkin  NSWLC 34
Hearing Dates: 8 September 2011
Decision Date: 15/09/2011
Before: Assessor Olischlager, Small Claims Division
Decision: Verdict for Plaintiff in the sum of $9,390.12 together with costs.
Catchwords: CIVIL PROCEEDINGS – loss of use of motor vehicle – hire of replacement vehicle – reasonableness of rate and duration – accord and satisfaction – estoppel
Legislation Cited: Civil Procedure Act 2005, Contracts Review Act 1980
Cases Cited: Anthanasopoulos v Moseley (2001) 52 NSWLR 262, Baltic Shipping Company v Dillon (“Mikhail Lermontov”) (1991) 22 NSWLR 1, British Russian Gazette & Trade Outlook Ltd v Associated Newspapers Ltd  2 KB 616, Chong v Berry  NSWLC 33, Darbishire v Warran  1 WLR 1067, Dimond v Lovell  1 AC 384, Fong v Hudson (Local Court, file 2010/00374969, 8 April 2011)
Franklin v Manufacturers Mutual Insurance Ltd (1935) 36 SR (NSW) 76, Harb v Marchbank  NSWLC 9, Qantas Airways Ltd v Gubbins  28 NSWLR 26
Category: Principal judgment
Parties: Marie Solar (plaintiff), Brad Elkin (defendant)
Representation: Mr Raffael (for the plaintiff), Mr Monzo (for the defendant)
File Number(s): 2011/00066417
1 The plaintiff is the owner of a 2006 Lexus IS250 motor vehicle that was damaged in a collision on 19 October 2010. The collision was due to the negligence of the defendant.
2 The plaintiff arranged for her vehicle to be taken to Northshore Classic Auto Body Centre smash repairs and lodged a claim with her insurer. While repairs were being undertaken the plaintiff hired a replacement vehicle through Compass Claims. The plaintiff hired a Lexis IS250 from 20 October 2010 and returned the vehicle on 1 December 2010.
3 The cost of the hire of the replacement vehicle was $10,520.40. This is based on a daily rate of $221 together with a daily liability waiver charge and a delivery charge of $30. Although Compass Claims issued a tax invoice on 2 December 2010 to the plaintiff, the terms of the hire included a mandate and authority whereby Compass Claims offered the hire of the vehicle on credit for 180 days and undertook to attempt recovery of the cost of hire from the at fault driver or his insurer.
4 These proceedings are brought to recover damages for the loss of use of the plaintiff’s vehicle based on the cost of the hire of the replacement vehicle. Claims of this type are common within the Small Claims Division of the Local Court. The defendant submits that the rate of hire is excessive. The defendant also states that as the vehicle should have been written off rather than repaired the duration of the hire should limited to no more than 14 days. In addition, the defence raises issues that have not been previously canvassed by this Court. Paragraph 7A of the amended Defence contains the following pleading:
Further and alternatively, in answer to the whole of the Statement of Claim the Defendant says that on 11 April 2011 the Plaintiff accepted the Defendant’s offer of a money sum “in full and final settlement and satisfaction of any and all claims and liabilities of whatever nature” that the Plaintiff or her insurer may have against the Defendant arising from the events which gave rise to the Plaintiff’s claim against the Defendant “and its principal”, as a result of which, the Plaintiff’s claim is not maintainable.
5 The pleading relates to a letter dated 11 April 2011 from A&G Insurance Services Pty Ltd, the insurer of the defendant’s vehicle, to NRMA Insurance, the insurer of the plaintiff’s vehicle, which purports to contain a letter of offer. The relevant section of the letter is as follows:
We enclose a cheque for $25,060.00 in full and final settlement and satisfaction of any all claims and liabilities of whatever nature that you or your insured, as the case may be, have in respect of this matter against A&G Insurance Services and its principal.
Banking of this cheque constitutes acceptance of this offer as full and final settlement.
6 NRMA Insurance banked the cheque on 15 April 2011. The defendant submits that the plaintiff is now estopped from pressing a claim for loss of use of the vehicle arising from the collision. The plaintiff submitted that the pleading raises issues of “accord and satisfaction” rather than estoppel. In any event the plaintiff submits that the offer of settlement related only to the property damage claim despite the broad terms of its release from liability.
7 The basis for the defendant’s claim of estoppel is that the acceptance by the insurer of the payment in full settlement of any claim arising from the matter constituted a representation that was relied upon by the defendant. The estoppel operated to prevent the plaintiff now asserting to recover further money arising from the loss of use of the motor vehicle.
8 The requirements of estoppel were stated by Jordan CJ in Franklin v Manufacturers Mutual Insurance Ltd (1935) 36 SR (NSW) 76 at 82:
The type of estoppel which became definitely established in the common law by the case of Pickard v Sears  EngR 195; (6 Ad & E 469) – estoppel by representation – depends upon different principles. In order that this type of estoppel may arise, it is necessary that (1) by word or conduct (2) reasonably likely to be understood as a representation of fact, (3) a representation of fact, as contrasted with a mere expression of intention, should be made to another person, either innocently or fraudulently, (4) in such circumstances that a reasonable man would regard himself as invited to act upon it in a particular way, (5) and that the representation should have been material in inducing the person to whom it was made to act on it in that way (6) so that his position would be altered to his detriment if the fact were otherwise than as represented.
9 The Court is of the view that the issue of estoppel is not made out. The defendant has failed to establish the element of reliance on the representation in such a way that his position would be altered to his detriment if that representation were not true.
10 Compass Claims wrote to Budget Direct Insurance services that provided the policy underwritten by A&G in December 2010 informing the insurer of the claim for loss of use. A further notice was issued on 5 January 2010 and file notes attached to Mr Adams’ statement indicate that the defendant’s insurer was aware of this claim in December 2010.
11 The letter dated 11 April 2011 by A&G Insurance to settle the claim was made in the context of a claim by NRMA Insurance to recover the cost of repairs to the vehicle. NRMA Insurance had forwarded a letter to A&G on 6 January 2011 indicating that it indemnified the client under their policy and sought to recover the sum of $38,988.87. Proof of loss documents were attached to the letter. The amount of $38,988.87 represented the cost of repairs. No claim was raised in respect to the hire of a replacement vehicle. The offer of settlement in the sum of $25,060.00 was made by A&G on the basis that the cost of repairs exceeded the pre accident value of the plaintiff’s vehicle. The settlement amount represented an estimate by A&G of the pre accident value of the plaintiff’s vehicle less its salvage value. Although A&G were apparently aware of the existence of a claim for loss of use of the vehicle the offered settlement amount did not include any component that related to car hire.
12 A&G was aware of the existence of the claim for loss of use of the vehicle and was aware that this claim was being pursued by Compass Claims separately from the property claim managed by NRMA. In that context it was understood as between NRMA and A&G that the offer of settlement figure was based on an assessment of the property loss claim.
13 The NRMA banked the settlement cheque on 15 April 2011. That is the representation relied upon by the defendant. There is no evidence that the defendant has somehow relied upon that representation to its detriment. There is no evidence to suggest that the defendant or his insurer took any steps after 15 April 2011 that might be referrable to the representation. The plaintiff commenced these proceedings in February 2011 and the original defence was filed on 8 April 2011. This was prior to the representation that the defendant now seeks to rely upon. The defendant has done nothing in reliance of the representation other than file an amended defence raising the pleading of estoppel. The defendant has not taken any steps to its detriment in reliance of the representation.
Accord and Satisfaction
14 The defendant did not press a claim of “accord and satisfaction”. Paragraph 7A of the amended defence asserts that there was an executed agreement to settle the present claim. That agreement may, on the face of it, give rise to a bar against this claim being maintained. The plaintiff construed the pleading in this manner and made submissions on the issue. For the sake of completeness the Court will address the issue.
15 The plaintiff referred the Court to the decision in British Russian Gazette & Trade Outlook Ltd v Associated Newspapers Ltd  2KB 616. That decision described the principle of “accord and satisfaction” as the “acceptance by the plaintiff of something in place of his cause of action”. The accord is the agreement between the parties to accept the satisfaction and upon the provision of satisfaction the cause of action is extinguished. In the present case accord and satisfaction may be said to have occurred when NRMA Ltd presented the cheque on the understanding that the act of presentation was an act evidencing its consent to the settlement offer.
16 The plaintiff submits that if the presentation of the cheque did give rise to accord and satisfaction then this only extinguished the cause of action relating to property damage. The plaintiff states that the terms of the settlement letter could not be construed as extinguishing other causes of action such as personal injuries claims or, as in this instance, a claim for loss of use of a motor vehicle. The Court agrees with this submission.
17 The letter containing the offer of settlement should be construed having regard to the intention of the parties. The agreement was analogous to a deed of release and the principles that apply to the construction of a deed of release should apply to the terms of the letter that form the basis of the purported agreement. In Qantas Airways Ltd v Gubbins  28 NSWLR 26 at 29 Gleeson CJ and Handley JA applied the rule that “the general words of a release will, in an appropriate case, be read down to conform to the contemplation of the parties at the time the release was executed” .
18 The intention of the parties was that the offer of settlement contained in the letter dated 11 April 2011 would resolve the issues relating to the claim for property damage. The use of the words “in respect of this matter” defined the subject of the offer of settlement. Given that the communication that was exchanged between the insurance companies related solely to the issue of property damage, the term “this matter” can only reasonably be construed as relating to the claim for property damage. If the letter of settlement intended to extinguish all causes of action the Court would have expected that the language of the letter to be in more expansive terms, for example, by expressly discharging liability “in respect of any matters arising from the collision”.
19 Even if the Court was incorrect on this view and the presentation of the cheque created “accord and satisfaction” in respect of the present claim the conduct of the defendant in obtaining such a broad agreement raises questions of unjustness. While the Court has not been called upon to consider a claim for relief under the Contracts Review Act 1980 the case put forward by the defendant bears similarities to the facts in Baltic Shipping Company v Dillon (‘Mikhail Lermontov’) (1991) 22 NSWLR 1. In that case the Court of Appeal considered a release to be unjust in circumstances where it dealt only with lost property and did not have provision for other entitlement to damage. In the present case the defendant offered a settlement amount that was calculated only on the property claim. The defendant negotiated the agreement with the plaintiff’s subrogated insurer notwithstanding that the defendant knew that the claim for loss of use of the vehicle was being pursued separately by the plaintiff. The defendant had filed a defence to these proceedings and knew that the plaintiff was legally represented yet it did not contact the solicitors on the record to negotiate the terms of the purported agreement. These are factors that put in issue whether the agreement, if having the construction that the defendant contends, was “unjust” within the meaning of the Contracts Review Act .
Rate of Hire
20 The defendant disputes the rate of hire of the motor vehicle. The approach of the Court in relation to assessing the reasonableness of the rate of hire of a replacement motor vehicle was outlined in Harb v Marchbank  NSWLC 9 and summarised in the following terms in the unreported decision of Fong v Hudson (Local Court, file 2010/00374969, 8 April 2011):
1. In New South Wales a person is entitled to claim for loss of use of a motor vehicle which is not used for profit (Anthanasopoulos v Moseley (2001) 52 NSWLR 262).
2. Damages for loss of use of a vehicle are not to be determined by reference to the actual cost to the plaintiff, but generally, by reference to the market cost of supplying a replacement vehicle (Anthanasopoulos v Moseley (2001) 52 NSWLR 262 (at 276-277)).
3. In assessing damages the Court will determine a reasonable sum for the wrongful interference with the plaintiff’s property (Stoke-on-Trent City Council v Wass Ltd  3All ER 394 per Nicholls LJ at 402).
4. In relation to the hire of a motor vehicle there is no single market or “spot rate”. Rather there will exist a range of rates available within the market at any time.
5. Provided that the actual cost incurred by the plaintiff represents a market rate or falls within the range of market rates the Court will accept that rate as a reasonable basis for the assessment of damages.
6. If the actual cost incurred is not a market rate and the cost falls outside the range of market rates the Court will nominate a reasonable rate.
7. Considerations of whether the plaintiff failed to mitigate damage or is in an improved position are irrelevant when assessing general damages for loss of use of a non income producing chattel.
21 The plaintiff hired a replacement vehicle through Compass Claims on credit. The plaintiff was not provided with a fixed hire rate until the conclusion of the hire period. In those circumstances, the Court considers that the rate does not, of itself, reflect a market rate. It is necessary to consider whether the rate was within the range of rates prevailing within the market at the relevant time. Mr Darryl Adams, a claims officer with Compass Claims, conducted an internet search on 13 October 2010. He has attached extracts that show daily hire rates for a Lexus IS250 from Luxury Car Hire averaged $172.86 per day together with excess reduction charged at $50 per day.
22 The defendant submits that the rate is excessive. Internet searches conducted by Ms Kylie Watson indicate that a daily rate for a Lexus IS250 was available from Luxury Hire Car for $165.00 per day, Hertz Car Rentals at $147.19 and Car Hire Shop for $126.21 per day. It appears that the rates quoted do not include damage liability reduction. As indicated in Harb v Marchbank  NSWLC 9 at  and by Magistrate Dillon in Chong v Berry  NSWLC 33 at  it is appropriate to incorporate excess reduction when determining hire car market rates as the plaintiff should not be required to bear this additional risk.
23 The Court is satisfied that the hire car market range for a Lexus IS250 extended up to $222.86 per day. The Court will allow this rate in relation to the hire by the plaintiff of a replacement vehicle.
Duration of Hire
24 The plaintiff hired the replacement vehicle for 42 days. The replacement vehicle was collected on 20 October 2010 and returned when the vehicle was repaired on 1 December 2010.
25 The defendant submits that the period of hire was excessive. The total cost of repairs was $42,772.59 and this exceeded the pre accident value of the vehicle less the salvage value that was estimated to be $25,060.00. The defendant states that the plaintiff should have treated the vehicle as being damaged beyond economic repair. The defendant states that this would have resulted in the plaintiff receiving a payout from his insurer within 14 days thus limiting the period in which the plaintiff would have required a replacement vehicle. In essence, the defendant relies on authorities such as Darbishire v Warran  1 WLR 1067 where the Court measured property damages on the basis of the cost of a reasonable substitute where that cost was significantly less that the cost of repair.
26 There are two difficulties with the defendant’s submission.
27 Firstly, it assumes that a payment by the plaintiff’s insurer of the insured value of the vehicle is an act that extinguishes the plaintiff’s claim for loss of use of a vehicle. It has not been explained how payment by the plaintiff’s insurer to the plaintiff under a policy of insurance discharges the defendant’s liability for loss of use of the vehicle. The payment by the plaintiff’s insurer to the plaintiff would appear to be res inter alios acta. This question was considered in Dimond v Lovell  1 AC 384 where a plaintiff obtained a replacement vehicle without cost. Lord Hoffmann stated at 398-399:
[The appellant's] next point was that it did not matter whether Mrs Dimond was liable to pay for the hire… The fact was that Mr Lovell had negligently deprived her of eight days’ use of her [vehicle]. This was her loss and the fact that she had been lucky enough to obtain the use of another car for nothing was, as one used to say, res inter alios acta. It should not affect Mr Lovell’s liability, any more than if a friendly neighbour who happened to be going on holiday had put his car at her disposal…
A general principle that benefits provided by third parties are res inter alios acta is obviously strongly supportive of [the appellant's argument].
28 In Anthanasopoulos v Moseley (2001) 52 NSWLR 262 the Court of Appeal considered the same issue in the context of a courtesy car programme offered by an insurer. Beazley JA (with whom Handley JA and Ipp A-JA agreed) held (at paragraph 40) that the arrangement was one which was re inter alios acta and irrelevant at law in determining a plaintiff’s entitlement for damages.
29 Secondly, even if the Court was able to accept the legal basis of the defendant’s argument, the facts in the present case are distinguishable from those arising in Darbishire v Warran . The plaintiff in that case elected to effect repairs knowing the cost was significantly more than the value of the vehicle. In the present case the smash repairer provided an initial estimate of $15,122.74 on 22 October 2010. It was on the basis of this estimate that the plaintiff’s insurer gave authority for repairs to be effected instead of determining the vehicle to be beyond economic repair. The cost of repairs increased substantially when the vehicle was dismantled and further damage was discovered. It is not entirely clear when the increase in cost of repairs was brought to the attention of the plaintiff’s insurer. What is clear is that at the time of the original estimate and assessment it appeared that the vehicle could be more economically repaired and the plaintiff and his insurer acted reasonably in authorising repairs to proceed.
30 Accordingly, there was no failure on the part of the plaintiff to act reasonably or mitigate his loss. The Court is satisfied that the plaintiff should be entitled to recover hire costs associated with the entire period of the hire.
31 The Court will allow loss of use to be determined at the rate of $222.86 per day for the period of 42 days together with a vehicle collection fee of $30. The Court allows a total amount for loss of use of the plaintiff’s vehicle in the sum of $9,390.12.
32 The Court will not allow interest under section 100 of the Civil Procedure Act 2005 given that there has not been a tax invoice issued by Compass Claims at the conclusion of the 180 day credit period which would give rise to an entitlement to recover interest.
33 The Court will enter a verdict and judgment in favour of the plaintiff in the sum of $9,390.12 together with costs.
Local Court Assessor
Small Claims Division