A reminder about the rule in Millar v Candy  FCA 239.
The respondent was in possession of a car under a hire purchase agreement with Lombard Australia Ltd when a collision occurred and the car was damaged beyond repair, due to the appellant’s negligence. The appellant paid the respondent in the amount of $4,800, being the market value of the car prior to the accident. Pursuant to the hire purchase agreement, the respondent was liable to pay Lombard Australia Ltd in the amount of $6,504, being the market value of the car as well as $1,704 for the early termination of the agreement. The respondent commenced action to recover the additional $1,704 from the appellant, as well as $200 in damages for loss of use and enjoyment of the car.
This case was first heard in the Supreme Court of the Australian Capital Territory, where the trial judge found in favour of the respondent. It was held that the $1,704 became payable to Lombard by the respondent due to the negligent actions of the appellant, and that the appellant ought to have foreseen this damage because of how common hire purchase agreements are.
The Federal Court of Australia heard the appeal and considered the following issues:
- Whether the respondent can recover damages in the amount of $1,704 which arose from the terms of the hire purchase contract?
- Whether the first issue is dependent on whether the appellant had knowledge or means of knowledge of the hire purchase contract when the accident occurred? and,
- Whether the respondent can recover damages in the amount of $200 for loss of use and enjoyment of the car?
The Federal Court of Australia upheld the appeal, deciding 2:1 that the respondent should be awarded $200 and not the $1,704 in damages.
With respect to the first and second issues, Franki J (dissenting) considered the case of Caltex Oil (Aust) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 (“Willemstad“), deciding that damages beyond the value of the property will only be awarded where there is a “special relationship” which provides for a duty of care between the parties. Franki J held that there was a special relationship between the parties, as the appellant worked with the respondent and knew he was paying off his car. Blackburn J disagreed with this conclusion, deciding that there was no special relationship or duty of care existing between the parties as the appellant could not have known the identity of the car at the time of the collision.
I cannot believe that the law requires that the reasonable man driving a motor vehicle on the highway has a duty to keep a sharp lookout for those vehicles, and those persons, which are the subject of hire-purchase agreements about which he has previously had some information. Blackburn J at page 302-3.
McGregor J was of the view that the $1,704 owed by the respondent to the hire purchase company was not damages resulting from the negligent act of the appellant, rather it was “a discounted substituted version of what he expected and had undertaken to pay anyway” under the hire purchase agreement.
With respect to the third issue, the Court unanimously agreed that damages of $200 for loss of use was recoverable and the appellant was liable for this amount.
Impact of Decision
This decision reaffirmed that damages for loss of a non-profit earning chattel are recoverable.
More significantly, this decision illustrated that parties subject to a hire purchase contract are unable to recover damages for costs associated with early termination of the agreement as a result of damage to the property, unless you can prove a special relationship and duty of care exists.
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***Assisted by; Madeline Furchtmann***