In an action for damages, a plaintiff would generally have a claim for direct damages. For example, a claim for cost of repairs of a damaged vehicle. This is commonly referred to as special damages or economic losses. Direct damages are generally easily calculated as they would be supported by invoices, receipts and/or assessment reports.
Consequential loss (loss of amenity of use) is a principle of general damages. It’s the plaintiff’s loss of enjoyment or financial loss which might be difficult to measure.
In Arsalan v Rixon; Nguyen v Cassim [2021] HCA 40 (”Arsalan”), the High Court affirmed the common law position on consequential loss and held that a negligent defendant is obligated to pay the injured plaintiff both direct damages and general damages, for the plaintiff’s loss of amenity and enjoyment (consequential loss). Arsalan’s decision is mainly in action in credit hire vehicle cases. A closer analysis of Arsalan however would show that “consequential loss” is not simply limited to the recovery of hire vehicle charges. The injured plaintiff is entitled to their claim for “loss of enjoyment” and if the loss is incapable of being calculated, then at the very least they should be entitled to some type of award.
So, what are the alternative ways of claiming consequential loss, where a claim for hire vehicle is not available?
Methods of claiming consequential loss
In the context of property damage, there are a number of ways of calculating loss of amenity of use:
The rentalcost of replacing the chattel during the period for which it was unavailable;
The loss of revenue that would otherwise have been generated if the chattel was not damaged;
Interest on the capital value of the chattel; or
If the loss cannot be calculated, nominal damages.
a) Rental costs
Rental costs of a replacement chattel is the most common and the often the easiest way of proving loss of amenity. There is generally an invoice for the replacement chattel and a contract between the plaintiff and the hire provider. As such this type of loss of amenity claims are not difficult to prove.
b) Loss of revenue / financial loss
If the chattel is an income earning chattel, then the financial loss or loss of revenue is the default position of a claim for loss of amenity of use. If the income earning chattel can be replaced by renting another similar chattel, then the consequential loss would consist of; the rental fees as well as any loss of revenue. If the income earning chattel is irreplaceable, then the consequential loss would be the actual financial loss of the plaintiff.
For a plaintiff to be able to establish actual financial loss, the plaintiff is generally required to prove this loss by way of (for example):
Financial statements and utilisation reports proving the financial loss;
Evidence of the average income that the particular chattel was generating for the plaintiff; and
Business activity statements or evidence from the plaintiff’s accountant calculating the losses.
On the basis that evidence of financial loss can be established, a plaintiff should not have difficulty in claiming consequential loss of a particular chattel.
c) Interest on the capital value of chattel
If evidence of actual financial loss cannot be established, the alternative method of claiming consequential loss is through the calculation of the interest on the capital value of the chattel for the period that the plaintiff was deprived of the use of the chattel. This was articulated in Arsalan at [20] where the court made references to old ship cases involving loss of use claims. In such cases, where a substitute ship was not available and where no actual financial loss was established, the approach of the court was to award interest on the depreciated value of the ship for the period of repair.
Recently in Yehia v Williams [2022] VSC 197 (“Yehia”), where a claim for a hire vehicle was rejected by the court, the plaintiff received an award for consequential loss by way of interest on the capital value of the plaintiff’s vehicle. Her Honour, Tsalamandris J at [164] adopted the approach and held:
“This is not a situation whereby Mr Yehia is disentitled from recovering any damages for the loss of use of his vehicle. The Magistrate awarded Mr Yehia damages for his inability to enjoy and appreciate his vehicle in the period in which it could have been repaired. The damages he awarded for that loss of use was by application of a percentage of capital value. That was indeed the approach endorsed by the High Court in Arsalan for situations when a replacement vehicle was not the appropriate measure”.
The approach of awarding interest on the capital value of chattel is not new and not limited to motor vehicle claims. It applies to any chattel. In Woodman v Rasmussen [1953] St R Qd 202, where the plaintiff could not prove financial loss of their damaged “sawmill”, Macrossan CJ on appeal held:
“In my opinion the judgment so far as it gave the respondents damages for loss of profits cannot be sustained. It would, however, be in accord with authority to give the respondents damages by way of interest at the rate of five per centum per annum on the capital value of the machine for the period of three months during which they would have been deprived of the use of it whilst the necessary repairs were being made.”
In BHP Coal Pty Ltd and Ors v O & K Orenstein & Koppel AG and Ors [2008] QSC 141, the plaintiff was unable to establish financial loss on a machinery known as the “bucket wheel operator”. McMurdo J held that the plaintiff was still entitled to recover general damages based on interest on the capital value of the bucket wheel operator system. This decision was made despite it being accepted that had the bucket wheel operator been in working order it would not have been in use during the period of repairs.
Another interesting case worth of discussion is the recent case of Qantas Airways Ltd v BMD Constructions Pty Ltd [2023] QSC 206 (“Qantas”). In that case Qantas was the lessee of a fleet of aircraft. One of the aircraft was damaged by the alleged negligence of the defendant. Qantas claimed their consequential loss based on the “interest on the capital value” of the aircraft. An application was brought by BMD to have the pleadings with respect to consequential loss struck out. Although the court did not deal with Qantas’ consequential loss in that case. The court did indicate that the method of calculation by Qantas was a valid method.
There are overwhelming discussions and case laws surrounding claims for consequential losses. Arsalan’s case does appear to be the starting point. But it’s not the beginning. Consequential loss in the sphere of property damage claims is a principle of general damages that pre-existed Arsalan’s case.
Ultimately, even if a claim for interest on the capital value of the plaintiff’s vehicle cannot be established, the plaintiff is likely to receive nominal damages for their claim for consequential loss. The plaintiff has lost the right of enjoyment of their chattel and is entitled to be compensated for their loss of enjoyment.
Note: This is a general guide only. Circumstances may vary and advice should be sought about your specific circumstances.
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