Arsalan v Rixon: what the High Court decided
Arsalan v Rixon is the High Court decision that confirmed a not at fault driver can recover the reasonable cost of hiring a replacement vehicle, even when that car is nicer than the one written off, provided the hire was reasonable in the circumstances.
For drivers in Sydney, the practical effect is simple: if someone else caused the crash, you are not stuck in a Corolla while your prestige car is off the road. But reasonable is doing a lot of work in that sentence, and the case has limits that insurers test every week.
Key takeaways
- Arsalan v Rixon confirms that a not at fault driver can recover the reasonable cost of a replacement vehicle, even if it is not the cheapest option available.
- The replacement does not have to be identical to the damaged car, but it should be reasonable in type, period and rate.
- Loss of use can be claimed even if no replacement car was hired, though it is harder to prove without a hire invoice.
- The case does not set fixed rates or guarantee a prestige replacement, and insurers still dispute quantum regularly.
- A clean paper trail, including repairer updates and a like for like replacement, is what makes the claim hold up.
- The facts: a crash, a hire car and a dispute
- The question the High Court had to answer
- What the Court held about reasonable hire
- Why a better car did not sink the claim
- Loss of use where no car was hired
- What the decision does not say
- How insurers have responded since
- What it means for your claim this week
- The reasonable hire test in practice
- Where credit hire fits in
The facts: a crash, a hire car and a dispute
The case began with a collision in Queensland. Mr Arsalan's vehicle was damaged by a driver who admitted fault. While his car was off the road, he hired a replacement and later claimed the hire cost from the at fault driver's insurer. The insurer resisted, arguing the amount was excessive and that he should have hired something cheaper or gone without.
The dispute worked its way through the Queensland courts and then to the High Court of Australia, which delivered judgment in 2021. By then the question had become broader than one man's hire car. Insurers across the country had been running a similar line for years: that a not at fault driver should mitigate loss by hiring the cheapest available vehicle, or by not hiring at all.
The High Court rejected that approach. It treated the loss as loss of use of the damaged vehicle, and the hire cost as the reasonable measure of that loss. If the replacement was reasonable, the fact that a cheaper option existed somewhere did not automatically reduce the claim.
That reasoning matters in Sydney because the same argument plays out here constantly, from the M4 at Parramatta to Military Road on the Northern Beaches. Insurers rely on it, and drivers who do not know the case often accept a lower figure than they are entitled to.
The question the High Court had to answer
The central question was how to measure damages for loss of use of a car that has been damaged by someone else's negligence. Two broad approaches were on the table.
The first, favoured by insurers, was that the not at fault driver should recover only what it would have cost to hire the cheapest reasonable substitute, or nothing if they could have borrowed a car or used public transport. On that view, a prestige car owner gets a basic hatchback rate, or nothing.
The second approach, which the High Court accepted, is that the driver is entitled to the reasonable cost of restoring the use they have lost. That is not necessarily the cheapest car on the market. It is a car that is reasonable for that driver, in those circumstances, for the period the damaged car is unavailable.
The Court also considered what happens when no replacement car is hired at all. It confirmed that loss of use can still be compensated, because the loss exists whether or not the driver spends money to fill it. That point is often overlooked and is worth raising with your insurer or solicitor.
If you want the fuller background on how these claims work in NSW, our guide to not at fault rights in NSW is a good starting point.
Age limits are set per car. Drivers under 25 can hire most cars with Young Driver Cover; the exact terms are shown before you pay.
What the Court held about reasonable hire
The Court held that the reasonable cost of hiring a replacement vehicle is recoverable as damages for loss of use. Reasonableness is assessed objectively, looking at the driver's circumstances, the nature of the vehicle damaged, the purpose it served and the period of hire.
Three practical points follow from the reasoning.
- The hire must be reasonable in kind. A like for like replacement is usually the safest position. If your damaged car was a large SUV used for family and work, hiring another large SUV is easier to justify than hiring a two seat sports car.
- The hire must be reasonable in duration. Hire for the period the car is genuinely off the road, supported by repairer updates and assessor delays, not an open ended booking.
- The rate must be reasonable. Insurers will compare your daily rate against market rates for comparable vehicles. Wildly above market figures invite a dispute.
What the Court did not do is set a fixed formula. There is no statutory cap and no prescribed class of car. The test is whether a reasonable person in the driver's position would have hired that car for that period at that rate. That is a question of evidence, and it is why paperwork matters as much as the car itself.
When you are ready to arrange a replacement, you can check availability through accident replacement cars in Sydney and see what fits your situation.
Not at fault? Start your claim
A like-for-like replacement car while yours is repaired. No cost to you when the other driver is at fault.
Start my claimWhy a better car did not sink the claim
One of the most quoted aspects of the decision is that the hire car did not have to be identical to the damaged car, and in some respects was better. The insurer argued this made the hire unreasonable. The Court did not accept that a replacement had to be the same or inferior.
The reasoning is that loss of use is about restoring the ability to go about your life, not about punishing the not at fault driver for having a nice car. If the damaged vehicle was a prestige SUV used for school runs, client meetings and weekend trips, a comparable prestige SUV is a reasonable substitute. A base model compact may not be, particularly if it cannot do the same job.
That said, the case is not a licence to upgrade. If your damaged car was a mid range sedan and you hire a top of the range performance model at three times the rate, expect the insurer to push back. The question is always whether the substitute is reasonable, not whether it is the most expensive thing you could find.
In Sydney, this plays out most often with European marques. A damaged BMW 3 Series is usually matched with a comparable sedan, not a hatchback. A damaged large SUV is matched with another large SUV. Our page on like for like replacement sets out how we approach that matching.
Loss of use where no car was hired
Not every not at fault driver hires a replacement. Some borrow a car from family, work from home, or simply wait. The High Court confirmed that loss of use is still a compensable loss in those circumstances.
The logic is straightforward. If your car is off the road for three weeks because of someone else's negligence, you have lost the use of it for three weeks, whether or not you paid for a substitute. That loss has a value, and it can be claimed.
Proving it is harder. Without a hire invoice, you need other evidence: how you got to work, what you paid for taxis or rides, what you had to cancel, what you had to borrow. Keep receipts, diary notes and messages. A claim built on nothing but a statement that you missed your car will not get far.
In practice, many drivers in Sydney find that hiring a replacement is cleaner. You have a documented cost, a compliant invoice and a clear period of hire. It also means you are not relying on a friend's car for six weeks while a repairer waits on a backordered part from Germany. Our guide to loss of use in NSW covers both paths in more detail.
What the decision does not say
Arsalan v Rixon is often cited as though it guarantees a prestige replacement for every not at fault driver. It does not. Several limits are worth knowing before you rely on it.
- It does not set a fixed rate or a fixed class of vehicle. Reasonableness is decided case by case.
- It does not remove the duty to mitigate. You still cannot hire unreasonably, for an unreasonable period, or at an unreasonable rate.
- It does not decide who pays upfront. Credit hire arrangements, where the hire company waits for the claim to resolve, are a commercial arrangement, not something the case requires.
- It does not override the at fault insurer's right to dispute quantum. Insurers can and do challenge invoices, particularly where the rate looks high or the hire period looks long.
- It does not apply automatically to every jurisdiction's statutory schemes. Compulsory third party schemes differ between states, and personal injury claims are a separate question.
It also says nothing about the practical reality of getting a prestige car repaired in Sydney, where parts for European marques can take weeks. That delay is relevant to the hire period, but it does not make an indefinite hire reasonable on its own.
Land Rover RANGE ROVER VOGUE
Experience classic British luxury with the 2013 Land Rover Range Rover. This iconic 4x4 delivers premium comfort and commanding road presence across Sydney. Whether navigating...
How insurers have responded since
Since the decision, at fault insurers have not stopped disputing hire claims. They have refined their approach.
The most common tactics are these. First, they ask for the hire agreement, the invoice, the repair authority and the repairer's updates, then argue the period should have been shorter. Second, they compare your daily rate against their own preferred supplier rates and argue the difference is unreasonable. Third, they question whether the replacement was truly like for like, particularly where the damaged car was older or higher mileage. Fourth, they delay, hoping the not at fault driver or the hire company gives up.
None of this means the claim fails. It means the file needs to be tidy. Repairer updates with dates, an assessor's authority, a hire agreement signed on day one and a replacement that matches the damaged car will usually carry the day. Vague timelines and a replacement that looks like an upgrade will not.
If your claim is being stalled, our page on insurer delays sets out what to do and when to escalate. For the broader picture on how credit hire works and who carries the risk, see credit hire versus paying yourself.
What it means for your claim this week
If you were hit in Sydney this week, the case gives you a clear position. You are entitled to the reasonable cost of a replacement vehicle while your car is repaired or written off, and the replacement does not have to be a downgrade.
What to do, in order:
- Photograph everything at the scene, including the other driver's plates, licence and insurer details. Our first 24 hours guide lists exactly what to collect.
- Report the incident to police if anyone was injured or the other driver failed to stop.
- Notify your own insurer as required by your policy, even though you are claiming against the other side.
- Get your car assessed quickly. A repairer or assessor report starts the clock on the hire period.
- Arrange a like for like replacement and keep the paperwork clean.
Where a specific car is the natural next step, these are the kinds of replacements that match common prestige and performance claims.
Porsche MACAN
2019 Porsche MACAN...
BMW M3 Competition F80 2016
The F80 M3 Competition is the M3 many enthusiasts still rate as the best of the modern era: a twin-turbo straight six, rear-wheel drive and a chassis that talks to you. It is...
Bookings are fulfilled by Drive Tribe (drivetribe.com.au), the trading name of Australian Business Holdings Pty Ltd, and this site is part of that group. The rate, the bond and every fee are shown on the car's page before payment, and cars can be booked from a single day.
For a broader view of how these claims are run, see not at fault accident replacement or browse the full range at drivetribe.com.au.
The reasonable hire test in practice
Stripped back, the test has four parts. Was a replacement needed? Was the type of car reasonable? Was the period reasonable? Was the rate reasonable?
| Question | What supports a yes |
|---|---|
| Was a replacement needed? | Repairer or assessor confirmation the car was off the road, plus your own need to travel to work, school or appointments. |
| Was the type reasonable? | A replacement in the same class as the damaged car, with a note on why that class was needed. |
| Was the period reasonable? | Dated repair updates, parts delays documented, no gap between repair completion and hire ending. |
| Was the rate reasonable? | A market rate for that class of car in Sydney, not the cheapest and not the dearest. |
If you can answer all four with documents, you are in a strong position. If one is thin, fix it early rather than at the end. Our page on the reasonable hire car test in NSW goes through each limb. Drivers in the west of Sydney may also find our Parramatta replacement car page useful, and Northern Beaches drivers can start at Northern Beaches.
Where credit hire fits in
Most prestige replacement arrangements in Sydney run on credit hire. You do not pay upfront. The hire company invoices the at fault insurer once the claim resolves, and you sign an agreement setting out your obligations.
Arsalan v Rixon did not create credit hire, and it does not regulate it. What it does is support the underlying principle that a reasonable hire cost is recoverable, which is what makes credit hire viable. If the claim succeeds, the insurer pays. If it does not, the agreement sets out what happens next, which is why you should read it before signing.
Two things to check in any credit hire agreement: the daily rate and the maximum hire period. Both should match what you would defend in front of an insurer. If the rate looks inflated or the period is open ended, ask questions. For a side by side comparison, see credit hire versus paying yourself.
Fleet managers should also look at business and fleet, where downtime costs are usually the bigger number, and at BMW M and AMG replacement cars if the fleet includes performance models.
Questions people ask
Does Arsalan v Rixon mean I can hire anything?
Does the case apply in NSW?
What is the test for reasonable hire?
Can I claim loss of use if I did not hire a car?
Will the at fault insurer pay my hire car directly?
How long can I hire a replacement car for?
Injured in the accident?
A replacement car covers the car. For legal advice about an injury, speak to Jameson Law, the most trusted personal injury firm in NSW (motor vehicle accident claims) on (02) 8806 0866.
Ready when you are
Start the claim online in five short steps, or call 0468 011 118. Replacement hires are arranged and fulfilled by Drive Tribe, the trading name of Australian Business Holdings Pty Ltd.
Start my claim