IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
Common Law Division
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2022 03827

ERAY YILDRIM	Appellant	
		
v  		
		
CAR ACCIDENT RENTAL SOLUTIONS PTY LTD	Respondent	

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JUDGE:	Gorton J	
WHERE HELD:	Melbourne	
DATE OF HEARING:	23 November 2023	
DATE OF JUDGMENT:	30 November 2023	
CASE MAY BE CITED AS:	Yildrim v Car Accident Rental Solutions Pty Ltd 	
MEDIUM NEUTRAL CITATION:	[2023] VSC 703	

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APPEAL – Appeal from Magistrates’ Court of Victoria against finding that motor vehicle accident damages included Goods and Services Tax (‘GST’) – Where liability for accident admitted – Where owner of vehicle registered for GST – Whether GST component of market value should be excluded where owner entitled to obtain input tax credit and to receive back GST payable on purchase of any replacement vehicle – Compensatory principle misapplied – A New Tax System (Good and Services Tax) Act 1999 (Cth) – Haines v Bendall (1991) 172 CLR 60 – Millington v Waste Wise Environmental Pty Ltd (2015) 295 FLR 301 – Gagner Pty Ltd v Canturi Corporation Pty Ltd (2009) 236 FLR 401.

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APPEARANCES:
	Counsel	Solicitors	
For the Appellant	Mr S Lowry	Grace Lawyers Pty Ltd	
			
For the Respondent	Mr D J Williams AM KC	John Curtain & Associates Pty Ltd	

HIS HONOUR:
1	Mr Eray Yildrim, the appellant, negligently damaged a Kia Rio motor car owned by Car Accident Rental Solutions Pty Ltd (‘CARS’), the respondent.  The car was a ‘write-off’ (where the cost of repair makes repair uneconomical) and CARS commenced a proceeding for damages against Mr Yildrim in the Magistrates’ Court of Victoria.  Mr Yildrim admitted negligence.  CARS sought damages based on the value of the car in its undamaged state less its salvage value together with sundry expenses.  The parties agreed on the car’s salvage value ($2,003.00) and other expenses incurred by CARS ($2,062.99).  They also agreed that the damaged car, if undamaged, had a market value of $18,490.00.  The dispute concerned whether CARS’s damages should be reduced having regard to the fact that CARS was registered for the purpose of the Goods and Services Tax (‘GST’) and so would obtain an ‘input tax credit’ equal to the GST component on any replacement car it purchased from a commercial vendor.  The Magistrates’ Court of Victoria concluded that the damages should not be so reduced and ordered Mr Yildrim to pay damages to CARS of $18,549.99 together with interest and costs.  Mr Yildrim has appealed against that order under s 109 of the Magistrates’ Court Act 1989.
2	The underlying principles were not in dispute:  
(a)	CARS is entitled to the damages necessary to put it in the position it would have been had the car not been damaged by Mr Yildrim’s negligence, but no more;  
(b)	It is an appropriate method of assessing damages to assess the value of the car in its undamaged state less its salvage value; and
(c)	There is no obligation on CARS in fact to use the damages to purchase a replacement vehicle.   
3	Experience shows that where a price is quoted for a good, there can be uncertainty about whether that price is ‘inclusive’ of a GST component, or whether the GST component still has to be added to that price.  The opinion relied on by which the market value of $18,490.00 for the second-hand Kia Rio was established did not clearly state that that price was inclusive of GST, but the advertisements for other vehicles that it relied on were said to be prices inclusive of GST.  Most importantly, however, the submissions made to the Magistrate made it clear that both parties proceeded below on the basis that the agreed market value of the Kia Rio of $18,490.00 was inclusive of GST.  That is, that its agreed market value was, on my calculations, $16,809.09 plus GST of $1,680.91.
4	It follows from the above that:
(a)	If CARS had sought to sell the Kia Rio immediately prior to the accident, it would have received $18,490.00 from a purchaser, but would have had to remit $1,680.91 out of that amount to the Commonwealth leaving it with net proceeds from that sale of $16,809.09; and
(b)	If CARS had sought to purchase an identical Kia Rio immediately prior to the accident from a car dealer, it would have had to pay $18,490.00, but would have received an input tax credit for $1,680.91, leaving it with a net cost for that car of $16,809.09.
5	An assessment of damages compensates for the effect of the negligent conduct on the particular individual claimant.  The same conduct can result in different levels of loss to different people.  It follows, in my view, that where a claimant’s damages are being assessed by reference to the value of their damaged vehicle, the relevant figure is the cost to that claimant of a replacement vehicle or the amount that that claimant could have realised by selling that vehicle.  If that claimant (for some reason) would not be liable to pay GST on the purchase of a replacement vehicle, the damages awarded should not include a component for GST.  Equally, if that claimant were entitled to obtain an input tax credit, and thus to receive back the GST payable on the purchase of a replacement vehicle, then the damages should not include a component for GST.  To do otherwise would lead to over compensation to the claimant.  Given the measure of damages adopted, this would be the same whether or not that claimant chooses to use the moneys awarded in fact to purchase, or has already purchased a replacement vehicle.
6	For these reasons, on the way the matter was presented to the Magistrate, the only open conclusion was that the amount required to compensate CARS for the loss of the Kia Rio was $16,809.09 (less the salvage value and together with the additional expenses).  To assess damages by the amount of $18,490.00 and to ignore the GST component of that price would be to over-compensate CARS.  Although CARS is not obliged to purchase a replacement car, where damages are assessed by reference to the value of the damaged car, CARS is not entitled to a greater sum in damages than would be the full cost to it of purchasing a replacement car. 
7	CARS asserted that the ‘agreed value’ of the car was $18,490.00 and so that should be the amount by which damages should to be assessed, or at least there was then an onus on Mr Yildrim to establish that some other value should be used.  CARS pointed out that it is only purchases from dealers that attract GST and if CARS were to purchase the notional replacement vehicle for $18,490.00 from a private seller it would not obtain an input tax credit of $1,680.91.  The problem with this argument is that it overstates the extent of the agreement reached, and assumes that the price would be the same regardless of whether GST is added.  As noted above, despite some confusion as to what was in fact agreed, the parties, ultimately, went to the Magistrate on the basis that the ‘agreed value’ was inclusive of GST.  The question of onus did not then arise.  Further, if the market were working efficiently, a private seller who does not have to remit 10% of the purchase price to the Commonwealth might well be prepared to sell the vehicle for less than a dealer who does have to remit 10% of the purchase price to the Commonwealth, and there was otherwise no evidence as to the price at which such a car would trade in an environment where GST was not payable.  
8	A similar conclusion was reached by Croft J in Millington v Waste Wise Environmental Pty Ltd and the Court of Appeal of New South Wales in Gagner Pty Ltd v Canturi Corporation Pty Ltd.  In Millington v Waste Wise Environmental Pty Ltd, Waste Wise Environmental Pty Ltd sought damages for the costs of repairing a rubbish truck damaged by the negligence of Mr Millington.  The repairs attracted GST, but Waste Wise Environmental Pty Ltd was entitled to input tax credits for the GST it would have to pay.  Waste Wise Environmental Pty Ltd was entitled to claim back, but was not obliged to claim back, those credits from the Commonwealth in due course.  Croft J, following statements of principle provided by Almond J in Fulton Hogan Construction Pty Ltd v Grenadier Manufacturing Pty Ltd (in liq), concluded that a proper assessment of damages would not include an allowance for the GST payable.  In Gagner Pty Ltd v Canturi Corporation Pty Ltd, Gagner Pty Ltd negligently flooded Canturi Corporation Pty Ltd’s jewellery store.  Canturi Corporation Pty Ltd subsequently undertook a substantial renovation.  Its damages were limited to the lesser amount that it would have cost just to make good the damage caused and, in assessing that notional amount, the GST components payable were to be disregarded because Gagner Pty Ltd would receive input credits for any such payments.  Campbell JA, with whom Macfarlan JA and Sackville AJA agreed, said:
In summary, as the GST legislation currently stands, if the plaintiff in an action for tort is registered for GST purposes, and stands to receive an input credit for any GST payments incurred in making good its damage, and there is no impediment to the plaintiff receiving the full benefit of the input credit, that GST amount should be excluded from the quantum of damages recoverable. 
9	There is no basis for drawing a distinction between an analysis based on repairing damaged property and an analysis based on replacing damaged property.
10	The Magistrate below, after setting out the competing submissions, stated that:
(a)	There was ‘no evidence’ of CARS ‘having made a “creditable acquisition” by way of a replacement motor vehicle’;
(b)	It cannot be assumed that [CARS] ‘is entitled to’ an input tax credit in respect of compensation to’ it; and
(c)	It follows that CARS was entitled to judgment for an amount calculated without reference to any GST component of the price.
11	In my view, the learned Magistrate, with respect, erred in his approach by focusing on whether CARS had in fact purchased a replacement vehicle and obtained an input tax credit, rather than on the true value of the damaged vehicle in CARS’s hands.  Accordingly, the appeal should be allowed.  Mr Yildrim ought to be ordered to pay damages, as I calculate it, in the sum of $16,869.08, being the value of the car in its undamaged state of $16,809.09 together with its expenses of $2,062.99 but less the car’s salvage value of $2,003.00, rather than in the sum of $18,549.99 that was ordered below.
12	I accept that, on this approach, Mr Yildrim’s liability is less than it otherwise would be because, perhaps fortuitously, he damaged a car owned by a company that was registered for GST and that could obtain input tax credits were it to replace the vehicle instead of an ‘ordinary person’.  That, however, is an inevitable consequence of a legal approach that measures liability by the effect on the injured party rather than by some objective standard.
13	It is not necessary to decide the other grounds of appeal.
14	This appeal concerns a relatively small sum of money, but, I was told, it was of some significance because this or like issues arose regularly in similar cases.  In those circumstances, I make the following observations:
(a)	This case concerns only the exclusion of GST when assessing the value of a damaged vehicle where the claimant is registered for GST and would, if they purchased a replacement, be entitled to an input tax credit.  It does not concern the situation where a claimant would not be entitled to an input tax credit or, possibly, for some reason would be unable to take advantage of it.
(b)	The assessment of damages must focus on the particular circumstances of any particular case.  Nothing in these reasons should be taken to prevent a party in CARS’ position from seeking to establish its loss by reference to, for example, actual moneys spent repairing a damaged vehicle or in fact purchasing a replacement vehicle in circumstances where it did not receive an input tax credit.  Questions of reasonableness might then have to be considered.  
(c)	There was some argument that related to whether the damages payable by CARS to Mr Yildrim were themselves subject to GST.  It was, ultimately, the joint position of the parties that GST was not payable on the damages figure awarded.  This issue was therefore a distraction.  But speaking generally, it is necessary to keep separate the issue of how damages are to be assessed to compensate a party for damage done to its property, and the issue of what, if any, allowance is to be made for the fact that GST may be payable on the damages award itself.
15	I will hear the parties on the form of order and on the question of costs both of the hearing in the Magistrates’ Court and of this appeal.