Miller v McKnight: How Western Australia Is Shaping National Credit Hire Law

1. Why This Case Matters

When the High Court decided Arsalan v Rixon in December 2021, it answered the headline question: yes, a third party can hire a broadly equivalent vehicle. But it left the mechanics of assessing damages almost entirely open.

Three years of uncertainty followed. Lower courts across six states applied different approaches, with no appellate guidance on the most contentious issues: rate assessment, credit hire premiums, and the duty to mitigate.

Then, in 2025, the Court of Appeal of the Supreme Court of Western Australia delivered its decision in Miller v McKnight [No 2] [2025] WASCA 61.

This is the first state-level Court of Appeal decision to address these issues in detail since Arsalan. It's binding across Western Australia and may well prove persuasive across the rest of the country. For credit hire operators, insurers, and lawyers working in this space, it's required reading.

2. The Journey Through Three Courts

The case began with a straightforward collision on 13 May 2019. Ms Miller's vehicle struck Ms McKnight's Opel Astra. Liability was not in dispute. Ms McKnight hired a replacement vehicle from Compass Corp Pty Ltd on a credit hire arrangement while her car was repaired.

Compass charged $95.88 per day for the hire. The total invoice was $3,832.66 for 39 days. RAC Insurance, acting for Ms Miller, offered $1,901.85 based on its assessment of reasonable market rates at $45.33 per day.

The dispute over the remaining $1,930.81 then travelled through three levels of court.

The Magistrates Court (2022)

Magistrate Darge heard the claim at first instance and made several important observations. He noted that "at last count there were almost 1,000 cases involving credit hire car claims" before the WA Magistrates Court, and that credit hire matters "move through the system at a glacial pace."

After comparing Compass's rate to mainstream market rates, the Magistrate concluded that the RAC payment of $1,901.85 represented the median hire rate and that the Compass rate included a credit hire premium that took it outside the market. The claim was dismissed.

The Magistrate's approach was to "look at the costs and, by comparison with the mainstream market, to try to determine what amount represents the credit hire component of the invoice."

The District Court (2023)

On appeal, Levy DCJ overturned the Magistrate's decision on three of the seven grounds argued.

Critically, the District Court held that the Magistrate had asked the wrong question. The issue was not "what is a reasonable rate?" but rather "was the rate actually charged unreasonable?" The burden of proving unreasonableness fell on the defendant.

The District Court also held the Magistrate had failed to consider Ms McKnight's personal circumstances, including that she was pregnant, had a daughter, and worked full-time, when assessing whether she had mitigated her loss.

Judgment was entered for Ms McKnight for $1,930.81.

The Court of Appeal (2025)

Before the appeal was heard, the Court of Appeal itself raised the question of whether the appeal should be struck out on proportionality grounds. The likely legal costs would exceed $30,000, far more than the $1,930.81 in dispute.

The Court declined to strike out. It recognised that "the principles applying to the recovery of credit hire car charges ought to be the subject of a considered decision by this court." There were almost 1,000 similar cases in the system and the aggregate value to the industry was substantial. This wasn't an ordinary dispute. It was a test case.

The Court of Appeal then reinstated the original Magistrate's decision, but on significantly more developed reasoning.

3. The Five Non-Compensable Benefits

The centrepiece of the Court of Appeal's decision is its analysis of non-compensable benefits.

The Court identified five additional services bundled into Compass Corp's hire charges that go beyond the simple provision of a replacement vehicle:

Credit provision. The cost of hiring the vehicle was provided on credit, meaning the customer paid nothing upfront.
Claims agency. The hire car company acted as the customer's "duly appointed agent" to manage the claim against the at-fault party's insurer.
Repair liaison. The hire car company liaised with repairers and monitored the progress of repairs to the customer's damaged vehicle.
Premium roadside assistance. Enhanced breakdown coverage was included in the hire arrangement.
Legal proceedings management. The hire car company undertook legal proceedings to recover the hire costs from the at-fault party.

The Court held that the value of these benefits must be accounted for when determining the amount of consequential damages payable. They are not part of the loss caused by the accident. They are additional services provided by the credit hire company that benefit the customer but aren't recoverable from the at-fault party.

4. The Mitigation Question

The Court of Appeal also addressed the duty to mitigate, an area where the Magistrate and District Court had taken sharply different views.

The Court of Appeal concluded that Ms McKnight had not adequately mitigated her losses. The key finding was that the hire charges were unreasonable because they included components attributable to non-compensable benefits, pushing the total well above mainstream market rates.

The Court emphasised that compensation should reflect mainstream market rates, not inflated credit hire costs. By hiring through Compass at rates that were demonstrably higher than comparable mainstream options, and where the premium was attributable to bundled services rather than the vehicle itself, the claimant had failed in her duty to mitigate.

This is significant because it shifts the mitigation analysis from the claimant's personal circumstances (the District Court's approach) back to an objective comparison with market rates (closer to the Magistrate's approach, but with more sophisticated reasoning).

5. How This Changes Things for Credit Hire Operators

The implications of this decision extend well beyond Western Australia. Here's what operators need to understand.

Bundled pricing models are now vulnerable. If your daily rate includes claims management, roadside assistance, and legal recovery costs, the WA Court of Appeal has said those components are non-compensable. Even if your headline rate looks defensible, the court will look at what's baked into it.

Transparent invoicing is no longer optional. Operators who can clearly separate the vehicle hire cost from additional services will be in a much stronger position. If your base vehicle rate is competitive with mainstream rental companies, the additional services become a separate, potentially recoverable argument rather than a reason to dismiss the entire rate.

Market rate evidence is critical. The Court compared Compass's rate directly to mainstream market rates. Operators should be maintaining contemporaneous evidence of comparable rates from mainstream providers. Without this, you're relying on the court to accept your rate on face value, and that's a losing strategy post-Miller.

The "personal circumstances" argument has limits. The District Court held that the Magistrate should have considered Ms McKnight's personal circumstances in assessing mitigation. The Court of Appeal effectively overruled this, returning to an objective market-based assessment. Personal circumstances may still be relevant in some cases, but they won't overcome rates that are demonstrably above market.

Expect this to be cited nationally. The decision is binding only in Western Australia, but it fills a gap that exists in every state. Insurers in NSW, Victoria, Queensland, and South Australia will cite Miller v McKnight in their defence of rate disputes. Courts in those jurisdictions may find it persuasive, particularly given the absence of equivalent appellate authority.

6. The High Court Question

Turks Legal noted in their analysis that "this is all, of course, subject to a High Court appeal." And that prospect is real.

The stakes are high enough, and the principles broad enough, that a special leave application to the High Court of Australia wouldn't be surprising. If granted, it would give the High Court the opportunity it passed up in Arsalan: to provide detailed guidance on how credit hire damages should be assessed.

Until then, Miller v McKnight is the most authoritative statement on these issues in Australian law.

7. What Operators Should Do Now

Whether you operate in WA or not, the following steps are practical and prudent.

Audit your pricing model. Identify which elements of your daily rate relate to vehicle hire and which relate to additional services. Understand how a court would classify each component under the Miller framework.

Restructure your invoicing. Present vehicle hire as a separate line item from claims management, roadside assistance, credit provision, and legal services. This doesn't mean you can't charge for these services. It means they need to stand on their own merits rather than being hidden in the hire rate.

Build your evidence kit. For every hire, maintain contemporaneous market rate evidence from at least three mainstream providers for the same vehicle class and period. This is your baseline defence.

Train your team. Make sure everyone involved in claims handling understands the distinction between compensable and non-compensable benefits. The language used in customer communications, agreements, and internal notes matters when documents are produced in litigation.

Monitor for a High Court appeal. If special leave is granted, the outcome will reshape the entire industry. Be prepared for either result.

Key Authorities

Miller v McKnight [No 2] [2025] WASCA 61
McKnight v Miller [2023] WADC 107
McKnight v Miller [2022] WAMAG (Magistrate Darge)
Miller v McKnight [2023] WASCA 182 (proportionality hearing)
Arsalan v Rixon; Nguyen v Cassim [2021] HCA 40
Patterson v Kenny [2017] WADC 58

CreditHire-Assist is an AI-powered legal assistant built specifically for Australian credit hire professionals. It draws on a curated knowledge base of Australian case law, legislation, and industry practice to support faster, more accurate claims handling.