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High Court of New Zealand Decisions |
Last Updated: 5 November 2019
FOR A COURT READY (FEE REQUIRED) VERSION PLEASE FOLLOW THIS LINK
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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CIV-2016-004-2229
[2018] NZHC 1876 |
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BETWEEN
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ILAN BLUMBERG
Plaintiff
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AND
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FRUCOR BEVERAGES LIMITED
Defendant
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CIV-2016-004-2200
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BETWEEN
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PETER BOARDMAN
Plaintiff
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AND
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HARRY WANG
Defendant
contd.../2
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Hearing:
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18-26 June 2018
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Appearances:
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D J Chisholm QC, A Wooding, and M Singh for the plaintiffs M G Ring QC for
all defendants; A Barnett for Mr Blumberg; S Connolly for
Mr Boardman; and J
McLennan for Ms Mackey
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Judgment:
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26 July 2018
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JUDGMENT OF JAGOSE J
This judgment is delivered by me on 26 July 2018 at 4.00pm pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
BLUMBERG v FRUCOR BEVERAGES LTD [2018] NZHC 1876 [26 July 2018]
CIV-2016-004-1916
BETWEEN RACHEL MACKEY
Plaintiff
AND HAYLEY SKARRATT
Defendant
Not at-fault drivers obtain replacement car from R2D for period of repair [6]
Defendants resist liability for expense of plaintiffs’ replacement cars
A: does R2D bring proceedings in the plaintiffs’ names?
—maintenance and champerty [17]
B: have the plaintiffs suffered loss?
—reframing the pleading in terms of mitigation expenses [33]
C: have the plaintiffs incurred mitigation expenses? [38]
D: were the plaintiffs’ mitigation expenses reasonably incurred? [42]
—expense of a replacement car [43]
—reasonable expense of a replacement car [48]
—expense of a replacement car, reasonably incurred [55]
—how to assess ‘reasonableness’? [55]
—price comparisons [58]
—back to the ‘prudent driver’ [63]
—delivery and collection costs [65]
—repairer’s independent obligation to repair? [68]
—defendants liable for plaintiffs’ mitigation expenses ... [70]
Schedule: extract from Pattni v First Leicester Buses Ltd
Introduction
[1] A driver loses use of her car for the period necessary to repair collision damage negligently caused by another driver, the cost of repair being borne by the at-fault driver. The not at-fault driver replaces her car with another vehicle rented for the period of the repair. Is the at-fault driver also liable to the not at-fault driver for the replacement vehicle’s expense?
[2] That is the core question before me in each of these three proceedings, brought by not at-fault plaintiffs against at-fault defendants. So stated, the question has an orthodox answer: yes, provided the not at-fault driver acted reasonably in obtaining the replacement car to mitigate her loss of use. “[A] private individual who is inconvenienced by the loss of use of his private vehicle can claim general damages for that loss against the tortfeasor”,1 and “the plaintiff may claim for expenses incurred in taking reasonable steps to mitigate” that loss.2
[3] But in the wings are the defendants’ insurers, and the company from which the plaintiffs rented their replacement cars, Right2Drive (New Zealand) Limited (“R2D”). R2D – operating similarly to its Australian parent, Right2Drive Pty Ltd – provides not at-fault owners with replacement cars for the period of their damaged car’s repair. It does not pursue not at-fault owners for those charges if they abide by the terms of their hires, and assist in the charges’ recovery (successful or not). R2D seeks to recover its charges for the replacement cars from the at-fault drivers or their insurers. The insurers do not always pay: since R2D’s entry to New Zealand in 2016, insurers have declined to pay some $4.22m of R2D’s charges.
[4] Counsel – David Chisholm QC for all plaintiffs (but really R2D), and Michael Ring QC for all defendants (but really their insurers) – describe these consolidated proceedings as a ‘test case’.3 They hope I will decide – in principle, as well as in fact
– whether damages recoverable by each of the plaintiffs should equate to R2D’s charge to them.
[5] More specifically, then, the real question I am to determine here is ‘Is the at-fault driver liable to the not at-fault driver for the price of the replacement vehicle charged by R2D?’.
1 Denne v Mathieson HC Invercargill AP50-87, 4 August 1988 at 8.
2 New Zealand Motor Bodies Ltd v Emslie [1985] 2 NZLR 569 at 598 followed in Dempsey v Howe
[2015] NZCA 9, (2015) 16 NZCPR 203 (CA) at [35].
Not at-fault drivers obtain replacement car from R2D for period of repair
[6] Each plaintiff arranged with the respective defendant’s insurer to attend a repairer. The repairer referred the plaintiff to R2D for a replacement car. The plaintiff contacted R2D, and provided details of the accident, the drivers, the vehicles, and the insurers. R2D selected a replacement car from its fleet, and organised for it to be available to the plaintiff at the repairer’s premises when leaving their own vehicle for repairs, for collection from the same place when the plaintiff recovered the repaired vehicle. It was unclear from the evidence when arrangements were made with R2D. Each plaintiff said in evidence s/he was told R2D would claim the hire costs from the respective defendant’s insurer, whose claim number the plaintiff had given R2D. R2D claimed those costs from the insurers; the insurers have not paid.
[7] The material background for each plaintiff can be depicted as follows:
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Blumberg
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Boardman
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Mackey
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Own car
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2005 Nissan Wingroad
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2015 Mercedes Benz C180 Coupe
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2011 Suzuki Swift
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Date of accident
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10/3/2016
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18/4/2016
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24/2/2016
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Defendant’s insurer
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Vero Insurance
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AMI Insurance
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AA Insurance
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Repairer
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Causeway Panelbeaters
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Ray Haslar Autohaus
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Hauraki Panel and Paint
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R2D’s replacement car
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2015 Mitsubishi ASX
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2012 Skoda Superb
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2016 Holden Barina
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R2D’s daily hire rate
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$114.62
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$138.92
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$112.17
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R2D’s delivery/pickup fee
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$50.00
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$50.00
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$50.00
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Rental period
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14/4/2016-16/5/2016
(33 days)
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16/5/2016-8/6/2016
(23 days)
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11/3/2016-17/3/2016
(6 days)
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R2D’s invoice (excl GST)
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$3,832.46
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$3,245.16
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$723.02
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R2D’s invoice (incl GST)
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$4,407.33
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$3,731.93
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$831.47
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[8] When leaving their car for repairs at the repairer’s premises, each plaintiff met a R2D representative, and executed largely pre-completed R2D documents, described as Application Form, Rental Agreement, Advice of Authority to Act, and Agreement and Authority to Act. Notably, the Rental Agreement’s box headed “Rental Charges (office use only)”, with space to specify ‘Daily Rental’ and ‘Delivery/Pickup’ rates, contained no detail. The Rental Agreement specified “[h]irers are liable for costs incurred during the rental period”, and provided it was “to be read with the Agreement and Authority to Act”.
[9] The Advice of Authority to Act asserted to the relevant insurer the plaintiff’s explanation their car was damaged “as a result of your client’s negligence”, entitlement to reimbursement of “the costs of a replacement vehicle for the period my car is to be repaired”, and expectation the insurer would reimburse “in full for the replacement vehicle costs”. Following in the same one-page document, the Agreement and Authority to Act explains “[i]t deals with the hirer’s legal liability to pay for a hire vehicle issued as a result of a road traffic accident”, and provides:
...
R2D agrees to provide the hire vehicle to the hirer for the hire period as shown on R2D’s tax invoice at the contract rate set out in the RA [Rental Agreement], on credit for the credit period.
R2D will use its best endeavours (not including the commencement of legal proceedings) during the credit period to have the charges paid by the TP [Third Party]. On receipt by R2D of payment from the TP, the hirer will be released from liability for the charges to the value of the payment received from the TP, provided the hirer has fully complied with the obligations imposed on the hirer under this Agreement. After the expiry of the credit period R2D may demand that the hirer pay, and if so demanded the hirer shall pay forthwith, any charges unrecovered from the TP by R2D at that date.
... The hirer agrees to assist, and render all cooperation required by R2D in respect to the implementation and conduct of the recovery process, which the hirer acknowledges may require that the hirer provide statements and documents, and appear in court as a witness.
...
As at the date of this Agreement, the charges are estimated because the hire period is based on an estimated duration of repair or replacement of the damaged vehicle. The final charges will not be known until the expiry of the hire period. The hirer agrees to be liable for such final charges advised by R2D.
‘The charges’ are defined as “[t]he amounts payable pursuant to this Agreement and the accompanying RA, which specifies the contract rates for provision of the hire vehicle”. ‘The credit period’ is defined as “[t]he period of 90 days from the date of issuance of R2D’s tax invoice for the charges”. This credit facility distinguishes R2D from conventional car rental companies, which typically secure payment at the time of the rental.
[10] Under cross-examination, each plaintiff denied any comprehension s/he was liable for the charges. None knew the “contract rate”, or the cumulative charges for
their rental. Prior to being shown it in cross-examination, none had seen R2D’s respective invoice issued against them.
Defendants resist liability for expense of plaintiffs’ replacement cars
[11] Each plaintiff now seeks to recover the amount of R2D’s invoice from each defendant (or, more realistically, from their insurer) as damages. The defendants each admit liability for the respective defined “Negligent Collision”, and admit the car was damaged, and repaired at the defendant’s insurer’s expense.
[12] The plaintiffs’ pleading continues:
(a) “[a]s a result of the Negligent Collision, the Plaintiff was unable to use the Plaintiff’s Vehicle during the [...] period the Plaintiff’s Vehicle was being repaired”;
(b) the plaintiff hired a replacement vehicle from R2D for that period; and
(c) “[as] a result of the Negligent Collision the Plaintiff has incurred the Cost of the Replacement Vehicle”.
[13] Those allegations are denied by the defendants, who plead as affirmative defences:
(a) R2D has no right to bring proceedings in the plaintiffs’ names;
(b) R2D’s support of the plaintiffs’ claims is in breach of rules against maintenance and champerty;
(c) the plaintiffs have suffered no loss because the cost of the replacement cars was borne by R2D; and
(d) the plaintiffs have not mitigated their loss (if any).
If those defences fail, and they are found to be liable to the plaintiffs in damages, the defendants say R2D’s invoices are not reasonable or in accordance with reasonable market hire rates.
[14] I decide these proceedings by answering four key questions:
(a) does R2D bring the proceedings in the plaintiffs’ names?
(b) have the plaintiffs suffered loss (and if so, what loss)?
(c) have the plaintiffs incurred mitigation expenses? and
(d) were each of their mitigation expenses reasonable?
A: does R2D bring proceedings in the plaintiffs’ names?
[15] Although the defendants each affirmatively plead R2D lacks any right to subrogation, Mr Ring addressed no significant argument to the proposition in opening or closing.
[16] Properly understood, ‘subrogation’ is not a right, but a remedy.4 It permits, rather than entitles, an indemnifier to enforce rights held by the indemnified. It is unnecessary to consider its availability in the present circumstances, in which the plaintiffs bring their own proceedings; they are not indemnified by R2D; and R2D acts expressly under their irrevocable appointment as “agent, representative and attorney, to recover the charges”.
[17] For the same reason, neither can it correctly be said (as the defendants each affirmatively plead) R2D’s support of the proceedings crosses the line into tortious maintenance or champerty. This is not a case involving “[a]ssignments of bare causes
4 Boscawen v Bajwa [1995] EWCA Civ 15; [1996] 1 WLR 328 (CA) at 335.
of action ... [which] are, with certain exceptions, not permitted in New Zealand”.5 And the level of control asserted in the proceedings by R2D does not in any event exceed what is reasonable to protect R2D’s provision in business of something of value to the plaintiffs.6
B: have the plaintiffs suffered loss?
[18] In Greig v Tasman Rental Cars Ltd, the Court of Appeal observed general damages were to compensate the owner for being “deprived of the use of the car and the convenience of having it to hand”.7 This statement is echoed in its later observation in Newmans Coach Lines Ltd v Robertshaw, “... general damages will always be due to individuals who are inconvenienced by the loss of use of a private vehicle ...”.8 And Richardson P took the point forward in Nauru Local Government Council v New Zealand Seamen’s Industrial Union of Workers:9
A successful plaintiff is entitled to be awarded such sum as will fairly compensate for the loss actually sustained as a result of the tort. That sum is to be assessed having regard to the facts of the particular case. Special damages are such damages which are pleaded and then proved in dollars and cents and general damages are such damages which although not capable of accurate quantification nevertheless can be shown to flow from the tort and are computed in broader terms on what is often referred to as a jury basis.
[19] Nauru Local Government Council was one of a long line of admiralty cases “in which similar questions of damages in tort have arisen in relation to the loss of use of the vessel while undergoing repairs”.10 The factual scenario of a car accident is in many respects materially similar. After reviewing these authorities, Richardson P concluded:11
... what sum will fairly compensate the plaintiff for the loss it has sustained through being tortiously deprived of the use of its vessel depends on the facts of the particular case; that a plaintiff is entitled to recover for loss of profits
5 Waterhouse v Contractors Bonding Ltd [2013] NZSC 89, [2014] 1 NZLR 91 at [57].
6 At [46].
7 Greig v Tasman Rental Cars Ltd [1982] 2 NZLR 171 (CA) at 173.
8 Newmans Coach Lines Ltd v Robertshaw [1984] 1 NZLR 53 (CA) at 57.
10 At 473.
11 At 477. See also at 485 per Casey J.
which could reasonably be expected to have derived but for the tort; and that where an asset would not have been employed for immediate commercial profit the owner is entitled to damages for the loss of the reasonable use to it of the asset which may ordinarily be measured by the cost to which it had committed itself in respect of the vessel for the period, (including an interest allowance in respect of the capital value of the vessel, amortisation and maintenance) together with additional outgoings to which it has been committed by the tort.
[20] Somers J agreed, adding “[o]ne aspect of proprietary or possessory rights in a chattel is the ability to do with the chattel whatever the owner may wish”:12
... Lord Halsbury in The ‘Mediana’ stressed that mere deprivation of a chattel sounds in damages and illustrated that by the example of the taking of a chair in which case it was nothing to the point that the owner did not usually sit in the chair or that there were other chairs available. The case cannot be changed by the fact that the intended user may be unprofitable, even foolish. The damages result from the deprivation. It could surely not be the case that if the Nauru Council had chartered another vessel to take the place of the Enna G during its enforced stay in Wellington the cost of such hire would not be recoverable.
The principle is that applied in Newmans Coach Lines Ltd v Robertshawe ... namely, that the owner of a chattel who is tortiously deprived of it is entitled to damages, not merely nominal, for such deprivation. Such damages compensate for the loss of the ability to use the chattel whether that user be for commercial or pleasure purposes, and embrace the mere ability to use it, where no precise intended user can be proved.
[21] Tipping J relied on these judgments in Denne v Mathieson, a case relating to damages for loss of use of a car, until repaired of the defendant’s negligent damage. His Honour considered:13
It is clear that there is no universal touchstone or formula which ought to be applied to this sort of case. It is a matter of working out what loss, inconvenience or relevant damage was within the ambit of reasonable foreseeability and then by using such materials as may be available it is a matter of determining what broadly is a fair figure to place on the qualifying losses.
[22] Mr Ring emphasised Richardson P’s ‘loss actually sustained’, to turn to cases in the United Kingdom and in Australia. The former are described as depicting a
13 Denne v Mathieson, above n 1, at 11.
“Titantic struggle” in the “credit hire war”,14 comprising at least four separate battles,15 and continuing skirmishes.16 At least in the United Kingdom, hostilities appeared to be initiated by the significant margin above conventional car rental company rates charged by the credit hire companies.
[23] The substance of the principal United Kingdom cases is usefully précised in
Stevens v Equity Syndicate Management Ltd as establishing:17
[T]he loss of the use of a vehicle as result of the negligence of another driver is a loss for which, in appropriate circumstances, the innocent party can recover damages. It is the duty of the innocent party to mitigate his loss, and if the loss of the use of the vehicle can be mitigated by the hire of a replacement vehicle, the cost of that replacement vehicle will be the measure of damages recoverable for the loss he has sustained.
Further, such an innocent party who hires a replacement vehicle on credit hire terms suffers a loss which is also recoverable as damages provided always that he has acted reasonably.
[24] But the balance of the latter paragraph unhelpfully blurs the distinction between compensatory damages and mitigation expenses:
Nevertheless, and even if he has acted reasonably, the innocent party may not be able to recover the full amount of the credit hire rate that he has agreed to pay to the credit hire company. It all depends upon his financial circumstances. If he could have afforded to hire a replacement vehicle in the normal way, that is to say without credit hire terms and by paying in advance, then the damages recoverable will be that sum which is attributable to the basic hire rate (or BHR) of the replacement vehicle. If, on the other hand, he is impecunious and could not have afforded to hire a replacement vehicle by paying in advance then, prima facie, he is entitled to recover the whole of the credit hire rate he has paid, provided it was a reasonable rate to pay in all the circumstances.
14 Judge Platt, “A Titanic struggle” New Law Journal (22 October 2010) 1454. See also Berrymans Lace Mawer “Credit hire claims” Motor claims update (November 2008) 27.
15 Giles v Thompson, above n 3; Dimond v Lovell [2002] 1 AC 384; Burdis v Livsey [2002] EWCA Civ 510, [2003] QB 36; and Lagden v O’Connor [2001] UKHL 64, [2004] 1 AC 1067.
16 Most recently Irving v Morgan Sindall PLC [2018] EWHC 1147, which marks “the silver anniversary ... [of] the first major battle in the continuing war of attrition between credit hire companies and motor insurers”: at [1].
17 Stevens v Equity Syndicate Management Ltd [2015] EWCA Civ 93 at [10]. The judgments’ principles are also collected at greater length in Pattni v First Leicester Buses Ltd [2011] EWCA Civ 1384, [2012] Lloyd’s Rep IR 577 at [29]-[41], replicated at the Schedule to this judgment for reference.
As illustrated by the paragraph’s final proviso, the innocent party’s financial circumstances are relevant to the reasonableness of actions taken in mitigation. They are not a further qualification on recovery of mitigation expenses, reasonably incurred. Those financial circumstances are not for consideration “[n]evertheless, and even if he had acted reasonably”. Rather, the fact ‘he had acted reasonably’ means they had already been taken into account.
[25] Consistently with some of the judgments it summarises,18 Stevens characterises mitigation expenses as a measure of compensable loss. The confusion seems to spring from a misreading of Dimond v Lovell, in which Lord Hoffman is clearly disagreeing with the Court of Appeal’s analysis of recovery of replacement vehicle expenses as damages for compensable losses.19 Instead, Lord Hoffman identifies mitigation expenses are recoverable in (but not as compensatory) damages.20
[26] To put that another way, the normal measure of damages is compensatory; at least as general damages, valuation of the loss is conceptual. By contrast, the mitigation expense is real. The reasonable expense of a replacement car as a measure of – or ‘proxy’ for – loss of use may not be the same as the expense of a replacement car, reasonably incurred in mitigation of that loss. There may be some marginal difference, depending on how ‘reasonableness’ is to be assessed in either calculation. I return to the point at [44] below.
[27] The Stevens passage also illustrates a seemingly irresistible temptation on the part of the United Kingdom courts to legislate for what is to be considered reasonable.
Thus, in Pattni (on the Bent appeal), Aitken LJ summarises:21
[T]he questions are: (i) did the claimant need to hire a replacement car at all; if so, (ii) was it reasonable, in all the circumstances, to hire the particular type of car actually hired at the rate agreed; if it was, (iii) was the claimant “impecunious”; if not (iv) has the defendant proved a difference between the credit hire rate actually paid for the car hired and what, in the same broad geographical area, would have been the BHR for the model of car actually hired and if so what is it; if so, (v) what is the difference between the credit hire rate and the BHR?
18 For example, see Burdis v Livesey, above n 15, at [134] and [147].
19 Dimond v Lovell, above n 15, at 401-402.
20 I return to Lord Hoffman’s analysis at footnote 43 below.
21 Pattni v First Leicester Buses Ltd, above n 17, at [73].
Such an approach does not sit comfortably with the New Zealand preference – evident in the cases discussed above – to assess general damages on a ‘broader’ basis.
[28] From the United Kingdom decisions, Mr Ring moved to personal injury damages decisions of the High Court of Australia. In the High Court of Australia’s decision in Blundell v Musgrave, Dixon CJ said:22
It may be safely stated as a general proposition of law that, before a plaintiff can recover in an action of negligence for personal injuries an item of damages consisting of expenses which he has not yet paid, it must appear that it is an expenditure which he must meet so that at the time the action is brought, though he has not paid it, he is in truth worse off by that amount.
Although the Chief Justice was dissenting in the result, all judges in Blundell agreed recovery required “actual financial loss”, which the High Court of Australia in CSR Ltd v Eddy upheld as being the “traditional view of the law”.23
[29] Mr Chisholm, for his part, relied on Anthanasopoulos v Moseley, in which the New South Wales Court of Appeal held:24
... injury to property which deprives a party of the use of the thing is compensable. It is irrelevant if a third party provides a substitute for the thing damaged and the principle res inter alios acta applies so as to make it irrelevant as to the basis upon which the third party provides the replacement.
[30] I do not find the Australian cases particularly helpful in articulating a New Zealand approach.
[31] The cases are determinedly focusing on “actual financial loss” recoverable for negligent personal injury – as distinct from the other categories recognised in CSR Ltd v Eddy, respectively for non-pecuniary loss for pain and suffering, and then loss of earning capacity.25 That this third type of loss has been adopted, or adapted, to
22 Blundell v Musgrave [1956] HCA 66, (1956) 96 CLR 73 at [5].
23 CSR Ltd v Eddy [2005] HCA 64, (2005) 80 ALJR 59 at [31].
24 Anthanasopoulos v Moseley [2001] NSWCA 266, (2001) 52 NSWLR 262 at [58]. Mr Ring sought to undermine this case on the grounds it inappropriately adopted the High Court of Australia’s decision in Griffiths v Kerkemeyer [1977] HCA 45, (1977) 139 CLR 161, which was disapproved in CSR Ltd v Eddy. But Beasley JA’s principal judgment in Anthanasopoulos, with which the other judges agree, is explicit it is determined “without reference to Griffiths v Kerkemeyer”: at [37].
25 CSR Ltd v Eddy, above n 23, at [28].
determine liability for the costs of credit hire after negligent vehicle accidents does not assist me here.
[32] By ‘actual financial loss’ in personal injury cases, the Australians are referring to special damage, directly arising from the negligent act. But loss of use of a vehicle due another’s negligence is, in itself, general damage. That is all I comprehend Anthanasopoulos relevantly to be saying: such loss is ‘compensable’. The quantum of that loss may be valued by, among other things, reference to the reasonable cost of a substitute. And mitigation expenses, reasonably incurred, may be recoverable.
—reframing the pleading in terms of mitigation expenses
[33] As pleaded, the plaintiffs’ claims appear to be for special damage: they seek the cost of the replacement vehicle allegedly caused by the negligent collision.26 But a moment’s reflection shows that characterisation cannot be maintained. Nothing in the collisions caused the plaintiffs to, or even made it reasonably foreseeable the plaintiffs would, hire a replacement vehicle and so incur the claimed cost. A not at-fault driver may not have required a replacement car. For example, any necessary repair may have coincided with a plaintiff’s absence overseas, or such travel as was required for the period of repair may have adequately been accommodated by public transport or taxis.
[34] It is plain the plaintiffs’ reasonably foreseeable loss is two-fold: on the one hand, reduction in their cars’ value by reason of the damage incurred; on the other, loss of use of their cars for the period of the repair. These are the losses ‘actually sustained’, to use Richardson P’s phrase in Nauru Local Government Council, for which damages are in principle recoverable from the defendants.
[35] And, as is orthodox, the normal measure of recoverable damages in tort is:27
... the sum of money which will put the party who has suffered a loss in the same position as he would have been had he not sustained the wrong for which he seeks compensation.
27 Attorney-General v Geothermal Produce New Zealand Ltd [1987] 2 NZLR 348 (CA) at 359.
The ‘position’ the plaintiffs would have been in, had they not sustained the wrongs for which they seek compensation, is with continued use of their undamaged cars.
[36] From that perspective, it cannot be said these plaintiffs suffered no loss. The damage loss is remedied by the insurer’s repair of the car (or otherwise the cost of such repair28). What remained was the loss of use while the car was in repair. But that has wholly been mitigated by the replacement car.
[37] As the Court of Appeal held in Dempsey v Howe, I am entitled to approach the plaintiffs’ claims for damages from mitigation principle.29 Thus the issue becomes whether the plaintiffs are entitled to recover their mitigation expenses – that is, whether those expenses have been reasonably incurred.
C: have the plaintiffs incurred mitigation expenses?
[38] Mr Ring says there is nothing to recover, because the plaintiffs each obtained a replacement car from R2D for the period of the repair, completely remedying or mitigating their loss of use, without incurring any obligation to pay for it. He explains the lack of obligation arises in two ways, the first being the ineffectiveness of the R2D contract. But there is also R2D’s explicit disavowal that the plaintiffs (having abided by their terms of hire, and assisted in recovery of R2D’s charges from the insurers) should ever be required to pay for their replacement car hires.
[39] The R2D contractual documentation is infelicitously drafted. They omitted (as was R2D’s practice) to specify “the contract rates” by the time of the parties’ entry into the Rental Agreement, meaning the Agreement and Authority to Act lacked the defined “charges”. The charges’ contractually-anticipated ‘estimation’ and ‘finalisation’ were therefore nullities. To the extent the Agreement and Authority to Act can be read to provide the hirer’s freestanding agreement “to be liable for such final charges advised by R2D”, R2D never advised the plaintiffs of the final charges, preferring to submit them exclusively to the defendants’ insurers.
28 Gardiner v Metcalf [1994] 2 NZLR 8 (CA) at 13.
29 Dempsey v Howe [2015] NZCA 9, (2015) 16 NZCPR 203 at [35]- [37].
[40] However, Mr Ring’s submission is not immediately attractive, not least because nothing in life is ‘free’. The plaintiffs may be liable to R2D notwithstanding its agreement not to seek recovery from them.30 Doubtless, the contractual interpretation arguments are available to the plaintiffs, as against R2D. They may, or may not, be successful. But there is something in Mr Chisholm’s submission the Court will strive to give efficacy to commercial arrangements.31
[41] More significantly, R2D would not provide the cars to the plaintiffs without their entry into the contractual documents, by which it gained their authority “to recover the costs of a replacement vehicle” on each plaintiff’s behalf, and recorded their obligation to pay. It is unarguable obtaining the replacement car had a cost, which is the mitigation expense claimed. And R2D is entitled to waive its rights against the plaintiffs. Any ‘sloppiness’ in the operation of R2D’s business, in which it is not alone,32 does not entitle insurers to avoid liability to the defendants (and, on their behalf, to the plaintiffs).
D: were the plaintiffs’ mitigation expenses reasonably incurred?
[42] Despite the issue being raised on the pleadings, the defendants conceded in submission it was reasonable for each plaintiff to obtain a replacement car, while theirs were being repaired. The issue is whether hiring the R2D vehicles was reasonable. The defendants affirmatively plead the expense of the plaintiffs’ steps taken in mitigation was unreasonable, and to that extent should not be recoverable from them.
[43] In damages, the principle of mitigation qualifies the principle of compensation.33 Mitigation issues arise after a defendant is established liable for the
30 By way of analogy, see Accent Management Ltd v Commissioner of Inland Revenue [2007] NZCA 230 (CA) at [121] citing Peterson v Commissioner of Inland Revenue [2005] UKPC 5, [2006] 3 NZLR 433 at [44].
31 Compcorp Ltd v Force Entertainment Centre Ltd [2003] NZCA 98; (2003) 7 NZBLC 103,996 (CA) at [25].
32 Burdis v Livsey, above n 15, at [39].
33 Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR 726 at [55] per Elias CJ citing British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 (UKHL) at 689; and approved in Wu v Body Corporate 366611 [2014] NZSC 137, [2015] 1 NZLR 215 at [134].
normal measure of damage.34 It is open to a defendant then to prove there were reasonable steps open to the plaintiff to reduce the loss incurred, for any excess in which the defendant is not liable.35 Whether the steps were reasonable is to be considered in light of all the circumstances (including the plaintiff’s own interests).36 But the defendant then is liable for the expense of such reasonable steps taken (whether or not effective in reducing or eliminating the loss).37
[44] On the present facts, the loss of use was completely mitigated – that is, reduced to nothing – by hiring the replacement car, the reasonably incurred expense of which is recoverable from the defendants. As previously said,38 the reasonable expense of a replacement car may not be the same as the expense of a replacement car, reasonably incurred. There may be some marginal difference, depending upon how ‘reasonableness’ is to be assessed in either calculation.
[45] To explain that further, by way of example, in Nauru Local Government Council, Richardson P identified a measure of loss of use as:39
... the cost to which it had committed itself in respect of the vessel for the period, (including an interest allowance in respect of the capital value of the vessel, amortisation and maintenance) together with additional outgoings to which it has been committed by the tort.
As the Judge explained, such would be claimed as special damages, if capable of accurate quantification, to be “proved in dollars and cents”.
[46] An alternative measure of the loss of use, now as general damages, is Stevens’ “cost of [the] replacement vehicle”. Although not incurred by the plaintiff, such cost is a proxy for the particular loss of use. In that setting, the reasonable cost of a replacement car reflects the value of the plaintiff’s continued use of an undamaged car.40 Here, what is ‘reasonable’ is to be determined by reference to that counterfactual.
34 Williams v K F Meates and Co Ltd (1971) 1 NZCPR 594 (CA) at 599.
35 Lander v Sorensen [1955] NZLR 219 (CA) at 228.
37 New Zealand Motor Bodies Ltd v Emslie, above n 2, at 598.
38 See at [26] above.
39 See at [19] above.
40 See at [35] above.
[47] But the plaintiff will suffer no loss of use if in fact she obtained a replacement car. Instead, she has incurred a mitigation expense, which is recoverable in damages to the extent it is reasonably incurred. Whether the cost of that replacement car is the same as would be reasonable by reference to the preceding counterfactual is immaterial. That is because mitigation expenses are not reflecting the value of the loss, but are the cost of avoiding its impact. That cost is recoverable in damages to the extent it was reasonably incurred.
—reasonable expense of a replacement car
[48] In submission, Mr Ring contended for a range of options open to the plaintiffs
– to obtain the replacement car from conventional car rental companies, or through their own or the defendants’ insurers, or from the repairer, or from R2D. He argued the plaintiffs’ election of R2D – without consideration of the other options, despite R2D allegedly carrying higher charges – was “the very definition of unreasonableness”.
[49] Alternative scenarios were drawn out from each plaintiff in cross-examination. Had any of the plaintiffs understood they may be liable for the expense of the replacement car:
(a) Mr Blumberg would have considered whether he would better have been served by another car rental company, either directly or through his defendant’s insurer;
(b) those were opportunities also open to Mr Boardman, who additionally had recourse to his own insurer; and
(c) while Ms Mackey’s restricted licence may have complicated her comprehended access to another rental company’s car, she would have waited for the repairer’s courtesy car to come available.
[50] In those scenarios, it was argued if a plaintiff would not have incurred the expense of a replacement car, incurred instead by the insurer or repairer, s/he would
have suffered no loss;41 alternatively, if incurring the expense of a replacement car superior to the plaintiff’s own, s/he could not recover that ‘betterment’ from the defendants.
[51] The defendants subject the plaintiffs’ replacement cars from R2D to pedantic scrutiny, even to the point of complaining not to have been credited the plaintiffs’ savings in depreciation and running costs for the distances travelled in the replacement cars. They say each plaintiff must establish:
(a) first, the appropriate car available for hire – either as the equivalent of that of which use is lost, or such lesser specification as the plaintiff would accept for the purposes of replacement;
(b) next, the appropriate charging basis, given the duration of the repair. Conventional car rental companies appear to charge on a daily, weekly, fortnightly, or monthly basis (or some other combination of days) – each longer period serially giving rise to greater discounted daily rates;
(c) then, the subset of compensable benefit contained in the car’s rental price – that is, to exclude the contended uncompensable benefit derived from the credit hire facility, including the provision of credit, avoidance of any need further to pursue the defendants, and avoidance of recovery risk. Mr Ring proposed, in an exercise of “judicial creativity”,42 I apply a $150 reduction to each established claim;43 and
41 Again, however, nothing in life is free: if a replacement car is obtained, somewhere it has a cost. If no replacement car is obtained, the plaintiff continues to suffer loss of use of his or her own car.
42 Relying on J B Caldwell Ltd v Logan House Retirement Home Ltd [1998] NZHC 988; [1999] 2 NZLR 99 (HC) at 105.
43 Mr Ring’s deduction is to pay lip service to Lord Hoffmann’s exclusion of non-compensable “additional services” in Dimond v Lovell, above n 15, at 393. But Lord Hoffmann was there excluding them from recovery in damages for compensable loss, as the Court of Appeal incorrectly had included. Instead, to assess whether there were any “additional benefits” obtained from reasonable mitigation steps (in which compensatory considerations do not apply), Lord Hoffmann allowed at 402: “prima facie their value is represented by the difference between what she was willing to pay 1st Automotive and what she would have been willing to pay an ordinary car hire company for the use of a car” (ie, if 1st Automotive’s prices were meaningfully above that of the ordinary car hire company). The ‘additional benefits’ are not ‘deductions’ to be applied in every case, but spring from British Westinghouse’s explanation of the scope of recoverable mitigation expenses. Any concerns about ‘betterment’ are better addressed in this context.
(d) last, in reliance on Stevens v Equity Syndicate Management Ltd,44 “the lowest rate that would have been available from a ‘mainstream’ rental car company for the equivalent vehicle in the relevant geographical area”.45
[52] Ultimately, if damages were payable at all, the defendants contended the maximum recoverable damages were to be calculated as follows:
|
|
Blumberg
|
Boardman
|
Mackey
|
|
Own car
|
2005 Nissan Wingroad
|
2015 Mercedes Benz C180 Coupe
|
2011 Suzuki Swift
|
|
Equivalent rental car
|
2008-2010 Nissan Wingroad
|
2014 Lexus ES300h
|
2011 Hyundai Getz or 2011 Toyota Yaris
|
|
Rental car company
|
GO Rentals
|
Hertz
|
GO Rentals
|
|
Rental period
|
33 days
|
23 days
|
6 days
|
|
Lowest comparable rate
|
$72.17
|
$129.48
|
$55.65
|
|
Sub-total
|
$2,381.61
|
$2,978.04
|
$339.12
|
|
Less $150
|
$2,231.61
|
$2,828.04
|
$324.12
|
This may be compared to R2D’s invoices (omitting the delivery/collection fee):46
|
|
Blumberg
|
Boardman
|
Mackey
|
|
R2D’s invoice (excl GST)
|
$3,782.46
|
$3,195.16
|
$673.02
|
[53] As with some of the United Kingdom cases on which they relied, the defendants’ approach is to confuse compensable loss with mitigation expenses. It is to quantify the reasonable expense of a replacement car in the abstract, rather than to identify the (un)reasonableness of the expense of the replacement car in reality. That it is an exercise conducted in hindsight is illustrated by the defendants’ use of conventional car rental companies’ longer rental periods corresponding more to the (then unknown) period of repair to establish contended lower comparative daily rates.
[54] That confusion also may explain the defendants’ express, and incorrect, assertions the plaintiffs bore the onus of proof their mitigation expenses were reasonable. But, conceptually, once a defendant is liable to pay compensatory
44 Stevens v Equity Syndicate Management Ltd, above n 17, at [39].
45 Mr Ring’s $150 deduction would then be double-counting.
46 It is not clear to me why the defendants’ calculation of damages omits GST incurred by the plaintiffs. If a plaintiff was not GST-registered, of which there was no evidence (Mr Boardman’s evidence being as to his employing company), their claim is rightly brought for the GST-inclusive figure incurred by them.
damages, it is for the defendant to prove a plaintiff has failed to take reasonable mitigatory steps in response to the defendant’s wrong.47 That is the correct focus for the defendants’ ‘requirements’ enumerated at [51] above.
—expense of a replacement car, reasonably incurred
—how to assess ‘reasonableness’?
[55] As the Court of Appeal observes in Hooker v Stewart, citing Halsbury's Laws of England (4th ed) at 1194, the plaintiff seeking to reclaim mitigation expenses “is only required to act reasonably”, and further:48
... whether he has done so is a question of fact in the circumstances of each particular case, and not a question of law. He must act not only in his own interests but also in the interests of the defendant and keep down the damages, so far as it is reasonable and proper, by acting reasonably in the matter. One test of reasonableness is whether a prudent man would have acted in the same way if the original wrongful act had arisen through his own default. In cases of breach of contract the plaintiff is under no obligation to do anything other than in the ordinary course of business, and where he has been placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the defendant whose breach of contract has occasioned the difficulty. Similar principles apply in tort.
[56] Importantly, what is ‘reasonable’ in all the circumstances is not to be regarded with too critical an eye in hindsight, but from the perspective of what would have appeared reasonable to the plaintiff at the time.49 From that perspective:
- (a) it is relevant a plaintiff could not afford to take steps in mitigation.50 Mr Blumberg and Ms Mackey each said they could not afford to pay for a rental car other than on credit. Neither may then be criticised for preferring R2D’s credit terms to the up-front payment requirements of conventional car rental companies (which were in any case apparently unavailable to Ms Mackey, given her restricted licence);
47 Treloar v Henderson [1968] NZLR 1085 (HC) at 1089.
48 Hooker v Stewart, above n 36, at 547.
49 At 547.
50 Attorney-General v Geothermal Produce New Zealand Ltd, above n 27, at 359-360.
(b) it is relevant the material options exclude steps taken by the plaintiff before the wrong occurred, which happen to reduce losses incurred. The plaintiff is not required to give the defendant the benefit of an insurance policy taken out to protect against the very wrong the defendant has committed.51 Thus at least Mr Boardman’s potential recourse to his own insurer does not undermine his obtaining a replacement car from R2D. Such indemnification would likely, anyway, have permitted subrogation of his claim against the defendant to that insurer; and
(c) where plaintiffs have options, their reasonable adoption of one is not to be held against them simply because another may be said a more effective or economical mitigatory step.52
Here, however, the reasonableness assessment is complicated by the plaintiffs’ lack of comprehension of personal liability to R2D, and therefore the absence of any clear indication of their decision-making at the time, other than to seek a replacement car for the period of the repair.
[57] Because the plaintiffs’ need for a replacement car is accepted,53 and any impecuniosity is to be disregarded,54 the most helpful test of reasonableness is whether such a prudent driver would take up R2D’s replacement car for a period to repair damage they caused to their own car.55
—price comparisons
[58] R2D’s managing director, Damien Mullins, explained in evidence in chief, after an application for hire has been approved, R2D provides the hirer with a similarly specified car from its modern fleet, and sets a rate for the hire on the day of the hire’s commencement. He further explained R2D personnel conducted internet searches of car hire company and comparison websites “to ascertain current market rates for a comparable vehicle” to each plaintiff’s car, and produced the Avis, Budget, and
51 Anscombe v Paul Christie Ltd [1991] 2 NZLR 176 (CA).
52 Gebruder Metalmann GmbH & Co KG v NBR (London) Ltd [1984] 1 Lloyd’s Rep 614 at 634.
53 See above at [42].
54 See above at [56].
55 See above at [55].
Europcar searches used to set the plaintiffs’ daily hire rates for the similarly specified car in R2D’s fleet.
[59] R2D engaged a consultant, The Data Group, to “harvest pricing using a data scraping process” from car hire websites – in New Zealand since November 2015, from Avis, Europcar, and Hertz. The Data Group’s chief executive officer, James Karis, illustrated the plaintiffs’ daily hire rates were in the vicinity of the average daily hire rate for comparable vehicles across the whole of 2016, and within the range of daily hire rates for comparable vehicles for each plaintiff’s particular rental periods. Even within the specific periods of each plaintiff’s repair, prices for comparable cars from conventional car rental companies showed significant range above and below R2D’s price.
[60] Consideration must also be given to R2D’s business model in evaluating its prices. While R2D also hires its cars at those same rates to the general public, at issue here is its rental business for not at-fault drivers. R2D’s chief financial officer, Timothy Warren, explained:
(a) unlike conventional car rental companies, whose rates (and other conditions and charges) dynamically respond to more predictable factors of supply and demand to secure optimal fleet utilisation, R2D’s business model must be responsive to unpredictability. R2D must provide not at-fault drivers with replacement cars on short notice for indeterminate periods of repair. In both these respects, R2D’s fleet utilisation is thus necessarily less efficient than that of conventional car rental companies;
(b) for reasons of reliability and maintenance costs, R2D prefers to maintain a modern fleet, comparable with those of the conventional car rental companies, in distinction from the older fleets of budget car rental companies; and
(c) it was appropriate to establish R2D’s pricing by reference to the published daily rates of comparable vehicles in the fleets of
conventional car rental companies (now obtained from The Data Group’s continuing work for R2D).
[61] Evidence from insurers and conventional car rental companies inferentially acknowledged the unique challenges of R2D’s business:
(a) James Dalglish, the general manager of the budget car rental company, GO Rentals, explained his company is “a utilisation business and ... we generally try to price to demand and peak so we would have some variations”. Some of those variations would be dependent on how far in advance the rental car was booked, which would “achieve a much better rate than somebody booking right at the last minute”; but
(b) as explained by Kereti Magalogo of AA Insurance Limited, timeframes for repairing cars cannot be estimated with precision. While the normal repair timeframe is between five to seven days (allowing a day either side for drop off and pick up), he said the insurer’s experience was “a shortage of qualified repairers” means “it can sometimes take days or weeks for a job to be completed”.
[62] Their evidence also illustrated R2D’s prices broadly reflect market rates:
(a) Christopher Kiddey, an employee of the insurer, IAG New Zealand Limited, in answer to questions from me, agreed “there are points at which [R2D]’s invoices at least more or less correlate with [IAG’s] appreciation of the market rate”;
(b) numerous specific comparisons were made in the evidence of Miriam Monk, an employee of Hertz:
(i) she stated Hertz typically rented replacement cars for “a nine day hire period”, that being “our experience of our understanding of how long the vehicles are generally out on rent with us in that scenario”. Engaging the applicable 8-14 day $113 daily rate for a Subaru Legacy, the comparable vehicle in the Hertz subsidiary Ace Rental budget fleet to Mr Blumberg’s
Nissan Wingroad, gave a near identical rate to the $114.60 charged by R2D;
(ii) Hertz’s daily rates of $129.48 and $159.18 for a Lexus ES300h, the comparable vehicle to Mr Boardman’s Mercedes, spanned the $138.92 charged by R2D;
(iii) Hertz’s Holden Barinas were rented out at daily rates ranging from above ($121.77) to below ($69.49) the $112.17 charged by R2D. Her evidence was that “the same daily rate doesn’t apply on every single day and this is pointing to the fluctuation of how pricing can be in the market and how our pricing operates”; and
(c) relevantly, Mr Dalglish of GO Rentals thought Hertz’s figures “sound about right”.
—back to the ‘prudent driver’
[63] The question remains: would a prudent driver take up R2D’s replacement car for the period of repair? A prudent driver can be taken to have some comprehension of the approximate cost of a rental car for the likely period of repair. It is unlikely to be a better comprehension than prospectively was had by insurers or conventional car rental companies.
[64] The general consistency of R2D’s prices with those of conventional car rental companies – together with the more fit-for-purpose terms of R2D’s hire for a replacement vehicle for an indeterminate period of hire – suggests a prudent driver may well have been prepared to take R2D’s offering in circumstances of their own default. Such prudent drivers would also factor in the mismatch between their uncertain requirements and conventional car rental companies’ requirements for predetermined rental periods (with only discretionary extensions, usually without further discount to price). That defendants could establish a lower-priced (let alone the lowest-priced) car may have been available to plaintiffs in those circumstances is ‘to weigh their effort in too nice a scale’.
—delivery and collection costs
[65] Two further issues are raised by the defendants. First, they say “the plaintiffs have the onus of establishing that both the delivery and collection costs claimed are reasonable”. That is wrong: as I have explained at [54] above, the onus is on the defendants to establish the opposite contention. R2D charged a flat $50 fee to deliver and collect the replacement cars, at the same time as the plaintiffs delivered and collected their own cars for repair, at the repairer’s premises. Ms Monk said Hertz provided the same service, for an average fee she estimated at $60.
[66] The convenience of such a seamless service is not without its attractions. The
$50 fee was not expressly addressed with Ms Mackey. But Mr Blumberg explained he chose a repairer immediately accessible to his work, implicitly because of its convenience. To obtain (and return) the defendant’s proposed replacement car would require him to incur a $30 taxi fare in each direction, or to have a work colleague drive him to a closer car rental company. Mr Boardman disputed Mr Ring’s suggestion he “would have gone with the cheapest option that gave [him] a vehicle he was satisfied with”. He answered “[p]erhaps and perhaps not, the convenience of [R2D] was a good thing as far as I was concerned”. Perhaps presciently, given the ‘prudent driver’ test, Mr Ring asked if his answer would change had he understood he was paying $50 for that convenience. Mr Boardman responded he thought it “was perfectly reasonable for the time I would waste doing it myself”, although he allowed that would depend on the respective locations of R2D and the repairer.
[67] Again, not to weigh matters on too nice a scale, I see nothing unreasonable in the plaintiffs incurring R2D’s delivery and collection fee, which is comparable to that charged by Hertz, and provides continuity of use. Each break in that continuity is an opportunity for further loss, for which compensable damages are recoverable. The continuous availability of a car to the plaintiff is what wholly mitigates the loss of use.
—repairer’s independent obligation to repair?
[68] Second, Frucor asserts the repairer had an independent obligation to repair Mr Blumberg’s vehicle in a timely manner. Because the repairer had overlooked ordering particular parts necessary for the repair, and retained the car while those
further parts were obtained, the repair took longer than was otherwise necessary. In reliance on United Kingdom and New Zealand cases about the contractual matrix between insurer, repairer and the insured,56 Mr Ring contended for a contractual matrix under which the repairer had direct obligations to the not at-fault driver, the at- fault driver’s insurer only having an obligation to meet that driver’s liabilities. This led Mr Ring to argue the delay in Mr Blumberg’s repair was an intervening cause for which Frucor should not be liable as arising out of its negligence.57
[69] The analysis again fails in its reliance on measures of compensable loss, as distinct from the reasonableness of Mr Blumberg incurring the mitigation expense. The cost of the repair was to be borne by the insurer, which directed Mr Blumberg to one of its preferred repairers. The reasonableness of Mr Blumberg incurring the mitigation expense for the full period of his loss of use of his car is not undermined by the repairer’s negligent contribution (if any) to the length of that period. Possibly the insurer has a claim for contribution from the repairer. But loss of use remains solely attributable to the at-fault driver’s negligence. And R2D’s replacement car wholly mitigated that.
Conclusions
—defendants liable for plaintiffs’ mitigation expenses ...
[70] Ultimately, I conclude the claimed expenses reasonably were incurred by each plaintiff to mitigate the loss of use of their cars for the periods of their repair from damage negligently caused by the defendants. Objectively considered, these were reasonable and proper expenses – reasonably incurred in the plaintiffs’ interests, and with proper regard for the defendants’ liability. Each defendant is liable to pay the amount of R2D’s invoice to the respective plaintiff.
56 Charnock v Liverpool Corporation [1968] 1 WLR 1498 (CA); Brown & Davis Ltd v Galbraith [1972] 1 WLR 997 (CA); Hamilton Panel Works Ltd v Thomas [1963] NZLR 771 (SC); and Best Food Tofu Ltd v China Taiping Insurance (NZ) Co Ltd [2014] NZHC 1279.
57 Mr Ring acknowledges, in United Kingdom cases such as Burdis v Livsey, above n 15, at [115]- [121], repair delays were held not to amount to an intervening cause. But in reliance on Price Waterhouse v Kwan [1999] NZCA 311; [2000] 3 NZLR 39 (CA) at [28], he submits Frucor’s negligence must be “a real and substantial cause of the claimed loss [which] requires a common sense judgment”.
[71] The plaintiffs also seek interest on the amount of each R2D invoice, from the date its payment was due “at such rates payable under the Judicature Act 1908”.
[72] Schedule 1, cl 1 of the Interest on Money Claims Act 2016 – which came into force on 1 January 2018 – provides s 87 of the Judicature Act 1908, although repealed by s 182(1) of the Senior Courts Act 2016, “continues to apply to every civil proceeding commenced before this clause comes into force”.
[73] These proceedings were each commenced in 2016. Section 87(1) continues to apply. I thus have discretion to order included in the judgment sum:
... interest at such rate, not exceeding the prescribed rate, as [the Court] thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment.
Since 1 July 2011, clause 4 of the Judicature (Prescribed Rate of Interest) Order 2011 prescribes that rate as “5.0% per year”.
[74] While not here applicable in its terms, also relevant to the exercise of my discretion is s 10(1) of the Interest on Money Claims Act 2016, which provides “In every money judgment, a court must award interest under this section as compensation for a delay in the payment of money”. While I have discretion whether to award interest at all, the 2016 Act illustrates a general expectation delays in payment of money will be compensated. But, by reason of the 1908 Act, my discretion to award interest may not exceed 5 per cent per annum.
[75] Section 13 of the 2016 Act mandates establishment of an “Internet site calculator”, which calculates interest rates for the purposes of the Act. The site’s FAQ explains:58
The interest rate is calculated for a specific day by:
58 “Civil Debt Interest Calculator” Ministry of Justice <www.justice.govt.nz>.
Zealand (RBNZ), and taking an average of these six rates. The average is the base rate.
Daily effective rate = ((1+“per annum simple interest rate as
%”/100)^(1/“Days in the year”-1) x 100
The result is the interest rate expressed as a daily effective rate for the specific day.
[76] I also take judicial notice of the Reserve Bank of New Zealand’s retail 6-month term deposit rate, which has been below 4 per cent per annum since mid-2015.59 I am not prepared to award interest at the maximum Judicature Act rate. To do so would be to allow the plaintiffs a meaningful premium. While I was initially attracted to simple application of the Reserve Bank of New Zealand’s retail 6-month term deposit rate, the more just calculation is in accordance with the 2016 Act’s calculator.
Orders
[77] I therefore give judgment:
(a) in CIV 2016-004-2229, to Mr Blumberg against Frucor Beverages Limited in the amount of $4,407.33, plus interest from 30 June 2016 at rates calculated in accordance with the Interest on Money Claims Act 2016, but not exceeding 5 per cent per annum;
(b) in CIV 2016-004-2200, to Mr Boardman against Mr Wang in the amount of $3,731.93, plus interest from 20 July 2016 at rates calculated in accordance with the Interest on Money Claims Act 2016, but not exceeding 5 per cent per annum; and
(c) in CIV 2016-004-1916, to Ms Mackey against Ms Skarratt in the amount of $831.47, plus interest from 30 May 2016 at rates calculated
59 “Interest Rates on Lending and Deposits” Reserve Bank of New Zealand <www.rbnz.govt.nz/-
/media/ReserveBank/Files/Statistics/tables/b3/hb3.xlsx>.
in accordance with the Interest on Money Claims Act 2016, but not exceeding 5 per cent per annum.
Costs
[78] Mr Ring and Mr Chisholm both ask I reserve costs. In my preliminary view – given the nature of the proceedings, and the interests of the principal participants – costs should lie where they fall.
[79] If that is not accepted by the parties, and they cannot otherwise agree on costs, costs are reserved for determination on short memoranda of no more than five pages
– annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served on the other by:
(a) the plaintiffs within ten working days of the date of this judgment;
(b) the defendants within five working days of service of the plaintiffs’ memorandum; and
(c) the plaintiffs strictly in reply within five working days of service of the defendants’ memorandum.
—Jagose J
Counsel/Solicitors:
David Chisholm QC, Auckland McVeagh Fleming – Albany Glaister Ennor, Auckland
M G Ring QC, Auckland Hesketh Henry, Auckland
Stuart Connolly, Barrister, Auckland Holmden Horrocks, Auckland
Schedule: extract from Pattni v First Leicester Buses Ltd
The following extract comes from Pattni v First Leicester Buses Ltd [2011] EWCA Civ 1384, [2012] Lloyd’s Rep IR 577 at [29]-[41] (with internal citations omitted):
Three House of Lords and one Court of Appeal decision have established certain principles concerning (a) the basis on which a claimant can recover damages for car hire costs when he is the innocent victim of an R[oad ]T[raffic] A[ccident] and he has hired a replacement car on credit hire terms and (b) what sums can be recovered as damages or otherwise. The authorities have all been concerned with cases where the claimant car driver was entirely without fault, had entered into a credit hire agreement with a credit hire company for a replacement car and that agreement provided that the hirer will not have to pay the hire charges until the successful prosecution of a claim for damages against the negligent driver. The cases are Giles v Thompson, Dimond v Lovell, Burdis v Livsey and Lagden v O’Connor.
For present purposes I think that the relevant principles established by these decisions are as follows: (1) the loss of use of a car as a result of the car being damaged by the negligence of another driver is a loss for which, in appropriate circumstances, the innocent claimant can recover damages, even where the car is “non-profit earning”. It is the duty of the innocent claimant to mitigate his loss. If the loss of use of a car can be mitigated or avoided by the hire of a replacement car, the cost of that replacement car will be the measure of damages recoverable for the loss of use of the car.
(2) A claimant who hires a car on credit terms as a replacement vehicle suffers a loss which is recoverable as damages, even though, by the terms of the credit hire agreement, the hirer is not liable to pay the hire until there has been a judgment in the hirer's favour against the negligent driver. In that circumstance there is, generally, a “real liability, the incurring of which constitutes a real loss to the motorist. Whatever the publicity material may have conveyed, the provision of the substitute car was not free”. If a claimant has had the use of a replacement car and he has had to pay for it, then the claim may more aptly be characterised as one for special damages; however, if he does not have to pay for it Longmore LJ has stated that: “... it may be difficult to say that he can recover special damages at all. It may be that he can only recover general damages”.
(3) The injured party cannot claim reimbursement for expenditure that is unreasonable. If the defendant can show that the cost that was incurred was more than was reasonable, either by proving that the claimant had no use for a replacement car in part or at all, or because the car hired was bigger or better than was reasonable in the circumstances, the amount expended on the hire must be reduced to the amount that would have been needed to hire the equivalent to the damaged car. As Lord Mustill put it in Giles v Thompson, “... The need for a replacement car is not self-proving”.60
60 Although those words are frequently cited, it should not be overlooked Lord Mustill then turned to the inference a person incurring the expense of a car does so out of need, which inference the defendant is to displace: Giles v Thompson, above n 3, at 167. In other words, unless displaced, the need is ‘self-proving’.
(4) Even if it was reasonable for the innocent claimant to hire a replacement car on credit hire terms, the measure of damages recoverable will not necessarily be the amount of the credit hire that the claimant agrees to pay the credit hire company. It will depend on the financial circumstances of the claimant. If the claimant could afford to hire a replacement car in the normal way, ie. without credit terms and by paying in advance, then the damages recoverable for loss of use of the damaged car will be that sum which is attributable to the basic hire rate of the replacement car.
This basic hire rate has often been referred to as the “spot rate”, but that is, with respect, a misnomer. The term “spot rate” is more appropriately applied to rates of freight or charter hire, or the price of a commodity in open, often international markets, where the service or commodity is bought for delivery today, as opposed to some time in the future. I think it would be better if, in the context of credit hire cases, the term “spot rate” were not used in future and the term “basic hire rate” or “BHR” were used instead. That term more accurately describes what is the basic measure of damages recoverable in cases where the claimant could afford to have hired a car by paying in advance, ie. not hiring the car on credit.
(5) The difference between the BHR and the credit hire rate (assuming there is one) takes account of the additional services that a credit hire company provides to the hirer, viz. credit, handling the claim and effecting the recovery from the negligent driver, taking the risk of not recovering from the latter and an element of profit. Those elements are not part of the recoverable loss of a claimant who has hired a replacement car on credit hire terms but who could have afforded to do so by paying in advance. However, it is for a defendant to demonstrate, by evidence, that there is a difference between the credit hire charge agreed between the claimant and the credit hire company and the BHR.
(6) If it was reasonable for the claimant to hire a replacement car but he could not afford to hire a replacement car by paying in advance, (in the word used in the cases, that he is “impecunious”) then, prima facie, he is entitled to recover the whole of the credit hire rate he has paid, provided that it was otherwise a reasonable rate to pay in the circumstances. If the claimant is “impecunious” then, on the assumption it is reasonable for him to hire a replacement car and it was a reasonable type of car that he hired, he is said to have had “no choice” but to hire on credit terms. In Lagden v O’Connor Lord Hope of Craighead suggested that a rule of thumb test on whether a claimant hirer is “impecunious” might be whether he has the use of a recognised credit or debit card. In practice whether someone is “impecunious” will depend on the facts of a particular case and Lord Hope’s rule of thumb test is not necessarily determinative of the issue of whether a claimant can afford to pay hire charges day by day, which is the key question.
...
(8) In the judgment of the Court of Appeal in Burdis v Livsey, the court considered the method by which judges could calculate the BHR and so the measure of damages for loss of use in circumstances where the claimant was not “impecunious”. The court canvassed three possible methods. The first was to break down the charge made by credit hire companies so as to enable the additional elements (for credit, claim handling etc) to be stripped out. That method was rejected because it was said it would entail detailed disclosure and analysis which would be cumbersome in small cases and the costs would
be disproportionate to the sums claimed in most of this type of case. I agree that may well be so in most cases. But I do not understand this court to be saying, at [137] of Burdis v Livsey, that it is wrong as a matter of law to consider direct evidence on this issue from the actual credit hire company that hired the replacement car to the claimant, eg. in the form of the company's published credit hire rates and BHRs. If there is such direct evidence it might be the best evidence of any difference between the credit hire rate charged and the BHR for that type of car in that area at the time the replacement car was hired. But if there is not such direct evidence, then it is unlikely that indirect evidence from the car hire company (such as its assertion of what its BHR would have been had they had one) will be useful. It would also probably entail disproportionately costly disclosure.
The second possible method canvassed was to apply a “reasonable discount” to the credit hire rate charged. That was rejected as being too arbitrary. I agree that this is not a satisfactory approach for the reasons given in Burdis at [138].
The third possible method and the one preferred by this court in Burdis at
[139] is to look at “... actual locally available figures”. However, the court also emphasised, at [146], that “... a person who needs to hire a car because of the negligence of another must, subject to mitigating his loss, be entitled to recover the actual cost of hire, not an average [cost of hire]”. I would, with respect, endorse that statement. Once the court has concluded that it was reasonable for the claimant to hire the type of car that he did, then the task of the court is to find what constitutes the BHR for the particular type of car actually hired. As this court put it at [147] in Burdis:
“[The claimant] can go round to the nearest hire company and is prima facie entitled to recover the amount charged whether or not the charge is at the top of the range of car hire rates. However, the basic principle is qualified by the duty to take reasonable steps to mitigate the loss. What is reasonable will depend on the particular circumstances.”
In practice, therefore, on the issue of what BHR is recoverable in a case where the claimant who has hired on credit is not “impecunious”, a judge may have two sorts of evidence. First, he may have direct evidence, in the form of published rates, from the actual credit hire company that hired the replacement car which demonstrates either that the credit hire rate and the BHR for that type of car is the same or it is different and what the difference is. Secondly, the judge may have evidence of the BHR charged by other car hire companies in the area for the type of car actually hired. From that he will be able to ascertain, on a balance of probabilities, what the BHR for the actual type of car hired was and so arrive at the measure of damages recoverabltcvFAe, subject to the issue of the reasonable time for hiring the car.
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URL: http://www.nzlii.org/nz/cases/NZHC/2018/1876.html