Court confirms at-fault driver liable for cost of hiring replacement car

Court confirms at-fault driver liable for cost of hiring replacement car

Blumberg v Frucor Beverages Limited [2018] NZHC 1876

Is an at-fault driver liable for the cost of hiring a replacement car for the period the not-at-fault driver’s car is being repaired?  The High Court’s answer to this is ‘Yes’ – provided these costs are reasonably incurred.

Three not at-fault drivers (the plaintiffs) lost the use of their vehicles while they were being repaired for collision damage.  They filed proceedings against the at-fault drivers (the defendants) to recover the cost of hiring a replacement car. The case was a test case.  In the wings were the defendant’s insurers and Right2Drive, the company from which the plaintiffs had hired their cars.

Right2Drive’s business model focusses on providing not at-fault owners with replacement cars for the period of their damaged car’s repair.  Instead of charging the owners the cost of hire, Right2Drive pursues the at-fault drivers (or, more often, their insurers) to recover its charges.  The insurers do not always agree to pay – since Right2Drive came to New Zealand in 2016, insurers have declined to pay some $4.22m of Right2Drive’s charges.

At the heart of the case was the question: ‘Is the at-fault driver liable to the not at-fault driver for the price of the replacement vehicle charged by Right2Drive?’

The defendants argued that the plaintiffs could not recover Right2Drive’s charges from them because:

1. the plaintiffs had not suffered any loss; and

2. even if they had suffered loss, the steps that the plaintiffs took to mitigate their losses were unreasonable.

The Court quickly put the first argument to rest.  The defendants’ foreseeable loss was two-fold: not only had their vehicles suffered damage, they had also lost the use of their vehicles for the period they were being repaired.  

It is well established that an at-fault driver is liable to pay general damages for the inconvenience caused by the loss of use of a private vehicle.  By hiring replacement cars, the plaintiffs mitigated this loss and the defendants were liable to them for the mitigation expenses – as long as they were reasonably incurred.  

The Judge held that the onus was on the defendants to prove the plaintiffs’ mitigation expenses were unreasonable:

“[C]onceptually, once a defendant is liable to pay compensatory damages, it is for the defendant to prove a plaintiff has failed to take reasonable mitigatory steps in response to the defendant’s wrong.”

The defendants put forward several affirmative defences regarding the reasonableness of the mitigation expenses.  First, they argued that the plaintiffs had not incurred any expenses because Right2Drive had met the cost of the replacement cars (as it intended to pass this cost on to the at-fault drivers).  The Judge disagreed, saying that nothing in life really comes free, and the plaintiffs were still contractually liable to Right2Drive for the charges, whether the plaintiffs realised it at the time or not.

Second, the defendants said that Right2Drive’s hire rates were unreasonable.  The Court looked at price comparisons and found Right2Drive’s rates were generally consistent with other rental car companies.  Right2Drive charges on a per day basis, which is generally more expensive. However, this is reasonable considering its business model, which requires it to be able to provide cars at short notice and for an indeterminate amount of time.

Finally, the defendants argued the plaintiffs had other, cheaper options available to them, and had therefore acted unreasonably.  They suggested that the plaintiffs would not have used Right2Drive’s service if they had realised they were potentially liable to Right2Drive for the charges.  Instead, they may have considered a different, cheaper car rental company, or waited for the repairer’s courtesy car to become available, or they could have requested their own insurer pay.  

However, the Judge said what is ‘reasonable’ in all the circumstances is not be regarded with too critical an eye in hindsight.  Where plaintiffs have options, their reasonable adoption of one is not be held against them simply because another may be said to be a more effective or economical mitigatory step.  The Judge pointed out that the plaintiffs’ own insurers would have had the right of recovery against the defendants, anyway.

Ultimately, the judge concluded that, objectively considered, the mitigation expenses were reasonably incurred and could be recovered from the defendants.

Comment – Craig Langstone

Whilst on its face this decision seems relatively unremarkable, it has all the hallmarks of a case with a lot going on in the background.  From a legal perspective, there is some interesting commentary on the onus on defendants to prove that costs claimed by plaintiffs are unreasonable (perhaps contrary to what one would have thought), and reference to those costs being mitigation expenses - i.e. the loss of use of a vehicle has occurred, so the cost of hiring a replacement is mitigation.  One wonders whether we shall be seeing a spate of similar cases like the UK did a few years back. Time will tell.

Read the full judgment here