Frucor Beverages Ltd v Ilan Blumberg

• Jurisdiction: New Zealand
• Judge: Wild J
• Judgment Date: 11 November 2019
• Neutral Citation: [2019] NZCA 547
• Docket Number: CA490/2018
• Court: Court of Appeal
• Date: 11 November 2019

Between

Frucor Beverages Limited

First Appellant

Harry Wang

Second Appellant

Hayley Skarratt

Third Appellant

and

Ilan Blumberg

First Respondent

Peter Boardman

Second Respondent

Rachel Mackey

Third Respondent

[2019] NZCA 547

Court:

French, Collins and Wild JJ

CA490/2018

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Insurance — recoverability of replacement vehicle hire charges of a not-at-fault driver from the insurers of at-fault drivers — recoverability of the “additional benefits” credit for hire companies provided to the not-at-fault driver — consideration of authorities from the United Kingdom and Australia

Counsel:

M G Ring QC for First, Second and Third Appellants

A L Barnett for First Appellant

P M Smith for Second Appellant

J E McLennan for Third Appellant

D J Chisholm QC, M Singh and P McKendrick for Respondents

• A The appeal is dismissed.

• B The appellants are to pay one set of costs to the respondents for a standard appeal on a band A basis with usual disbursements. We certify for two counsel.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Wild J)

Table of Contents

	Para No
Introduction	[1]
Factual situation	[5]
Issues	[10]
Liability issues	[11]
Issue 1: In respect of R2D's charges for the replacement car, had Mr Blumberg incurred a compensatable loss or expense recoverable by him from Frucor?	[11]
Issue 2: Was R2D's hire agreement unenforceable, in that it assigned a bare cause of action and was champertous?	[52]
Quantum	[61]
Issue 3: Did the Judge err in applying a subjective rather than an objective standard when considering the reasonableness of Mr Blumberg hiring a replacement car from R2D?	[62]
Issue 4: Was it reasonable for Mr Blumberg to take the R2D option rather than one of the other available options?	[66]
Issue 5: Were R2D's hire charges reasonable?	[82]
Issue 6: Did R2D's charges include the cost of additional services which were not properly allowed by the Judge to Mr Blumberg as mitigation expenses?	[109]
Issue 7: Was the repairer's carelessness in not ordering parts in a timely way an intervening cause disentitling Mr Blumberg from recovering R2D's hire charges for the resulting extended repair period of some 12 days?	[119]
Interest Issues	[132]
Issue 8: Did the Judge err in allowing Mr Blumberg interest on the judgment sum?	[132]
Concluding remarks	[151]
Result	[163]
Costs	[165]

Introduction

1 This appeal is from a judgment delivered by Jagose J on 26 July 2018. 1 The raft of issues for decision arises from the commencement of business in New Zealand in 2016 by Right2Drive (New Zealand) Limited (R2D). R2D has an Australian parent company. It is an ordinary rental car operation but about two thirds of its business is hiring replacement cars to “not-at-fault” drivers while their collision damaged vehicles are repaired. R2D advertises this service generally and particularly to vehicle repairers. The service includes delivering the replacement vehicle to the driver when the damaged vehicle is brought to the vehicle repairer, and collecting it when the driver picks up the repaired vehicle from the repairer.

2 Before the replacement vehicle is handed over, the driver is required to sign hire documentation. Essentially this makes the driver liable for the hire charges but these are payable only when and to the extent they are not recovered from the at-fault driver (normally, recovery is from that driver's insurer). In practice, R2D waives any unrecovered charges. That is the basis on which R2D represented to not-at-fault drivers that the replacement car is “free” or comes at “no cost” to the not-at-fault driver.

3 So called “credit hire companies” with a modus operandi similar to R2D have been in business in the United Kingdom and in Australia for many years. Much litigation, particularly in Britain, has resulted between those companies on the one hand and insurers for at-fault drivers on the other. We will be referring to a number of those cases because they decide, or offer guidance on, the issues for decision on this appeal. The clash of commercial interests which led to this litigation was explained 20 years ago by Lord Hobhouse in Dimond v Lovell: 2

The popularity of this scheme [operated by credit car hire companies similar to R2D] with the public is matched by its unpopularity with the main line motor insurance companies who are covering the negligent motorists against third party claims and find themselves faced with these increased claims. They also have an increased incidence of loss of use claims because the scheme enables drivers, who otherwise would not go to the expense of hiring a substitute car, to hire one and make a claim for it.

4 The present three cases are the first to come before a New Zealand court. Counsel described them to us as “lead cases”. That is because the appellants' insurers (respectively, Vero, AMI and AA Insurance) have refused to pay some $4.9 million invoiced to them by R2D for providing replacement vehicles to not-at-fault drivers such as the three respondents. 3 Between them, these companies have about 45 per cent of New Zealand's motor vehicle insurance business. Counsel informed us that this judgment will have ramifications for the other motor vehicle insurers. So a substantial sum hinges on the outcome of these cases. Counsel also expressed the hope that this judgment will provide some guidance for the future. However, Mr Chisholm QC told us that R2D has, since the present three cases arose, made some changes to the way it does business. There was reference in the evidence to some of those changes.

Factual situation

Three respondents

5 We restrict our outline of the facts to the case of the respondent Mr Blumberg, because it raises all the appeal issues. The cases of the respondents Mr Boardman and Ms Mackey are factually substantially the same, but do not involve a delay in completing repairs, and thus do not involve Issue 7 dealt with in [119] below. We will refer to the cases of those two respondents only where they raise some additional or different point requiring consideration.

Mr Blumberg's case

6 Mr Blumberg's 2005 Nissan Wingroad car was damaged, but not immobilised, in a collision. The collision was the fault of a driver employed by the appellant, Frucor Beverages Ltd. Mr Blumberg took his car for repair to Barrys Point Panelbeaters & Painters, a repairer recommended by Frucor's insurer, Vero. Barrys Point estimated the repairs would take two to three weeks. The repair process was supervised by Mr Brown, a senior estimator employed by Vero. The repairs took 33 days. The extended repair period resulted from the need for additional replacement parts.

7 When Mr Blumberg inquired, Barrys Point told him they could not provide him with a courtesy car during the repair period, but referred him to R2D which could. So Mr Blumberg contacted R2D which told him it could provide a replacement car during the repair period at no cost to Mr Blumberg. When Mr Blumberg delivered his vehicle to Barrys, he was met by a representative of R2D. He was again assured there would be no cost to him for the replacement vehicle but was required to sign hire documentation. After signing this he was provided with a 2015 Mitsubishi ASX vehicle.

8 When Mr Blumberg's car was repaired and ready to collect, he was again met at Barrys Point by an R2D representative who collected the Mitsubishi. R2D prepared an invoice addressed to Mr Blumberg for its charges for hiring ($3,782.46 plus GST) and delivering and collecting ($50 plus GST) the Mitsubishi during the 33-day repair period. It passed this invoice to Vero for payment. Vero refused to pay this invoice. Exercising rights Mr Blumberg had given to it in the hire documentation, R2D brought a claim in Mr Blumberg's name in the High Court to recover its hire charges from Frucor (Vero was obviously the real defendant to this claim).

9 Jagose J gave judgment for Mr Blumberg, deciding all the issues in his favour. We will revert to the judgment in more detail as we deal with each issue.

Issues

10 The issues for decision on each of these three cases are the same. Because we have restricted ourselves to the facts of Mr Blumberg's case, we state the issues as they apply to him. But issues 1–6 and 8 also arise in the other two cases.

Liability issues

Issue 1: In respect of R2D's charges for the replacement car, had Mr Blumberg incurred a compensatable loss or expense recoverable by him from Frucor?

11 Some matters relating to this first issue are not in dispute. First, the relevant deprivation loss for which Mr Blumberg can recover damages is his loss of use of his car while the collision damage was repaired. 4 Second, Mr Blumberg wholly mitigated that loss by hiring a replacement car from R2D during the repair period. In other words, he was never actually “deprived” of a car. Third, Mr Blumberg can recover, as special damages, the cost he incurred in mitigating his deprivation loss, providing he acted reasonably in hiring the replacement car and providing also that the hire charges were reasonable. That reasonable mitigation cost is the measure of damages recoverable for the loss of use of the car (and a ‘proxy’ or substitute for the general damages which would otherwise be recoverable by Mr Blumberg). 5

12 The matters set out in the previous paragraph draw a distinction between general and special damages. However, in many cases Judges have said this distinction is unimportant. 6

13 We interpret the High Court's judgment as giving a ‘yes’ answer to this first issue. The following summarises the Judge's reasoning: 7

• (a) The drafting of R2D's hire documentation and its dealings with Mr Blumberg both give rise to...