BLUMBERG v FRUCOR BEVERAGES LTD [2018] NZHC 1876 [26 July 2018]

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

CIV-2016-004-2229

[2018] NZHC 1876

BETWEEN

ILAN BLUMBERG

Plaintiff

AND

FRUCOR BEVERAGES LIMITED

Defendant

CIV-2016-004-2200

BETWEEN

PETER BOARDMAN

Plaintiff

AND

HARRY WANG

Defendant

contd…/2

Hearing:

18-26 June 2018

Appearances:

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

Judgment:

26 July 2018

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

CIV-2016-004-1916

BETWEEN RACHEL MACKEY

Plaintiff

AND HAYLEY SKARRATT

Defendant

Introduction [1]

Not at-fault drivers obtain replacement car from R2D for period of repair [6]

Defendants resist liability for expense of plaintiffs’ replacement cars

—pleadings [11] —issues [14]

A: does R2D bring proceedings in the plaintiffs’ names? —subrogation [15] —maintenance and champerty [17]

B: have the plaintiffs suffered loss? —New Zealand cases [18]

—United Kingdom cases [23]

—Australian cases [28] —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]

Conclusions [70]

—defendants liable for plaintiffs’ mitigation expenses … [70] — … plus interest [71]

Orders [77]

Costs [78]

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]. 3 The better characterisation is ‘lead case’, for the reason stated by Lord Mustill in Giles v Thompson

[1993] UKHL 2, [1994] 1 AC 142 at 155: “… because there is no agreement, formal or otherwise,

that the parties to other disputes will be bound by the outcome of the appeals”.

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:

Blumberg Boardman Mackey

Own car 2005 Nissan

Wingroad

2015 Mercedes Benz

C180 Coupe

2011 Suzuki Swift

Date of accident 10/3/2016 18/4/2016 24/2/2016

Defendant’s insurer Vero Insurance AMI Insurance AA Insurance

Repairer Causeway

Panelbeaters

Ray Haslar Autohaus Hauraki Panel and

Paint

R2D’s replacement car 2015 Mitsubishi

ASX

2012 Skoda Superb 2016 Holden Barina

R2D’s daily hire rate $114.62 $138.92 $112.17

R2D’s delivery/pickup fee $50.00 $50.00 $50.00

Rental period 14/4/2016-16/5/2016

(33 days)

16/5/2016-8/6/2016

(23 days)

11/3/2016-17/3/2016

(6 days)

R2D’s invoice (excl GST) $3,832.46 $3,245.16 $723.02

R2D’s invoice (incl GST) $4,407.33 $3,731.93 $831.47

[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

—pleadings

[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.

—issues

[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?

—subrogation

[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”.

—maintenance and champerty

[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 [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?

—New Zealand cases

[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. 9 Nauru Local Government Council v New Zealand Seamen’s Industrial Union of Workers [1986] 1

NZLR 466 (CA) per Richardson P at 472. 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

12 Nauru Local Government Council v New Zealand Seamen’s Industrial Union of Workers, above n

9, at 481-482 (internal citations omitted). 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.

—United Kingdom cases

[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.

—Australian cases

[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.

26 The actual pleading is: “Judgment for $[x] being the Cost of the Replacement Vehicle”, incurred

“[a]s a result of the Negligent Collision”. 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.

—expense of a replacement car

[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) 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. 36 Wu v Body Corporate 366611, above n 33, at [141]; Hooker v Stewart [1989] 3 NZLR 543 (CA)

at 547. 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 [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 [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”.

— … plus interest

[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:

1. Taking the six most recent observations for the retail 6-month term

deposit rate that have been published by the Reserve Bank of New

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.

2. Adding the base rate to the premium (0.15%). The result becomes the

per annum simple interest rate.

3. Converting the per annum simple interest rate into a daily effective

rate. The formula for this conversion is as follows:

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 recoverable, subject to

the issue of the reasonable time for hiring the car.