Gardam v WTH Pty Ltd
[2016] TASFC 10
•25 November 2016
[2016] TASFC 10
COURT: SUPREME COURT OF TASMANIA (FULL COURT)
CITATION: Gardam v WTH Pty Ltd [2016] TASFC 10
PARTIES: GARDAM, Thomas
v
WTH PTY LTD t/as AVIS AUSTRALIA
FILE NO: 2037/2015
JUDGMENT
APPEALED FROM: Gardam v WTH Pty Ltd [2015] TASSC 46
DELIVERED ON: 25 November 2016
DELIVERED AT: Hobart
HEARING DATE: 5 October 2016
JUDGMENT OF: Wood, Estcourt and Pearce JJ
CATCHWORDS:
Contracts – General contractual principles – Construction and interpretation of contracts – Exemption clauses – Vehicle rental agreement – Clause absolving hirer of liability for damage – Exemption if blood alcohol content of driver exceeds legal limit.
Aust Dig Contracts [110]
Insurance – Motor vehicles – Insurance of motor vehicles for loss or damage – Warranties and conditions excluding liability –– Exclusion when blood alcohol content of driver exceeds legal limit – Whether clause made void by statute - Whether contract of insurance or waiver.
Road Safety (Alcohol and Drugs) Act 1970 (Tas), s 21.
Aust Dig Insurance [1108]
REPRESENTATION:
Counsel:
Appellant: S G Wright
Respondent: K Stanton
Solicitors:
Appellant: S G Wright
Respondent: Foster Nicholson Jones
Judgment Number: [2016] TASFC 10
Number of paragraphs: 29
Serial No 10/2016
File No 2037/2015
THOMAS GARDAM v WTH PTY LTD t/as AVIS AUSTRALIA
REASONS FOR JUDGMENT FULL COURT
WOOD J
ESTCOURT J
PEARCE J
25 November 2016
Order of the Court
Appeal dismissed.
Serial No 10/2016
File No 2037/2015
THOMAS GARDAM v WTH PTY LTD t/as AVIS AUSTRALIA
REASONS FOR JUDGMENT FULL COURT
WOOD J
25 November 2016
I agree with the reasons of Estcourt J as to both grounds of appeal. The appeal should be dismissed.
File No 2037/2015
THOMAS GARDAM v WTH PTY LTD t/as AVIS AUSTRALIA
REASONS FOR JUDGMENT FULL COURT
ESTCOURT J
25 November 2016
The appeal
In this appeal the appellant, Thomas Gardam, contends that Blow CJ erred in his decision in Gardam v WTH Pty Ltd [2015] TASSC 46 in dismissing an appeal from Magistrate Brett (as he then was) by concluding that the appellant was liable to pay the respondent WTH Pty Ltd for damage to its rental vehicle when the appellant had paid that company for a "Loss Damage Waiver" option.
There are two grounds of appeal.
The effect of the first ground is that the learned Chief Justice erred in determining that the scheme of the relevant clauses of the agreement between the parties ("the rental agreement") was that any damage suffered when the vehicle was being used in contravention of any provision in cl 4.1 of the rental agreement should be regarded as damage "caused by a breach" of that clause within the meaning of cl 8.3(a)(iii) of that agreement.
The effect of the second ground is that his Honour erred in holding that s 21(b) of the Road Safety(Alcohol and Drugs) Act 1970 (the Act) did not apply to the rental agreement so as to render the exclusion to the Loss Damage Waiver option contained in the relevant part of cl 8.3(a)(iii) of the agreement void as offending s 21(b).
For the reasons that follow I am of the view that the both grounds of appeal must fail.
The factual background
The learned primary judge set out the relevant facts at [2] of his reasons for judgment:
"2 The company, WTH Pty Ltd, trades as Avis Australia. It is the respondent to this appeal. Thomas Gardam, the appellant in these proceedings, hired a Toyota Hi-ace passenger van from the company on 19 March 2011 at Wynyard Airport. Later that day, that vehicle broke down on the Lake Highway somewhere south of Deloraine. The appellant contacted the company and arranged for a replacement vehicle to be sent to him. While he and his companions waited for the replacement vehicle to arrive, they consumed some alcoholic drinks. They subsequently resumed their southward journey in the replacement vehicle, with the appellant driving. While negotiating a right hand bend, the appellant failed to keep the vehicle on the sealed portion of the roadway. The rear left wheel went onto the gravel verge, with the result that the vehicle flipped onto its side and was damaged. The police were called. A breath test was administered. The appellant was prosecuted. It appears that he pleaded guilty to a charge under s 6(1) of the Road Safety (Alcohol and Drugs) Act 1970 on the basis that he was driving with a blood alcohol concentration of 0.053%. That subsection makes it an offence to drive with a blood alcohol concentration exceeding .05%."
The respondent sued the appellant in the Magistrates Court to recover the amount of the damage to its vehicle in the sum of $38,033.63, and Magistrate Brett held that the appellant was liable to pay the respondent that sum pursuant to the terms of the rental agreement.
The rental agreement contained provisions to the effect that the appellant was liable to the respondent for all damage to the vehicle unless the appellant accepted and paid for the Loss Damage Waiver option, or paid hiring charges at a rate that included that option. In that event the respondent waived any claim in respect of damage to the rental vehicle and the appellant was entitled to be indemnified in respect of damage caused to third parties under the "Avis Insurance Policy", all except in certain circumstances. One of those circumstances was if the damage was "caused by" the appellant or any authorised driver having a blood alcohol content that exceeded the legal limit in the State or Territory in which the vehicle was being driven.
The Loss Damage Waiver option was included in the hiring rate that the appellant paid for the vehicle, but the learned magistrate held that the appellant was not entitled to the benefit of that indemnity because his blood alcohol content exceeded the "legal limit" in Tasmania. The legal limit in Tasmania is an amount greater than "the prescribed concentration". Section 3 of the Act defines the term "prescribed concentration" as meaning "a concentration of 0.05 of a gram of alcohol in 210 litres of breath or a concentration of 0.05 of a gram of alcohol in 100 millilitres of blood".
The learned primary judge set out the relevant clauses of the rental agreement at [7]-[12] of his Honour's reasons as follows:
"7 The general provision in the rental agreement that imposed liability for damage to the vehicle was cl 8.1(a), which read as follows:
'8.1 Subject to this clause 8, You are liable:
(a) for the loss of, and all damage to, the Vehicle …'.
8 Also, cl 6.1(b) of the rental agreement provided as follows:
'6.1 You must return the Vehicle to Avis:
(a) …
(b) in the same condition as it was at the commencement of the Rental Period, fair wear and tear excepted.'
9 When the 'Loss Damage Waiver' applied, cl 8.1(a) was superseded by cl 8.2(a), which read:
'8.2 Subject to clauses 8.3 and 8.4, Avis waives Your liability under clause 8.1 for damage to, or loss of, the Vehicle and will ensure that You and any Authorised Driver are entitled to be indemnified under the Avis Insurance Policy, if:
(a) You accept and pay for the Loss Damage Waiver option on the Rental Document (or if it is included in Your rate) …'.
10 In certain situations, cl 8.2 was superseded by cl 8.3(a)(iii), which read as follows:
'8.3 Additional amounts payable: In addition to Clause 8.2, You must always pay to Avis the following costs and fees:
(a) the cost of repairing any:
…
(iii) damage to the Vehicle or to the property of any third party caused by a breach of clause 3, 4.1 or 5 …'.
11 Drink driving was covered by cl 4.1(d). Because of the provisions of cl 8.3(a)(iii), the Loss Damage Waiver provisions did not apply when damage to a vehicle was 'caused by a breach' of cl 4.1.
12 Although only cl 4.1(d) related to alcohol, I will set out the whole of cl 4.1. It read as follows:
'4.1 You and any Authorised Driver must:
(a)not use, or allow the Vehicle to be used, for any illegal purpose, race, contest or performance test of any kind;
(b)not, without Avis' prior written consent, use, or allow the Vehicle to be used, to push anything;
(c)not carry, or allow the Vehicle to carry, more passengers than may be properly accommodated by the seat belt restraints provided in the Vehicle;
(d)not be under the influence of alcohol, drugs or have a blood alcohol content that exceeds the legal limit in the State or Territory in which the Vehicle is driven;
(e)not, without Avis' prior written consent, use or allow the Vehicle to be used to carry passengers for payment of any kind;
(f)not use the Vehicle when it is damaged or unsafe;
(g)not drive the Vehicle after an accident or hitting an object (including an animal) until You have obtained Avis' approval to do so;
(h)not use the Vehicle to transport goods, except in compliance with all necessary approvals, permits, licences and government requirements (to be obtained at Your cost) and in accordance with the Manufacturer's Specifications and Avis' recommendations;
(i)not, without Avis' prior written consent, use the Vehicle to carry any inflammable substance which has a flash point under 22.8oC or any other explosive or corrosive substances;
(j)not use the Vehicle for the conveyance or towing of any load unless You have Avis' prior written consent; the load is correctly loaded and secured and not in excess of that for which the Vehicle was manufactured; for towing, the Vehicle is fitted with a tow bar; and the conveyance or towing is undertaken in accordance with the Manufacturer's Specifications and Avis' recommendations; and
(k)not use the Vehicle in contravention of any law'."
The appellant's argument on ground 1
The appellant points out that unlike the other paragraphs of cl 4.1 of the rental agreement, cl 4.1(d) does not refer to the use of the vehicle, but rather, provides only that the customer and any authorised driver must not be under the influence of alcohol or drugs, or have a blood alcohol content exceeding the legal limit. That is to say, the appellant contends that the clause does not express those prohibitions by reference to the using of the vehicle.
The appellant points out that that distinction is significant given that the wording of cl 8.3(a)(iii) is that the customer must pay the cost of repairing any damage to the rented vehicle "caused by" a breach of cl 4.1.
Thus, the appellant argues, the combined effect of cl 8.3(a)(iii) and cl 4.1(d) is that he would only be liable to pay for repairing any damage if that damage was caused by him having a blood alcohol content that exceeded the legal limit. He argues that there was no evidence that such was the case.
The decision below on ground 1
The learned primary judge rejected the appellant's argument at [17]-[20] of his reasons as follows:
"17 The learned magistrate concluded that it was not necessary for the company to prove that the damage had been caused by the driver having a blood alcohol content over the legal limit. His reasons for that conclusion were stated in his judgment at [27]-[29]. Those paragraphs read as follows:
'27 At common law, a hiree was required to strictly observe any restrictions imposed upon the right of possession granted by the bailment. Breach of those restrictions had the effect of making the bailee an insurer ie, imposing strict liability upon the bailee for losses and damage occasioned whilst the bailee was in breach of the restrictions on use, irrespective of whether the bailee's negligence was a causative factor in respect of the damage (see Roberts v McDougall [1887] 3 TLR 666; Hughes v Rooke [1954] QSR 45).
28 In my view, the clear intention of cl 8.3 is to except from the waiver contained in cl 8.2 damage caused when the rental vehicle is being used in circumstances forbidden by the rental agreement, which include those referred to in cl 4.1. Any stricter interpretation of the provisions of cl 8.3(iii) would place the claimant's position under the rental agreement in a weaker position than at common law. It would be difficult, if not impossible in most cases to prove the causal link between the alcohol concentration and the damage. When regard is had to the provisions of cl 8.3, and the reference in 8.3(a) (iii), to cls 3, 4.1 and 5, it is clear that the scheme of the agreement is that the reduction of liability through the waiver will only apply when the vehicle is being driven within the ambit defined by the permitted purposes and restrictions laid down by the rental agreement. The purpose of those restrictions is to keep the risk to the vehicle at an acceptable level, hence balancing the interests of the parties in respect of a waiver of liability in exchange for monetary consideration. For example, it could not possibly have been contemplated by the parties that a vehicle being driven by someone under the influence of alcohol, or during an illegal race, would be an acceptable risk for the purposes of the waiver of liability. In such circumstances, it is entirely reasonable that the hiree should, in effect, insure the vehicle.
29 Accordingly, I find that the damage to the vehicle was caused by a breach by the defendant of cl 4.1 in that it was caused at a time when he was driving the vehicle with a blood alcohol content exceeding the legal limit in Tasmania. It follows that, provided that the provisions in question are valid, and despite the waiver of liability set out in cl 8.2, the defendant will be liable for an amount calculated in accordance with the provisions of cls 8.3, 8.4 and 8.5 of the agreement.' (Emphasis added.)
18 The meanings of the relevant clauses have to be determined by reference to what a reasonable person would have understood them to mean having regard to the text of the clauses and also the surrounding circumstances known to the parties and the purposes and objects of their transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [41]; Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 at [22].
19 Although cl 4.1(d) made no mention of driving, I think it is clear from the nature of the company's business, and from the nature of its vehicle rental transactions, that it was the intention of the parties that cl 4.1(d) prohibited using the vehicle by driving with an excessive blood alcohol concentration, as distinct from prohibiting the customer from having an excessive blood alcohol concentration. No purpose would have been served by a contractual provision as to a customer's blood alcohol concentration that was unrelated to the driving of the vehicle. From another perspective, cl 4.1(d) may be interpreted as applying only when the vehicle is being driven, since there is otherwise no 'legal limit' on anyone's blood alcohol content. For these reasons, I think it is clear that driving with a blood alcohol concentration of .053% amounted to a breach of cl 4.1(d).
20 Further, I think it is clear from the scheme of the relevant clauses that any damage suffered when the vehicle was being used in contravention of any provision in cl 4.1 should be regarded as damage 'caused by a breach' of that clause within the meaning of cl 8.3(a)(iii). The scheme of the contract was that the customer was to be responsible for any damage that eventuated when the vehicle was being used in contravention of any of the provisions of cl 4.1. The 'breach' contemplated by cl 8.3(a)(iii) was a breach constituted by the use of the vehicle in circumstances in which the customer had promised not to use it. The reasoning of the learned magistrate in the paragraphs quoted above is impeccable. I need not repeat what he said."
Consideration
With respect I agree entirely with the view taken by the learned magistrate and the learned primary judge. The expressions "not be" or "have" in cl 4.1(d) must mean not be under the influence of alcohol, or not have a blood alcohol content that exceeds the legal limit when driving the vehicle. Were it otherwise the ridiculous possibility could arise that the exclusion applied when the vehicle was damaged when parked in a car park while the renter had a blood alcohol content over the legal limit whilst asleep in bed after drinking alcohol in the evening.
That does not however lead to a conclusion that the words "caused by" in cl 8.3(a)(iii) require proof by the respondent of a causal relationship between the driving that caused the damage and the appellant's blood alcohol concentration.
A consideration of some of the other circumstances proscribed by cl 4.1 makes it clear that cl 8.3 ought not to be reasonably and objectively understood as requiring a causal connection between the circumstance and the damage. There could for example be no causal connection between the conduct prohibited by cl 4.1(e) of carrying a passenger for payment and a collision causing damage. Equally, cl 4.1(k) provides that a driver must not use the vehicle in contravention of "any law". There could hardly be a causal connection between damage to a vehicle and the driver failing to wear a seatbelt or smoking with a child in the car, or not holding a driver's licence.
In my view the words "damage … caused by a breach of clause 3,4.1 or 5 …" in cl 8.3(iii) of the rental agreement can only be understood by a reasonable person as meaning "damage … occasioned at a time when the vehicle was being driven in breach of clause 3,4.1 or 5". Ground 1 of the notice of appeal must fail.
The appellant's argument on ground 2
The learned primary judge set out the appellant's argument as to what is now ground 2 of the appellant's notice of appeal at [22]-[24] of his reasons as follows:
"22 As I have said, the appellant contends that the learned magistrate erred by holding that s 21 of the Road Safety (Alcohol and Drugs) Act had no application to this case. That section reads as follows:
'Any covenant, term, condition, or other provision of a contract or other agreement to the extent that it purports to exclude or limit the liability of an insurer under any contract of insurance in the event of the owner or driver of a motor vehicle —
(a) being convicted of an offence under this Act (not being an offence under section 4); or
(b) having more than a specified concentration of alcohol present in his breath or blood as indicated by an analysis of his breath, blood, or urine —
is void.'
23 Counsel for the appellant submitted that s 21 can apply in a situation where there are two contracts – a 'contract or other agreement' that contains the provision that the section renders void, and a 'contract of insurance' that constitutes a separate contract. Ordinarily, one would expect s 21 to operate in relation to a provision contained in a contract of insurance. However it is no doubt possible to have a situation where a contract of insurance contains no provision that offends s 21, but where there also exists a collateral contract that purports to limit the liability of the insurer under the contract of insurance by means of a provision that does offend the section.
24 Counsel for the appellant relied on s 21(b), but not s 21(a). Obviously s 21(a) was inapplicable because the contractual provisions in question did not relate to the driver 'being convicted'. As to s 21(b), the appellant contended that cls 8.3(a)(iii) and 4.1(d) together purported to exclude liability in such circumstances that s 21(b) rendered them void."
The decision below on ground 2
The learned primary judge rejected the appellant's submission, correctly in my view, however in doing so, contrary to the view taken by the learned magistrate, the learned primary judge assumed without deciding that it may well be that, within the meaning of s 21 of the Act, cl 8.3(a)(iii) and cl 4.1(d), when taken in combination, purport to exclude the liability of an insurer under the "Avis Insurance Policy" in the event of the driver of the motor vehicle in question having more than a specified concentration of alcohol present in his blood. I respectfully agree with that reasoning so far as it relates to the appellant's contractual entitlement to an indemnity under the Avis Insurance Policy in respect of damage to the property of third parties.
That aspect of his Honour's reasoning however only disposes of part of the potential difficulty for the rental agreement presented by s 21 and, in my view, not a relevant part of that difficulty. The difficulty is not limited to the Avis Insurance Policy but arguably extends to the respondent's purported exclusion of its waiver as to damage to the rental vehicle itself. As to that, I accept as correct the view taken by the learned magistrate that the combination of the two clauses insofar as they relate to the damage to the respondent's vehicle, as opposed to damage to any third party's vehicle, does not amount to a contract of insurance, but merely to a waiver. Thus the respondent cannot be characterised as an "insurer" within the meaning of s 21 of the Act.
The learned magistrate set out the reasons for the view that he reached at [39]-[44] of his reasons for judgment in [2014] TASMC 20 as follows:
"39 It is arguable that the contractual provisions in question in this case exhibit the usual features of a contract of insurance. There is an agreement that the claimant, in return for a money consideration (the payment of the loss damage waiver option fee) will provide the defendant with a benefit corresponding to the payment of money (the limited waiver of liability, subject to payment of an excess and certain exceptions) upon the occurrence of a specified event (the loss of or damage to the vehicle). The happening of the event is clearly uncertain, and the defendant has an insurable interest, in particular his liability to the claimant under cl 8.1. On the other hand, the agreement is expressed as a waiver, rather than an indemnity, although, as noted above, the benefit provided by a contract of insurance need not necessarily be in the nature of an indemnity.
40 I was referred to various authorities concerning analogous circumstances. However, they all deal with the question of whether a car rental company becomes an insurer in respect of limitation of liability provisions concerning third party damage. It is not helpful to examine the outcome of those cases because each turns on the terms of the particular contractual provision, and deals with a different form of liability to the one in question in this case. However, in one such case, Bayswater Car Rental Pty Ltd v Hannell [1999] WASCA 34, the Full Court of the Supreme Court of Western Australia dealt with a car rental agreement which contained a provision whereby the owner agreed to provide collision indemnity during the rental term as follows:
(i) On the rented car;
(ii)On a court judgment against the renter for third party property damage; and
(iii) On claims by third parties for bodily injuries.
The case turned on the question of whether or not the rental agreement, in particular the provisions concerning indemnity for third party damage, constituted a 'contract of liability insurance' for the purposes of the Insurance Contracts Act 1984 (Commonwealth). Although the case was not concerned with the question of indemnity for damage to the vehicle itself, Kennedy J made the following obiter observation:
'The position is somewhat complicated by the wording of the three categories of indemnity provided for in condition 3. The wording in subpara (i) appears to be inappropriate for giving rise to an agreement by the appellant to "indemnify" the renter for damage to the rented car. It simply amounts to the owner agreeing not to make any claim against the renter in respect to that damage. It is in the nature of a waiver of any claim for damage to the vehicle. It may be presumed that the appellant itself will insure its own vehicle for its own benefit'.
42 His Honour, in agreement with the balance of the Court, went on to find that the provisions relating to third party liability did create an obligation on the part of the renter to indemnify the driver, and not merely to arrange indemnity by an insurer.
43 Pidgeon J (at [31]) noted also that the question turned on whether or not the owner was required to indemnify the renter, albeit he was dealing with the third party liability provisions. He said this:
'If the owner has not given such an indemnity, then it is clear and it is accepted that there could be no insurance cover within the meaning of the Act'.
44 Ultimately, the interpretation of the contract must be resolved having regard to the intention of the parties, as revealed by the terms of the contract. In relation to the rental agreement in this case, it seems to me to be manifest in the structure of the agreement, that the claimant is not an insurer providing insurance to the defendant under the provisions of cl 8, irrespective of whether it relates to damage to the vehicle, or in respect of liability accrued by the defendant to a third party. It is clearly expressed that the liability to a third party will be dealt with under a separate insurance policy, the Avis Insurance Policy, and the obligation of the claimant is to 'ensure that (the defendant) is entitled to be indemnified under' that policy. The question of liability in relation to loss or damage to the vehicle is expressly dealt with by way of a waiver. Accordingly, despite the features of cl 8 in respect of the waiver of liability for damage to the vehicle which are consistent with those normally found in a contract of insurance, I am satisfied that those provisions do not amount to such a contract."
For those reasons, neither s 21(b) of the Act nor s 54 of the Insurance Contracts Act 1984 (Cth) as suggested on behalf of the appellant, even when taken with the enlarged definition of the term "contract of insurance" in s 10 of that act, had any relevant application to the rental agreement. The respondent was not an insurer. The decision in Annear v GRE Insurance Limited [1987] TASSC 13, referred to by the appellant, has no application to the rental agreement in the present case.
That disposes of the appeal, however for completeness I note that the learned primary judge took the view that s 21(b) of the Act did not apply because it would only be engaged where the contractual provision related to a concentration of alcohol "as indicated by an analysis of his [the owner's or driver's] breath or urine". His Honour said that there was nothing in the relevant clauses about any analysis, or about the indication of any blood alcohol concentration by analysis. In other words, his Honour was of the view that the particular clause must contain the precise words set out in s 21 of the Act before the section had application.
In my view such a construction is unnecessarily nuanced. The words of the section are proscriptive of the type of condition in a contract and not prescriptive of the precise wording of the proscribed condition. Section 21(b) of the Act appears to me to be engaged wherever a clause such as cl 4.1(d) refers to "the legal limit in the State or Territory", and where the legal limit in the relevant State legislation, as is the case in Tasmania, defines a prescribed concentration as a concentration of alcohol in a person's blood or breath, and where the legislation, considered as a whole, only allows a breach to be established in a court where such concentration is found by analysis of a person's blood or breath.
Disposition
It follows from what I have said that, in my view, both grounds of appeal must fail. I would dismiss the appeal.
File No 2037/2015
THOMAS GARDAM v WTH PTY LTD t/as AVIS AUSTRALIA
REASONS FOR JUDGMENT FULL COURT
PEARCE J
25 November 2016
Subject to the following limited qualifications, I agree with Estcourt J that, for the reasons his Honour gives, the appeal must be dismissed. As to ground 1, I agree that the reasoning of the learned magistrate concerning the meaning of cl 4.1(d) of the rental agreement, adopted by the Chief Justice in the appeal below, should be accepted.
I also agree that ground 2 fails. The operation of s 21 of the Road Safety (Alcohol and Drugs) Act 1970 extends only to "any covenant, term, condition, or other provision of a contract or other agreement to the extent that it purports to exclude or limit the liability of an insurer under any contract of insurance". In the appeal below, and in the appeal to this Court, there was no challenge to the learned magistrate's finding that the rental agreement between the appellant and the respondent was not a contract of insurance. The ground of appeal challenging the finding was withdrawn before the primary judge and was expressly disavowed before this Court. The Avis Insurance Policy referred to in the rental agreement concerned third party liability and was not relevant to the claim for damage caused to the vehicle hired by the appellant. In those circumstances, s 21 could have no application, regardless of the view taken of the meaning of s 21(b) as it may otherwise have applied to cl 8.3(iii) and cl 4.1(d) of the rental agreement. Thus, it is not necessary to reach a concluded view about how s 21(b) is to be construed and I would prefer not to do so in this appeal.
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