Gardam v WTH Pty Ltd
[2015] TASSC 46
•7 October 2015
[2015] TASSC 46
COURT: SUPREME COURT OF TASMANIA
CITATION: Gardam v WTH Pty Ltd [2015] TASSC 46
PARTIES: GARDAM, Thomas
v
WTH Pty Ltd trading as Avis Australia
FILE NO: 893/2014
JUDGMENT
APPEALED FROM: WTH Pty Ltd v Gardam [2014] TASMC 20
DELIVERED ON: 7 October 2015
DELIVERED AT: Hobart
HEARING DATE: 30 June 2015
JUDGMENT OF: Blow CJ
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.
Road Safety (Alcohol and Drugs) Act1970 (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: [2015] TASSC 46
Number of paragraphs: 28
Serial No 46/2015
File No 893/2014
THOMAS GARDAM v WTH PTY LTD
trading as AVIS AUSTRALIA
REASONS FOR JUDGMENT BLOW CJ
7 October 2015
This appeal concerns a dispute between a vehicle rental company and one of its customers concerning damage to a rented vehicle.
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 company sued the appellant in the Magistrates Court for $38,033.63 in respect of damage to the vehicle. On 23 September 2014 a magistrate, Mr M Brett, held that, under the parties' rental agreement, the appellant was liable to pay the company for the damage: WTH Pty Ltd v Gardam [2014] TASMC 20. Judgment was entered accordingly. This is an appeal from that judgment.
The rental agreement was in a standard form. It contained provisions to the following effect. As a general rule, the customer was liable for all damage to the vehicle. However, if the customer accepted and paid for the "Loss Damage Waiver option", or paid hiring charges at a rate that included that option, then the customer was entitled to be indemnified under the "Avis Insurance Policy", subject to certain provisos and exceptions. One of those exceptions related to having a blood alcohol content exceeding the legal limit. I will set out the full text of the relevant contractual provisions at a later stage.
The Loss Damage Waiver option was included in the rate that the appellant paid for the vehicle, but the learned magistrate held that the appellant was not entitled to the benefit of the relevant provision in the rental agreement because his blood alcohol content exceeded the legal limit of .05%. The appellant argued that the exclusion clause relating to having a blood alcohol content exceeding the legal limit was void because of s 21 of the Road Safety (Alcohol and Drugs) Act, but the learned magistrate rejected that contention. Amongst other things, that section renders void any provision in a contract that purports to exclude the liability of an insurer under a contract of insurance in the event of the driver of a motor vehicle having more than a specified concentration of alcohol present in his or her breath or blood, as indicated by an analysis. I will set out the full wording of the section later in these reasons.
The appellant originally pursued three grounds of appeal, but Ground 2 was abandoned during the hearing. The appellant's remaining contentions are that the learned magistrate erred in law in two respects:
· By interpreting a clause in the rental agreement to mean that the appellant was liable for all damage that occurred when he was driving with a blood alcohol content exceeding the legal limit, whether or not alcohol played a part in the causation of that damage (Ground 1).
· By concluding that s 21 of the Road Safety (Alcohol and Drugs) Act 1970 had no application to the case (Ground 3).
Ground 1: Meaning of the exclusion clause
The general provision in the rental agreement that imposed liability for damage to the vehicle was cl 8.1(a), which read as follows:
"8.1Subject to this clause 8, You are liable:
(a) for the loss of, and all damage to, the Vehicle …".
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."
When the "Loss Damage Waiver" applied, cl 8.1(a) was superseded by cl 8.2(a), which read:
"8.2Subject 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) …".
In certain situations, cl 8.2 was superseded by cl 8.3(a)(iii), which read as follows:
"8.3Additional 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 …".
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.
Although only cl 4.1(d) related to alcohol, I will set out the whole of cl 4.1. It read as follows:
"4.1You 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."
I have set out the whole of cl 4.1 in order to demonstrate that par (d) of that clause is worded differently from its other paragraphs. Unlike the other paragraphs, (d) does not refer to the use of the vehicle. All that it says is 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. It does not expressly limit those prohibitions by reference to the using of the vehicle.
The appellant contends that that becomes important when one considers the wording of cl 8.3(a)(iii). Under that clause, the customer must always pay the cost of repairing any damage to the rented vehicle "caused by a breach" of cl 4.1.
The appellant contends that the combined effect of cl 8.3(a)(iii) and cl 4.1(d) is that he would be liable to pay for the repairs only if the damage was caused by him (or some other authorised driver) having a blood alcohol content that exceeded the legal limit. He contends that there was no evidence that alcohol played any part in the causation of the damage to the vehicle he was driving, and that the learned magistrate should therefore have dismissed the claim against him.
The company contends that cl 4.1(d) should not be given a strict literal interpretation, but should be interpreted as prohibiting the customer from driving its vehicle when the customer's blood alcohol content exceeds the legal limit. It contends that if a customer drives with a blood alcohol content exceeding the legal limit, that driving amounts to a breach of cl 4.1(d), and that cl 8.3(a)(iii) then applies so as to require the customer to pay for any repairs if the rented vehicle is damaged.
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 [26]-[29]. Those paragraphs read as follows:
"26 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).
27 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."
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].
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).
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.
In my view the learned magistrate correctly interpreted the relevant contractual provisions. Ground 1 must therefore fail.
Ground 3: Applicability of s 21
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."
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.
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.
However s 21(b) will only apply to a contractual provision that relates to a concentration of alcohol "as indicated by an analysis of his [the owner's or driver's] breath, blood, or urine".
It may well be that, within the meaning of s 21, cls 8.3(a)(iii) and 4.1(d) together purported 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. However the relevant clauses would need to go further in order for s 21(b) to apply. They would need to exclude liability in the event of the driver having more than a specified concentration of alcohol present in his blood "as indicated by an analysis of his breath, blood or urine". There is nothing in the relevant clauses about any analysis, or about the indication of any blood alcohol concentration by an analysis. It follows that s 21(b) did not apply to the parties' rental agreement and did not render any provision in it void.
Ground 3 must therefore fail.
Conclusion
For these reasons, I have decided to dismiss the appeal.
1
1