Major Win for Insurance Industry – Detention of Vehicles by Repairers

In a major win for the insurance industry at large in New South Wales, the Supreme Court of NSW in Wong v Maroubra Automotive Refinishers and Ayres v Maroubra Automotive Refinishers has sent a strong message to the NSW motor vehicle repair industry about whether or not a repairer can detain a vehicle until the repairer is paid storage fees.

In each case:

  1. The repairer was located in New South Wales.
  2. The repairer had received a vehicle from a tow truck driver.
  3. The tow truck driver delivered the vehicle to the repairer at the direction of the owner.
  4. That direction was made by the owner nominating the repairer’s address in an authorisation form that was compliant with the Tow Truck Industry Act 1988 and Regulations.
  5. The owner had no prior knowledge of the repairer and the tow truck driver had inserted the repairer’s address into the form before the owner signed it.
  6. The owner had no prior dealings with the repairer and, in particular, had not discussed, let alone agreed to the payment of storage fees to the repairer.
  7. The repairer did not provide an estimate or quote for the vehicle and undertook no repair work.
  8. Despite demands being made by the owner, the repairer refused to release the vehicle until storage fees it alleged were owed were paid.

The Court found:

  1. The repairer could not detain the vehicle pending payment of towing and/or storage fees.  In legal terms, the repairer could not exercise a lien over the vehicle.
  2. There was no contract between the repairer and the owner for the repairer to store the vehicle in exchange for payment of storage fees.  The Court noted that the simple acceptance of the vehicle was not enough to create a contract and that, moreover, the repairer had the option of refusing to accept delivery of the vehicle.
  3. The Tow Truck Industry Act did not assist the repairer in trying to create a contract between the repairer and the owner for storage of either vehicle.
  4. The Motor Vehicle Repair Industry Code of Conduct did not assist the repairer in trying to create a contract between the repairer and the owner for storage of either vehicle.
  5. Even if it is assumed that a contract for the storage of the vehicle did exist between the repairer and the owner, it was not possible to imply a term into that contract to the effect that clause 4.2(e) of the Code had to be complied with before the owner could recover the vehicle.  Clause 4.2(e) states that a repairer must not remove a motor vehicle from a Repairer’s premises without notifying the Repairer in advance and compensating the Repairer for any legitimate or reasonable towing or storage costs associated with the vehicle and in compliance with relevant legislation.  Rightly, the Court found that this was a matter between the repairer and the insurer, but had no impact on the relationship between the repairer and the owner.
  6. Each owner was entitled to damages for the period after they had demanded the return of their vehicle up to when they received it back.  That was equal to the market rate of hire of a replacement vehicle for the period between when the demand for return of the vehicle was made and when the vehicles were actually returned (this included periods where they did not have use of any replacement vehicle).  Notably, the Court found that the comments of Ipp JA in Anthanasopoulos v Moseley should be followed when assessing damages for wrongful detention.
  7. A claim against the insurer for the payment of storage fees was unsuccessful.

In very simple terms, if a repairer in New South Wales:

  1. receives a vehicle from a tow truck driver;
  2. does no repair work on the vehicle; and
  3. has no direct dealings, let alone an agreement, with the owner of the vehicle regarding storage fees or to withhold the vehicle pending payment of storage fees;

then the repairer cannot detain the vehicle once the owner makes a demand for its return and the Code or towing legislation will not assist the repairer in any way in those circumstances to detain the vehicle.

What does it mean for an insurer?

If an insurer encounters a situation in NSW that fits into the circumstances outlined above, then the insurer probably has a good chance of assisting its insured to recover the insured vehicle from the repairer.

In cases where the repairer has actually completed repair work or provided a quote, in our view the outcome is likely to be the same.   Of course, Wong/Ayres does not deal with how clause 4.2(e) of the Code should be applied when it comes to dealings between insurers and repairers, but what it does show is that there is a way to assist insureds in having their vehicles returned.

William Roberts acted for the owners and insurer in this matter.

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