car rental / hire car businesses overcharge for damage
Hire car businesses are tempted to
overcharge customers for vehicle damage repairs, to make
them a profit centre, as opposed to passing on the actual
The ACCC (the Australian Competition and
Consumer Commission) takes a dim view of hire car businesses
which profit from repairs. It says that – Hire car
companies must behave honestly in relation to charges for
vehicle repairs and ensure that they have adequate systems
in place to refund any overcharged amounts.
2013, the ACCC had the Federal Court of Australia fine the
former Tasmanian Europcar hire car franchisee $200,000 for
misleading and deceptive conduct because it overcharged by
- holding back refunds due to its customers for
vehicle repairs; and
- using two-tier invoicing to deceive its customers
and others about the true cost of the repairs.
The Court also fined the managing director of the
franchise, Brendon Ayers, $40,000 for masterminding
these contraventions of the Australian Consumer Law.
What should the car hire industry do when a vehicle
is returned damaged?
In the car rental / hire car
industry, vehicle damage requires careful management
because the repair costs can quickly mount up and affect
For this reason, hire car contracts
require the renter to pay a Damage Liability Fee if they
return the vehicle damaged. This Fee is a fixed cost
estimate calculated to cover the cost of the repairs and
third party claims. It is charged by a pre-authorised
debit to the renter’s credit card. If Collision Damage
Waiver insurance is taken out, the Fee will be less.
Later, when the actual Repair Cost and other costs are
known, the part not used is refunded to the renter.
What did Tasmanian Europcar do when the vehicle
damage cost was less than the renter was charged?
The Tasmanian Europcar car rental franchise operator
disregarded the hire car contract it used and the
Europcar Website which contained statements that the
unused part of the Damage Liability Fee would be
refunded. Instead, it overcharged its customers by –
Not refunding unused money charged – four
different ways were used -
- The car rental business failed to process
refunds where the Repair Cost was lower than the
Damage Liability Fee by less than $400 – it waited
until a customer enquired about whether a refund was
- The car rental business developed standard
charges for items or types of vehicle damage, which
it charged the customer, regardless of the actual
Repair Cost (which was nearly always less than the
- The car rental business would wait until it had
several instances of minor damage – dents and
scrapes, before repairs were done, but did not pass
on the savings as a refund.
- The car rental business’ system for reviewing
third party damage files was inadequate, and it held
back the Damage Liability Fee even after it knew
that the claim was resolved.
Using two-tier invoicing where the car
rental business could conceal the fact that it paid
less for the Repair Cost than it charged the
customer for the same vehicle repair. This is how it
- The operator arranged with its affiliated
bodyworks repairers to issue a higher invoice
with labour and retail prices for parts; and a
lower invoice with a 10% discount for
labour and wholesale prices for parts.
- The higher invoice (the inflated
invoice) was passed on to the customer and third
party motorists (or their insurers) as the
Repair Cost; and the lower invoice was
the actual Repair Cost paid to the bodyworks
What happened in the Tasmanian Europcar
The ACCC alleged that the non-refund
and the two-tier invoicing was conduct that was
misleading and deceptive or likely to mislead or
deceive the car rental customers and was
unconscionable in contravention of the
Australian Consumer Law.
The Federal Court found significant
contraventions and losses under the Australian
Consumer Law, which were deliberate and were
designed to profit the business over the
The civil penalty was $200,000 for
the car rental business operator; and $40,000
for its managing director. These were not
criminal proceedings because the conduct is not
a criminal offence. Therefore the Court did not
need to consider whether imprisonment might be
The ACCC’s action effectively put Tasmanian
Europcar out of business. Europcar terminated
the franchise agreement early, took over the
fleet, and employed the staff.
Europcar Australia has introduced a new
charging model that customers are only charged
for vehicle damage once an independent assessor
has reported on the exact cost of the repairs.
Europcar Australia was not a party to the
proceedings and no orders were made against it.
For a more detailed analysis, google my article:
The ACCC targets hire car companies for
overcharging for damage repairs – the Federal
Court orders a $200,000 civil penalty.
A fall from a top bunk creates a $853,396 migraine!
The award On 26 June 2009, the Supreme Court of NSW
awarded $853,396 to compensate a child for brain damage,
medical expenses and future loss of earnings caused by
falling from the top bunk of a bunk bed in a private home.
The decision was reported as Thomas v Shaw  NSWSC 510.
The facts On 23 April 2004, Cameron Thomas (aged 10)
was staying at his friend’s house (the Shaws’ house). He was
sitting in the top bunk, legs over the side. He decided to
slide down, he put one foot on a chest of drawers, he
slipped and landed face down on the floor, fracturing his
skull. The floor was a carpeted concrete slab. When
purchased in 1997 the bunk bed had a tubular steel ladder
and a guardrail, but the parents had removed them both about
a year after purchase ‘because the steel ladder was slippery
and the bolts of the guardrail had stripped out of the
framework’. Therefore Cameron had no safe way of getting out
of the top bunk, because 2 points for hand and feet grip had
The law An occupier of premises is responsible for
the safety of visitors and guests. This is known at law as a
‘duty of care to take precautions against a risk of harm’
and a breach results in a civil liability to pay
compensation. In this case the absence of the ladder and
guardrail meant that the bed did not comply with
Australian/New Zealand Standard 4220, and therefore there
was a breach of the duty of care. Fortunately the Shaws had
public liability insurance, the insurer defended the claim
and will pay the compensation awarded.
The lessons for backpacker operators
- Bunk beds must comply with safety standards (ladder
and guardrail essential)
- Display a sign warning ‘Take Care when climbing in
or out of top bunks’
- Use a soft underlay to carpets/ floor coverings in
bed areas to cushion falls
- If an injury occurs, it will be covered by
insurance. But a claim will mean that insurance premiums
in the following years will increase with a ‘claims
loading’, often of thousands of dollars
- If an injury occurs, take a written statement from
each person who witnessed the accident, photographs, and
a video. And ensure the injured person receives
immediate medical treatment, for even the most minor
injury. Keep this material in a safe place.
As published in the Backpackers Trade Magazine