The High Court has confirmed that a towing company’s lien can be substituted by adequate security provided by an insurer.

The dispute between the parties related to the release of a motor vehicle which was insured by the applicant insurer, the applicant. The motor vehicle was involved in an accident and subsequently towed by the towing company, the respondent. Upon receipt of the invoice for towing and storage services from the respondent, the insurer challenged the charges, deeming them unreasonable. The key issue revolved around the respondent’s right of lien and whether the security provided by the insurer was adequate to compel the release of the vehicle.

The court acknowledged the respondent’s right of lien, allowing them to retain the vehicle until payment was secured. However, it emphasized that this right could be substituted by adequate security from the applicant. The insurer had offered to pay a reasonable amount based on industry norms and paid the balance into the applicant’s attorney’s trust account as security, with an undertaking to pay the balance due on the success of the respondent’s claim.

The court found the insurer’s approach to be reasonable, highlighting the unnecessary nature of the litigation initiated by the respondent. The respondent’s failure to suggest alternative security measures further weakened their stance.

The judgment reinforced that providing security in a trust account is an acceptable substitute for physical possession under lien.

The court ruled in favour of the insurer, ordering the release of the vehicle upon the security already provided. It concluded that the security offered by the insurer was sufficient and reasonable, negating the need for continued possession by the respondent. The court also mandated that any further storage costs from April 3, 2023, be covered by the trust account pending the resolution of the legal dispute over the towing charges.

Insurers are entitled to challenge unreasonable towing and storage charges by offering adequate security for any payment due on final resolution of any legal proceeding to determine the reasonable storage charges payable. This approach can also expedite the recovery of insured assets which are being unreasonably withheld by towing or storage companies. A similar decision is discussed in our blog [Link to blog: “Insurer entitled to provide security … etc 27/07/2023]

Old Mutual Insure vs Saider Towing Service CC (2021/2023) [2024] ZAECMHC 36 (23 May 2024)