Dimond v Lovell

A hire agreement which creates an indebtedness but contractually defers payment beyond the time when payment would otherwise be earned provides “credit” for the purposes of the Consumer Credit Act 1974. A short-term vehicle-hire agreement may therefore be a regulated consumer credit agreement even though it is not a consumer hire agreement.

A claimant whose need for a replacement vehicle has been met without legal cost has no compensatory loss. Damages may be awarded for gratuitous services only where they can properly be held for the provider. Equity cannot impose such a trust to defeat the statutory consequence of an unenforceable regulated agreement.

The reasonableness of replacement-hire expenditure depends on the circumstances. A claimant need not invariably shop around before using a specialist service.

Mrs Dimond’s car was damaged by Mr Lovell’s negligent driving. While it was repaired, she hired a replacement car from 1st Automotive Ltd under an agreement which deferred payment until her damages claim concluded. The written agreement did not state the hire charges before she signed it.

The Sheffield County Court held that the agreement was outside the Consumer Credit Act 1974, that Mrs Dimond could recover the hire charges even if it were unenforceable, and that she had acted reasonably in using the specialist hire service. Mr Lovell appealed.

The central issues were whether the agreement was regulated consumer credit, whether an unenforceable agreement left any recoverable loss, and whether the hire charges were reasonably incurred.

1. Appeal allowed unanimously. The Vice-Chancellor gave the leading judgment. Lord Justice Thorpe agreed. Lord Justice Judge agreed with the reasoning except for qualifications concerning mitigation, but did not dissent from the conclusion on that issue.

2. The agreement gave Mrs Dimond credit. It created an underlying indebtedness for the hire charges, while deferring the time for payment until conclusion of her damages claim. Credit is provided where payment is contractually deferred beyond the time at which it would otherwise be due.

   The agreement was therefore a personal and consumer credit agreement under sections 8 and 9 of the Consumer Credit Act 1974. It provided fixed-sum credit and financed the hire transaction between the parties, so fell within section 11(1)(a), not section 11(1)(c), and was a debtor-creditor-supplier agreement. Its 28-day limit prevented it from being a consumer hire agreement.

3. The agreement was not properly executed. The signed document omitted the hire charges and did not embody all the terms. No enforcement order could be made because Mrs Dimond had not signed a document containing all prescribed terms. The agreement was consequently unenforceable against her.

4. Applying Hunt v Severs [1994] 2 AC 350, negligence damages are compensatory. Mrs Dimond’s need for a replacement vehicle had been met, and she had no legal liability to pay 1st Automotive. A trust over damages can support recovery where it properly recompenses a voluntary provider, but no trust could be imposed to relieve 1st Automotive from the statutory consequence of its own non-compliance. The court therefore declined to follow McAll v Brooks (1984) RTR 99, which it held was no longer good law.

5. Although unnecessary to the result, the court held that Mrs Dimond had acted reasonably in using the specialist service on her broker’s recommendation. The fact that ordinary hire might have been cheaper did not itself establish a failure to mitigate. Lord Justice Judge added that reasonableness remains fact-sensitive, including the urgency of need, alternatives offered by insurers, opportunity for enquiries, and the rate charged.

• Court of Appeal (Civil Division) — allowed Mr Lovell’s appeal and entered judgment for him: [1999] EWCA Civ 1311.
• Sheffield County Court — Recorder Anton Lodge QC had given judgment for Mrs Dimond for the replacement-hire charges.