Ketley v Gilbert

For an agreement to qualify for exemption from regulation under the Consumer Credit Act 1974, payments must be required within the specified period. A provision requiring payment “on the expiry” of 12 months permits payment after that period and therefore falls outside the exemption in the Consumer Credit (Exempt Agreements) Order 1989. The question concerns when the act of payment must be performed, rather than the precise instant at which an obligation arises. Authorities concerning trusts, notices to quit, leases and other obligations were context-specific and did not alter that conclusion. Any genuine ambiguity would be resolved in favour of the consumer. An unenforceability argument not raised below could not be introduced for the first time on appeal.

The claimant’s vehicle was damaged in a road accident. He hired a replacement vehicle from an accident hire company under a written agreement requiring the hire charges to be repaid when his claim against the responsible third party was satisfied or on the expiry of 12 months from the agreement, whichever was earlier.

A district judge awarded the hire charges. Judge Faulks allowed the defendant’s appeal on the ground that the agreement was not exempt under article 3(1) of the Consumer Credit (Exempt Agreements) Order 1989, because payment on expiry of 12 months was not payment within a period not exceeding 12 months. The claimant appealed. The central issue was whether the agreement was an exempt and enforceable agreement.

1. Appeal dismissed. The agreement was not exempt under article 3(1)(a)(i) of the Consumer Credit (Exempt Agreements) Order 1989.
2. The expression “within a period not exceeding 12 months” requires payment before the expiry of that period. A contractual obligation expressed to be performed “on the expiry” of 12 months permits the payment to be made after the period has expired. It therefore falls outside the exemption.
3. The court distinguished authorities concerning the rule against perpetuity, periodic tenancies and lease provisions. Those cases concerned different statutory, contractual or contextual questions. They did not establish that an express obligation to make a payment on expiry of a period is performed within that period.
4. The reasoning in Dimond v Lovell meant that, if the agreement was regulated and its formalities did not comply with the Act, the hire company could not recover its charges or rely on subrogation. Any uncertainty in the construction of the agreement would also have been resolved in favour of the hirer, although it was unnecessary to rely on regulation 6 of the Unfair Terms in Consumer Contracts Regulations 1994 or the rule contra proferentem.
5. The alternative submission under sections 65(1) and 127(1) of the Consumer Credit Act 1974 was not entertained because it had not been pleaded, evidenced or considered below. The appeal was dismissed with agreed costs of £29,000. Leave to appeal to the House of Lords was refused.

• Court of Appeal: Appeal from Judge Faulks’s decision in the Newcastle-upon-Tyne County Court dismissed. The court upheld the conclusion that the replacement-vehicle hire agreement was outside the statutory exemption.
• Newcastle-upon-Tyne County Court: Judge Faulks allowed the defendant’s appeal from the district judge’s assessment of damages.
• Newcastle-upon-Tyne County Court: District Judge Powell had awarded the claimant £2,078.63, including the disputed replacement-vehicle hire charges.