Dimond v Lovell

An accident-hire agreement provides credit where hire charges, otherwise payable during or at the end of the hire, are deferred until completion of a damages claim. If the agreement omits a prescribed term and the court cannot order enforcement under the Consumer Credit Act 1974, the hirer incurs no enforceable loss.

Common-law restitution cannot reverse Parliament’s intended consequence. Nor may a tort claimant recover the notional cost of a replacement vehicle received without charge merely because a third party supplied it. Such recovery would offend the rule against double recovery.

By majority obiter, reasonable use of an accident-hire service does not make the whole package charge recoverable. The value of credit and claim-management benefits must be excluded, ordinarily leaving the equivalent spot-hire rate.

Mr Lovell negligently damaged Mrs Dimond’s car. While it was being repaired, she hired a replacement vehicle for eight days from an accident-hire company. The £346.63 charge was deferred until her damages claim had concluded, and the company expected to recover its charge from the damages.

The insurer accepted liability for the accident and paid the repair cost, but resisted the hire charge. The trial judge found that Mrs Dimond had acted reasonably and accepted that the full accident-hire rate was recoverable. The Court of Appeal, [1999] 3 WLR 561, reversed the judge because the agreement was an improperly executed regulated agreement under the Consumer Credit Act 1974 and was unenforceable. It nevertheless indicated that the full charge would otherwise have been recoverable.

The central issues were whether the agreement provided regulated credit, whether any loss survived its statutory unenforceability, and, if it had been enforceable, whether damages extended beyond the ordinary spot-hire rate.

1. Appeal dismissed unanimously. Lord Hoffmann delivered the leading speech. Lord Browne-Wilkinson, Lord Nicholls and Lord Saville agreed with his reasons for dismissing the appeal. Lord Hobhouse reached the same result in a separate speech.

2. Per Lord Hoffmann, the agreement supplied credit within sections 8, 9 and 189 of the Consumer Credit Act 1974. The accident-hire company’s primary obligation was to supply the vehicle. In the absence of credit, the hire charge would have been payable during or at the end of the hire. The provisions postponing payment until conclusion of the damages claim therefore constituted financial accommodation. Section 18 did not divide the agreement into separate hire and credit agreements because the creation of the debt and the terms governing its payment formed part of one contract. Lord Hobhouse agreed, while cautioning that deferred payment does not invariably amount to credit; the transaction and its commercial context must be examined.

3. The agreement omitted the prescribed statement of the amount of credit required by section 61(1) and Schedule 6 to the Consumer Credit (Agreements) Regulations 1983. Section 127(3) therefore prevented an enforcement order. The agreement was irredeemably unenforceable under section 65(1), and Mrs Dimond bore no liability for the hire charge.

4. Per Lord Hoffmann, restitution could not restore the value of the free hire. Parliament intended the consumer to escape payment where the statutory formalities were not satisfied. A common-law remedy reversing that consequence would conflict with the statute. The broad third-party-benefit principle stated in Donnelly v Joyce [1974] QB 454 and used in McAll v Brooks [1984] R.T.R 99 could not prevail after Hunt v Severs [1994] 2 AC 350. Insurance and benevolence remain policy-based exceptions to the rule against double recovery. No further exception applied, and recovery as trustee for the hire company would confer rights which the statute withheld.

5. Measure of damages, obiter. Lord Hoffmann, Lord Browne-Wilkinson and Lord Hobhouse concluded that an enforceable claim would ordinarily have been limited to the equivalent spot-hire rate. Reasonable resort to an accident-hire company did not make the whole package charge recoverable. Per Lord Hoffmann, applying British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673, the benefits of credit, claim management and risk assumption had to be brought into account. Lord Hobhouse preferred commercial apportionment between vehicle hire and the additional services.

6. Lord Nicholls disagreed on that hypothetical issue. He considered that reasonable charges for the additional services should be recoverable because they made the claimant’s legal remedy effective in practice. Lord Saville expressed no view because the issue did not arise for decision. Lord Hobhouse additionally observed that loss of use of a non-profit-earning chattel is compensable in principle, although compensation is not awarded for a loss which has been avoided.

1. House of Lords: In Dimond v Lovell [2002] 1 AC 384, unanimously dismissed the appeal and affirmed the Court of Appeal’s conclusion that the claimant had no recoverable hire-charge loss.
2. Court of Appeal: In [1999] 3 WLR 561, reversed the trial judge. It held that the accident-hire agreement was an improperly executed and unenforceable regulated agreement under the Consumer Credit Act 1974. Its majority nevertheless agreed with the judge that the full hire charge would otherwise have been recoverable.
3. Trial judge: Found that the claimant acted reasonably in using the accident-hire company and that the full accident-hire rate was recoverable. That decision was reversed by the Court of Appeal.