Lagden v O’Connor

A credit-hire and credit-repair arrangement must be classified by the true construction of the consumer-credit legislation and the agreements. Artificial features or non-enforcement of strict rights do not alone make an otherwise exempt scheme a pretence.

A consumer-hire agreement concerns the duration of the bailment. A payment obligation extending beyond three months does not itself make a short hire a regulated consumer-hire agreement. An agreement requiring one payment at the end of a 26- or 51-week credit period may satisfy the four-payment and 12-month exemption.

In tort, vehicle repair costs measure the immediate diminution in value. They remain recoverable where third-party payment is collateral. By contrast, hire and related losses are recoverable only to the extent reasonably incurred, subject to mitigation and the claimant’s particular circumstances.

Five credit-hire appeals were heard together. Four arose from sample cases determined by HHJ Charles Harris QC in the Oxford County Court, reported at [2002] Lloyds Rep IR 138. The fifth, concerning repair costs, arose from Gray J’s decision in [2001] 1 WLR 1751.

In the Helphire cases, innocent motorists had entered credit-hire and credit-repair agreements, supported in most cases by insurance arranged within the Helphire group. Insurers challenged the scheme under the Consumer Credit Act 1974 and disputed several heads of damages. The conjoined appeals also raised whether repair costs were recoverable where a regulated credit-repair agreement was unenforceable.

The central issues were the enforceability of the arrangements and the proper compensatory measure for repair costs, hire charges, delay, impecuniosity, ancillary charges and interest.

1. Appeal allowed in part. The court’s single judgment upheld the finding that the Helphire arrangements were not a pretence. The statutory question was whether, properly construed, the transactions fell within the Consumer Credit Act 1974, not whether they had been devised to avoid it. The insurance arrangements and payments made by Angel genuinely discharged customers’ liabilities.

2. The short vehicle hires were not consumer-hire agreements within section 15 merely because the associated obligation to pay continued for more than three months. Section 15 concerned the duration of the bailment. The credit agreements also met the exemption requiring no more than four payments within 12 months: they required payment in full at the end of the stated credit period.

3. As an alternative conclusion, the court held that a tariff supplied separately could not satisfy section 61(1)(a). The prescribed document itself had to contain the prescribed term concerning the amount of credit.

4. On repair costs, the court allowed the appeal in Burdis v Livsey. Damage to a vehicle causes an immediate direct loss, ordinarily measured by the reasonable cost of restoration. A collateral arrangement by which a third party paid the repairer did not reduce that loss. Jones v Stroud remained good law and was not displaced by Hunt v Severs or Dimond v Lovell.

5. A claimant could recover the full proper repair cost despite a factoring company having bought the garage debt at a discount. Delay by reputable repairers did not reduce recoverable hire charges where the claimant acted reasonably and no supervening cause broke the chain of loss.

6. An impecunious claimant who reasonably needed a replacement car and could not obtain ordinary hire or credit could recover the reasonable full cost of the available credit-hire package. Otherwise, recovery for hire was the actual reasonable cost incurred, not an average market rate. Delivery charges required proof of need; engineers’ fees were not recoverable. Interest on subrogated claims ran from Angel’s actual payments, but no interest was awarded in Burdis v Livsey.

• Court of Appeal (Civil Division): The conjoined appeals were allowed in part: [2002] EWCA Civ 510.

• High Court: Gray J’s decision in the repair-cost appeal was reversed. The appeal in Burdis v Livsey was allowed: [2001] 1 WLR 1751.

• Oxford County Court: HHJ Charles Harris QC determined four sample credit-hire cases. His decision was reviewed and varied on the appeals: [2002] Lloyds Rep IR 138.