TRM Copy Centres (UK) Ltd & Ors v Lanwall Services Ltd

A consumer hire agreement under section 15 of the Consumer Credit Act 1974 is confined to a bailment by way of hire. Hire requires a right to use and enjoy the goods, an obligation to return them, and payment or another reward provided by the bailee. The reward need not be monetary.

Whether an agreement is one of hire depends on its commercial purpose and its terms as a whole. An arrangement under which the owner places equipment at business premises, receives payments from users through the occupier, and pays the occupier commission for providing space and accounting, is not ordinarily a hire. It remains a bailment but is not a regulated consumer hire agreement.

TRM supplied photocopiers for installation in retailers’ shops and sub-post offices under location agreements. The retailers collected charges paid by users, accounted to TRM, and retained a commission. They had no minimum payment obligation.

TRM alleged that Lanwall induced retailers to breach subsisting location agreements by removing TRM’s machines and replacing them with Lanwall equipment. Lanwall contended that, where a retailer was an individual, the agreement was a consumer hire agreement that could be terminated under the Consumer Credit Act 1974.

Flaux J held that the agreements were not consumer hire agreements: [2007] EWHC 1738 (QB). Lanwall appealed. The central issue was whether the location agreement was a bailment by way of hire within section 15.

Decision

1. The appeal was dismissed. Thomas LJ, with whom Hooper LJ and Sir Mark Potter P agreed, held that the location agreement was not a consumer hire agreement under section 15 of the Consumer Credit Act 1974.

2. Section 15 was concerned only with bailment by way of hire. Such a bailment requires a right for the bailee to use and enjoy the goods, an obligation to return them, and payment or another reward provided by the bailee. A gratuitous bailment cannot qualify. The reward may be money or another form of recompense; the phrase “stipulated payment” did not confine the reward to money.

3. The court rejected the proposition that a payment must be for possession rather than use before the agreement can be a hire. Payment calculated by use may be consistent with hire. However, the nature and direction of the payments, and the nature of any alleged quid pro quo, remain relevant when deciding whether the agreement is properly characterised as hire.

4. The correct approach was to examine the agreement’s commercial purpose and reality, rather than to classify each obligation separately. Clause 4 was an accounting mechanism for sums paid by users, not an obligation on the retailer to make predetermined payments. TRM paid the retailer commission for making space available and accounting for the receipts. The retailer was not obliged to make a minimum payment and paid only if using the machine personally, like any other customer.

5. Accordingly, the arrangement was a modern form of bailment under which the machine owner and premises owner hoped jointly to profit from customer use. It was not, in an ordinary commercial sense, a hire of the machine by the retailer. The first-instance answer to the preliminary issue was affirmed.

• Court of Appeal (Civil Division): dismissed Lanwall’s appeal and affirmed that the location agreements were not consumer hire agreements: [2008] EWCA Civ 382 .
• Queen’s Bench Division (Flaux J): determined the preliminary issue in TRM’s favour, holding that the location agreements were not consumer hire agreements: [2007] EWHC 1738 (QB).