TRM Copy Centres (UK) Limited and others (Respondents) v Lanwall Services Limited (Appellants)

A consumer hire agreement under section 15 of the Consumer Credit Act 1974 requires bailment by way of hire. The recipient must acquire possession and use of the goods in return for rent or other reward, payable in cash or kind.

The court must examine the agreement’s commercial purpose as a whole. An arrangement is not consumer hire where the provider places equipment on business premises to generate income, pays the business commission for facilitating its use, and imposes no obligation on the business to pay for possessing the equipment. Payment at a set rate when the business itself uses the equipment does not alter that conclusion.

TRM installed photocopiers in shops and sub-post offices under standard Location Agreements. The retailers housed and supervised the machines, collected payments for copies and retained commission. Lanwall, a competitor, removed some machines and replaced them with its own equipment. TRM alleged that Lanwall had induced breaches of the Location Agreements.

Lanwall contended that the agreements were regulated consumer hire agreements under section 15 of the Consumer Credit Act 1974. If so, TRM’s lack of a consumer hire licence affected enforceability and the retailers could terminate under the Act.

Flaux J decided the preliminary issue in TRM’s favour: [2007] EWHC 1738 (QB). The Court of Appeal dismissed Lanwall’s appeal: [2008] EWCA Civ 382; [2008] Bus LR 1231. The issue before the House was whether the Location Agreements contained the essential elements of consumer hire.

1. Appeal dismissed unanimously. Lord Hope delivered the leading speech. Lord Hoffmann, Lord Rodger, Lord Walker and Baroness Hale agreed with his reasons and the disposition. The Location Agreement was not a consumer hire agreement within section 15 of the Consumer Credit Act 1974.

2. Per Lord Hope, section 15 refers in England and Wales to bailment by way of hire, rather than every form of bailment. Its effect is equivalent to the Scottish reference to hiring. The defining feature is that the person receiving possession agrees to pay, in cash or kind, for use of the goods during possession. Gratuitous bailment falls outside the provision.

3. Per Lord Hope, the commercial purpose of the agreement had to be considered as a whole. The retailers assumed no obligation to pay for possession of the photocopiers. Nothing was payable unless copies were made. Where customers made the copies, the retailer merely accounted for money collected on TRM’s behalf and retained commission. The retailer was free not to use the machine itself.

4. The commercial flow of value was from TRM to the retailer. TRM obtained the benefit of locating its machine and promotional material where customers could use them. The retailer was rewarded by commission for providing the location and facilitating use. Its obligations were directed towards maximising TRM’s return. The arrangement was therefore a delivery of equipment in return for a reward to the bailee, rather than a hiring by the bailee.

5. Baroness Hale emphasised that the essential inquiry was who paid whom, and for what. Hire requires possession and use in return for rent. This arrangement lacked an obligation to pay for keeping the machine, irrespective of its profitability. Although the retailer could use the copier at the ordinary per-copy price, that possibility made no material difference.

6. Baroness Hale also observed that the arrangement did not exhibit the principal consumer-hire mischiefs addressed by the 1974 Act. The retailer was committed to housing and insuring the machine for three years, but had no corresponding commitment to pay for it.

1. House of Lords: The appeal was dismissed unanimously. The Location Agreement was not a consumer hire agreement within section 15 of the Consumer Credit Act 1974: [2009] UKHL 35.

2. Court of Appeal: Lanwall’s appeal on the consumer-hire preliminary issue was dismissed: [2008] EWCA Civ 382; [2008] Bus LR 1231.

3. High Court: Flaux J held that the Location Agreements were not consumer hire agreements and decided two contractual-termination preliminary issues against Lanwall: [2007] EWHC 1738 (QB).