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

This appeal concerned whether TRM's standard form "Location Agreement" was a "consumer hire agreement" within the meaning of section 15 of the Consumer Credit Act 1974. The House held that it was not.

The court identified the essential element of a consumer hire agreement under section 15 as a bailment by way of hire — in other words that the hirer acquires use and possession of goods in return for a rent (whether in cash or in kind). Applying a commercial reality test to the Location Agreement, the House concluded that the arrangement was primarily a means for TRM to locate its machines where customers would use them and generate revenue for TRM. Financial flows showed that the business received commission from TRM rather than paying a rent to TRM, and there was no obligation on the retailer to pay money to keep the machine. Accordingly the contract was not a consumer hire agreement within section 15 and the statutory consequences (licensing, unenforceability under section 40, right to termination under section 101) did not arise.

Background and parties:

• TRM and Lanwall were competing providers of photocopier machines located in shops and sub-post offices. TRM placed machines under a standard form "Location Agreement" with retailers; Lanwall supplied machines and serviced them under a different business model. TRM sued after discovering that Lanwall had removed TRM machines and installed its own, alleging the tort of inducing breach of contract.

Procedural posture:

• A Master ordered trial of three preliminary issues, one being whether the Location Agreement was a regulated consumer hire agreement under section 15 of the Consumer Credit Act 1974. At first instance Flaux J held it was not ([2007] EWHC 1738 (QB)). The Court of Appeal dismissed Lanwall's appeal ([2008] EWCA Civ 382). The House of Lords dismissed the further appeal.

Nature of claim and relief sought:

• TRM sued for the tort of inducing breach of its Location Agreements; specific remedies sought are not stated in the judgment.

Issues framed and reasoning:

• Issue: whether the Location Agreement was a consumer hire agreement within section 15 (and thus subject to licensing and the consequential protections such as unenforceability against the hirer under section 40 and the right to terminate under section 101).
• The court analysed the meaning of "consumer hire agreement" as a bailment by way of hire and emphasised the need to look at commercial reality rather than form alone. The Location Agreement required the retailer to provide a location and operate/oversee the machine for customers, to collect payments and account monthly to TRM, and entitled the retailer to a commission. There was no obligation on the retailer to pay TRM in cash other than accounting for customer payments, and if no copies were made no payment was due. Financial benefit primarily accrued to the retailer by way of commission paid by TRM, and TRM's objective was to secure locations for its machines to generate income from customers.
• Conclusion: because the essential characteristic of hire — the hirer paying rent for the use of goods — was absent and the commercial purpose was to permit TRM to exploit the machines to customers, the agreement was not a consumer hire agreement within section 15. The statutory licensing and termination consequences therefore did not apply.

Wider context:

• The court noted the policy aim of the Consumer Credit Act 1974 to look to substance not form, and some judicial unease was recorded about drawing fine distinctions by reference to contract form. Nevertheless, on the facts and commercial analysis before it, the House upheld the conclusion that the contract was not caught by section 15.

Appeal dismissed. The House held that TRM's Location Agreement was not a "consumer hire agreement" within section 15 of the Consumer Credit Act 1974 because, on its true commercial construction, it was not a bailment by way of hire: the retailer did not pay rent for the use of the photocopier and in practice received commission from TRM, so the statutory licensing/unenforceability and termination provisions did not apply.

Preliminary issues ordered by Master Rose (2 May 2007). First instance: Flaux J held Location Agreements were not consumer hire agreements ([2007] EWHC 1738 (QB)). Court of Appeal dismissed the appeal ([2008] EWCA Civ 382). House of Lords dismissed the appellant's further appeal ([2009] UKHL 35).