BMW Financial Service (GB) Ltd v Hart

For limitation purposes, a contractual claim for future or accelerated sums accrues when the contractual condition making those sums payable is satisfied. If the contract requires the owner to elect to terminate or accept a repudiation, the cause of action arises only when that election is communicated. An earlier instalment default does not itself accelerate the whole liability.

Authorities concerning a single-condition acceleration clause, where default alone makes the whole debt payable, do not govern a two-stage hire-purchase contract. The contract must be construed on its own terms. Under section 5 of the Limitation Act 1980, time runs from accrual of the relevant cause of action.

Mr Hart entered into a hire-purchase agreement with BMW’s predecessor in March 1999. He missed instalments due in July and August 1999. BMW served a termination notice on 26 August 1999 and later obtained default judgment for the sums claimed under the termination provisions.

On Mr Hart’s application, Chester County Court set aside the judgment, holding that limitation began when the first instalment was missed and relying on Reeves v Butcher [1891] 2 QB 509. The central issue on appeal was whether the claim for the larger termination sum accrued on the earlier default or only when BMW elected to terminate or accepted repudiation.

1. Disposition. The appeal was unanimously allowed. The default judgment was not to be set aside and therefore stood.
2. Accrual under the contract. Clause 12 made the larger termination liability conditional on termination of the hiring or the owner’s acceptance of the customer’s repudiation. The right to recover those sums arose only when BMW exercised that election by notice or communicated acceptance. Before then, only unpaid instalments were due. Under section 5 of the Limitation Act 1980, time therefore ran from the termination or acceptance, not from the earlier missed instalment: per Moore-Bick LJ at [25] and Lewison LJ at [28].
3. Authorities. Rix LJ distinguished Reeves v Butcher [1891] 2 QB 509. That case concerned a loan and a single condition: after 21 days’ default in interest, the principal became recoverable without a separate pre-action demand. It did not govern a contract requiring both a default and a subsequent optional termination notice. Hemp v Garland 4 QB 519 was likewise a single-condition acceleration case. The reasoning was consistent with Lakshmijit v Faiz Sherani [1974] AC 605 and Thakore v Malick, which emphasised construction of each contract and the effect of an election.
4. Nature of the termination liability. Lewison LJ noted that clause 12 did more than accelerate future instalments. It required credits, rebates, sale proceeds and other losses or expenses to be calculated. This reinforced the conclusion that the clause 12 liability did not arise until a condition precedent was satisfied. The express exception in paragraph 7 of Schedule 1 to the Limitation Act 1980 also supported the general principle that contractual remedies arising on election accrue when the election is made.

• Court of Appeal (Civil Division): Allowed the appeal and held that the claim was not time-barred. The default judgment stood.
• Chester County Court: On 2 December 2011, HHJ Halbert set aside the default judgment, holding that limitation began with the first missed instalment and relying on Reeves v Butcher [1891] 2 QB 509.