Salat v Barutis

For regulation 5, a contract is “made” when a legally binding agreement is concluded, not when negotiations begin. A credit hire agreement signed at a consumer’s home therefore falls within the Regulations even if earlier telephone discussions were substantial.

Failure to give the prescribed cancellation notice makes the agreement unenforceable against the consumer. Where the consumer has received a full indemnity and has not paid the hire charges, he has suffered no recoverable loss. Participation in proceedings does not affirm the agreement without knowledge of its unenforceability and an unequivocal willingness to be bound. The Regulations are not incompatible with Article 1 of Protocol 1 and cannot be read to exclude this type of solicited home visit.

The appellant’s motorcycle was damaged by the respondent’s careless opening of a car door. The appellant obtained a replacement motorcycle from BLD Group Ltd under a credit hire agreement signed at his home when the motorcycle was delivered. The agreement contained no cancellation notice required by the Regulations, and the hire charges remained unpaid.

District Judge Jenkins dismissed the claim for loss of use, holding that the agreement was unenforceable and that the appellant had suffered no recoverable loss. His Honour Judge Powles Q.C. upheld that decision. The appeal concerned when the agreement was made, the effect of prior telephone negotiations, possible affirmation, the relevance of the credit hire arrangements, and compatibility with Article 1 of Protocol 1.

1. Appeal dismissed. The agreement was made at the appellant’s home when he signed the credit hire documents. The earlier telephone discussion amounted only to preliminary negotiations. Regulation 5 refers to the point at which the parties enter into a legally binding agreement, not to the entirety of their earlier dealings.
2. The court followed the approach in Swift (trading as A Swift Move) v Robertson [2012] EWCA Civ 1794, [2013] Bus. L.R. 479. A contract is made where and when it is concluded, even though negotiations may have taken place earlier. The Regulations therefore applied to this credit hire agreement. The criminal sanction in regulation 17 did not justify a narrower construction because regulation 5 had a clear meaning.
3. Under regulation 7(6), the absence of the prescribed notice rendered the agreement unenforceable against the appellant. Applying Dimond v Lovell [2002] 1 A.C. 384, the appellant had received the use of a replacement motorcycle without paying the charges and had suffered no recoverable loss. The wider question whether an unenforceable agreement can ever be affirmed was left undecided. At minimum, affirmation would require knowledge of the unenforceability and an unequivocal willingness to be bound. Neither requirement was satisfied.
4. The appellant’s arrangements with BLD could not be treated as collateral to his claim against the respondent. The reasoning in W v Veolia Environmental Services (UK) plc [2011] EWHC 2020 (QB), [2012] 1 All E.R. (Comm) 667, concerning payment of hire charges, did not alter the result because the charges here remained unpaid. King v Victoria Insurance Co [1896] A.C. 250 was distinguishable. The general or special character of the loss made no difference where the appellant had received a full indemnity.
5. The Regulations were compatible with Article 1 of Protocol 1. Wilson v First County Trust Ltd [2003] UKHL 40, [2004] 1 A.C. 816, supported the conclusion that an agreement unenforceable from the outset did not give BLD an effective right against the appellant. BLD knew of the regulatory requirements and had no legitimate expectation of enforcement. The question of proportionality therefore did not arise. Stretch v United Kingdom (2004) 38 E.H.H.R. 12 did not affect that conclusion.
6. The court expressed no opinion on other types of solicited home visit, but it was not possible to construe the Regulations so as to exclude credit hire contracts of this kind. The order dismissing the claim was upheld.

• Court of Appeal (Civil Division): The court dismissed the appeal and upheld the decision below: [2013] EWCA Civ 1499.
• Brentford County Court: District Judge Jenkins dismissed the claim. His Honour Judge Powles Q.C. upheld that decision on appeal.