Dimond v. Lovell

This appeal concerned whether a hire agreement between an innocent motorist and an "accident hire" company was a "regulated agreement" under the Consumer Credit Act 1974 and therefore unenforceable because improperly executed, and, if unenforceable, whether the hirer or the accident hire company could recover damages from the negligent driver (or his insurers) for the cost of providing a replacement vehicle. The House held that the hire contract did provide credit within the meaning of the Act (section 8, section 9) and thus was a "regulated agreement" (section 189(1)), but it was improperly executed and therefore unenforceable without a court order (section 61, section 65). Consequently the hirer had no enforceable liability to the accident hire company and could not recover the hire charge from the negligent driver. The court rejected restitution/unjust enrichment as a route to recovery and applied the established principle that benefits obtained by reasonable mitigation must be brought into account; had the agreement been enforceable the proper measure of damages for loss of use would ordinarily be the market "spot" rate less the value of additional services provided by the accident hire company (applying British Westinghouse).

The appellant (1st Automotive, nominally represented by Mrs Dimond) sought recovery of hire charges for a replacement car supplied after her car was damaged in a collision caused by the respondent (Mr Lovell), whose insurer accepted liability for the accident damage but refused to pay the hire charges. The hire agreement provided that the accident hire company would allow credit until the third-party claim concluded and would pursue that claim in the hirer's name. The insurer relied on two defences: (i) the agreement was a regulated agreement under the Consumer Credit Act 1974 and was improperly executed and therefore unenforceable; (ii) alternatively the claimed sum was excessive because the hirer could have hired a car at a lower "spot" rate or the package included additional services which should reduce recoverable damages.

Issues framed by the House included: (i) whether the contract provided "credit" and was therefore a regulated agreement; (ii) whether the improperly executed regulated agreement could be enforced or avoided, and if avoided whether the hirer had been unjustly enriched; (iii) whether benefits arising from the arrangement were res inter alios acta or had to be set off when assessing damages; and (iv) in the event the agreement were enforceable, the correct measure of damages for loss of use.

The House examined the contract terms (notably clauses describing a "credit facility" and rights to pursue claims), concluded the arrangement did provide credit and was a regulated agreement which failed prescribed execution formalities and so was unenforceable without a court order (sections 61, 65; Regulations and Orders noted). The court rejected a common-law restitutionary claim for unjust enrichment as inconsistent with Parliament's scheme. On the allocation of benefits and mitigation the House applied the principle from British Westinghouse that additional benefits gained by reasonable mitigation must be brought into account; accordingly, if recoverable, damages for loss of use would ordinarily be assessed by reference to the ordinary market ("spot") hire rate after deducting the value of the extra services provided by the accident hire company.

Appeal dismissed. The House held that (1) the accident-hire contract did provide credit and therefore was a "regulated agreement" under the Consumer Credit Act 1974; (2) the agreement was improperly executed and unenforceable without a court order under section 65(1) and section 61(1); (3) restitution/unjust enrichment could not be used to circumvent that statutory consequence; and (4) had the agreement been enforceable, damages for loss of use would ordinarily be assessed by reference to the market "spot" hire rate after deducting the value of additional services supplied by the accident hire company (applying British Westinghouse).

First instance: trial judge found hiring from the accident-hire company reasonable and allowed recovery. Court of Appeal reversed the judge, holding the hire agreement was a regulated agreement and unenforceable under the Consumer Credit Act 1974 ([1999] 3 WLR 561). The appellant appealed to the House of Lords which dismissed the appeal ([2000] UKHL 27).