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Session 1999-2000
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Judgments - Dimond (Original Appellant and Cross-Respondent) v. Lovell (Original Respondent and Cross-Appellant)


Lord Browne-Wilkinson Lord Nicholls of Birkenhead
Lord Hoffmann Lord Saville of Newdigate Lord Hobhouse of Wood- borough








ON 11 MAY 2000


My Lords,

    I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Hoffmann. I agree with it and for the reasons which he gives would dismiss the appeal. I further agree with his view that, even if the claim for damages for loss of the use of the car had been sound, the damages recoverable would have been limited to the sum required to provide an alternative vehicle i.e. the spot rate quoted by hirers other than accident hire companies.


My Lords,

    I have had the advantage of reading a draft of the speech of my noble and learned friend Lord Hoffmann. For the reasons he gives I would dismiss this appeal. The only point on which I differ from Lord Hoffmann concerns the measure of damages which would have been recoverable had the claim not been dismissed. The point is of general importance to accident car hire companies and to insurance companies operating in this field.

    These proceedings arise out of an everyday occurrence. Momentary inattention by a driver results in his car running into and damaging another vehicle. The damaged car needs repair and is off the road for some days while being repaired. The owner of the damaged car requires a replacement vehicle. Many car insurance policies make no provision for a replacement if the insured car is damaged in an accident. So the victim of a no fault accident has to make his own arrangements to tide himself over the days he is without his car.

    Under an ordinary car hiring arrangement, the hirer has to produce the hire charge up front. Usually the amount of money involved is not large, but for many people it is still a considerable sum to have to find. Further, there is no certainty the money will ever be recovered from the insurers of the car whose driver was at fault. The innocent motorist has no clout when it comes to seeking payment from someone else's insurers. And no one would wish to become involved in court proceedings to recover the money from the insurers. So there are many cases where innocent motorists make do as best they can. They manage somehow without a car, or borrow one from a relation, or get lifts from friends. Either that, or they hire a car and write off the hire charge as just one of those things.

    So it comes about that accident car hire companies are fulfilling a real need. They provide replacement cars and additional services as well. The hirer does not have to produce any money, either at the time of the hiring or at all. The hire company pursues the allegedly negligent driver's insurers. The hire company is not deterred by having to bring court proceedings should this become necessary. If the claim is unsuccessful, in practice the hire company does not pursue the hirer.

    These are valuable additional services. At first sight there seems to be no reason why the negligent driver's insurers should have to pay for these additional services. If a car owner wishes to have these services he should pay for them himself. I consider this would be to take too narrow a view of the position in which the no-fault driver finds himself. The position in law is that the negligent driver, backed by his insurers, is liable to pay reasonable charges incurred in hiring a replacement car if this is reasonably necessary. For many motorists the existence of this liability of the other motorist can be more theoretical than real. In practice this source of recompense frequently does not yield money, or even an acceptance of liability, in time to be of use. In Giles v. Thompson [1994] 1 A.C. 142, 155A, Lord Mustill observed that:

    ' . . . there exists in practical terms a gap in the remedies available to the motorist, from which the errant driver, and hence his insurers, frequently profit'.

The additional services provided by accident car hire companies bridge this gap. They redress the imbalance between the individual car owner and the insurance companies. They enable car owners to shift from themselves to the insurance companies a loss which properly belongs to the insurers but which, in practice, owners of cars often have to bear themselves. So long as the charge for the additional services is reasonable, this charge should be part of the recoverable damages.

    This House was told by counsel of a scheme or proposed scheme, the 'A.B.I. Initiative', whereby insurance companies and car hire companies will provide hire vehicles to victims of no fault accidents. Depending on its terms, a scheme of this nature may meet the need which has given rise to the accident car hire business. Until that happens, the accident car hire arrangements provide a reasonable basis by which no-fault victims can in fact obtain the benefit of the right which the common law and compulsory third party insurance seek to give them against careless drivers. A measure of damages which does not achieve this result would be sadly deficient. The law on the measure of damages should reflect the practicalities of the situation in which a wronged person finds himself. Otherwise it would mean that the law's response to a wrong is a right to damages which will often be illusory in practice. I do not believe this can be the present state of the law in a situation which affects thousands of people every year.


My Lords,

1. The Facts

    On 30 December 1996 Mrs. Vanessa Dimond was driving her Suzuki Vitara home from work when a car driven by Mr. Lovell ran into her from behind. Her vehicle was damaged but still drivable. Her husband made an appointment for a garage to do the repairs two or three weeks later. While it was in the garage, she needed a replacement vehicle to get to work. On the advice of her insurance broker, she hired a Ford Mondeo from a car hire company called 1st Automotive Ltd. The charge was £30 a day for the 8 days during which her vehicle was off the road, together with £5 a day collision damage waiver and a £15 delivery charge. The total charge including VAT was £346.63.

2. The Issues

    The Co-operative Insurance Society ("C.I.S."), which insured Mr. Lovell, accepted that he had been negligent and was liable for the loss caused to Mrs. Dimond by the accident. They paid for the cost of repair. But they refused to pay for the hire of the replacement car. They did not say that it was unreasonable for Mrs. Dimond to have hired a car. But they raised two defences. The first was that the form of agreement under which Mrs. Dimond hired the car was technically defective. It was a "regulated agreement" within the meaning of the Consumer Credit Act 1974 and did not contain the particulars that the Act required. As a result, it was unenforceable. Mrs. Dimond could not be required to pay for the hired car and therefore had suffered no loss. The second was that the sum claimed was excessive. Mrs. Dimond could have hired a suitable car from another company for less. She had therefore either failed to take reasonable steps to mitigate her loss or the hire agreement had given her benefits additional to the use of the car which she should bring into account in calculating her loss. The Court of Appeal [1999] 3 W.L.R. 561 held (reversing the judge) that the defendant succeeded on the first point. The hire agreement was unenforceable under the Act of 1974 and Mrs. Dimond had suffered no loss. She had been lucky enough to have a replacement car for nothing. It was therefore not necessary for the Court of Appeal to consider whether, if it had been enforceable, the full amount of the hire could have been recovered. But they said that they agreed with the judge that it could. Mrs. Dimond appeals to your Lordships' House against the decision that she was under no liability to 1st Automotive and Mr. Lovell invites your Lordships to express a different view on the quantum of damages. Of course the real parties in interest are 1st Automotive and the C.I.S. and I shall therefore refer to them as appellant and respondent respectively.

    3. Accident hire

    My Lords, I should explain why this dispute over £346.63 comes before your Lordships' House. 1st Automotive is an accident hire company. It specialises in hiring cars to people like Mrs. Dimond whose cars have been damaged in road accidents caused by the fault of someone else. I shall in a moment invite your Lordships' attention to some of the terms of its standard form of hiring agreement. But the effect of the agreement is that, in the normal course of events, the hirer will not have to pay. The company pursues the hirer's claim at its own expense and satisfies its claim for hire out of the damages recovered on the hirer's behalf. Thus the hirer is spared the need to lay out the cost of the hire in advance of recovery from the defendant or his insurers, the trouble and anxiety of pursuing a claim and the risk that the claim may fail.

    The services thus offered by an accident hire company, in providing the car on credit and assuming the burden and risk of pursuing the claim, have filled a gap in the market. Many comprehensive motor insurance policies cover damage to the vehicle but not the cost of hiring a replacement. The owner of a damaged car can arrange for his car to be repaired in the knowledge that the bill will be sent to the insurance company. Whether his company meets the cost itself or recovers it from the other driver's insurer is (apart from the question of a no-claim bonus) not a matter which need concern him. If, however, he wants to hire a replacement vehicle, he will have to make the arrangements at his own expense and claim the cost from the other driver himself. Faced with such a prospect, many drivers will make do without a car while their vehicle is off the road. Accident hire companies enable them to have a replacement car without cost, trouble or risk.

    The accident hire business has increased the cost of third party claims against motor insurance companies such as C.I.S. Motorists not only hire replacement cars when they would not previously have done so but also, since they are not themselves paying, do not necessarily exercise the closest scrutiny over the rate that is being charged. Partly for this reason and partly because the companies have to be compensated for the credit and additional services that they provide, claims by accident hire companies are generally at rates substantially above the market or "spot" rates that an ordinary hire company would have been willing to offer for ready money. Motor insurance companies have therefore tried to resist such claims. The first attempt was based upon the theory that the arrangements between motorist and accident hire company were champertous. It was rejected by your Lordships in Giles v. Thompson [1994] 1 A.C. 142. The present case is a return to the charge by other means. Your Lordships were told that many other cases, both at first instance and in the Court of Appeal, wait upon the result.

The Consumer Credit Act 1974.

    Section 65(1) of the Act provides as follows: "An improperly-executed regulated agreement is enforceable against the debtor or hirer on an order of the court only."

    There has been no court order for the enforcement of Mrs. Dimond's hiring agreement and, for reasons which I shall briefly touch upon later, it is accepted on both sides that on the facts of the present case the court would not have jurisdiction to make one. It is also accepted that, for reasons which I shall explain, the agreement was improperly executed. So the only question for your Lordships' decision on this part of the case is whether the hiring agreement was a "regulated agreement" within the meaning of the Act.

(a) "Regulated agreement"

    The Act has a definition of a "regulated agreement" in section 189(1). It means - "a consumer credit agreement, or consumer hire agreement, other than an exempt agreement."

    The C.I.S. says that the hiring agreement was a consumer credit agreement and that it was not exempt. A "consumer credit agreement" is defined in section 8(2):

    "A consumer credit agreement is a personal credit agreement by which the creditor provides the debtor with credit not exceeding [a sum specified by regulation, which at the time of the hiring agreement was £15,000: see the Consumer Credit (Increase of Monetary Limits) Order (S.I. 1983 No. 1878)]."

    This definition sends one to the definition of a "personal credit agreement", which is to be found in section 8(1):

    "A personal credit agreement is an agreement between an individual ('the debtor') and any other person ('the creditor') by which the creditor provides the debtor with credit of any amount."

    The definition chase ends with the meaning given to "credit" by section 9(1): "In this Act 'credit' includes a cash loan, and any other form of financial accommodation."

    My Lords, it seems to me that one emerges from these statutory thickets holding onto a very simple question. Did 1st Automotive provide Mrs. Dimond with credit? If so, the hiring agreement was a personal credit agreement and, since it was for a good deal less than £15,000, a consumer credit agreement and thus (subject to the question of exemption) a regulated agreement. 1st Automotive contends, as it did in the Court of Appeal, that it did not provide any credit at all. To consider the merits of this argument, one must examine the terms of the hiring agreement.

    Clauses 5 and 6 provides as follows:

    "5. Where the hire is consequent upon the hirer's own vehicle being unroadworthy as a result of a road traffic accident: (i) the lessor will allow the hirer credit on the hire charges until such time as a claim for damages has been concluded against the party (hereinafter called the third party) that the hirer alleges is liable for damages arising out of the said accident, subject only to condition (6) hereunder. (ii) The lessor shall have the right to pursue an action in the hirer's name against the third party. (iii) The lessor shall have the right to pursue such action through the county court and/or High Court and the hirer must co-operate in the conduct of the action and, if required by the lessor, attend any hearing that the court appoints. (iv) Provided that notwithstanding the credit facility referred to above the hirer will discharge any indebtedness as soon as reasonably practicable, and shall take such action as is necessary to obtain interlocutory judgment or an interim payment of damages for the purpose of discharging the said indebtedness.

    "6. If, and only if, the hirer is in default of condition 5(iii) then the credit allowed by the lessor to the hirer shall be terminated and the hire charges will be due from the hirer to the lessor 28 days from the lessor giving notice thereof to the hirer by reference to this condition (6)."

    So, according to the terms of the contract, 1st Automotive "allow[s] the hirer credit on the hire charges," this arrangement is described as a "credit facility" and if there is a breach of condition 5(iii) the "credit allowed" may be terminated. This is unpromising material for an argument that 1st Automotive does not give credit. C.I.S. adopts Professor Goode's definition of credit (Goode, Consumer Credit Legislation, looseleaf ed., vol 1, para. 443) which was approved by the Court of Appeal ([1999] 3 W.L.R. 561, 572):

    "credit [is] extended whenever the contract provides for the debtor to pay, or gives him the option to pay, later than the time at which payment would otherwise have been earned under the express or implied terms of the contract."

    C.I.S. says that in the absence of credit terms, hire would have been payable per diem in diem during the hiring period or, at the latest, when it ended. Allowing the hirer to defer payment until the claim for damages had been concluded was providing credit.

    Against this straightforward argument 1st Automotive say that while it might be true that, under an ordinary hiring agreement, the hire would, in the absence of credit, be payable during or at the end of the hire, this agreement was far more complex. The services provided to Mrs. Dimond were not only the use of the car but also the pursuit of her claim. If one treats these obligations as forming part of an entire contract, 1st Automotive could not recover any part of the consideration until it has not only allowed Mrs. Dimond the use of the car but also brought the claim for damages to a conclusion. Only at this point would 1st Automotive become entitled to payment and therefore the provision for "credit" was not really credit at all. Payment was not postponed beyond the date at which it would in any event have first become payable.

    This argument depends upon construing the contract as imposing upon 1st Automotive a duty to Mrs. Dimond to pursue the claim and treating the performance of that duty as forming part of an entire contract which also included the provision of the vehicle. I do not think that this contract is susceptible of so artificial a construction. I draw attention to the fact that nowhere does the contract impose any duty upon 1st Automotive to pursue the claim. Under clauses 5(ii) and (iii) it has a right to pursue the claim in Mrs. Dimond's name and she has a duty to co-operate, but that is all. 1st Automotive say that such a duty must be implied. But there seems to me no basis for such an implication. I can see the argument for implying a term that 1st Automotive should not be entitled to recover the hire unless it had made all reasonable efforts at its own expense to pursue the claim. It might even be possible, with the aid of some unguarded statements in the brochure, to imply a term that 1st Automotive should not be entitled to recover the hire unless the claim had been successful, although this seems to me far more difficult and contrary to the view expressed by Lord Mustill in Giles v. Thompson [1994] 1 A.C. 142, 160. But I do not think it is possible to read the words "shall have the right" in clauses 5(ii) and (iii) to mean "shall have the duty." Mrs. Dimond would not be in the least concerned with whether 1st Automotive pursued her claim or not, as long as she did not have to pay. It therefore seems to me that any implications about pursuing the claim can relate only to the conditions upon which the hire will be recoverable and cannot take the form of a positive duty.

    In my opinion there was no misuse of language when the contract described clause 5(i) as a credit facility. The only obligation of 1st Automotive under the agreement was to provide the vehicle. In the absence of credit, it would have been entitled to payment during or at the end of the hire. All the provisions about the pursuit of the claim were express or implied conditions that deferred the right to recover the hire and therefore constituted a granting of credit. In addition, of course, the pursuit of the claim by 1st Automotive on behalf of Mrs. Dimond may have given rise to further obligations to her, such as the obligation to indemnify her against a liability for costs which Lord Mustill mentions in Giles v. Thompson [1994] 1 A.C. 142, 163.

    Mr. Wingate-Saul Q.C., who appeared for 1st Automotive, advanced a further argument based on section 18 of the Act. The first four subsections read as follows:

    "18.-(1) This section applies to an agreement (a 'multiple agreement') if its terms are such as-

    (a) to place a part of it within one category of agreement mentioned in this Act, and another part of it within a different category of agreement so mentioned, or within a category of agreement not so mentioned, or

    (b) to place it, or a part of it, within two or more categories of agreement so mentioned.

    (2) Where a part of an agreement falls within subsection (1), that part shall be treated for the purposes of this Act as a separate agreement.

    (3) Where an agreement falls within subsection (1)(b), it shall be treated as an agreement in each of the categories in question, and his Act shall apply to it accordingly.

    (4) Where under subsection (2) a part of a multiple agreement is to be treated as a separate agreement, the multiple agreement shall (with any necessary modifications) be construed accordingly; and any sum payable under the multiple agreement, if not apportioned by the parties, shall for the purposes of proceedings in any court relating to the multiple agreement be apportioned by the court as may be requisite."

    I fear that I may not be able to do justice to the argument based upon this section, because I am not sure that I fully understood it. But I think Mr. Wingate-Saul submitted that if his first argument was rejected and the hiring agreement not construed as an entire contract, then it became a multiple agreement within section 18. One part was the hiring of the car and the other the provisions for pursuit of the claim. If the former were construed as a separate agreement, it would not include any provision for credit and not be a regulated agreement. The credit provisions, if any, would belong the part that dealt with the pursuit of the claim.

    The difficulty I have with this argument is that it seems to sever the provisions that create the debt (hiring the car) from the provisions that allow credit for payment of the debt. Whatever a multiple agreement may be, one cannot divide up a contract in that way. The creation of the debt and the terms on which it is payable must form parts of the same agreement. The truth of the matter is that I accept that the hiring agreement was a single contract. But I do not accept Mr. Wingate-Saul's submission as to what that contract was. He argues that it involved multiple obligations on the part of 1st Automotive that had to be performed over a period starting when the car was hired and ending when the damages were recovered. I consider, on the contrary, that the only primary obligation of 1st Automotive was to provide the car. The rest of the agreement dealt with the conditions upon which it would be entitled to recover the hire. To such an agreement section 18 has, of course, no relevance.

    Finally on this issue I should mention that it was submitted to the Court of Appeal that a contract for the bailment of a goods to a hirer (such as the bailment of the car to Mrs. Dimond) could not be a consumer credit agreement. It was either a consumer hire agreement if it satisfied the requirements of section 15(1) of the Act or it was altogether unregulated. The argument, based upon a passage by Professor Goode (Consumer Credit Legislation, vol. 1, para. 456.6), was rejected by the Court of Appeal [1999] 3 W.L.R. 561, 573 and not pursued before your Lordships.

    It is conceded that the agreement was not an exempt agreement. It is however worth noticing that article 3(1)(a) of the Consumer Credit (Exempt Agreements) Order 1989 (S.I. 1989 No. 869) exempts consumer credit agreements such as this one if the total number of payments to be made by the debtor does not exceed four and -"those payments are required to be made within a period not exceeding 12 months beginning with the date of the agreement."

    1st Automotive can therefore obtain exemption from the Consumer Credit Act 1974 if they include a clause that requires that the hire should in any event be paid (if at all) within 12 months. But the hiring agreement executed by Mrs. Dimond was a regulated agreement within the meaning of section 65(1).

(b) Improperly executed.

    Although it is conceded that the agreement was not properly executed, I think I should briefly explain why. By section 61(1), a regulated agreement is not properly executed unless, among other things:

    "a document in the prescribed form itself containing all the prescribed terms and conforming to regulations under section 60(1) is signed in the prescribed manner both by the debtor or hirer and by or on behalf of the creditor or owner."

    Section 60(1) gives the Secretary of State power to make "regulations as to the form and content of documents embodying regulated agreements" to ensure that the debtor or hirer is made aware of, among other things, "the amount and rate of the total charge for credit (in the case of a consumer credit agreement." By the Consumer Credit (Agreements) Regulations 1983 (S.I. 1983 No. 1553), the Secretary of State prescribed the form and contents of regulated consumer credit agreements. Schedule 6 provided that certain terms were to be "prescribed terms" which the document had to contain for the purposes of section 61(1). These were, in the case of a consumer credit agreement to finance the acquisition of services by the debtor (such as the provision of the car to Mrs. Dimond) , "a term stating the amount of the credit, which may be expressed as the total cash price of the . . . services." It is conceded that no such term appeared in the agreement signed by Mrs. Dimond. The agreement was therefore improperly executed.

(c) Order of the court

    Section 65(1) provides that an improperly executed agreement shall be enforceable only "on an order of the court." Section 127 gives the court power to make orders for the enforcement of agreements that are, for various reasons, improperly executed. But subsection (3) provides that a court shall not make an enforcement order for an agreement that does not comply with section 61(1)(a) unless the debtor signed a document containing "all the prescribed terms." The hiring agreement in this case did not and is therefore irredeemably unenforceable.

5. Unjust enrichment

    Mr. Wingate-Saul says next that that if the hiring agreement is unenforceable, Mrs. Dimond has been unjustly enriched. She has had 8 days use of a Ford Mondeo for nothing. She has certainly been enriched at the expense of 1st Automotive. The fact that she only needed a car from 1st Automotive because Mr. Lovell had damaged her Suzuki and was therefore on balance no better off seems to me irrelevant. It is no reason why 1st Automotive should have provided her with a free car. Mr. McLaren Q.C., who appeared for the C.I.S., said that that was exactly what the parties intended. The attraction of the transaction to Mrs. Dimond was that she would not have to pay. But that seems to me an oversimplified analysis. The agreement was that Mrs. Dimond would pay. The damages recovered from the C.I.S. would have been Mrs. Dimond's money. They would not have been subject to any assignment or charge to 1st Automotive. When they were recovered, the debt that she incurred by hiring the car would fall due. But the effect of section 61(1) of the Act is that she no longer has to pay.