Thew & Anor v Cole & Anor

These two appeals arise from the long running dispute between companies who provide hire cars on credit to the innocent victims of motor accidents and the motor insurance market. It is not necessary to set out the history of this dispute which is now well known. It is summarised at the beginning of this court’s judgment in Burdis v Livsey [2002] EWCA Civ. 210; [2003] QB 36. The present appeals raise points on the agreements of two credit hire companies: Alpha Accident Management Limited which is now in administration and Western Accident Management Limited which has ceased trading. In each case the first issue is whether the agreement is exempt from regulation under the Consumer Credit Act 1974 because the hire charges were required “to be paid within a period not exceeding twelve months beginning with the date of the agreement”. In the Liverpool County Court in King v Daltray His Honour Judge Marshall-Evans Q.C. and in the Cardiff County Court in Thew v Cole His Honour Judge Masterman held that the agreements were exempt. The appellants say they were wrong. In King v Daltray, if the judge’s decision is wrong and the agreement is regulated, there are further issues as to whether it contained the prescribed terms and if so whether it should be enforced and a point on quantum; in Thew v Cole there is an issue as to whether the hire charges were recoverable in any event.

The threshold issue in each appeal therefore is whether the agreements are exempt and I propose to deal with this first.

Mr King’s Volvo was damaged on 18^th August 1999 whilst it was parked outside his house in Waltham Abbey by Mr Daltray’s admitted negligence. Mr King needed a replacement vehicle whilst his own was being repaired to transport his disabled wife. On 13^th September 1999 through the agency of his repairers Mr King entered into a rental agreement with Alpha for the hire of a similar Volvo to his own. The agreement was headed:

“This is an agreement exempt from regulation under the Consumer Credit Act 1974”.

For present purposes it is only necessary to refer to the following terms.

5.

Where the hire is consequent to the Hirer’s own vehicle being damaged as a result of a road traffic accident

i.

The Lessor will allow the Hirer to defer payment of the hire charges until such time as a claim for damages has been concluded (irrespective of outcome) against the party alleged to be at fault (the Third Party) or for a period of not more than 12 months from the start of the agreement whichever period is shorter….

iv.

Notwithstanding the deferred payment facility referred to in clause 5 (i) above, the Hirer will discharge any indebtedness as soon as reasonably practicable, and shall take such action as is necessary to obtain any judgment or interim payment in order to ensure that payment is made within the maximum period allowed under this agreement.

The maximum period of hire was stated to be three months. In the event Mr King hired the car for ten days. His claim was for £886.54, the total amount due to Alpha under the rental agreement.

Mrs Thew’s car was damaged beyond economic repair on 7^th November 1998 in a collision in a car park in Blaenavon for which Mrs Cole was admittedly liable. Mrs Thew needed to hire a replacement car and entered into two agreements with Western: a hire agreement and a credit agreement. Nothing turns on the terms of the hire agreement. The credit agreement started by saying:

This agreement is not regulated by the Consumer Credit Act 1974, being an exempt agreement.

Clause 1 stated that its purpose was to finance sums payable to Western under the hire agreement. The relevant terms for present purposes are:

2.

If at the termination of the Hire an amount representing the rental due … is not paid… Western will give you credit for that amount (“the Credit Facility”) for a period not exceeding 12 months from the date of this agreement (including the date of this agreement). ….

5.

The total amount of the Credit Facility and all interest is payable to Western in a single payment on the date of payment to you or any person on your behalf of a sum which satisfies any judgment or compromise in respect of the Claim or on termination …. or, if neither of these have occurred 12 months from the date of this agreement.

The date of the agreement is 21^st November 1998. Mrs Thew’s claim included £2,684.22, the full amount due under the hire agreement.

The 1974 Act applies to credit agreements entered into by private individuals and unincorporated bodies within certain financial limits. Such a consumer credit agreement is a regulated credit agreement if it is not an exempt agreement. Article 3 of the Consumer Credit (Exempt Agreements) Order 1989 says:

(1)

The Act shall not regulate a consumer credit agreement which is an agreement of one of the following descriptions, that is to say –

(a)

a debtor-creditor-supplier agreement being either -

(i)

an agreement for fixed-sum credit under which 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 twelve months beginning with the date of the agreement….

It is common ground that the agreements the subject to these appeals are debtor-creditor-supplier agreements for fixed-sum credit.

Judge Marshall-Evans Q. C. heard King v Daltray as one of six selected test cases. Five of these cases related to the Hamco Group of companies who have since settled with the motor insurers. A variety of issues arose in those cases which the judge had to resolve, but are no longer relevant. He dealt quite shortly with the exemption argument in this case. Having referred to the decisions of this court in Zoan v Rouamba [2000] 1 WLR 1509 and Ketley v Gilbert [2001] 1 WLR 986 to which I shall come shortly he said:

… hire payment is to be deferred “for a period of not more than twelve months from the start of the agreement” which to my mind means to be paid within that twelve month period which starts when the agreement is made.

This conclusion made it unnecessary for the judge to consider the position if the agreement was regulated, but he decided that it would have been enforceable even if it was regulated.

Judge Masterman’s decision in Thew v Cole was made on appeal from a District Judge who had decided that the Western agreement was regulated. Judge Masterman however said:

In my judgment the credit agreement achieves its stated purpose and …. Clause 5 is to be read as referring to the same period of time as in clause 2 and therefore it achieves exemption….

In Zoan the contract provided that the hire charges could remain outstanding “until a date on or before twelve months after the date of this agreement”. Such charges were to become immediately due and payable upon, at the latest, “the first anniversary of this agreement”. This court held that the twelve months did not include the date of the agreement and so the agreement was regulated. This is hardly surprising given that payment could be made on the anniversary of the agreement. In giving the judgment of the court Chadwick L.J. said at para. 23:

Where, under some legislative provision, an act is required to be done within a fixed period of time “beginning with” or “from” a specified day it is a question of construction whether this specified day itself is to be included in, or excluded from, that period. Where the period within which the act is to be done is expressed to be a number of days, months or years from or after a specified day, the courts have held, consistently since Young v Higgon (1840) 6 M & W.49, that the specified day is excluded from the period; that is to say, that the period commences on the day after the specified day.

To qualify for exemption however the payment had to be made within twelve months including the day of the agreement. Thus at para. 24 Chadwick L.J. said:

Where, however, the period in which the act is to be done is expressed to be a period beginning with a specified day, then it has been held with equal consistency over the past forty years or thereabouts, that the legislature (or the relevant rule-making body, as the case may be) has shown a clear intention that the specified day must be included in the period.

Such a construction of paragraph 3 (1) is not in issue on these appeals.

In Ketley the contract provided for payment of the hire charges when the third party claim was satisfied “or on the expiry of twelve months starting with the date of this agreement” whichever was earlier. The Circuit Judge held that “the words ‘on the expiry of twelve months’ meant in plain English after twelve months have been exceeded” so the agreement was not exempt. This court upheld his decision. Brooke L.J. gave the first judgment. He recited counsel for the respondent’s argument that under this agreement payment could not be made until the twelve months have expired. Thus the hirer has to pay on the day following the expiry of twelve months. In order to comply with the exemption, if an agreement starts on 1^st January the payment must be made at the latest on 31^st December if it is required to be paid within a period not exceeding twelve months. If the payment has to be made on 31^st December at the latest, then it is not made on the expiry of twelve months. Brooke L.J. said that on first impression these arguments appeared to be soundly based. If something had to be done on the expiry of a person’s life, it would be an abuse of language to say that it may be done within his lifetime. He then referred to a number of cases relied on by the appellant to show that the agreement should be flexibly interpreted and said:

26.

It appears to me that none of these cases … provide any assistance to [the appellant]. If the words of the agreement could be flexibly interpreted to permit payment a reasonable time after expiry of twelve months (since it could not reasonably be expected that the hirer would make payment on the stroke of midnight), such payment was not required to be made within a period not exceeding twelve months, as was necessary if exemption was to be afforded to this agreement pursuant to the 1989 Order.

27.

In other words I consider that the judge was right for the reasons he gave. It is not necessary to have recourse to … the rule, in cases of doubt, that a written instrument should be interpreted contra proferentem, but if there had been any doubt in the interpretation of the agreement that doubt would have to be resolved in favour of Mr Ketley as the hirer, so as to render the agreement unenforceable.

Walker L.J. agreed with Brooke L.J. The Master of the Rolls then said:

31.

I agree that this appeal must be dismissed for the reasons given by Brooke L.J.. On analysis this is not a decision which turns on splitting the second that spans the last day of the twelve month period and the day immediately following that period. This case is not concerned with the precise moment of the vesting of a right, or the incurring of an obligation. It is concerned with when the act of making a payment had to be performed.

32.

An obligation to make payments within a period can only, in practice, be complied with by making the final payment before the period expires. The [1989 Order] exempts from the regulation of the 1974 Act agreements under which payments are to be made “within a period not exceeding twelve months beginning with the date of the agreement” – that is before the expiry of that period. An agreement permitting the final payment to be made “on expiry” of that period permits the final payment to be made after the 12 months period has expired. Such an agreement does not fall within the terms of the 1989 Order.

Mr Stuart-Smith Q.C. for the appellant takes two points. First he says that the words “from the start of the agreement” in clause 5(1) should be construed so as to exclude the date of the agreement as in Zoan.

I do not accept this submission. The agreement did not say that the period was to run “from” or “after” the date of the agreement as it did in Zoan. It was to run “from the start” of the agreement. The agreement started on the day it was signed by which time Mr King had the hire car and became liable to pay hire charges. The parties must have intended that day to be included in the period referred to; they cannot have intended it to start the day after. The words “from the start” carry the same meaning as the words “beginning with” in the Regulation. So I think the judge was obviously right to reject Mr Stuart-Smith’s first point.

Mr Stuart-Smith’s second point is more difficult. He submits that if his first point is wrong, clause 5 (i) defines the period in which payment is to be deferred: “a period of no more than twelve months”. Credit is therefore extended for up to the whole of that period and payment is not required until immediately after it has ended or at the moment it ends. In either event this is too late for the reasons given in Ketley. Mr Stuart-Smith illustrated his argument by assuming that the agreements started on 1^st January. Credit was extended for up to the last moment of 31^st December. Payment was only required “on the expiry” of that period and so it would be too late.

The first question is, whether the time by which the hirer is required to make payment coincides exactly with the end of the period in which the hirer is allowed to defer payment or is at some time later. I think the two events are contemporaneous. The obligation to make payment is stated. It is deferred, but the moment that the agreed period of deferral comes to an end the requirement to pay arises. No question of splitting seconds arises.

So the next question is whether a requirement to pay by the end of a period of deferral is “within a period not exceeding twelve months”. As the agreement defines the period of deferral as “not more than twelve months” the simple answer to this question appears to be yes. This construction is supported by clause 5 (iv) of the agreement which refers back to the deferred payment facility and to payment being made “within the maximum period allowed under this agreement”.

But does Ketley compel a different answer to this question? The short answer might be that Ketley was concerned with a differently worded agreement and does not compel any construction of the agreements in this case. Our essential task is of course is to construe these agreements. However it appears to me that the ratio of the majority at least was that the words “on the expiry of twelve months” meant after twelve months had been exceeded. It is worth noting that on the wording in that case unless the claim had been satisfied earlier payment could not be made until expiry. There were no such words as “not more than twelve months” as in this case. What the Master of the Rolls said must be considered in the light of the fact that he agreed with Brooke L.J.’s reasons. The fact that he said that the case did not involve splitting seconds shows that he must have thought that the obligation to pay did not arise until after twelve months as he makes clear in the penultimate sentence of paragraph 32 of his judgment. The meaning of the rest of para. 32 is not entirely clear. A requirement to make a payment within a period not exceeding twelve months must permit payment at the end of twelve months because self evidently payment at that time would not be made at a time which exceeded twelve months. It would be (just) within the permitted period. If the Master of the Rolls is saying that the requirement is for payment to be made at some time before this then, with respect, I disagree. This certainly does not seem to have been Brooke L.J.’s view.

So I conclude that the Alpha agreement was exempt. I have reached this conclusion without reference to what must be taken to be the stated intention of the parties that their agreement was to be exempt. There was a certain amount of argument about the effect of such a statement. The appellant says it should be ignored on Street v Mountford ( [1985] AC 809) grounds; the respondent that it gave some, but not particularly strong, support to his argument. Like the contra proferentem rule I would regard the statement as an aid to construction of last resort. Neither have any part to play in the conclusion I have reached.

Mr Hough for the appellant submits that clause 5 of this agreement, with its requirement for payment “twelve months from” its date, is not exempt. Clause 2 extends the period of credit to the end of the twelve months; clause 5 requires payment by the end of the following day. Read in this way the clauses can be construed consistently and it is not necessary to give the words in clause 5 the same meaning as the words in clause 2 as the judge did. At the very least Mr Hough says the agreement is ambiguous and should be construed against Western. In any event, he submits, even if clause 5 has the same meaning as clause 2 and payment had to be made by the end of the credit period that was too late. In other words he takes Mr Stuart-Smith’s second point which he says applies here as well.

I reject the latter point in this case for the same reasons as I have already given in the other case. Clause 2 extended credit to the end of the twelve month period at which time (subject to the point about clause 5) payment was required. The requirement to pay was therefore deferred “for a period not exceeding twelve months” as clause 2 says. This conclusion also sheds light on how clause 5 should be construed. Why should this clause require payment at some later time? Unless it is construed so that the words “from the date of this agreement” have the same meaning in each clause, the clauses are inconsistent. I do not think the parties can have intended such inconsistency and so must have intended that these words should have the same meaning in the both clauses. The agreement has to be read as a whole. The draftsman obviously did not see the need to repeat the words in brackets which he added to clause 2 in clause 5. Construed in this way the agreement is not ambiguous and again there is no need to resort to the statement that it is exempt or the contra proferentem rule.

It follows that in both cases I think the judges were right to conclude that the agreements were exempt. This makes it unnecessary to decide the other points raised on the appeals to which I have briefly referred in the introduction to this judgment apart from the point on quantum taken in the King v Daltray appeal. We have heard argument on the other points but were not invited to decide them irrespective of our conclusions about exemption. I would have been reluctant to do so anyway since neither case can now properly be called a test case, other than on the issue of exemption, and any conclusions which we reached on the other difficult points involved would self-evidently be obiter.

I can deal with this point quite shortly. The appellant complained that the judge had not permitted any investigation as to whether the hire charges claimed by Mr King were all recoverable. If they included an element which reflected the fact that Alpha provided additional benefits to its customers this element was irrecoverable.

The judge gave judgment for the whole amount claimed by Mr King but said nothing to cast doubt on the principles to be applied in such cases which were laid down in Dimond v Lovell [2002] 1 AC 384 and considered further in Burdis v Livsey. In his judgment all the judge said was that as a matter of proportionality he did not think it would be fair to subject the individual claims of the claimants in the test cases to scrutiny. The trial on the liability issues had taken eighteen judge days and he was not prepared to embark upon a further hearing to consider quantum issues in each of the cases as the appellants requested. I think that was a perfectly justified view for the judge to take.

At the end of the day all Mr Stuart-Smith was keen to ensure was that the judge’s decision did not mean that in all Alpha cases the full amount of its hire charges was recoverable. Mr Williams, instructed by Alpha on behalf of Mr King, rightly accepted that it did not. So Mr Stuart-Smith has the assurance he needs and I need say no more about this point.

I would dismiss both these appeals.

I agree that these appeals should be dismissed, for the reasons which Tuckey LJ has given.

Absent authority, I would construe the provision in paragraph 3(1)(a)(i) of the 1989 Order that payments by the debtor are required be made ‘within a period not exceeding 12 months ....’ as meaning that such payments can be required to be made at any time up to and including the last moment of that period: only if under the terms of the relevant agreement a payment can be made after that period has expired – that is to say, after that last moment has passed – will the agreement fail to comply with that provision.

In Ketley the majority of the Court of Appeal (Brooke and Robert Walker LJJ) agreed with the judge at first instance that the expression ‘on the expiry’ in a credit hire agreement meant ‘after the expiry’. As Tuckey LJ has pointed out, the words ‘on the expiry’ do not occur in either of the agreements in the instant appeals. However, in paragraph 32 of Ketley the Master of the Rolls went further than Brooke and Robert Walker LJJ and expressed the view that the words ‘within a period not exceeding 12 months’ in paragraph 3(1)(a)(i) mean “before the expiry of that period”. The Master of the Rolls continued:

“An agreement permitting the final payment to be made ‘on expiry’ of that period permits the final payment to be made after the 12-month period has expired.”

On the footing that, as the majority decided in Ketley, ‘on expiry’ means ‘after the expiry’, I respectfully agree with this last observation by the Master of the Rolls. But in my judgment it does not follow, nor do I take the Master of Rolls to be saying, that “before the expiry of that period” excludes the last moment of the period. In my judgment it plainly cannot have that effect.

Turning, then, to the relevant provisions of the agreements in the instant appeals, it seems to me that the key to the question of construction lies in the fact that the respective credit periods cannot (as I read them) be said to terminate after the expiry of the period prescribed by paragraph 3(1)(a)(i): nor, indeed, has that been suggested. That being so, it seems to me that it must follow that they terminate ‘within’ the prescribed period. And since the obligation to pay, which has remained dormant during the credit period, revives at the very same moment as the credit period terminates, it seems to me that it must also follow that the obligation to pay arises ‘within’ the prescribed period.

I agree that both appeals should be dismissed for the reasons given by my Lords.