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Case No: 99/0863/2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NORTHAMPTON COUNTY COURT
(HIS HONOUR JUDGE CHARLES HARRIS QC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday, 21st January 2000
B e f o r e :
LORD JUSTICE HENRY
LORD JUSTICE CHADWICK
and
LORD JUSTICE MAY
- - - - - - - - - - - - - - - - - - - - -
|
NIGEL
ZOAN
|
|
|
-
and -
|
|
|
BEATRICE
ROUAMBA
|
|
-
- - - - - - - - - - - - - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Hilary Heilbron QC and Tim Kevan Esq (instructed by Messrs Rollinsons
for the Appellant)
Ian Hunter Esq, QC and Fred Philpot Esq (instructed by Messrs
Franklins for the Respondent)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©
Friday, 21st January 2000
JUDGMENT
LORD JUSTICE CHADWICK:
1) This is the judgment of the Court in an appeal, with leave of the trial
judge, from that part of the order of His Honour Judge Harris QC, made in the
Northampton County court on 19th July 1999, giving the claimant damages for the
cost of hiring substitute vehicles while his own vehicle, damaged by the
defendant's negligence, was off the road.
2) The facts are simple. Mr Zoan owns and drives a Jeep Grand Cherokee motor
car. It was damaged in a road traffic accident by a vehicle driven by Mrs
Rouamba, the defendant. The accident was entirely the defendant's fault.
Happily no-one was injured. Mrs Rouamba was insured, and her insurers
conducted her defence. They admitted liability, and paid for the vehicle to be
repaired. But they refused to pay for two heads of damage. The first, the
diminution of value of the claimant's vehicle, because the repairs did not
restore it to its pre-accident value, need not concern us beyond noting that
the claimant recovered £1,300 under that head.
3) But additionally, the claimant claimed the cost of hiring equivalent
vehicles over the repair period while his vehicle was off the road. He
recovered damages of £25,833.48 under that head of claim. The defendant
appellant now appeals as to £10,702.45 of the damages awarded in relation
to hire charges.
4) There were four separate contracts of hire, one for each vehicle. The
respondents concede that the judge was right to treat them separately. Each of
those contracts was on the standard form contract of Swift Rent-A-Car Limited
("Swift"). One aspect of Swift's business was the hiring out of replacement
cars to those whose vehicles were off the road as a result of accidents that
were not their fault. Swift under their contract extended credit to the hirer,
so that, if he got on with his action, he would not have to pay the hire
charges until he got his damages. Swift were notified of this appeal, but have
not applied to be heard.
5) For the purposes of this appeal, there is one defence only: namely that
three of the four contracts of hire for the replacement vehicles were
"improperly executed and unenforceable" because of the pleaded failure to
comply with the statutory requirements of the Consumer Credit Act, 1974, and
the regulations made thereunder. The case below focused entirely on whether
the three car hire agreements were exempt from that statutory regime on the
ground that Condition 10 of those agreements complied with Paragraph 3(1)(a)(i)
of the Consumer Credit (Exempt Agreements) Order 1989. Both sides made
concessions to define the issue for the judge:
"The plaintiff in fact conceded that, if these agreements were not exempt
agreements, then they were indeed unenforceable and, as the law currently
stands, that he could not recover from the defendant as a result of Dimond
-v- Lovell. [1999 3 AER 1]
The defendant in turn agreed that the fourth agreement was indeed exempt since
the amount of credit exceeded £15,000."
6) The judge's reference to Dimond -v- Lovell requires some explanation.
For a long time many claimants whose vehicles were put off the road by the
negligence of others did not claim that head of damage. This benefited
negligent drivers and their insurers. Car hire companies saw this niche in the
market, and entered the market to fill it, with apparent commercial success.
Motor insurers counter-attacked, claiming that such agreement were champertous,
and therefore unlawful. This claim failed in their Lordships' House in
Giles -v- Thompson [1994] 1 AC 142. We take Lord Mustill's analysis of
the forensic history (at pp 154 - 155):
"The question has arisen in this way. A substantial proportion of motor
accidents happened in circumstances where there is little room for doubt that
one party is exclusively to blame: typically, where the car of one driver
(hereafter `the motorist') is stationary, for example at a traffic light, and
where a car driven by another person (`the defendant') is carelessly driven
into the back of it. There are two types of damages which may be awarded to
the motorist in any resulting litigation. First there are damages for any
personal injury which the motorist may have suffered. These will usually
comprise general damages for pain, suffering and loss of amenity, and special
damages for past and future loss of earnings. Secondly, there are damages
related to the loss of or damage to the motorist's vehicle. These will or may
have two elements: a figure representing the diminution in value of the
motorist's vehicle, and another figure representing the financial loss suffered
by the motorist because he or she cannot use the vehicle whilst it is either
being replaced (if written off) or undergoing repairs. In practice these
various elements are dealt with in various ways. The damage to the car itself
is settled between insurers, apart from the excess on the motorist's policy,
which he may not trouble to pursue except as an appendage to a larger claim.
The motorist's claim for personal injuries may be substantial in amount, and
will be made the subject of an action, if the motorist can finance the action,
either from his own resources, or from some form of insurance, or (if he is of
very limited means) by legal aid.
There remains the claim for loss of use of the car. In principle, if such a
claim is made it will often by quantified by reference to the cost of hiring a
substitute vehicle, and will be recoverable upon proof that the motorist needed
a replacement car whilst his own was off the road. I say `if such a claim is
made' for two reasons. First, because the loss of use is not recoverable under
a comprehensive policy, so that there are no subrogated insurers to stand
behind the claim, and in situations where there is no personal injury claim and
where the damage to the motorist's vehicle is dealt with as between insurers
there are few motorists who will have the time, energy and resources to go to
law solely to recover the cost of a substitute vehicle. Secondly, because
there are many motorists who lack the inclination or the ready cash to hire a
substitute on the chance of recovering reimbursement from the defendant's
insurers. Thus, 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.
In recent years a number of commercial concerns (hereafter `the companies')
have identified this gap and have sought to fill it in a manner advantageous
alike to motorists and to themselves, by offering to motorists with apparently
solid claims against the other parties to collisions the opportunity to make
use of the company's cars whilst their own are off the road. The terms on
which this opportunity is given are said to be, in broad outline, as follows.
(1) The company makes a car available to the motorist whilst the damaged car
is under repair. (2) The company pursues a claim against the defendant, at
its own expense and employing solicitors of its choice, in the name of the
motorist for loss of use of the motorist's car. (3) The company makes a
charge for the loan of the replacement car, which is reimbursed from that part
of the damages recovered by the motorist from the defendant or his insurers
which reflects the loss of use of the motorist's car. (4) Until this happens
the motorist is under no obligation to pay for the use of the replacement car.
(5) These arrangements are conditional on the co-operation of the motorist in
pursuing the claim and any resulting legal proceedings. (6) The companies aim
to confine the scheme to cases where the motorist is very likely to succeed in
establishing the defendant's liability, without any contributory negligence on
the part of the motorist.
Transactions on these general lines have been entered into in large numbers, to
the discomfort of the defendants' insurers, who have been faced with claims of
which an element reflects the cost of a replacement vehicle which would not
have been hired but for the existence of the scheme. The insurers have
counter-attacked by alleging that the hiring agreements are champertous and
accordingly unlawful, or otherwise contrary to public policy. Whilst no longer
contending that actions which include an element of damages referable to
charges made, or said to be made, by the companies are an abuse of the process
of the court, and should be therefore struck out in their entirety, the
insurers say that damages cannot be awarded for the hiring charges, since to do
so would enable the motorist to rely on an unlawful contract."
7) We know from Dimond's case that in Giles -v- Thompson no point
on the Consumer Credit Act arose. In Dimond's case, another head of
illegality was raised, successfully on this occasion. That case involved a
different care hire company operating on a different contract. It is presently
under appeal to their Lordships' House. The appellants assert that the issue
in this case (as defined above) was not dealt with in Dimond's case, and
that the question whether a clause providing payment within a year and a day
achieves exemption from the Consumer Credit Act 1974 is the major defence being
litigated in a large number of credit hire cases going through the court. No
application was made to stay this hearing to await result of the appeal in
Dimond. Nor was it suggested that we were bound by Dimond on the
point in this appeal. So we proceeded to hear this appeal.
8) It is common ground that, if the relevant hire agreements are properly to be
regarded as consumer credit agreements within the meaning of section 8(2) of
the Consumer Credit Act 1974, the short question raised by this appeal is
whether the words used in condition 10.1 of the agreements are apt to take
those agreements out of the regulatory regime imposed by that Act and the
Consumer Credit Regulations 1983 and 1987.
9) The question whether or not a replacement vehicle hire agreement under which
the obligation to pay the hire charge was deferred pending resolution of a
claim by (or in the name of) the hirer against a third party was capable of
being regarded as a consumer credit agreement for the purposes of the Act of
1974 was considered by this Court in Dimond v Lovell [1999] 3 All ER 1.
This Court held that it was. In particular, it was held: (i) that such an
agreement, if made with an individual hirer, was a personal credit agreement
within section 8(1) of the Act; and (ii) that if the amount of the credit
provided did not exceed the limit prescribed under section 8(2) - £15,000
at the time relevant to this appeal - the agreement was a consumer credit
agreement. Subject to one point - to which we are about to refer - the
respondent did not seek to re-open that question on this appeal.
10) The amount of the deferred hire charge in Dimond v Lovell was well
within the limit prescribed under section 8(2) of the Act of 1974. In the
present case, however, the amount payable under the fourth of the hire
agreements exceeded the prescribed limit. It was accepted by the appellant that
that fourth agreement fell outside section 8(2) and was not a consumer credit
agreement. But it was also accepted, by the respondent, that - as the judge had
held - the four agreements had to be treated as separate contracts; so that the
fact that the amount payable under all four agreements (taken together)
exceeded the prescribed limit did not lead to the conclusion that the first
three agreements could not be consumer credit agreements.
11) In this Court, however, the respondent sought for the first time to rely on
the fact that, although the credit actually provided under each of the first
three agreements was less than £15,000, the agreements themselves imposed
no limit. At the time when each agreement was made it was possible that the
amount of the credit to be provided under it would exceed £15,000 - as, in
the event, happened in the case of the fourth agreement. The respondent sought,
by way of notice under CPR 1/RSC/59r6(1)(b), to contend that an agreement
which, as made, provided for credit without limit could not be a consumer
credit agreement within section 8(2) of the Act; notwithstanding that, in the
events which happened, the credit actually provided under the agreement did not
exceed the limit prescribed by that section.
12) That Respondent's Notice (the only copy of which we have seen is unsigned
and undated) was never lodged with the Court, and did not get into the Core
Bundle, though we are told it was received by the appellants on 13th October,
some time out of time. Accordingly we were surprised to be confronted with it
at trial when the time estimate for the hearing already seemed tight. We
refused to admit it out of time, for reasons which follow.
13) First, the effect of this point would have brought Dimond centre
stage, and thus would potentially cause an over-run to another day in a tight
schedule. And the connection with Dimond appears to bring this new
point close to, if not caught by, the stay imposed by the Vice-Chancellor on
Dimond cases.
14) Second, if this point is right, it has taken a long time to emerge, and so
is just the sort of point on which the views of, and filter imposed by, the
judge at first instance would have been particularly valuable.
15) Third, both those points are strengthened by the fact that this new point
put forward as a test case. It is entirely different from and unrelated to the
illegality defence which is already before the Court. It is unsatisfactory for
a test case not to have the benefit of the decision at first instance,
particularly when the point sought to be put in issue was conceded before the
judge.
16) Fourth, if it is a proper point to be tested by a test case, there will be
no difficulty (apart from the Vice-Chancellor's stay on all Dimond
cases) preventing such a test case being set up at short notice.
17) We should make it clear that we have not formed any view on the merits of
the point itself; or on the question whether, having regard to the decision in
Dimond v Lovell, it could succeed in this Court.
18) The position, therefore, is that this appeal has been argued on the basis
that the first three agreements ("the relevant agreements") are consumer credit
agreements within section 8(2) of the Act. The issue is whether they are also
regulated agreements.
19) A consumer credit agreement is a regulated agreement for the purposes of
the Act of 1974 if it is not an "exempt agreement"; that is to say, if it is
not an agreement specified in or under section 16 of the Act - see section
8(3). Section 16(5) gives power to the Secretary of State to provide by order
that the Act shall not regulate consumer credit agreements where the number of
payments to be made by the debtor does not exceed the number specified for that
purpose in the order. That power was exercised by the making of the Consumer
Credit (Exempt Agreements) Order 1977. Paragraph 3(1) of the 1977 Order
provided that the Act of 1974 should not regulate a consumer credit agreement
which fell within one of a number of descriptions. Those descriptions included,
at paragraph 3(1)(a)(i), a debtor-creditor-supplier agreement for fixed sum
credit under which the number of payments to be made by the debtor did not
exceed four.
20) Fixed sum credit is defined by section 10(1) of the Act of 1974. It means
any facility under a personal credit agreement whereby the debtor is enabled to
receive credit (whether in one amount or by instalments), not being
running-account credit within section 10(1)(a). A debtor-creditor-supplier
agreement is defined by section 12 of the Act of 1974. The expression includes
a restricted-use credit agreement falling within section 11(1)(a) of that Act.
A restricted-use credit agreement is a regulated consumer credit agreement to
finance a transaction between the debtor and the creditor. It was held by this
Court in Dimond v Lovell - at paragraph 69 in the judgment of Sir
Richard Scott, Vice-Chancellor, with which the other members of the Court (Lord
Justice Thorpe and Lord Justice Judge) agreed - that a replacement
vehicle hire agreement in terms which (so far as material in this context) are
indistinguishable from those of the relevant agreements in the present case was
an agreement for fixed sum credit within section 10(1)(b), a restricted-use
credit agreement within section 11(1)(a) and a debtor-creditor-supplier
agreement under section 12(a) of the Act of 1974. On the basis that the
relevant agreements are consumer credit agreements for the purposes of section
8(2) of the Act of 1974 it is not in dispute that, if not exempt agreements,
they would be debtor-creditor-supplier agreements for fixed-sum credit.
21) The 1977 Order was revoked and replaced by the Consumer Credit (Exempt
Agreements) Order 1980; and the 1980 Order was, in turn, revoked and replaced
by the Consumer Credit (Exempt Agreements) (No. 2) Order 1985; but the relevant
provisions in paragraph 3(1)(a)(i) remained unchanged until the coming into
operation of the Consumer Credit (Exempt Agreements) Order 1989.
22) The 1989 Order was made in the light of an EC Council Directive of 22
December 1986 (87/102/EEC). The Directive, which had as its expressed objective
the provision of "a certain degree of approximation of the laws, regulations
and administrative provisions of Member States concerning consumer credit", was
to have no application to credit agreements under which the consumer was
required to repay the credit either within a period not exceeding three months
or by a maximum number of four payments within a period not exceeding 12 months
- see Article 2.1(g). No doubt it was with that provision in mind that
paragraph 3(1)(a)(i) of the 1989 Order was in a more restrictive form than that
which had appeared in the earlier Orders. The relevant paragraph in the 1989
Order is in these terms:
"3(1) The Act [of 1974] 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 12 months beginning with the date of
the agreement; or ..."
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 the 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.
Examples of such an "exclusive" construction are found in The Goldsmith's
Company v The West Metropolitan Railway Company [1904] 1 KB 1 ("the powers
of the company for the compulsory purchase of lands for the purposes of this
Act shall cease after the expiration of three years from the passing of this
Act") and in In re Lympe Investments Ltd [1972] 1 WLR 523 ("the company
has for three weeks thereafter neglected to pay"). In Stewart v Chapman
[1951] 2 KB 792 ("a person ... shall not be convicted unless ... within
fourteen days of the commission of the offence a summons for the offence was
served on him") Lord Goddard, Chief Justice, observed, at pages 78-9, that it
was well established that "whatever the expression used" the day from which the
period of time was to be reckoned was to be excluded.
24) Where, however, the period within 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. Examples
of an "inclusive" construction are to be found in Hare v Gocher [1962] 2
QB 642 ("if within [the period of two months beginning with the commencement of
this Act] the occupier of an existing site duly makes an application ... for a
site licence") and in Trow v Ind Coope (West Midlands) Ltd [1967] 2 QB
899 ("a writ ... is valid ... for 12 months beginning with the date of its
issue"). As Lord Justice Salmon pointed out in Trow v Ind Coope, at page
923, the approach adopted in the Goldsmith's Company case and Stewart
v Chapman can have no application in a case where the period is expressed
to begin on the specified date. He observed, at page 924, that "I cannot ...
accept that, if words are to have any meaning, `beginning with the date of its
issue' can be construed to mean the same as `beginning with the day after the
date of its issue'".
25) The judge held that it was "obvious", from the use of the expression
"beginning with the date of the agreement" in paragraph 3(1)(a)(i) of the 1989
Order, that the period of twelve months prescribed by that paragraph included
the date of the agreement. In our view he was plainly correct to reach that
conclusion. Notwithstanding the submissions advanced on behalf of the
respondent, we can see no basis on which this Court could refuse to apply the
reasoning which led the majority (Lord Justice Harman and Lord Justice Salmon)
in Trow v Ind Coope to hold that there is a real difference between a
direction that a period of time is to begin with a specified date and a
direction that a period is to be reckoned from that date.
26) It was submitted that to give an inclusive construction to the expression
used in paragraph 3(1)(a)(i) of the 1989 Order would be inconsistent with the
obvious purpose of that paragraph; because it would fail to give effect to
Council Directive 87/102/EEC. We find it impossible to accept that submission.
First, it seems to us impossible to say, with any confidence, that Article
2.1(g) was intended to exclude from the application of the Directive agreements
under which the consumer was required to repay the credit within a period of
twelve months commencing on the day after the date of the agreement, but not to
exclude agreements under which the period of twelve months commenced on the
date of the agreement itself. There is no reason to think that, in framing
Article 2.1(g), the EC Council had in mind the approach to the reckoning of
time developed in our domestic courts; nor that that approach would be followed
in the European Court of Justice or in the courts of other Member States.
Secondly, whatever might be the construction of Article 2.1(g) as a matter of
EC law, there is nothing in the Directive which prevents a Member State from
giving effect to its obligations thereunder by exempting only agreements under
which the repayment period does not exceed twelve months commencing on the date
of the agreement itself; and by not exempting agreements under which the
repayment period is longer by one additional day. The penultimate recital to
the Directive makes that clear. Thirdly, there can be no doubt that, in using
the words "beginning with the date of the agreement" in paragraph 3(1)(a)(i) of
the 1989 Order, the Secretary of State did intend to prescribe, for the
avoidance of doubt, the day on which the period of twelve months is to
commence; and, in the light of the decision of this Court in Trow v Ind
Coope, must be taken to have known the effect (or, at the least, the likely
effect) which those words would have as a matter of English law.
27) On the basis, therefore, that the relevant agreements will not be taken out
of the regulatory regime imposed by the Act of 1974 and the associated
regulations by paragraph 3(1)(a)(i) of the 1989 Order unless repayment of the
credit provided by each of those agreements is required, by the terms of the
agreement, to be made within a period of twelve months which includes the date
of the agreement, we turn to the provision for deferred repayment which is
contained in condition 10.1. It should be considered in context. Condition 9
contains the primary obligation to pay hire charges. It is in these terms:
"9 Payment
Save where the Owner has agreed to provide credit pursuant to Condition 10 the
Hirer shall pay to the Owner the Hire Charges within 14 days of the end of the
Hire Period.
9.2 ..."
28) Condition 10 applies where, as occurred in the present case, the hire
company, as "Owner", allowed credit:
"10 Credit on the Hire Charges
10.1 Where a Claim exists the Owner may at its complete discretion and
subject to the provisions of this Condition allow the Hire Charges to remain
outstanding until a date on or before 12 months after the date of this
Agreement (the "Credit Period").
10.2 The Hirer agrees to pay to the Owner interest on any outstanding Hire
Charges at the Interest Rate from the due date for payment of the Hire Charges
provided for in Condition 9.1 until actual payment.
10.3 The Hire Charges together with interest thereon shall become immediately
due and payable by the Hirer upon the occurrence of the earliest of the
following events:
10.3.1 the first anniversary of this Agreement;
10.3.2 ..."
29) "Claim" is identified as:
"... a claim by the Hirer to recover loss, including the cost of hiring the
vehicle hereunder, resulting from damage sustained by the Hirer's own vehicle
involved in an accident, which claim is against a party other than the Owner or
Hirer's own insurers."
30) The other events specified under condition 10.3 may or may not occur before
the first anniversary of the agreement. When condition 10 is read as a whole it
is, in our view, beyond argument that the date "12 months after the date of
this Agreement" referred to in condition 10.1 is intended to be the same date
as "the first anniversary of this Agreement" referred to in condition 10.3.1.
That, of course, is consistent with giving to the words "12 months after the
date of this Agreement" a construction which excludes from the twelve month
period the day on which the agreement was made. To give to those words a
construction which excludes the day from or after which the period is to be
reckoned is, itself, to adopt the approach consistently adopted by the Courts
in relation to similar expressions since Young v Higgon in 1840.
31) The problem to which that approach gives rise may be illustrated by
reference to the first of the relevant agreements. The agreement is dated 3
March 1997. The first anniversary of 3 March 1997 is 3 March 1998. The last day
of the period of twelve months after 3 March 1997 (excluding 3 March 1997
itself from that period) is 3 March 1998. But the last day of the period of
twelve months beginning with the date of the agreement - that is to say,
including 3 March 1997 within the period - is 2 March 1998. So the effect of
giving to the words "12 months after the date of this Agreement" which are used
in condition 10.1 of the agreement a construction which excludes the date of
the agreement itself is that (where the hire company allows credit under
condition 10) the period within which payment of the hire charges is required
to be made is one day longer than the period prescribed by paragraph 3(1)(a)(i)
of the 1989 Order. The agreement is not within the description set out under
paragraph 3(1)(a)(i); it is not an exempt agreement for the purposes of section
8(3) of the Act of 1974; it is a regulated agreement to which the regulatory
regime imposed by that Act applies.
32) The judge sought to avoid that consequence by giving to the words "12
months after the date of this Agreement" in condition 10.1 a meaning which
included the date of the agreement itself. He reminded himself of Lord
Hoffmann's summary of the principles by which contractual documents should be
construed, set out in Investors Compensation Scheme Ltd v West Bromwich
Building Society [1998] 1 WLR 896 at pages 912-3; and, in particular, to
the principle (numbered 1 in Lord Hoffmann's summary) that:
"Interpretation is the ascertainment of the meaning which the document would
convey to a reasonable person having all the background knowledge which would
reasonably have been available to the parties in the situation in which they
were at the time of the contract."
33) The judge went on, at pages 7G - 8G in the transcript of his judgment:
"Applying these principles, what would the parties, using the form of words in
question in this case, reasonably have been understood to mean by one of Lord
Hoffman's (sic) "reasonable people" considering the matter. I think that the
answer is tolerably clear. He would conclude that a year from the date of the
agreement, not a year from the day after the agreement, was being specified.
A year and a day is a curious and unusual unit of time. Precisely a year, from
and including a particular date, is not.
In the context of this contract, 12 months after a particular day would be
understood to mean, and I find does mean, the same as 12 months from a day; 12
months including the date of the agreement. All the more so if the terms of the
Consumer Credit Exempt Agreement 1989 (sic) are to be taken as part of "all the
background knowledge which would reasonably have been available to the parties
in the situation in which they were at the time of the contract", in Lord
Hoffman's expression. Certainly they would have been part of the car provider's
background knowledge, and it could have no conceivable reason for providing for
a period which neatly avoided exemption.
The plaintiff, even though an experienced and successful businessman, would
not, of course, have had the regulations explicitly in mind, although no doubt
they were "available" to him or his advisers had he wanted them.
Against this relevant background, in my view, 12 months from and including the
date of the agreement is what the parties in using those words would reasonably
have been understood to mean by the expression, "12 months after the date of
this agreement"
34) The first difficulty in the judge's reasoning, as it seems to us, is that,
absent reliance on the 1989 Order, there is no basis for the conclusion that
the expression "12 months after the date of this agreement" - or "12 months
from the date of this agreement", which the judge treated (correctly, in our
view) as having the same meaning - would be reasonably understood to mean "12
months including the date of this agreement". The usual meaning of the words
"after" or "from" in the context of reckoning time, as the authorities make
clear, is that the day "after" or "from" which a period of time is to be
reckoned is not included within the period. There are good reasons for this.
The event which gives rise to the need to determine when a limited period of
time has ended (or will end) may itself happen at any time of the day on which
it occurs. It is in order to avoid disputes as to fractions of a day - and to
give to the party who must comply with the limit the maximum period for such
compliance - that time is reckoned, in effect, from the last moment of that
day; that is to say, the period begins to run from the first moment of the next
day. To treat a period of a year "from the date of the agreement" as commencing
at the first moment after the end of the day on which the agreement is made is
not (as the judge appears to suggest) to construe the words as if they read "a
year from the day after the agreement".
35) The second difficulty is that to construe the expression "12 months after
the date of this agreement" as meaning "12 months including the date of this
agreement" produces an inconsistency between the time restriction in condition
10.1 and that in condition 10.3.1. "The first anniversary of this Agreement"
is, plainly, one day later than the last day of the period of "12 months
including the date of the agreement"; the first anniversary of 1 January 2000
is 1 January 2001, not 31 December 2000. The judge's reasoning does not address
this point.
36) The third difficulty is that, as the judge himself recognised, there is no
basis for an assumption that the respondent, as "Hirer" under the relevant
agreements, would have had the Act of 1974 or the 1989 Order in mind at the
time when he signed those agreements. It is, perhaps, pertinent to recall that,
until the decision of this Court in Dimond v Lovell [1999] 3 All ER 1
was handed down on 29 April 1999, the law was widely thought to be as expressed
by Professor Goode in his work Consumer Credit Legislation 1999 - to
which Sir Richard Scott, Vice-Chancellor, makes reference at paragraphs 63-66
of his judgment in that appeal. To attribute to the hirer under a replacement
vehicle hire agreement made in 1997 knowledge that the transaction into which
he was entering might be affected by consumer credit legislation and the
provisions for exemption in an order made pursuant to an EC Directive is, in
our view, to give to Lord Hoffmann's expression "knowledge which would
reasonably have been available to the parties in the situation in which they
were at the time of the contract" a scope which he could not have intended.
37) We accept, of course, that if the inquiry as to the meaning of the words in
condition 10.1 of the relevant agreements has to be approached on the basis
that both parties to those contracts knew (or must be treated as knowing) (i)
that, unless exempted, the agreements would be within the regulatory regime
imposed by the consumer credit legislation , (ii) that there were provisions in
the 1989 Order which could be invoked to confer exemption - see the
observations of Sir Richard Scott, Vice-Chancellor, at paragraph 51 of his
judgment in Dimond v Lovell - and (iii) that those provisions were
available only where the period for repayment of the credit did not exceed
twelve months, then it becomes arguable that both parties knew that the time
restriction in condition 10 of the relevant agreements had been included in
order to take advantage of the exemption. Indeed, it might be said that, given
that approach, it was obvious to the hirer that that was the purpose which the
hire company hoped to achieve by including the time restriction in condition
10. On that basis it could have been argued that was the common purpose of both
parties; and that that common purpose is not to be frustrated by their failure
to use the language which would have been apt to achieve it. Reliance would, no
doubt, have been placed on the fourth of Lord Hoffmann's principles in
Investors Compensation Scheme Ltd v West Bromwich Building Society,
[1998] 1 WLR 896, 913:
"The meaning which a document (or any other utterance) would convey to a
reasonable man is not the same thing as the meaning of its words. The meaning
of words is a matter of dictionaries and grammars; the meaning of the document
is what the parties using those words against the relevant background would
reasonably have been understood to mean. The background may not merely enable
the reasonable man to choose between the possible meanings of words which are
ambiguous but even (as occasionally happens in ordinary life) to conclude that
the parties must, for whatever reason, have used the wrong words or syntax: see
Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749."
38) We do not find it necessary to decide whether an argument advanced on that
basis would succeed. The foundation for that argument has not been established.
It is, in our view, impossible to attribute to someone in the position of the
hirer at the time that the agreements were made the background knowledge which
we have described.
39) We were referred to the decision cited by Lord Hoffmann in support of the
fourth of his principles of interpretation - Mannai Investments Co Ltd v
Eagle Star Life Assurance Co Ltd [1997] AC 749. The question in that appeal
was whether a tenant's notice to determine a lease which was expressed to take
effect on 12 January 1995 was validly served under a provision which entitled
the tenant to determine the lease by not less than six months' notice "to
expire on the third anniversary of the term commencement date" in circumstances
in which the term had commenced on 13 January 1992. The landlord claimed,
correctly, that the date specified in the notice (12 January 1995) was one day
before the third anniversary of the term commencement date (13 January 1995).
As Lord Goff of Chievely observed, at page 753D, the tenant had made an obvious
mistake - in reading the clause in the lease as if it had provided for the
notice to be served to expire "at the end of the third year of the term" rather
than "on the third anniversary of the term commencement date" - so that it was
tempting to assist the tenant "when it must have been obvious to the landlord
that the tenant was attempting to give an effective notice under the clause".
Lord Goff and Lord Jauncey took the view that the temptation to assist the
tenant had to be resisted. Although, looked at in the context of the provision
in the lease, it was plain that the tenant had made a mistake, the mistake was
not obvious from notice itself. The notice could not be construed so as to
contradict the words actually used. The majority (Lord Steyn, Lord Hoffmann and
Lord Clyde) took a different view. Lord Steyn identified the issue, at page
767G-H, as how a reasonable recipient would have understood the notice,
construing the notice in the relevant objective context. He concluded, at pages
768H-769A:
"Crediting a reasonable recipient with knowledge of the terms of the lease and
third anniversary date (13 January), I venture to suggest that it is obvious
that a reasonable recipient would have appreciated that the tenant wished to
determine the leases on the third anniversary date of the leases but wrongly
described it as the 12th instead of the 13th. The
reasonable recipient would not have been perplexed in any way by the minor
error in the notices. The notices would have achieved their intended
purpose."
40) The intended purpose, in that context, was to inform the landlord that the
tenant had decided to determine the lease in accordance with the right reserved
- see Lord Steyn's observation at page 768E. Lord Hoffmann, in a passage at
page 779G-H which foreshadows what he was to say in the Investors
Compensation Scheme case, pointed out that commercial contracts were
to be construed in the light of all the background which could reasonably have
been expected to be available to the parties; so that:
"The fact that the words are capable of a literal application is no obstacle to
evidence which demonstrates what a reasonable person with knowledge of the
background would have understood the parties to mean, even if this compels one
to say that they have used the wrong words. In this area we no longer confuse
the meaning of words with the question of what meaning the use of the words was
intended to convey."
41) He could find no answer to the question why the rule for the construction
of notices should be different from those for the construction of commercial
contracts. Lord Clyde took a similar view to that of Lord Steyn - see at page
783A:
"No reasonable landlord would in my view be misled by the statement of the date
which in the context of a clear intention to invoke clause 7(13) [of the lease]
was inaccurate. The landlord would in my view recognise that in each case the
reference to 12 January was to be read as a reference to 13 January and I would
so construe the notice[s]."
42) In our view the decision of the majority in the House of Lords in Mannai
Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 provides
no support for the respondent's contentions in the present appeal. It must be
kept in mind, first, that in the Mannai case there was no doubt that the
landlord knew - or that any reasonable landlord must be taken to have known -
what were the terms of the relevant clause in the lease; so that it was obvious
not only that a mistake had been made by the tenant, but also what that mistake
was. Secondly, the notice took effect unilaterally. The landlord's intention
was irrelevant. The only relevant question was what a reasonable person in the
position of the landlord would have understood from the notice to be the
intention of the tenant. There was no need to find an expressed consensus
between landlord and tenant. By contrast, in the present case, (i) it has not
been established that the hirer knew - or should be taken to know - the
significance or the terms of paragraph 3(1)(a)(i) of the 1989 Order or what the
hire company was seeking to achieve by the time restriction in condition 10.1
of the agreements; and (ii) it has not been established that, if the hirer did
know or suspect what the hire company was seeking to achieve by that time
restriction, the hirer shared the hire company's intention. The intention of
both parties is relevant to the interpretation of a contractual term. There is
a need - which is not present when construing a notice which takes effect
unilaterally - to find an expressed consensus between the parties to the
contract.
43) We have sought to explain why we have not been persuaded that it could be
appropriate to attribute to the hirer - or to a reasonable person in the
position of the hirer - knowledge that the purpose of the hire company in
relation to the time restriction in condition 10.1 was to obtain exemption
under the 1989 Order. It is unnecessary to decide whether, if that knowledge
were to be treated as "reasonably available" to a reasonable person in the
position of the hirer, the hirer ought also to be treated as having agreed that
condition 10.1 should have the effect which the hire company intended. But it
is, we think, important to keep in mind that, as a general rule, a document
will not be given the meaning for which one party, say "A", contends merely
because the other party knew or suspected, at the time, that that was what A
was hoping to achieve. There must be some other reason to construe the document
in that way. In the present case, it is by no means clear that, even if the
hirer knew what the hire company was hoping to achieve by the time restriction
in condition 10.1, he must be treated as having contracted on the basis that
condition 10.1 did not have the meaning which the words used would naturally
convey. In particular, there is no reason to attribute to the hirer an
intention that the agreement should be exempt from the protection which the
consumer credit legislation was enacted to provide for his benefit.
44) It follows that we would allow this appeal in relation to the hire
charges incurred under the first three agreements.
Order: Appeal allowed with costs. Application for permission to appeal to
the House of Lords refused. Order does not form part of approved judgment.
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