Does Dimond v Lovell Need to be Revisited?

It’s been well over 20 years since the well-known case of Dimond v Lovell [2000] 2 All ER 897. However, in the light of the passage of time, is it not sensible to at least consider revisiting Dimond v Lovell? When I state “revisiting”, I mean looking at the decision again in the light of developments since. 

I examine in this article, how it could be argued that Dimond Lovell should be revisited. Please note this article is not an attempt to interpret the law. Rather it’s an article examining a potential case in favour of revisiting Dimond v Lovell. It’s an attempt to revitalise this area of law, when there appears to too much assumption that all parameters of the law on this area have already been exhausted. 

Please note I am not examining the issue of credit hire rates in this article, which was also addressed in Dimond v Lovell. I am purely looking at the issue of enforceability and its impact upon the recoverability of the hire charges. 

I will address this article in the following way: (1) a summary of Dimond v Lovell (in respect of enforceability only) and (2) the case for revisiting Dimond v Lovell.

A summary of Dimond v Lovell (in respect of enforceability only) 

The hire agreement which Mrs Dimond signed was a regulated hire agreement, which was not exempt under section 189 (1) of the Consumer Credit Act 1974 - so it had to comply with the various requirements of the Consumer Credit Act 1974. In summary the agreement did not comply with section 60 (1) of the Consumer Credit Act, in that “all the prescribed terms” were not included (the amount of credit was excluded in the agreement”). Under s65 (1) of the Consumer Credit Act 1974, a non-compliant agreement shall be enforceable only “on an order of the court”. However, the breach in Dimond v Lovell was of such a type that the court did not have that power to enforce the agreement. This is because section 127 (3) of the Act (since repealed) states that the court shall not make an enforcement order in this type of a situation. So, Lord Hoffman described the hire agreement as “irredeemably unenforceable”. The hire charges were not recoverable. 

The case for revisiting Dimond v Lovell

This can be summarised as follows: (i) Dimond v Lovell was restricted to “irredeemably unenforceable” agreements only; (ii) since Dimond v Lovell, the consumer credit legislative regime has materially changed and (iii) it is arguable that there are questions as to whether Dimond v Lovell applies to the Consumer Credit Act 1974, as amended in 2006. 

Dimond v Lovell was restricted to “irredeemably unenforceable” agreements only 

The hire agreement in Dimond v Lovell could not be enforced by way of any court order (pursuant to section 127 (3) of the Act, repealed by the Consumer Credit Act 2006). Dimond v Lovell was dealing with an “irredeemably unenforceable” agreement. Indeed, when one looks at the decision of Dimond v Lovell carefully, it is arguable that it only ever applied to “irredeemably unenforceable” agreements and not redeemably unenforceable agreements. 

Lord Hoffman stated, “The hiring agreement in this case did not and is therefore irredeemably unenforceable”. 

There is nothing in the judgment about the position where the breach could be “cured” and the agreement made enforceable by a court order - all breaches of the Consumer Credit Act 1974 can now be potentially enforced by way of a court order. 

Since Dimond v Lovell, the consumer credit legislative regime has materially changed 

There were material changes to the Consumer Credit Act 1974 after Dimond v Lovell. 

To have any understanding of the Consumer Credit Act 1974, one has to consider the original purpose of the Act. This was legislation, designed to protect the consumer. The preamble to the Consumer Credit Act 1974 states that it is: “An Act to establish for the protection of consumers a new system”. 

I suppose this was a completely noble intent. “Hard doorstep selling” was a problem and the consumer needed protection from the “pushy” doorstep seller. 

However, the legislative environment in which the Dimond v Lovell decision was made, was changed by the Consumer Credit Act 2006. Section 127 (3) of the 1974 Act was repealed meaning all unenforceable agreements could be enforceable by way of an order of the court. The amendment in 2006 was sensible. The growing use of the internet meant that members of the public were perhaps more aware of their rights than they were in 1974. Whilst there was still an understandable need to protect consumers, that protection would not even in the most serious breaches be an unfettered one. 

So, the decision in Dimond v Lovell should be read in the context of the legislative environment at the time. 

This arguably suggests that when the 1974 Act was amended (so that s127 (3) was repealed), Dimond Lovell needed to be revisited. Which of course it never was.

It however seems clear that with the repeal of s127 (3), it is potentially arguable that there is a distinction to be drawn between those situations in which the contract is irredeemably unenforceable and those cases in which a court can make an order that the unenforceable agreement can be enforced. This is very significant as potentially any breach of the Consumer Credit Act can be enforced by way of court order and this has been the case for some time. I am indeed surprised that such a distinction has not been more forcibly pronounced. 

The implications of this distinction cannot be underestimated. Let’s look at this hypothetical situation: a court dismisses a hire claim as the hire agreement is in breach of the Consumer Credit Act and therefore there is “no loss”. After the trial, the hire company pursues the hire against the claimant and makes an application for the enforcement of the hire agreement. This is a highly unsatisfactory position. 

It is arguable that there are questions as to whether Dimond v Lovell even applies to the amended Consumer Credit Act 1974 

I would even go so far as to suggest that a case may be made that in the light of the changes to the Consumer Credit Act in 2006, Dimond v Lovell does not even apply to breaches of the Consumer Credit Act 1974 now.

In Dimond v Lovell, Lord Hoffman was very clear in referring to a “irredeemably unenforceable” agreement. 

I was involved in the Court of Appeal case of Salat v Barutis in 2013 [2013] EWCA Civ 1499. Like Dimond v Lovell we were dealing with an agreement which had become “irredeemably unenforceable” under different legislation (Cancellation Regulations). In that case the Court of Appeal stated (para 27): “No distinction can be drawn for these purposes between the effect of sections 65 and 127(3) of the Consumer Credit Act 1974 (as originally enacted) and that of regulation 7(6). In each case the contract is rendered unenforceable from the outset as a result of the lender’s having failed to comply with the documentary requirements of the legislation”. In Salat v Barutis, the Court of Appeal was stating no distinction can be drawn between the provisions in Dimond v Lovell and the cancellation regulations, as far as enforceability was concerned. However, it is surely arguable
that there is a distinction between “irredeemably” unenforceable agreements under the original 1974 Act as understood in Dimond v Lovell, and the present situation where all agreements under the Consumer Credit Act are potentially enforceable by way of a court order. If there was any doubt as to whether the Court of Appeal in Salat v Barutis understood this distinction, then the following passage in paragraph 27 settles any doubts
in my view: “It can therefore have had no legitimate expectation of being able to enforce the agreement against Mr. Salat if it did not comply with regulation 7(2)”. 

So, what about the situation where the hire company does have a “legitimate expectation” of being able to enforce the agreement? In all unenforceable consumer credit agreements, the court has a discretion to make an order that the agreement is enforceable. So, one could state there is always in these cases a “legitimate expectation” that a hire company will be able to enforce an unenforceable agreement by way of court order. There is nothing in Dimond v Lovell and Salat v Barutis about situations where the court may have a discretion to enforce a contract. This is because neither Dimond v Lovell nor Salat v Barutis were dealing with such a regulation in which the court had a discretion to enforce. 

Conclusion and summary 

In conclusion and summary:

(1) Dimond v Lovell was dealing with an “incurable” breach of the Consumer Credit Act 1974, which meant a court did not have discretion to order enforcement of the agreement;

(2) in 2006, the Consumer Credit Act 1974 was amended so that the court could make an order that any agreement could be enforceable, notwithstanding any breach;

(3) There is nothing in Dimond v Lovell to suggest that it applied to situations where there was a discretion for the court to make an order that the agreement was enforceable;

(4) in the light of the change in 2006 to the Consumer Credit 1974 whereby all agreements could be enforced by way of court order, it is arguable that Dimond v Lovell should be revisited;

(5) Indeed it is surprising that the potential distinct situations between irredeemably unenforceable and redeemably unenforceable agreements has not been more forcefully pronounced so far;

(6) the Court of Appeal case of Salat v Barutis which I was involved in followed Dimond v Lovell and it stated it could not make a distinction between the breach of the cancellation regulation and breach of the Consumer Credit Act 1974 in Dimond v Lovell;

(7) what is however clear is that that there is distinction between those agreements that can never be enforced (Dimond v Lovell, Salat v Barutis), and those which can be enforced by way of a court order (all breaches of the Consumer Credit Act 1974, as amended by the Consumer Credit Act 2006);

(8) the implications of this distinction are very significant. A hire claim could be dismissed on the basis that there is a breach of the Consumer Credit Act 1974 and therefore there is “no loss”. The hire company could then afterwards pursue the claimant for the unpaid hire charges by applying for the hire agreement to be enforced;

(9) a case may be made that in the light of the changes to the Consumer Credit Act in 2006, Dimond v Lovell does not even apply to breaches of the Consumer Credit Act 1974 now. 

In any event, it is my view that a more vigorous analysis is required of Dimond v Lovell. 

Please note this article does not constitute legal advice for any specific case or cases. 

© Mohammed Azeem Ali 2023 15/12/2023