TRM Copy Centres (UK) Ltd and Others v Lanwall Services Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Thomas,Lord Justice Hooper,Sir Mark Potter |
| Judgment Date | 17 April 2008 |
| Neutral Citation | [2008] EWCA Civ 382 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 April 2008 |
| Docket Number | Case No: A2/2007/1824 |
[2008] EWCA Civ 382
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
FLAUX J
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Mark Potter President Of The Family Division
Lord Justice Thomas and
Lord Justice Hooper
Case No: A2/2007/1824
Jonathan Ferris (instructed by Messrs Devereaux) for the Appellant
Bridget Williamson (instructed by Messrs Sherrards) for the Respondent
Hearing date: 7 February 2008
Introduction
The defendant (Lanwall) appeals, with the permission of the single Lord Justice, against the decision of Flaux J dated 18 July 2007 on one of the preliminary issues ordered to be tried by Master Rose on 2 May 2007 in an action brought by the claimants (TRM) against the defendants for inducing breach of a number of contracts in standard form. The form of contracts in question were Location Agreements made between TRM and shopkeepers and sub-post masters (Retailers) to whom TRM supplied photocopiers for installation at their shops or sub-post offices. It was Lanwell's case that the Location Agreement was, in the case of a Retailer who was an individual, a regulated “consumer hire agreement” for the purposes of s.15 of the Consumer Credit Act 1974; it claimed it would then follow that the Retailer was entitled, after the requisite period specified in the Act, to give no more than 3 months notice of termination under s.101 of the Act and TRM had no right to claim liquidated damages (see s.101 and s.173 of the Act). The preliminary issue which was the subject of this appeal was whether the Location Agreements were consumer hire agreements within s.15. Flaux J decided that they were not – [2007] EWHC 1738 (QB). The issue on the appeal turns on the interpretation of s.15 (on which there is little authority) and its application to the Location Agreements.
The factual background
The background is set out in full in paragraphs 2–7 of Flaux J's judgment; it can be summarised:
a) TRM carry on the business of leasing photocopying machines from a finance company and installing them in sub-post offices and shops by agreement with the Retailers on the terms of a Location Agreement for an initial period of 36 or 60 months. Thereafter, unless notice of termination is given, the agreements automatically renew for successive periods of 12 months, subject to a right of termination on 90 days' written notice. There were two forms of Location Agreement; it will be sufficient to refer to the June 2002 form of agreement.
b) Under the Location Agreement, the Retailer agrees to the installation of a photocopier at a visible and accessible place in his shop; customers of the Retailer are charged for a copy at the rate provided in the Location Agreements. The Retailer then accounts each month to TRM for the sums collected, but is entitled to deduct from those sums commission which increases as a greater number of copies are made. There is no obligation to make rental payments as such and, indeed, no obligation on the Retailer to pay anything to TRM unless the photocopier is used.
c) Lanwall operates a business which competes with that of TRM; that business is structured in a completely different way. It supplies copiers to finance companies which lease them to the Retailers; it then services and maintains the copiers.
d) These proceedings were commenced when TRM discovered that Lanwall had removed TRM's photocopiers from the premises of a number of Retailers who were bound by subsisting Location Agreements and had replaced them with equipment supplied by Lanwall. This was done without reference to TRM and without terminating the Location Agreements.
e) TRM's case was that the Defendant's actions constitute the tort of inducing the Retailers to breach their Location Agreements with TRM. Lanwall's defence was that the Location Agreements had either been terminated or could be brought to an end under the terms of the Consumer Credit Act.
The main provisions of the Location Agreement are also set out in full in the judgment of Flaux J. It provides for the ownership to be retained by TRM, possession to be transferred to the retailer and for the photocopier to be returned on termination (in respect of which there are detailed provisions to the effect I have already mentioned). It is only necessary to set out the clauses of the June 2002 Location Agreement relevant to the matters in issue:
“UK COPIER LOCATION AGREEMENT
TRM and the Business [i.e. the Retailer] desire to allow TRM to locate a TRM owned photocopy machine and related products (the “Equipment”) and proprietary promotional material at the retail locations owned and operated by the Business. The Equipment will be available for use by the Business and its customers. TRM and the Business agree as follows:
1. TRM's Obligations. During the term of this Agreement, TRM will:
1.1 deliver and install the Equipment and promotional material to the Business' locations owned and operated by the Business as set out in the Schedule 1 of this Agreement (Stores Sites) and such other additional locations as TRM shall agree;
1.2 supply the Business with all the paper, toner and supplies necessary for the operation of the Equipment;
1.3 provide repair and maintenance services for the Equipment and promotional material; and
1.4 provide appropriate training to the Business for the operation of the Equipment.
2 The Business' Obligations. During the terms of this Agreement, the Business will:
2.1 accept all the supplies necessary to operate the Equipment;
2.2 provide electrical power to operate the Equipment;
2.3 provide a clean, safe and orderly location for the Equipment, which is easily visible and accessible by the Business' customers;
2.4 provide adequate space for promotional material provided by TRM;
2.5 collect all sums paid for copies made on the Equipment and account to TRM for all monies received from customers using the Equipment, less the Business' commission in accordance with Schedule 2 below;
2.6 oversee the use and operation of the Equipment by the Business' customers making best efforts to maximise copier uptime by the timely refilling of supplies, removal of paper jams when possible, and contacting TRM promptly in the event of copier malfunction;
4. Retail Price and Commission Schedule. In consideration of TRM carrying out its obligations set out in this Agreement, the Business will pay TRM monthly for all copies made on the Equipment times the retail price specified in Schedule 2 (the Monthly Revenue), less the appropriate commission applied to all monthly copies as described in Schedule 2, together with VAT thereon.
The amount which is payable to TRM shall be computed and paid as follows: TRM will calculate and invoice the Business, monthly, for the amount due for copies made over the previous meter reading. TRM's invoice shall be paid within thirty (30) days from the invoice date. A late payment charge of 1.5 percent per month, or a minimum of £0.50, shall be added to any unpaid balance. Further, in the event that the business fails to make such timely payment, TRM shall have the right to enter upon the Business location and to terminate this Agreement and remove the Equipment and promotional materials from the Business Location at any time without advance notice.
[There was a provision for an increase or decrease in the price per copy]
“11. Use of equipment. The Business shall at all times exercise reasonable care in using and supervising the use of the Equipment and shall not remove the Equipment from the Business location, part with the possession of the equipment, or allow the Equipment to be used by anyone other than the Business or its agents, employees and customers. If the Equipment is damaged or destroyed … TRM shall have the right, in addition to any other rights it may have, to deduct the cost of repairing or replacing the Equipment … from the Business' commission due under this Agreement.”
The definition of a consumer hire agreement in the Consumer Credit Act
Section 15 of the Consumer Credit Act 1974 , as amended, sets out the definition of a consumer hire agreement:
“(1) A consumer hire agreement is an agreement made by a person with an individual (the “hirer”) for the bailment or (in Scotland) the hiring of goods to the hirer, being an agreement which—
(a) is not a hire-purchase agreement, and
(b) is capable of subsisting for more than three months, and
(c) does not require the hirer to make payments exceeding £25,000.
(2) A consumer hire agreement is a regulated agreement if it is not an exempt agreement”
Hirerisfurtherdefinedbys.189(1):
“'hirer' means the individual to whom goods are bailed or (in Scotland) hired under a consumer hire agreement, or the person to whom his rights and duties under the agreement have passed by assignment or operation of law, and in relation to a prospective consumer hire agreement means the prospective hirer;”
The answer to the preliminary issue is determined by the application of this statutory definition to the transaction set out in the Location Agreement.
The decision of the judge
The judge's reasons for his conclusion that the Location Agreement was not a consumer hire agreement can also be summarised:
a) Under s.15, a consumer hire agreement was a bailment by way of hire under which stipulated payments were made by the hirer to the owner. (“Stipulated payments” was a term used in the decision of Sir Andrew Morritt in Britax International v Commissioners of Inland Revenue ...
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