Ayr man who continued to drive rejected hire purchase car not entitled to rely on rescission of contract

About this case:

• Citation:
  [2023] SAC (Civ) 4
• Judgment:
  External link
• Court:
  Sheriff Appeal Court
• Judge:
  Sheriff Principal Derek Pyle

Appellant Alan King argued that the use of the vehicle post-rejection did not as a matter of law prevent him from relying upon a purported rescission of the contract. The sheriff at first instance took the opposite view and granted decree of absolvitor in favour of Black Horse Ltd (trading as Jaguar Financial Services).

The appeal was heard by Sheriffs Principal Craig Turnbull and Derek Pyle, along with Appeal Sheriff Gillian Wade. Haddow, advocate, appeared for the appellant and Adams, advocate, for the respondent.

Tactical choice

In June 2019, the parties entered into a hire purchase agreement for a Jaguar supplied by a third party, Park’s (Ayr) Ltd. The appellant later emailed the respondent in October 2020 rejecting the vehicle under reference to section 9 of the Consumer Rights Act 2015, alleging that it was defective. However, he continued to make the contractual monthly payments and had the vehicle taxed and insured from the date of rejection to 3 November 2021, adding another 6,231 miles to its mileage.

The appellant’s position was that it was a tactical choice on the part of the respondent not to recover the vehicle after rejection. If post-rejection use extinguished the consumer’s ability to enforce their rights, it created a considerable burden on them in the form of storage costs and additional costs to meet transport needs. Further, cancellation of the direct debit payments may result in a notice of default that would affect their credit rating. Comparatively, there was no risk of damage for the trader as he had maintained an insurance policy and any additional mileage was merely a litigation risk that only crystallised if the trader lost the action.

Counsel for the appellant further submitted that the 2015 Act created a new short-term right to reject which could not be waived in a manner adverse to the consumer which was distinct from the concept of personal bar. In any case, personal bar could not apply in this case as the appellant had raised proceedings within weeks of the rejection and thus the respondent could not credibly claim to have reasonably believed that he would not enforce his right to rejection.

For the respondent, it was submitted that the continued use of the vehicle was an obvious and continuing prejudice to it given the risk of damage or destruction on the road. Rejection had the same effect under the 2015 Act as it did at common law, i.e. rescission of the contract. There was a presumption of statutory interpretation against the common law being changed by statute unless the enactment used clear and unambiguous language, and this was not present with the 2015 Act.

Neutral on post-rejection

Delivering the opinion of the court, Sheriff Principal Pyle began by considering pre-1893 authorities on the rule not to use goods after rejection, saying: “They do contain a tension between the principle that rescission of a contract brings the contract to an end (albeit still with legal consequences flowing from it) as against intimation of rejection followed by adoption due to actings inconsistent with the rejection. Be that as it may, the point is that the rule is clear: use of goods after rejection is prohibited. The authorities do not treat it as an aspect of the law of personal bar - or personal exception, as Professor Bell describes it, although the effect is similar.”

He continued: “It is clear from the authorities that the rule that defective goods should not be used after rejection is not governed by the general principles of the concept of personal bar. It is, we accept, in its effect a bar on the exercise of the remedies which flow from a valid rejection, but that is, as is clear from Bell’s Principles, no more than the use of the word ‘bar’ to describe the practical consequences of such conduct. Indeed, it is instructive that Professor Bell does not discuss the rule at all in the context of personal bar.”

Assessing whether this position was changed by the 2015 Act, Sheriff Principal Pyle said: “At best, it is neutral on use post-rejection. Section 24(9) deals with the specific circumstance where the trader has agreed to collect the goods, but fails to do so. That is quite separate from use post-rejection where the rejection itself is in dispute. We regard the points made by counsel for the appellant about extraneous matters such as credit scoring, the risks within litigation and so on as irrelevant.”

He concluded: “In practice, hire purchase is a device which gives the hirer possession and the use of the goods over a period during which the seller retains title to the goods as security for the unpaid price. It is not a contract of sale until the hirer exercises the option to purchase the goods. Nevertheless, there is nothing inherent within a hire purchase contract, particularly given its adoption into the statutory regime for the sale of goods and, further, for consumer contracts, for the obligations post-rejection to exclude the rule of non-use post-rejection.”

The court therefore held that the sheriff was correct to grant summary decree, and the appeal was refused.