INTRODUCTION

There is often a difficult question where consumers under hire purchase or conditional sale agreements continue to use a vehicle after rejecting it. On 31 January 2024, the Court of Session allowed the consumer’s appeal in King v Black Horse Limited & Another [2024] CSIH 3 and decided it is possible for a consumer to continue to use the vehicle after rejecting it.

THE FACTS

The facts are pretty common. Alan King (the consumer) entered into a hire purchase agreement regulated by the Consumer Credit Act 1974 (the agreement) with Black Horse Limited (the lender) for a motor vehicle (the vehicle). The lender bought the vehicle from a dealer, Park’s Ayr Limited.

The consumer had issues with the vehicle’s diesel particulate filter. The agreement was subject to the Consumer Rights Act 2015 (the CRA). The consumer purported to reject the vehicle claiming it was not of satisfactory quality when supplied (in breach of Section 9(1)). The consumer purported to exercise his final right to reject (rather than a short-term right to reject).

THE EARLIER DECISIONS

In the lower courts, the Court decided that the consumer could not continue to use the vehicle after he had rejected it. The Court said the principle in Ransan v Mitchell (1845) 7 D 813 continued to apply after the CRA’s introduction. The consumer appealed.

THE APPEAL COURT’S DECISION

The Court decided (whilst leaving the door open to ‘personal bar’ arguments) that:

• The proper approach to interpreting the CRA was to look at the words of the statute. The aim of the EU Consumer Rights Directive (the CRD) was “enhanced consumer protection”. It was possible to introduce greater levels of protection, and the UK decided to do so.
• The scheme of the CRA “differs in substantial ways from the protection previously offered to consumers”. For example, once the consumer rejects a vehicle then they are entitled to treat the contract as at an end even if the trader refuses to accept the rejection.
• But after rejecting a vehicle, the “consumer is under an obligation to make the goods available for collection”. The continued use “is not incompatible with that obligation”.
• The refund must be paid “without unreasonable delay and in any event within 14 days of the trader agreeing that the customer is entitled to a refund” and this “surely indicates that there must be anticipated a period of post-rejection use”.
• The fact that there is no mention of immediately stopping using the vehicle following rejection in Section 24(5) of the CRA indicates it is not a requirement.
• The trader may make a deduction for the use of the vehicle “in the period since they were delivered” under Section 24(8) of the CRA. This suggests the deduction is from the period of delivery to refund (not to rejection).
• If a vehicle’s use after rejection meant they lost their right to a refund, “there would be no need to qualify the trader’s right to reduce a refund” as the consumer would not be due any refund at all (and so Section 24(9) would be irrelevant).

The Court therefore allowed the appeal. The fact that the consumer had continued to use the vehicle after rejecting it did not automatically mean the customer had not rejected it.

WHAT DOES THIS MEAN FOR MOTOR FINANCE LENDERS?

There has been much noise about this decision and its impact. Consumer groups claim it is a significant win. But, in our view, all the decision says is that there is no absolute ban of any post-rejection use of a vehicle following its rejection. Such a decision is not surprising where the customer is exercising their final right to reject: the CRA expressly allows a lender to make a deduction for the vehicle’s use and this can clearly include post-rejection use. The County Court in England came to the same conclusion in Gordon v Volkswagen Financial Services (UK) Limited t/a Audi Finance [2019] GCCR 17099 where the customer’s continued use following rejection was ‘inconclusive’.

But this decision does not mean that consumers can use a vehicle after purporting to reject it without any consequence. For example, it is still possible to argue (in Scotland) the concept of personal bar (which the appeal court said it had not considered) or (in England and Wales) a consumer has affirmed the breach where they communicate that affirmation in clear and unequivocal terms to the lender. It will therefore be necessary to consider the facts of each case to decide whether the consumer has lost their right to reject.

FOR MORE INFORMATION

Walker Morris LLP have a dedicated and specialist consumer and motor finance team acting for a significant number of lenders across different sectors of the market.