THE IMPACT OF 'DIMOND v LOVELL'The Court of Appeal's decision in Dimond v Lovell [1999] 3 WLR 561 concerned an agreement for the hire of a car.

Ms Dimond's car was damaged by Mr Lovell's negligence.

While it was being repaired, she hired a replacement from a company under an agreement whereby payment was postponed until damages were recovered from Mr Lovell.It was agreed between the parties that the agreement had not been properly executed for the purposes of the Consumer Credit Act 1974 (the Act).

Mr Lovell's insurance company contested the charges for the hire of a replacement car which had been sought on Ms Dimond's behalf.At first instance, the judge held that the agreement was not a regulated consumer hire agreement under the Act, but even if it was, and was enforceable, Ms Dimond could still recover as damages the cost of hiring a replacement vehicle.

Mr Lovell appealed.The Vice-Chancellor, Sir Richard Scott, found that the agreement was regulated by the Act, but was not properly executed and was therefore unenforceable.

He found that if payment for goods, services or land was deferred at a time when, if nothing about time of payment had been agreed, payment would be due, then credit was being advanced.The decision has obvious ramifications for the car hire industry.

However, it has also caused practitioners to be concerned about the status of conditional fee agreements.

After careful consideration of the decision, the view of the Law Society's conditional fees task force is that conditional fee agreements do not come within the ambit of the Act.This is because the liability for a solicitor's costs under a conditional fee agreement is not deferred, but instead does not crystallise until the end of the case when it is known whether the case is won or lost.

To treat a conditional fee agreement as a provision of credit would not only be artificial, it is a misunderstanding of the very nature of such an agreement.The society also maintains that cases covered by legal expenses, insurance or trade union litigation do not come within the Act.Dimond v Lovell i s set to be considered by the House of Lords.

The Court of Appeal has stayed all pending cases until the outcome is known.COSTS UPDATEPart 36.21 of the Civil Procedure Rules (CPR) provides that where a claimant does better than he proposed in his Part 36 offer, the court may order interest on the whole or part of the sum of money awarded to him, and also that he is entitled to costs on the indemnity basis and interest on those costs.While the interest on damages clearly belongs to the client, practitioners have raised the question of to whom the penalty interest on costs properly belongs.

There is no direct guidance about this issue in the CPR or in the relevant Practice Direction.The Law Society's remuneration working party has considered this issue.

Its view is that in the absence of any contractual arrangement to the contrary, the interest on costs properly belongs to the client.Indeed, the sample client care letters produced by the society to assist solicitors in complying with the society's practice rule 15 and the Solicitors' Costs Information and Client Care Code 1999, deal specifically with any interest on costs which is awarded to the client (see [1999] Gazette, 21 April).Letter 1, which is a general contentious letter to a privately paying client, provides in the second paragraph as follows, under the heading 'Other parties' charges and expenses':'If you are successful and a court orders the other party to pay some or all of your charges and expenses, interest can be claimed on them from the other party from the date of the court order.'We will account to you for such interest to the extent that you have paid our charges or expenses on account, but we are entitled to the rest of that interest.'Unless solicitors insert a similar provision in the retainer with the client, the interest on costs will properly belong to the client.