McGinn v Grangewood Securities Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Clarke,Lady Justice Hale,Lord Justice Kennedy |
| Judgment Date | 23 April 2002 |
| Neutral Citation | [2002] EWCA Civ 522 |
| Docket Number | Case Nos: B2/2001/1077 & 1078 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 April 2002 |
[2002] EWCA Civ 522
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NORWICH COUNTY COURT
His Honour Judge Langan QC
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Kennedy
Lord Justice Clarke and
Lady Justice Hale
Case Nos: B2/2001/1077 & 1078
Tristram Hodgkinson (instructed by Fosters) for the Appellant
Peter Wulwik (instructed by Blatchfords) for the Respondent
Introduction
These appeals raise a number of issues under the Consumer Credit Act 1974 ("the Act") which has recently provided so much work for the courts. Like others, this case demonstrates the unsatisfactory state of the law at present. Simplification of a part of the law which is intended to protect consumers is surely long overdue so as to make it comprehensible to layman and lawyer alike. At present it is certainly not comprehensible to the former and is scarcely comprehensible to the latter.
However that may be, this judgment is concerned with appeals or proposed appeals by Mrs Valerie McGinn ("the debtor") from parts of two orders of His Honour Judge Langan QC dated as long ago as 6 th October and 20 th November 2000. The orders were in part made on interlocutory applications and in part made by way of determination of preliminary issues. They were made in two actions. In the first action ("the 1991 action") Grangewood Securities Limited ("the lender") is the claimant and the debtor is the defendant and in the second action ("the 1997 action") the debtor is the claimant and the lender is the defendant. The actions arise out of a credit agreement and second charge dated 2 nd May 1990. The loan which is the subject of the credit agreement is secured on the debtor's home, namely 174 Cadge Road in Norwich.
In the 1991 action the lender procured a suspended possession order dated 28 th August 1991 on the ground that the debtor was in arrears with her monthly repayments under the agreement. The possession order has not been enforced and the debtor remains in her home. In order to resolve the issues in this appeal it is not necessary to set out the complex history of the two actions, which is set out by the judge in detail in his judgment. In doing so the judge said this:
"This history is at the same time a salutary illustration of how, without some sense of proportion on all sides, litigation under [the Act] can be diverted from what should be the main road down numerous by-ways, if not into cul-de-sacs."
For my part, I entirely agree and was horrified to hear that the first hearing before the judge took eight days and that the second took over one and a half days.
In short, the debtor challenged the enforceability of the credit agreement and the charge under the Act. The judge decided to determine the question whether the agreement and charge were enforceable as a preliminary issue. He decided that preliminary issue in favour of the lender and, by his order of 6 th October 2000, declared that the credit agreement and charge were not improperly executed for the purpose of the Act. He granted the debtor limited permission to appeal on three points which relate to building society arrears, legal costs and broker's fee respectively. The judge made a number of further orders both on 6 th October and on 20 th November 2000 and subsequently refused the debtor's application for permission to appeal against some of them.
In substance the position after the various orders made by the judge is that the possession order made in the 1991 action has been set aside as a matter of discretion in order to enable the debtor to argue that the credit bargain should be re-opened under the Act. In the result all outstanding questions are to be decided in the 1997 action. In essence, the remaining questions for decision arise under sections 137 to 140 of the Act, which give the court certain powers in the case of an extortionate credit bargain. The debtor submits that this bargain should be re-opened as an extortionate credit bargain.
We are not, however, concerned with that question, but only with appeals from and applications for permission to appeal from the two orders made by the judge on 6 th October and 20 th November 2000. On 30 th March 2001 Blofeld J transferred both the appeals and any renewed applications for permission to appeal to this court. It was subsequently directed by Tuckey LJ that the applications for permission to appeal be heard at the same time as the appeals with the appeals to follow if permission was granted. We have accordingly heard argument, so far as appropriate, on the issues raised by both the appeals and the various applications for permission to appeal.
It seems to me that the sensible course is to consider first the three points upon which permission to appeal has been granted and to turn to the applications for permission to appeal only so far as necessary thereafter. I shall therefore adopt that course. In order to do so it is necessary to say a word first about the statutory framework, and then to identify the issues and to set out the relevant facts before considering the three issues upon which permission to appeal was given in turn. They each relate to the enforceability of the credit agreement and charge under the Act.
The Statutory Framework
The Act was introduced in order to assist consumers who wish to borrow money. It is unduly complicated and has given rise to a number of decisions of this court in recent times, some of which have been made since the decision of the judge in this case. They include Wilson v First County Trust Ltd [2001] QB 407 (which I shall call " Wilson (No1)"), Wilson v First County Trust (No 2) [2001] EWCA Civ 633, [2001] 3 WLR 42 and Watchtower Investments Ltd v Payne [2001] EWCA Civ 1159, [2001] 35 LS Gaz 32. Both Wilson (No 1) and Watchtower were concerned with whether the credit agreement was unenforceable on the ground that it failed correctly to state the amount of the credit. The relevant principles were discussed in both cases. In Wilson (No 1) it was held by this court that the agreement was unenforceable, whereas in Watchtower it was held that the agreement was enforceable. The Watchtower case is perhaps of more direct relevance in this appeal because it raised a similar point to the building society arrears point taken here.
Several of the cases expressly recognise that since the Act was designed for the protection of the consumer, it should be construed with that consideration in mind: see eg Huntpast Ltd v Leadbetter [1993] CCLR 15, per Sir Christopher Slade at page 29, Wilson (No 1) per Sir Andrew Morritt VC at paragraph 18 and, more recently, Broadwick Financial Services Ltd v Spencer [2002] EWCA Civ 35, per Dyson LJ, giving the judgment of the court, at paragraph 21.
In the Watchtower case Peter Gibson LJ set out the relevant statutory provisions in paragraphs 15 to 29. I also tried to summarise the position in paragraph 60. Given that the relevant provisions have been extensively reviewed in that case, and indeed in Wilson (No 1), it does not seem sensible to set them out again in such detail here. It is I think sufficient to summarise their effect, much as was done by Sir Andrew Morritt VC, giving the judgment of the court in Wilson (No 2) at paragraph 4.
Section 65(1) of the Act provides that an improperly executed regulated agreement is enforceable against the debtor only by an order of the court. Section 127 sets out the powers of the court on an application for an enforcement order inter alia under section 65(1). Section 127(1) provides, subject to subsection (3), that the court shall dismiss the application if, but only if, it considers it just to do so having regard to prejudice caused to any person by the contravention in question, to the degree of culpability for it and to the powers under section 135 to impose conditions or suspend the operation of the order and under section 136 to vary the agreement and security. Section 127(2) gives the court power, if it appears just to do so, to reduce or discharge any sum payable by the debtor, so as to compensate him for any prejudice suffered as a result of the compensation in question.
For present purposes the crucial provision is section 127(3), to which section 127(1) is expressly made subject. It provides:
"The court shall not make an enforcement order under section 65(1) if section 61(1)(a) (signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under section 60(1)) itself containing all the prescribed terms of the agreement was signed by the debtor or hirer (whether or not in the prescribed manner)."
It follows that in a case where there is no document signed by the debtor which contains all the prescribed terms of the agreement the court has no power to make an enforcement order. In such a case the effect of sections 65(1) and 127(3) of the Act is that the agreement is not enforceable against the debtor. Nor is any security taken for the loan: see section 113 and Wilson (No 2) at paragraph 6. I did not understand Mr Wulwik to submit on behalf of the lender that, if the agreement was unenforceable under section 127(3), the same was not true of the charge.
It is common ground that the credit agreement is a regulated agreement under section 8 of the Act. It is an agreement by which the lender provided the debtor with credit not exceeding £15,000 within the meaning of section 8(2) and it is not an exempt agreement specified in or under section 16. Since the date of this agreement...
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