Office of Fair Trading v Lloyds TSB Bank Plc
| Jurisdiction | UK Non-devolved |
| Judge | LORD HOFFMANN,LORD BROWN OF EATON-UNDER-HEYWOOD,LORD MANCE,LORD WALKER OF GESTINGTHORPE,LORD HOPE OF CRAIGHEAD |
| Judgment Date | 31 October 2007 |
| Neutral Citation | [2007] UKHL 48 |
| Court | House of Lords |
| Date | 31 October 2007 |
and others
and others
[2007] UKHL 48
Appellate Committee
Lord Hoffmann
Lord Hope of Craighead
Lord Walker of Gestingthorpe
Lord Brown of Eaton-under-Heywood
Lord Mance
HOUSE OF LORDS
Appellants:
Lloyds TSB:
Mark Hapgood QC
Sonia Tolaney
(Instructed by Lovells LLP)
Tesco:
Mark Hapgood QC
Sonia Tolaney
(Instructed by SJ Berwin LLP)
Respondents:
Office of Fair Trading:
Jonathan Sumption QC
William Hibbert
(Instructed by Office of Fair Trading)
American Express:
Mark Howard QC
Iain MacDonald
(Instructed by CMS Cameron McKenna LLP)
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Mance, with which I agree. I gratefully adopt his statement of the background and the issues in this appeal.
Section 75(1) of the Consumer Credit Act 1974 makes a creditor under a debtor-creditor-supplier agreement jointly and severally liable with the supplier in respect of any misrepresentation or breach of contract by the latter in relation to a "transaction financed by the agreement". The question is whether a "transaction" within the meaning of the Act includes a transaction which takes place and is performed abroad and is governed by a foreign law.
There is nothing in the language of section 75(1) to exclude foreign transactions. But the appellant credit card issuers, who are "creditors" for the purposes of section 75(1), submit that, for two main reasons, such a limitation should be implied.
The first is the presumption that legislation was not intended to have extra-territorial effect: see Ex P Blain, In re Sawers (1879) 12 Ch D 522. But extra-territorial effect means seeking to regulate the conduct or affect the liabilities of people over whom the United Kingdom has no jurisdiction. In this case, the Office of Fair Trading accepts that section 75(1) applies only to agreements with a creditor carrying on business in the United Kingdom. The effect of the section is equivalent to the statutory implication of a term in the contract between a United Kingdom creditor and the debtor by which the former accepts joint and several liability with the supplier. If the supplier is a foreigner, the Act does not purport to regulate his conduct or impose liabilities upon him. It is only the United Kingdom creditor who is affected. To construe it as applying to such cases does not therefore conflict with the presumption against extra-territoriality.
The second reason is based upon section 75(2), which provides that, subject to contrary agreement, the creditor is entitled to be indemnified by the supplier against loss suffered by reason of claims against him under section 75(1), and also upon section 75(5), which says that a creditor sued under section 75(1) is entitled, in accordance with rules of court, to have the supplier made a party to the proceedings.
For the reasons already stated, section 75(2) and (5) would not be construed as applying to foreign suppliers. Parliament would be presumed not to have intended to impose a statutory liability upon foreigners. Of course the creditor, in his agreement with the supplier (if there is one) may have expressly contracted for a right of indemnity or he may have one under the foreign law. But he cannot invoke the statutory remedy under section 75(2).
The appellants submit that section 75(1) should be construed as limited to cases in which the supplier would have a right of indemnity under section 75(2). The two subsections should be treated as indissolubly linked. It seems to me, however, that if Parliament had wanted to limit the application of section 75(1) by reference to the enforceability of section 75(2), it would have said so. It is not obvious why there should be such a link. Section 75(1) is consumer protection legislation for the benefit of the customers of United Kingdom creditors. It cannot be excluded by agreement between debtor and creditor. Section 75(2) is a default provision to regulate relations between creditor and supplier. It applies only in the absence of contrary agreement and can be supplemented by the terms of the contract or (if foreign) the governing law. If card issuers choose to authorise the use of their cards by foreign suppliers or join four-party schemes under which their cards may be so used, they can be expected either to make their own arrangements about indemnity against liability under section 75(1) or accept that the commercial advantages of allowing foreign use outweighs the absence of a right of indemnity.
Section 75(2) is therefore an inadequate basis for implying a limitation in the scope of section 75(1). The appellants also relied upon provisions in the Act about cancellation which they said were incapable of application to transactions with foreign suppliers. Perhaps in some cases they are, but if section 75(2) cannot bear the weight of the appellants' argument for an implied limitation in section 75(1), the other provisions are still less able to do so. I would therefore dismiss the appeal.
My Lords,
I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Hoffmann and Lord Mance. I agree with them, and for the reasons they give I would dismiss the appeal.
Not all consumers may be aware of the right of recourse against the card issuer that section 75(1) of the Consumer Credit Act 1974 affords should the supplier breach his obligations under the supply contract. But there is no doubt that some are, and that claims are now being made in relation to foreign transactions as well as those entered into domestically. One such claim is pending in the Sheriff Court at Kirkcaldy: David Boyack v The Royal Bank of Scotland. Your Lordships were told that the claim in that case relates to a clock purchased in Dubai arising out of, it is said, misrepresentations that were made orally by the supplier. The case was sisted on 15 August 2007 to await the outcome of this appeal. The question whether the right of recourse extends to foreign transactions is therefore of considerable importance to consumers, as it plainly is too for the Banks and other card issuers.
Section 75(1) of the Act is concerned with the relationship between the debtor and the creditor. As there is no indication to the contrary, the ordinary territorial limitation applies. It states what the law is in regard to transactions which have a sufficient nexus with the United Kingdom for them to be subject to its laws. For practical purposes this can be taken to be so where the card issuer carries on business in any part of the United Kingdom, bearing in mind that the Act extends to Northern Ireland: section 193(2). The same territorial limitation applies to section 75(2). As Mr Hapgood QC for the Banks pointed out, the right of indemnity under that subsection would not found an action in Dubai against the seller of the clock to Mr Boyack, in the absence of any indication that the law of any part of the United Kingdom was to apply their transaction. The seller is not subject to the jurisdiction of the Scottish courts, so he is under no incentive to enter an appearance in the action to answer the allegations that are made against him in Scotland. If Mr Boyack succeeds in his claim against the bank, the bank will have to go to Dubai to obtain redress against a supplier with whom - as this was a four-party transaction of the kind described by Lord Mance in para 24 – it has no contract. That, in essence, is the complaint that the Banks make about extending the right of recourse to foreign transactions. The absence of an effective means of redress in the case of four-party transactions, over which they have no direct control, lies at the heart of the argument.
The answer to the question whether the right of recourse under section 75(1) does extend to foreign transactions is to be found in the words of the statute, not in any presumption either way as to its application extraterritorially. As one looks for the answer, the most striking feature is the absence of any indication in the subsection that it was the intention that it should not to apply to them: see Lord Wilberforce's response to the question whether the statute that he was considering in Clark v Oceanic Contractors Inc [1983] 2 AC 130 could not have been intended by the legislature to apply to companies if they were non-resident, at p 152: "Why not?". The words "in relation to a transaction financed by the agreement", read with the definitions in sections 11(1)(b) and 12(b) of the Act, are unqualified. They are to be understood as extending to whatever was in contemplation when the agreement between the debtor and the creditor was entered into. In 1974 the use of credit cards issued by United Kingdom providers for foreign transactions was limited to Barclaycard: Report of the Crowther Committee on Consumer Credit (1971) (Cmnd 4596), para 3.9. But I do not think that it can be said that Parliament did not envisage the possibility of transactions being entered into abroad, linked to the relationship between the issuer of the card and the cardholder, of the kind that is now commonplace. Almost invariably - leaving aside American Express and Diners Club, who make their own arrangements-they are entered into today as part of a four-party transaction. But there is nothing in the language of section 75(1) to indicate that transactions of that kind are excluded from the right of recourse. Nor are transactions of that kind included among the transactions listed in section 75(3) to which section 75(1), expressly, does not apply.
The simple and unqualified statement of the right that is expressed in section 75(1) is consistent with the...
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