Wilson v First County Trust Ltd (No 2)

JurisdictionEngland & Wales
Judgment Date02 May 2001
Neutral Citation[2001] EWCA Civ 633
Docket NumberCase No: B2/1999/1073
CourtCourt of Appeal (Civil Division)
Date02 May 2001
Wilson
Appellant
and
The First County Trust Limited
Respondent

[2001] EWCA Civ 633

Before:

The Vice-chancellor

Lord Justice Chadwick and

lord Justice Rix

Case No: B2/1999/1073

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM KINGSTON UPON THAMES COUNTY COURT

(His Honour Judge Hull QC)

Mr Richard Salter QC and Mr Martin Young (instructed Pro Bono) for the Appellant

Mr Philip Havers QC and Mr William Hibbert (instructed by Messrs Park Nelson) for the Respondent

Mr Jonathan Crow (instructed by the Treasury Solicitor) for the Secretary of State as Intervenor

Miss Monica Carss-Fisk QC (instructed by the Treasury Solicitor) as Amicus Curiae

1

We handed down interim judgments in this appeal on 23 November 2000. We indicated, in those judgments [2001] QB 407, that we were considering whether to make a declaration, under section 4(2) of the Human Rights Act 1998, that a provision of primary legislation – section 127(3) of the Consumer Credit Act 1974 – was incompatible with a Convention right. In those circumstances we directed that notice should be given to the Crown under section 5 of the Act of 1998 and we adjourned the appeal for further hearing. This is the judgment of the Court following the further hearing of the appeal.

The application of the 1974 Act to the facts in this case

2

The appeal is from an order made on 24 September 1999 by His Honour Judge Hull QC, sitting in the Kingston upon Thames County Court at Epsom, in proceedings brought by Mrs Penelope Wilson against The First County Trust Limited, a pawnbroker. The underlying facts are set out in the earlier judgment of the Vice-Chancellor. It is unnecessary to rehearse them at any length. It is sufficient to recall that the principal issue was whether the inclusion of an amount (£250), described as a document fee, in the amount (£5,250) stated on the face of a loan agreement signed by Mrs Wilson on 22 January 1999 to be the amount of the loan had the effect that "the amount of the credit" was mis-stated. We held, reversing the judge, that the document fee – being an item which entered into the total charge for credit – could not, itself, be treated as credit. Accordingly, on a true analysis of the position, "the amount of credit" was £5,000, not £5,250.

3

It was common ground that the agreement of 22 January 1999 was a regulated agreement for the purposes of the Consumer Credit Act 1974. Section 61(1) of the Act sets out three conditions which must be satisfied if a regulated agreement is to be treated as properly executed. Condition (a) requires that a document in the prescribed form containing all the prescribed terms and conforming to regulations under section 60(1) is signed in the prescribed manner both by the debtor and by or on behalf of the creditor. In the present context "the prescribed terms" for the purposes of section 61(1)(a) of the Act include "a term stating the amount of the credit" – see paragraph 2 in schedule 6 to the Consumer Credit (Agreement) Regulations 1983 ( S.I. 1983/1553). It followed from the fact that the amount of the credit was mis-stated that the agreement of 22 January 1999 was not a properly executed regulated agreement.

4

Section 65(1) of the 1974 Act provides that an improperly executed regulated agreement is enforceable against the debtor on an order of the court only. Section 127 of the Act sets out the powers of the court upon an application for an enforcement order under (interalia) section 65(1). Section 127(1) provides that the court shall dismiss the application if, but only if, it considers it just to do so having regard to (i) prejudice caused to any person by the contravention in question and the degree of culpability for it, and (ii) the powers conferred on the court by section 127(2) and sections 135 and 136 of the Act. Section 127(2) empowers the court (if it appears just to do so) to reduce or discharge any sum payable by the debtor, so as to compensate him for prejudice suffered as a result of the contravention in question. Sections 135 and 136 confer further powers on the court in relation to the terms upon which enforcement orders may be made.

5

Section 127(1) of the 1974 Act is subject to the restrictions imposed by sections 127(3) and (4). Those subsections set out circumstances in which the court shall not make an enforcement order under section 65(1) of the Act. In particular, section 127(3) is in these terms:

"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 – or 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.

6

Further, at least prima facie, security taken for the loan will also be unenforceable in such a case. Section 113(1) of the Act provides (so far as material) that:

"Where a security is provided in relation to an actual or prospective regulated agreement, the security shall not be enforced so as to benefit the creditor … , directly or indirectly, to an extent greater (whether as respects the amount of any payment or the time or manner of its being made) than would be the case if the security were not provided and any obligations of the debtor … under … the agreement were carried out to the extent (if any) to which they would be enforced under this Act."

In a case where the agreement itself is not enforceable against the debtor – by reason of the provisions in sections 65(1) and 127(3) – the creditor could obtain no benefit if "the security were not provided". So, in such a case, notwithstanding that "security is provided", the security cannot be enforced so as to benefit the creditor. The point is reinforced by section 113(2):

"In accordance with subsection (1), where a regulated agreement is enforceable on an order of the court … only, any security provided in relation to the agreement is enforceable (so far as provided in relation to the agreement) where such an order has been made in relation to the agreement, but not otherwise."

In a case where no enforcement order can be made in relation to the regulated agreement, it must follow that security provided in relation to the agreement is not enforceable either.

7

We held that the present case fell within section 127(3) of the 1974 Act – because (in the absence of a term correctly stating the amount of the credit) the document signed by the debtor on 22 January 1999 did not include all the prescribed terms of the agreement. It followed (i) that the agreement was not enforceable against Mrs Wilson and (ii), at least primafacie, that First County Trust could not rely on the security which she had provided by way of pledge over her BMW car.

The Convention rights

8

Article 6(1) of the Convention for the Protection of Human Rights and Fundamental Freedoms agreed by the Council of Europe at Rome on 4 November 1950 as it has effect for the time being in relation to the United Kingdom ("the Convention") provides, so far as material, that:

"In the determination of his civil rights and obligations … , everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law… ."

Article 1 of the First Protocol to the Convention, agreed at Paris on 20 March 1952, provides that:

"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law . .

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest …"

9

We pointed out, in the judgments which we handed down on 23 November 2000, that the effect of sections 65(1) and 127(3) of the 1974 Act – in a case to which the latter section applies – is to deprive the court of any power to enforce a regulated agreement from which a prescribed term has been omitted; notwithstanding that no prejudice has been caused to anyone by that omission. We queried whether that was a proportionate response, having regard to the creditor's Convention rights. The point was identified by the Vice-Chancellor, at paragraph 27 of his earlier judgment:

"It appears to me that it may be arguable that s.127(3) infringes Article 6(1) and/or Article 1 of the First Protocol set out in Schedule 1 to the Human Rights Act 1998. In the case of Article 6(1) it is arguable that the absolute bar to enforcement in the case of an agreement which does not contain the prescribed terms is a disproportionate restriction on the right of the lender, which exists in all other cases, to have the enforceability of his loan determined by the court. Cf Osman v United Kingdom (1998) 5 BHRC 293. The position is similar in the case of Article 1 of the First Protocol. The money advanced by FCT to Mrs Wilson was in its possession. It lent that money to Mrs Wilson on terms, as it thought, that it should be repaid in six months time. It has been deprived of that possession as provided for by law in the form of s.127(3). But does that law strike a fair...

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