Wilson v First County Trust Ltd (No 2)

In January 1999 Penelope Wilson borrowed £5,000 from a pawnbroker for a period of six months. The pawned property was her car, a BMW 318 Convertible. She did not repay the loan. The pawnbroker sought repayment, failing which the car would be sold. Mrs Wilson's response was to commence proceedings in the Kingston upon Thames County Court. She claimed the agreement was unenforceable because it did not contain all the prescribed terms. She sought on order for the return of her car. Alternatively she sought to reopen the agreement as grossly exorbitant. At the trial Mrs Wilson appeared in person. The pawnbroker was a two-man company, First County Trust Ltd. The company was represented in court by its finance director.

From these modest beginnings the County Court proceedings burgeoned into a case with wide-ranging implications. Neither Mrs Wilson nor First County Trust appeared before the House. But the Attorney General appeared on behalf of the Secretary of State for Trade and Industry. The Speaker of the House of Commons and the Clerk of the Parliaments intervened. They were represented by leading and junior counsel. The Finance and Leasing Association also intervened, as did four insurance companies which are among the largest providers of motor insurance in this country. And leading and junior counsel also appeared as amicus curi'.

The £250 fee: was it 'credit'?

When Mrs Wilson signed her agreement and pawn receipt she was charged a 'document fee' of £250. This was added to the amount of her loan. In the agreement the amount of the loan was stated as £5,250. The amount payable on redemption was £7,327, made up of £5,250 and interest of £1,827. The annual percentage rate of interest was stated to be 94.78%.

The agreement was a regulated agreement for the purposes of section 8 of the Consumer Credit Act 1974. A regulated agreement is not properly executed unless the document signed contains all the prescribed terms: section 61(1)(a). One of the prescribed terms is the 'amount of the credit': see the Consumer Credit (Agreements) Regulations 1983 ( SI 1983/1553), regulation 6 and Schedule 6, para 2. The consequence of failure to state all the prescribed terms of the agreement is that the court is precluded, by section 127(3), from enforcing the agreement. In the absence of enforcement by the court the agreement is altogether unenforceable: section 65(1).

On 24 September 1999 His Honour Judge Hull QC, in a carefully reasoned judgment, held that the fee of £250 was part of the amount of the credit. So the agreement was enforceable. He reopened the agreement as an extortionate credit bargain and reduced the amount of interest payable by one half. Mrs Wilson appealed to the Court of Appeal. Pending the hearing of her appeal she paid First County Trust £6,900 to redeem her car. That was in December 1999.

The appeal was heard in November 2000, shortly after the Human Rights Act 1998 came into force. The Court of Appeal, comprising Sir Andrew Morritt V-C, and Chadwick and Rix LJJ, allowed Mrs Wilson's appeal: see [2001] QB 407. Sir Andrew Morritt V-C recognised there was considerable force in First County Trust's submissions in support of the judge's view. But having analysed the statutory provisions, the court held that the £250 added to the loan to enable Mrs Wilson to pay the document fee was not 'credit' for the purposes of the Consumer Credit Act. So one of the prescribed terms was not correctly stated. In consequence the agreement was unenforceable. So also was the security. First County Trust was ordered to repay the amount of £6,900 Mrs Wilson had paid the company after Judge Hull's judgment together with interest amounting to £662. The overall result was that Mrs Wilson was entitled to keep the amount of her loan, pay no interest and recover her car.

The adjourned hearing

Sir Andrew Morritt V-C expressed concern at this outcome. He considered it might be arguable that section 127(3) of the Consumer Credit Act infringes article 6(1) of the European Convention on Human Rights and article 1 of the First Protocol to the Convention. The court adjourned the further hearing of the appeal for notice to be given to the Crown, pursuant to section 5 of the Human Rights Act, that the court was considering whether to make a declaration of incompatibility. The Secretary of State for Trade and Industry was then added as a party to the proceedings.

On 2 May 2001 the court gave judgment at the adjourned hearing: see [2001] EWCA Civ 633, [2002] QB 74. The court held that the inflexible exclusion of a judicial remedy by section 127(3), preventing the court from doing what is just in the circumstances of the case, is disproportionate to the legitimate policy objective of ensuring that particular attention is paid to the inclusion of certain terms in the document signed by the borrower. It is not possible to read and give effect to section 113 or section 127(3) in a way compatible with First County Trust's Convention rights. The court made a declaration, pursuant to section 4 of the Human Rights Act, that section 127(3), in so far as it prevents the court from making an enforcement order under section 65 of the Consumer Credit Act unless a document containing all the prescribed terms of the agreement has been signed by the debtor, is incompatible with the rights guaranteed to the creditor by article 6(1) of the Convention and article 1 of the First Protocol to the Convention.

The Secretary of State appealed to your Lordships' House. First County Trust did not. The Secretary of State accepted that Mrs Wilson's agreement was not 'properly executed' within the meaning of section 61 of the Consumer Credit Act. She accepted that, in consequence, no enforcement order could be made under section 65 and that the security over the car was unenforceable. The Secretary of State also accepted it is not possible to 'read down' the relevant provisions of the Consumer Credit Act and thereby save them from any Convention rights incompatibility otherwise existing. But she challenged the decision of the Court of Appeal on several grounds. Her primary submission was that the court has no jurisdiction to make a declaration of incompatibility in relation to events occurring before the Human Rights Act came fully into force on 2 October 2000. Here, the agreement was made in January 1999 for a period of six months. Additionally, the parties' rights were determined before the Human Rights Act came into force. The County Court decision was in September 1999.

Retrospectivity and section 4 of the Human Rights Act

As everyone knows, the purpose of the Human Rights Act 1998 was to make the human rights and fundamental freedoms set out in the European Convention on Human Rights directly enforceable in this country as part of its domestic law. The question raised by the Secretary of State's submission is how the Act was intended to operate regarding events occurring before the Act came into force, that is to say, events taking place at a time when these human rights were not as such part of the domestic law of this country.

Section 1 of the Act defines 'Convention rights' and states how the relevant articles of the Convention and its Protocols are to have effect for the purposes of the Act.Section 2 provides that when determining a question arising in connection with a Convention right courts must take into account, among other matters, decisions of the European Court of Human Rights and the European Commission of Human Rights. I can put these two introductory sections on one side. Contrary to the submissions of the Secretary of State, I do not think they assist either way on the point now under consideration. They are neutral.

The Act prescribes two principal means whereby it 'brings human rights home' from Strasbourg: first, by making provision for the interpretation and amendment of legislation and, secondly, by making it unlawful for a public authority to act in a way incompatible with a Convention right.Sections 3 to 5 and 10 are concerned with the former of these objectives, sections 6 to 9 with the latter. I shall consider the latter group of sections first.Sections 6 to 9 are forward looking in their reach.Section 6(1) provides that it 'is unlawful for a public authority to act in a way which is incompatible with a Convention right'. On a natural reading this provision is directed at post-Act conduct. The context powerfully supports this interpretation. One would not expect a statute promoting human rights values to render unlawful acts which were lawful when done. That would be to impose liability where none existed at the time the act was done.Sections 7 to 9 are concerned with conduct outlawed by section 6(1). They prescribe remedial consequences which ensue when a public authority has acted, or proposes to act, in a way 'which is made unlawful by section 6(1)': section 7(1). It follows therefore that, like section 6(1), sections 7 to 9 are concerned with post-Act events.

Section 22(4) is an exception to this scheme. It is a curious provision. Commentators and judges have spilled much ink in discussing it. Its effect is that in response to proceedings brought by a public authority a victim of an unlawful act may rely on a Convention right 'whenever the act in question took place'. So this provision enables a victim to assert and rely on a Convention right in respect of conduct which was not unlawful when it took place. In...