Consumer credit - loan agreement's failure correctly to state amount of credit giving rise to statutory bar on lender enforcing agreement - statutory bar not incompatible with defendant's convention rights

Wilson v First County Trust (No 2): HL (Lord Nicholls of Birkenhead, Lord Hope of Craighead, Lord Hobhouse of Woodborough, Lord Scott of Foscote and Lord Rodger of Earlsferry): 10 July 2003

In 1999, the claimant borrowed 5,000 from the defendant against the security of her motor car.

When the claimant signed her agreement she was charged a 'document fee' of 250 which was added to the amount of the loan so that the agreement stated the loan as 5,250.

The agreement was a regulated agreement under section 8 of the Consumer Credit Act 1974.

The claimant refused to repay the loan on the ground that the agreement was unenforceable because it did not contain all the prescribed terms, in that the 'amount of the credit' was wrongly stated.

The county court judge held that the fee of 250 was part of the amount of the credit so the agreement was enforceable.

The Court of Appeal [2001] QB 407, reversed that decision and, by virtue of section 127(3) of the 1974 Act, the agreement was unenforceable.

Consequently, the claimant was entitled to keep the amount of the loan, pay no interest and recover her car.

Following a further hearing, the Court of Appeal [2001] EWCA Civ 633; [2002] QB 74, made a declaration, pursuant to section 4 of the Human Rights Act 1998, that the exclusion of a judicial remedy by section 127(3) of the 1974 Act, was an infringement of the defendant's rights under article 6 of the European Convention on Human Rights and article 1 of the first protocol to the convention.

The Secretary of State for Trade and Industry appealed.

Lord Goldsmith QC, Attorney-General, and Jonathan Crow (instructed by the Treasury Solicitor) for the secretary of state; Jonathan Sumption QC and Mark Hoskins (instructed by the Treasury Solicitor) for the Speaker of the House of Commons and the Clerk of the Parliaments as interveners; Richard Gordon QC and Jonathan Hough (instructed by Sharpe Pritchard) for four motor insurance companies as interveners; William Hibbert and Robert Weir (instructed by Gregory Rowcliffe Milners) for the Finance and Leasing Association as interveners; Monica Carrs-Frisk QC and Jane Mulcahy (instructed by the Treasury Solicitor) as amici curiae; the claimant and the defendant did not appear and were not represented.

Held, allowing the appeal, that jurisdiction to make a declaration of incompatibility under section 4 of the 1998 Act did not arise unless the court had first construed the legislation in accordance with section 3(1) and concluded that it was not possible to give effect to it compatibly with convention rights; that it could not have been Parliament's intention that the application of section 3(1) should alter the existing rights and obligations of the parties to an agreement made before it came into force in October 2000; that if section 127(3) of the 1974 Act were construed favourably to the defendant it would deprive the claimant of the protection she had acquired when entering into the agreement in 1999; that, therefore, for the purposes of identifying the parties' rights and obligations under the agreement, the 1974 Act was to be construed without reference to section 3(1), and so the court's powers under section 4 did not arise and it had no jurisdiction to make the declaration of incompatibility; but that, in any event, section 127(3) of the 1974 Act was not incompatible with convention rights since it did not bar access to the court to determine whether the agreement was enforceable, and so there was no breach of article 6; that, since money lending transactions as a class gave rise to significant social problems, and since bargaining power lay with the lender, Parliament was entitled to decide that the appropriate way of protecting the borrower was to deprive the lender of all rights under the agreement, including the rights to any security, unless the statutory requirements had been strictly complied with; that that was a proportionate means of achieving the legitimate aim of consumer protection and, therefore, there was no breach of article 1 of the first protocol; that when deciding issues on the compatibility of legislation with convention rights, the court was entitled to have regard to relevant background material, including ministerial statements when the Bill was proceeding through Parliament, but parliamentary debates were not a proper matter for investigation or consideration; that the court should also be careful not to treat ministerial statements as indicative of the objective intention of Parliament, and legislation was to be judged on the basis that the will of Parliament was expressed in the language of the enactment.

(WLR)