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Wilson and others v Secretary of State for Trade and Industry [2003] UKHL 40

David Manknell
Rosalind English



In January 1999, Mrs. Wilson entered into a regulated consumer credit agreement with a pawnbroker, First County Trust against the security of her car. First County Trust advanced £5000 in cash to Mrs. Wilson, but documented an advance of £5250 and an up front fee of £250. Mr. Wilson defaulted on the loan and First County Trust sought to exercise their right to sell the car, but claimed that the agreement was unenforceable. The case reached the Court of Appeal which held that the credit agreement was unenforceable by virtue of s.127(3) of the Consumer Credit Act 1974 because it did not contain the 'prescribed term' of the amount of the credit . First County Trust should have documented a loan of £5000 and not £5250, hence the documented APR was also wrong. The consequence was that, because of the operation of s.127(3), Mrs. Wilson was entitled to both the return of her car and to keep the money that had been advanced to her.


The Court of Appeal however had raised the issue of whether this had the effect of violating First County Trust's rights under Article 6(1) ECHR and Article 1 of the First Protocol to the ECHR. After an adjournment, this point was argued and the Court of Appeal concluded that (1) s.127(3) CCA 1974 was incompatible with the rights under the HRA, and made a declaration of incompatibility.


The Secretary of State for Trade and Industry appealed on the basis that a declaration of incompatibility should not have been made in a case where the relevant events took place prior to the coming into force of the Human Rights Act, and that in any event s.127(3) was not incompatible with the Convention.




(1) The Court of Appeal had been wrong to make a declaration of incompatibility where the cause of action arose and the parties' rights were determined by the County Court prior to the entry into force of the Human Rights Act. The court could make a declaration of incompatibility only where s.3 of the 1998 Act was available as an interpretative tool. That was not this case here when events occurred prior to the Act, as Parliament could not have intended the application of s.3(1) to alter the parties' existing rights and obligations under the Consumer Credit Act. Nor was it correct of the Court of Appeal to characterise the relevant event for the purposes of s.6 HRA to be its own order.


(2) Section 127(3) did not engage Art.6(1) ECHR. The provision did not bar access to a court. If Protocol 1 Art.1 was engaged by the application of s.127(3) , then the interference with the lender's rights was justified. The Court of Appeal was accordingly also wrong to have concluded that s.127(3) was incompatible with the Convention.


Per curiam: It would be rare that resort to Hansard would be appropriate in deciding the compatibility of an Act of Parliament with the Convention, and the possible interpretations that could be given to that Act, and that this was not a case where reference to Hansard was appropriate.




(i) Retrospectivity


The most interesting aspect of this judgment is insofar as it relates to the retrospective effect of the Human Rights Act in relation to (1) the interpretative obligation in section 3 and (2) declarations of incompatibility.


There have been a number of House of Lords decisions on the retroactive effect of the various parts of the HRA. This decision resolves probably the last of these – many might say not before time given that the Act has been in force for 3 years and that in another three years time there are unlikely to be any new claims where it is even a potential issue.


In R. v. Lambert (HL) [2001] 3 All ER 577, the question was whether an accused can, on an appeal after the HRA came into force, rely on an alleged breach of Convention rights by the investigating or prosecuting authority, at a trial which took place before the HRA came into force. In that case the House of Lords had already approved the statement of Morritt V-C in the Court of Appeal in this case, that


"Nor should the decisions of courts and tribunals made before those sections had come into force be impugned on the ground that the court or tribunal was said to have acted in a way which was incompatible with Convention rights".


And the decision in Lambert was itself re-examined and approved, albeit with some reluctance, by the House of Lords in R v Kansal (HL) [2001] 3 WLR 1563.


More recently, the House of Lords confirmed that where a public body  (e.g. the Secretary of State) appeals from an unfavourable judgment, that appeal does not constitute "proceedings brought by or at the instigation of a public body" for the purposes of s.22(4) HRA (MacDonald v Advocate General for Scotland; Pearce v Governing Body of Mayfield School [2003] UKHL 34; [2003] IRLR 512). So, where as in MacDonald, the acts complained of occurred prior to October 2000 and the applicant could not pray in aid the HRA, the mere fact that it was a public body appealing does not change the position so as to allow reliance on the HRA.


In that context, the decision of the Court of Appeal in this case was somewhat out of place and it is unsurprising that it was disapproved by the House of Lords. The Court of Appeal had decided that, as it was a public body itself, it was under an obligation under s.6 HRA to interpret legislation compatibly with the ECHR where possible.


The start point for most of their Lordships was that there is a common law presumption that Parliament does not intend a statute to have retrospective effect. It was derived from this general principle that Parliament would not intend to affect the rights and obligations that parties had to each other prior to the HRA coming into force unless Parliament said so. The effect of the Consumer Credit Act should therefore not be altered from how the parties would have perceived it, using the s.3 interpretative obligation that did not exist at the time that the contract was entered into.


Once the argument had started from this point, there was no way that the Court of Appeal's reasoning could be approved. Their Lordships took the view, correctly, that if the s.3 interpretative obligation could not apply, then nor could declarations of incompatibility be made, as it could not be said that the s.3 obligation failed to interpret the statute compatibly. The Court of Appeal's reasoning was distinguished variously on the grounds that "it does not confront the issue of retrospectivity" (per Lord Scott), that "While it is true that the court is required by section 6(1) of the 1998 Act to act in a way that is compatible with Convention rights, the issue in this case relates to the meaning and effect of legislation. The first task which confronts the court in a case of this kind is to construe the provisions of the statute" (per Lord Nicholls) and that "The inclusion of provisions relating to the Executive and to the Judiciary all under the heading 'Public authorities' and the unqualified inclusion of courts in the definition of the term 'public authority' do not assist the reader in making the necessary distinction between the Executive and the Judiciary and their different constitutional functions." (per Lord Hobhouse).


Accordingly, we are left with a position that, while open to criticism, is at least likely to be relatively clear in relation to what is ultimately only a transitional state of affairs.


(ii) s.127(3) Consumer Credit Act


Practically, the case is also important in the consumer credit area as it confirms that s.127(3) of the Consumer Credit Act 1974 does not infringe either Article 6(1) nor Article 1 of the First Protocol. This point was of great importance to the insurance industry in particular, and explains why the case was taken so far  - it is notable that neither of the original parties, Mrs. Wilson nor First County Trust appeared or were represented at the hearing. Instead, the position of First County Trust was argued by counsel on behalf of four very large insurance companies, and other counsel on behalf of the Finance and Leasing Association.


(iii) Use of Hansard


There has undoubtedly been something of a backlash in recent years against what was perceived as an ever-increasing resort to Hansard in attempts to resolve questions of statutory construction. In Robinson v Secretary Of State For Northern Ireland & Ors (2002) [2002] UKHL 32, the House of Lords made it very clear that the circumstances in which its use will be appropriate are very tightly constrained.

The use of Hansard in this case was described as an issue of "constitutional significance" by Lord Nicholls. It arose because the Court of Appeal had deemed it relevant to consider the comments made during the passage of the 1974 Act in determining whether the effect of the s.127(3) was proportionate and justified, and concluded that as there was no explanation offered by Parliament as to why it was necessary to have such a provision, this gave no assistance to the argument that the provision was justified.


Lord Nicholls made it clear that this was not an acceptable methodology and was highly critical of the approach of the Court of Appeal. He said (at paragraph 53):


"The courts should not treat speeches made in Parliament, whether by ministers or others, as evidence of the policy considerations which led to legislation taking a particular form. The exercise on which the Court of Appeal engaged is not an appropriate exercise for a court. There are no circumstances in which it is appropriate for a court to refer to the record of parliamentary debates in order to decide whether an enactment is compatible with the Convention. The policy and objects of a statute must by determined by interpreting its language, which alone represents Parliament's intention. Reference to debates for the purpose of determining whether the policy considerations put forward by those participating in debates in either House were justifiable in Convention terms and proportionate to the remedy proposed would involve 'questioning' what is said in Parliament contrary to article 9 of the Bill of Rights 1689. That is a different exercise from the one undertaken in Pepper v Hart [1993] AC 593, and it is an exercise essentially adverse to Parliament's intention, not supportive of it."


Lord Scott wholly endorsed the comments of Lord Nicholls on this point.


Lord Hobhouse voiced the most trenchant criticism of the citation of Hansard in general, beginning by voicing the traditional objections to such citation; the cost and potential waste of resources, and that a lone speaker's voice may not represent the will of Parliament.  He then went on to indicate his view that:


"Judicial experience has taught me, particularly since I was appointed a member of this House, that the attempt by advocates to use Parliamentary material from Hansard as an aid to statutory construction has not proved helpful and the fears of those pessimists who saw it as simply a cause of additional expense in the conduct of litigation have been proved correct."


He then qualified this by saying that the questions of justification and proportionality may justify the admission of Parliamentary material as evidential material. However, he followed this with the comment of potentially wider significance, that:


"The question of justification and proportionality has to be answered by reference to the time the events took place to which the statutory provision is being applied. The person claiming to be a victim has to show how he has been affected by the provision he complains about. Those who are seeking to justify the use of the statutory provision have to do so as at the time of that use. … Merely to examine the situation at the time the Act in question was passed and treat that as decisive is wrong in principle. …To look for justification only in the Parliamentary debates at the time the statute was originally passed invites error."


This point that the questions of justification and proportionality have to judged at the time of the alleged infringement is well noted, and something that is from time to time lost sight of.


 David Manknell, 1 Crown Office Row

Wilson v First County Trust (23 November 2000)

CA (Sir Andrew Morritt V-C, Chadwick LJ, Rix LJ) 


The provision in the Consumer Credit Act preventing a creditor from enforcing a credit agreement that did not fulfil certain formalities was incompatible with Articles 6 and Article 1 Protocol 1


In January 1999 the defendant, FCT, agreed to lend W, the claimant, £5,000 on the security of her car. FCT charged a variable document fee of £250 in respect of the loan, which W was unable or unwilling to pay immediately. Accordingly, the fee was added to the amount of the loan. W and FCT entered into a regulated agreement under the Consumer Credit Act 1974 Act which recorded, inter alia, the amount of the fee and the amount of the loan (£5,250).

W subsequently brought proceedings: (i) for a declaration that the agreement was unenforceable by reason of s.127(3) of the 1974 Act because it misstated the amount of the loan, which should have been recorded as £5,000, and so failed to contain the prescribed terms required; and  (ii) for the agreement to be reopened on the basis that it was an extortionate credit bargain. The judge rejected W's case as to (i), but reopened the agreement and substituted a lower rate of interest. W subsequently redeemed her car on payment of the redemption sum determined in accordance with the judge's decision. W appealed against the judge's decision as to (i), contending that the agreement and the loan of £250 made on the same day were unenforceable and seeking an order for repayment of the redemption sum.


The court was satisfied that s.9(4) of the 1974 Act required that the £250 by which the loan was increased should not have been treated as credit because it was "an item entering into the total charge for credit". The fact that the fee had been added to the loan did not alter the fact that it remained a charge for credit and not credit itself. It followed that the agreement had misstated the amount of the credit to which it related, contrary to s.61 of the 1974 Act and the Regulations.  The apparent consequence of that misstatement was, as W contended, that the agreement was unenforceable. That was the clear and undoubted effect of s.127(3) of the Act, which precluded enforcement of the agreement under s.65 of the Act (see Dimond v Lovell (2000) 2 WLR 1121).

However, if that was the consequence of s.127(3), it seemed at the least arguable that s.127(3) was incompatible with Article 6(1) and/or Protocol 1 Article 1 European Convention on Human Rights, as set out in Sch.1 to the Human Rights Act 1998. The absolute bar on enforcement in the case of an agreement that did not contain the terms prescribed by s.61 appeared, in the case of Article 6(1), to be a disproportionate restriction on the right of the lender, existing in all other cases, to have the enforceability of his loan determined by the court. In the case of Protocol 1 Article 1 it effectively deprived FCT of its property, namely the money which it had lent.

In those circumstances, the court considered that the appropriate course was to give notice to the Crown under s.5 of the 1998 Act that the instant court was considering making a declaration of incompatibility. The Attorney-General would be invited to appoint an amicus curiae to argue for making declarations of incompatibility if they were opposed by the Crown. In the meantime, the appeal would be adjourned. 

The court should not refrain from making declarations of incompatibility where it would have no impact on the parties before it.

Judgment accordingly.

COMMENT (December 2001)

There have been a couple of attempts between the passing into force of the Human Rights Act and the present date to get the courts to exercise their power under Section 4 of that Act to make a Declaration of Incompatibility; so far unsuccessful (R v Wigan BC ex parte DK). This present case is very interesting in that the Court itself raised the possibility of making a Declaration of its own motion; as a public authority it is under an obligation imposed by the Act to detect potential breaches of the Convention and deal with them, proactively if necessary. The Vice Chancellor noted that  neither of the parties had relied upon the Human Rights Act,  but that it did not absolve the court from considering the application. "It appears to me that there may be some question whether the provisions of s.127(3) Consumer Credit Act 1974 are compatible with convention rights." Note that one of the reasons why the judge thought incompatibility might be the issue here was because it had the potential to deprive the money lender of his opportunity to enforce the agreement in court, contrary to Osman v United Kingdom (1998) 5 BHRC 293;  and that he felt that in these circumstances the law perhaps did not strike a fair balance between the demands of the general community  and the fundamental right of the individual to peaceful enjoyment of his possessions - in other words the amount that he had agreed to loan: cf Stran Greek Refineries and Stratis Andreadis v Greece (1994) 19 EHRR 293 para 69.

One important aspect of this case is not only that the Human Rights Act point was raised by the court of its own motion, but that the litigation was between two private parties; the decision therefore provides more grist to the mill for supporters of the horizontal reach of the Human Rights Act.