Wilson and others v. Secretary of State for Trade and Industry (Appellant)
65. To that limited extent there may be occasion for the courts, when conducting the statutory 'compatibility' exercise, to have regard to matters stated in Parliament. It is a consequence flowing from the Human Rights Act. The constitutionally unexceptionable nature of this consequence receives some confirmation from the view expressed in the unanimous report of the parliamentary Joint Committee on Parliamentary Privilege (1999) (HL Paper 43-I, HC 214-I), p 28, para 86, that it is difficult to see how there could be any objection to the court taking account of something said in Parliament when there is no suggestion the statement was inspired by improper motives or was untrue or misleading and there is no question of legal liability.
66. I expect that occasions when resort to Hansard is necessary as part of the statutory 'compatibility' exercise will seldom arise. The present case is not such an occasion. Should such an occasion arise the courts must be careful not to treat the ministerial or other statement as indicative of the objective intention of Parliament. Nor should the courts give a ministerial statement, whether made inside or outside Parliament, determinative weight. It should not be supposed that members necessarily agreed with the minister's reasoning or his conclusions.
67. Beyond this use of Hansard as a source of background information, the content of parliamentary debates has no direct relevance to the issues the court is called upon to decide in compatibility cases and, hence, these debates are not a proper matter for investigation or consideration by the courts. In particular, it is a cardinal constitutional principle that the will of Parliament is expressed in the language used by it in its enactments. The proportionality of legislation is to be judged on that basis. The courts are to have due regard to the legislation as an expression of the will of Parliament. The proportionality of a statutory measure is not to be judged by the quality of the reasons advanced in support of it in the course of parliamentary debate, or by the subjective state of mind of individual ministers or other members. Different members may well have different reasons, not expressed in debates, for approving particular statutory provisions. They may have different perceptions of the desirability or likely effect of the legislation. Ministerial statements, especially if made ex tempore in response to questions, may sometimes lack clarity or be misdirected. Lack of cogent justification in the course of parliamentary debate is not a matter which 'counts against' the legislation on issues of proportionality. The court is called upon to evaluate the proportionality of the legislation, not the adequacy of the minister's exploration of the policy options or of his explanations to Parliament. The latter would contravene article 9 of the Bill of Rights. The court would then be presuming to evaluate the sufficiency of the legislative process leading up to the enactment of the statute. I agree with Laws LJ's observations on this in International Transport Roth GmbH v Secretary of State for the Home Department  3 WLR 344, 386, paras 113-114.
Article 1 of the First Protocol and proportionality
68. I turn now to consider whether section 127(3) of the Consumer Credit Act is compatible with the rights guaranteed by article 1 of the First Protocol. Inherent in article 1 is the need to hold a fair balance between the public interest and the protection of the fundamental rights of creditors such as First County Trust. It is common ground that section 127(3) pursues a legitimate aim. The fairness of a system of law governing the contractual or property rights of private persons is a matter of public concern. Legislative provisions intended to bring about such fairness are capable of being in the public interest, even if they involve the compulsory transfer of property from one person to another: see the leasehold enfranchisement case of James v United Kingdom (1986) 8 EHRR 123, 141, para 41. More specifically, persons wishing to borrow money are often vulnerable. There is a public interest in protecting such persons from exploitation.
69. There must also be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved. The means chosen to cure the social mischief must be appropriate and not disproportionate in its adverse impact. Whether that relationship exists in the case of section 127(3) is the key issue.
70. In approaching this issue, as noted in R v Johnstone  UKHL 28 para 51, courts should have in mind that theirs is a reviewing role. Parliament is charged with the primary responsibility for deciding whether the means chosen to deal with a social problem are both necessary and appropriate. Assessment of the advantages and disadvantages of the various legislative alternatives is primarily a matter for Parliament. The possible existence of alternative solutions does not in itself render the contested legislation unjustified: see the Rent Act case of Mellacher v Austria (1989) 12 EHRR 391, 411, para 53. The court will reach a different conclusion from the legislature only when it is apparent that the legislature has attached insufficient importance to a person's Convention right. The readiness of a court to depart from the views of the legislature depends upon the circumstances, one of which is the subject matter of the legislation. The more the legislation concerns matters of broad social policy, the less ready will be a court to intervene.
71. I turn to the statutory setting of section 127(3). The Consumer Credit Act contains many requirements about the form and contents of regulated agreements. Parliament has singled out some obligations as having such importance that non-compliance leads automatically and inflexibly to a ban on the making of an enforcement order whatever the circumstances. These obligations are specified in section 127(3) and (4). In these two subsections Parliament has chosen, deliberately, to exclude consideration of what is just and equitable in the particular case. The latter approach, enabling the court to consider the circumstances of the particular case, was adopted as the general rule in section 127(1). Section 127(3) and (4) are, expressly, exceptions to the general rule. In prescribing these two exceptions Parliament must be taken to have considered that the sanction generally attaching to non-compliance with the statutory requirements was not sufficient to achieve compliance with the duty to include all the prescribed terms in the agreement (section 61(1)(a)) or the duties to provide copies and notice of cancellation rights (sections 62 to 64). Something more drastic was needed in order to focus attention on the need for lenders to comply strictly with these particular obligations.
72. Undoubtedly, as illustrated by the facts of the present case, section 127(3) may be drastic, even harsh, in its adverse consequences for a lender. He loses all his rights under the agreement, including his rights to any security which has been lodged. Conversely, the borrower acquires what can only be described as a windfall. He keeps the money and recovers his security. These consequences apply just as much where the lender was acting in good faith throughout and the error was due to a mistaken reading of the complex statutory requirements as in cases of deliberate non-compliance. These consequences also apply where, as in the present case, the borrower suffered no prejudice as a result of the non-compliance as they do where the borrower was misled. Parliament was painting here with a broad brush.
73. The unattractive feature of this approach is that it will sometimes involve punishing the blameless pour encourager les autres. On its face, considered in the context of one particular case, a sanction having this effect is difficult to justify. The Moneylenders Act 1927 adopted a similarly severe approach. Infringement of statutory requirements rendered the loan and any security unenforceable. So did the Hire Purchase Act 1965, although to a lesser extent. This approach was roundly condemned in the Crowther report (Report of the Committee on Consumer Credit, under the presidency of Lord Crowther, March 1971) (Cmnd 4596), vol 1, p 311, para 6.11.4:
74. Despite this criticism I have no difficulty in accepting that in suitable instances it is open to Parliament, when Parliament considers the public interest so requires, to decide that compliance with certain formalities is an essential prerequisite to enforcement of certain types of agreements. This course is open to Parliament even though this will sometimes yield a seemingly unreasonable result in a particular case. Considered overall, this course may well be a proportionate response in practice to a perceived social problem. Parliament may consider the response should be a uniform solution across the board. A tailor-made response, fitting the facts of each case as decided in an application to the court, may not be appropriate. This may be considered an insufficient incentive and insufficient deterrent. And it may fail to protect consumers adequately. Persons most in need of protection are perhaps the least likely to participate in court proceedings. They may well let proceedings go by default: see, in relation to money lending agreements, the Crowther report, p 236, para 6.1.19.
75. Nor do I have any difficulty in accepting that money lending transactions as a class give rise to significant social problems. Bargaining power lies with the lender, and the social evils flowing from this are notorious. The activities of some lenders have long given the business of money lending a bad reputation. Nor, becoming more specific, do I have any difficulty in accepting, in principle, that Parliament may properly make compliance with the formalities required by the Consumer Credit Act regarding 'prescribed terms' an essential prerequisite to enforcement. In principle that course must be open to Parliament. It must be open to Parliament to decide that, severe though this sanction may be, it is an appropriate way of protecting consumers as a matter of social policy. In making its decision in the present case Parliament had the benefit of experience gained over many years in the working of the Moneylenders Act 1927 and the hire purchase legislation, and also the views of the Crowther committee. Further, it must be open to Parliament so to decide even though the lender's inability to enforce an agreement will not assist a borrower who consents to the enforcement of the agreement in ignorance of the true legal position.
76. The one point which has caused me difficulty is whether the requirement to state the amount of 'credit' is sufficiently clear and certain. The more severe the sanction, the more important it is that the law should be unambiguous. In the present case the confusion over the treatment of the document fee of £250 as 'credit' may have been due to a widespread misunderstanding within the trade. Certainly it was shared by an experienced trial judge. Mr Hibbert on behalf of the Finance and Leasing Association submitted it is sometimes far from easy to apply the complex provisions of the Consumer Credit Act and the ancillary regulations. He gave examples of types of cases where, he said, identifying the amount of 'credit' is fraught with difficulty.
77. That there was genuine confusion in the present case is admitted. But I am not persuaded the degree of uncertainty involved in identifying the amount of 'credit' is unacceptably high. The consumer credit legislation has to cope with a wide range of types of transactions. It is not surprising that now and again problems of definition will arise. With the assistance of court decisions points of uncertainty, when they occur, can be clarified. The mere fact that a legal provision is capable of more than one interpretation does not mean that it fails to meet the requirement implied in the Convention concept of 'prescribed by law': Vogt v Germany (1995) 21 EHRR 205, para 48. Moreover, I have in mind that the statutory provisions apply only to loans up to a prescribed financial limit, currently £25,000. So the exposure of a creditor in any one case is confined. The burden imposed on him is not excessive.
78. Accordingly, in my view section 127(3) is compatible with article 1 of the First Protocol.
79. The Court of Appeal reached the opposite conclusion. In doing so the court approached the matter from a slightly different angle. The effect of the court's judgment was to treat section 127(1) as the touchstone for proportionality and then require positive justification for any more draconian provision: see  QB 74, 95-96, paras 38-39. I respectfully consider this is an erroneous approach. Section 127(3) is one provision in an overall package of measures, some more severe than others, approved by the legislature in response to a perennial social problem. In this type of case the court should approach the relevant statutory provision without any preconceptions of the requirements of proportionality based on other provisions of the statute. The court should simply have regard to the relevant statutory provision and its policy objective and consider whether the provision bears so unfairly on the applicant that it was not open to Parliament to adopt this provision, even as part of an overall package, in response to the social problem in question. In other words, is it apparent that Parliament must have attached insufficient importance to the applicant's Convention right? As I have indicated, I would answer 'no' to this question in the present case.
80. As a footnote I should add that in stating this conclusion I am not to be taken as expressing a view on what would be the position if, as is now under consideration, the current limit of £25,000 were removed and the Consumer Credit Act were to apply to loans regardless of their amount. An adverse consequence, acceptable for a loan of £25,000, may not be acceptable when applied to a loan of £250,000.
LORD HOPE OF CRAIGHEAD
81. It is a mark of the importance of the issues which have been raised by the case that neither of the parties to the dispute which have given rise to it have taken any part in the appeal to this House. It has been brought by the Secretary of State for Trade and Industry, who was joined as a party to the proceedings in the Court of Appeal in response to a notice which was served on her under section 5(1) of the Human Rights Act 1998 ("the 1998 Act"). It has been responded to by four providers of motor insurance to the general pubic in the United Kingdom, by the Speaker of the House of Commons and the Clerk of the Parliaments ("the House Authorities") and by the Finance and Leasing Association which is the leading trade association representing the consumer finance industry. Your Lordships have also had the benefit of helpful submissions by an amicus curi' appointed by the Attorney General. In this situation the facts of the case may seem to be of little importance. But they cannot be overlooked entirely, as they provide the context for an examination of the wider issues that need to be dealt with.
82. My noble and learned friend, Lord Nicholls of Birkenhead, has set out the underlying facts. I am happy to adopt what he has said about them and confine myself to what I see as the essential details. The first point is that the transaction between Mrs Wilson and First County Trust ("FCT") was entered into, was acted upon by both sides and was the subject of proceedings in the County Court all before the relevant provisions of the 1998 Act were brought into force on 2 October 2000 by the Human Rights Act (Commencement No 2) Order 2000 (SI 2000/1851).
83. The loan agreement was signed on 22 January 1999. The loan was for a period of six months. It was due to be repaid, together with interest, on 21 July 1999. Mrs Wilson did not repay the loan on that date. On 23 July 1999 FCT sought payment of the amount due under the agreement. Mrs Wilson then instituted proceedings against FCT in the county court. She sought a declaration under the Consumer Credit Act 1974 ("the 1974 Act") that the agreement was unenforceable, its reopening on the ground that the rate of interest at 94.78 % was grossly excessive and an injunction forbidding FCT from disposing of the motor car which it taken from Mrs Wilson in pawn as security for the loan. An interim injunction was granted on 12 August 1999. On 24 September 1999 the District Judge refused Mrs Wilson's application for a declaration that the agreement was void and unenforceable. But he granted a declaration that the credit agreement was extortionate, substituted a monthly interest charge at an agreed rate and permitted Mrs Wilson to redeem the motor car on payment of the loan with interest on or before 1 October 1999. On 18 October 1999 she gave notice of an appeal against the rejection of her claim that the agreement was unenforceable. But on 17 December 1999 she redeemed her car by paying the whole of the sum that was then due to FCT.
84. Mrs Wilson's appeal against FCT came before the Court of Appeal for hearing on 9 November 2000. By that date the 1998 Act had come into force. As Sir Andrew Morritt V-C observed when judgment was given on 23 November, neither party relied on it:  QB 407, 417F-G, para 25. But he said that that did not absolve the court from considering its application. So it was that the court, having concluded that it was barred by section 127(3) of the 1974 Act from enforcing the agreement and that Mrs Wilson was entitled to repayment of the sum which she had paid to redeem her motor car, decided to adjourn the appeal to enable further consideration to be given to the question whether the bar on its enforcement infringed FCT's Convention rights and, if so, whether it should make a declaration of incompatibility under section 4 of the 1998 Act.
85. This brief history shows that the transaction which has given rise to this appeal was over and done with before the relevant provisions of the 1998 Act were brought into force, subject only to the question whether Mrs Wilson is entitled to repayment of the sum which she paid over to redeem her motor car. This raises a difficult and important question about the extent to which the 1998 Act can be relied upon so as to affect rights and obligations arising from previous transactions ("the retrospectivity issue"). Then there is the question whether, if the 1998 Act can be relied upon in these circumstances, the effect of section 127(3) of the 1974 Act in the events which have happened is to engage any of FCT's Convention rights ("the Convention rights issue").
86. The second point is that, in the course of its discussion in the judgment which was delivered on 2 May 2001 of the question whether the provisions of section 127(3) of the 1984 Act were incompatible with FCT's Convention rights, the Court of Appeal examined the content of the debates on the Consumer Credit Bill in Parliament as reported in Hansard in order to identify the aims and issues of social policy which led to its enactment: [2001 EWCA Civ 633,  QB 74, 94D-95F, paras 35-37. In the Court of Appeal the Secretary of State submitted that an attempt to do this was illegitimate. Her position before your Lordships was, as the learned Attorney General put it on her behalf, more moderate. But he urged caution in the use of this material and criticised the way it had been used by the Court of Appeal. The argument that its use is illegitimate has not gone away, however. It was the subject of submissions made by Mr Sumption QC on behalf of the House Authorities, and it is plain in view of its importance that we must deal with it: ("the reference to Hansard issue").
87. There is one other issue which has to be addressed. As has already mentioned, the Court of Appeal held in its first judgment that the effect of section 127(3) of the 1984 Act was that the agreement between Mrs Wilson and FCT was unenforceable and that she was entitled to repayment of the sum which she paid over to redeem her motor car. Sir Andrew Morritt V-C said that he would not wish to arrive at a conclusion which permitted Mrs Wilson both to retain her car and to recover the money which she paid to redeem it unless the statutory provisions left no alternative:  QB 407, 416D, para 20. Having considered the decision of your Lordships' House in Dimond v Lovell  1 AC 384 however he concluded that prima facie she was entitled to the orders which she sought: para 25. FCT have not sought to appeal against this decision, and it will not be disturbed. But the Secretary of State submits that the decision in Dimond v Lovell is distinguishable and that, if the agreement is unenforceable, FCT is entitled to a restitutionary remedy against Mrs Wilson ("the Dimond v Lovell issue").
The retrospectivity issue
88. The Court of Appeal decided that it would be appropriate to declare that, having regard to the terms prescribed by regulation 6(1) of and Schedule 6 to the Consumer Credit (Agreements) Regulations 1983 (SI 1983/1553), the provisions of section 127(3) of the 1974 Act, in so far as they prevent the court from making an enforcement order under section 6(1) of that Act unless a document containing all the prescribed forms of the agreement has been signed by the debtor or hirer are incompatible with the rights guaranteed to the creditor or hirer by article 6(1) of the Convention and article 1 of the First Protocol: QB 74, 99B-C, para 50. The issue is whether it was open to the Court of Appeal to make this declaration.
89. The Secretary of State submits that it was not open to the Court of Appeal to do so, as sections 1 and 4 of the 1998 Act came into force after the agreement was made, after the due date for payment under that agreement and after judgment had been pronounced in the County Court on Mrs Wilson's application for a declaration that the agreement was void and unenforceable. Her argument is that FCT had at the relevant times no Convention rights under the 1998 Act that were capable of being infringed by the operation of section 127(3) of the 1974 Act. In short, as the declaration was made in relation to events which occurred before the 1998 Act fully came into force, it offends against the general principle that legislation does not have effect retrospectively: Bennion, Statutory Interpretation, 4th ed (2002), pp 265-269, 689-690.
90. The only provision in the 1998 Act which gives retrospective effect to any of its provisions is section 22(4). It directs attention exclusively to that part of the Act which deals with the acts of public authorities: see sections 6 to 9. What it says is that section 7(1)(b) applies to proceedings brought by or at the instigation of a public authority whenever the act in question took place. I do not think that there is any mystery as to why this provision was included in the 1998 Act, although the consequences that flow from it are much less certain. The explanation lies in the fact that the purpose of sections 6 to 9 of the Act is to provide a remedial structure in domestic law for the rights guaranteed by the Convention. As article 13 of the Convention makes clear, it is the obligation of states which have ratified the Convention to provide everyone within their jurisdiction with an effective remedy if the rights or freedoms which it protects are violated. The scheme of the Act is to give effect in domestic law to the obligation which is set out in article 13. If that scheme was to be followed through, victims had to be given an effective remedy in domestic law for a violation by the state of their Convention rights. The principle upon which the Act proceeds is that actions by public authorities are unlawful if they are in breach of Convention rights: section 6(1). Effect is given to that principle in section 7. But it was appreciated that victims of a violation by the state of their Convention rights were already entitled to obtain a remedy in the European Court of Human Rights under article 41 of the Convention. In that context it made sense for the provisions of section 6(1) to be made available for use defensively where proceedings are brought against the victim by or at the instigation of a public authority, whenever the violation took place. That is what section 22(4) achieves by enabling section 7(1)(b) to be given effect retrospectively.
91. But we are not concerned with the acts of public authorities in this case or with proceedings brought by or at the instigation of a public authority. There is no claim by a victim that a public authority has acted in a way that is made unlawful by section 6(1) of the Act.
92. It has been held that acts of courts or tribunals which took place before 2 October 2000 which they were required to do by primary legislation and were done according to the meaning which was to be given to the legislation at that time are not affected by section 22(4): see R v Kansal  UKHL 62,  2 AC 69, 112F-113A, para 84; Wainwright v Home Office  EWCA Civ 2081,  QB 1334, 1346A-1347C, paras 29-36. It has also been held that the Act cannot be relied upon retrospectively to make unlawful conduct which was lawful at the time when it took place: Wainwright v Home Office  QB 1334, 1337G-H para 40. The effect of these decisions is that the 1998 Act cannot be applied retroactively so as to deem the law to have been different from what it was when these acts were done. But we are not concerned in this case with the lawfulness of acts done or the lawfulness of conduct which took place before the Act was brought fully into force. The question in this case is whether the rights and obligations of parties to an agreement made before 2 October 2000 are, as a result of the coming into force of the relevant provisions of the 1998 Act, different now from what they were when the agreement was entered into.
93. The approach which the Court of Appeal took to this problem was to apply section 6(1) of the 1998 Act to the facts of this case, as the court was required by that subsection to act in a way which was compatible with Convention rights, and then to ask itself whether the order which it was about to make was or was not compatible with Convention rights. Its conclusion was that, approached in this way, the relevant event was not the making of the agreement on 22 January 1999 but the making of its order on the appeal. Section 22(4) had no relevance, as the court had had to have regard to the facts as they were at the time when it made its order:  QB 74, 88B, para 17, 89G-H, para 22.
94. 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 which it is being asked to apply. The question which the Court of Appeal posed for itself in November 2000 was whether it was possible to read and give effect to section 127(3) of the 1974 Act in a way that was compatible with FCT's rights under article 6(1) of the Convention and article 1 of the First Protocol.