Wilson and others v. Secretary of State for Trade and Industry (Appellant)
145. For these reasons and, subject to what I have said, the substance of those given by my noble and learned friends Lord Nicholls of Birkenhead and Lord Hope of Craighead, I too would make the orders proposed. I should also add that I agree with and gratefully adopt what my noble and learned friend Lord Rodger of Earlsferry is to say about the various usages of the word 'retrospective'.
LORD SCOTT OF FOSCOTE
146. This appeal is brought by the Secretary of State. She appeals against the declaration of incompatibility contained in the order of the Court of Appeal dated 2 May 2001 (as amended on 12 June 2001). Neither the claimant in the litigation, Mrs Penelope Wilson, nor the defendant, First County Trust Ltd ("FCT") has taken any part in this appeal. Nonetheless an array of counsel have appeared before your Lordships representing the Secretary of State, the Finance and Leasing Association, three leading insurance companies, the Speaker of the House of Commons and the Clerk of the Parliaments and, in addition, an amicus curi'. The circumstances in which this has come about are set out in the opinions of my noble and learned friends, Lord Nicholls of Birkenhead and Lord Hope of Craighead, and I need not repeat them. The issues which have necessitated this appeal and have led to the representation to which I have referred include issues of commercial and of constitutional importance.
147. The issues have arisen out of a simple moneylending transaction. Under an agreement made in January 1999 FCT lent Mrs Wilson £5000 for six months on the security of her motor car. The agreement was a 'regulated agreement' within the meaning of section 8 of the Consumer Credit Act 1974. Section 61 of the Act requires a document containing all the "prescribed terms" of a regulated agreement to be signed by the debtor. One of the prescribed terms is "the amount of the credit". FCT charged Mrs Wilson, inter alia, a £250 fee but, by agreement between them, the £250 was not paid by Mrs Wilson but instead was added to the £5000 to be repaid by her. In the document presented by FCT to Mrs Wilson for signing, and signed by her accordingly, "the amount of the credit" was stated to be £5250. But the £250 was "an item entering into the total charge for credit" (see section 9(4) of the Act) and, accordingly, was not part of "the amount of the credit" (see Schedule 6 to the 1983 Regulations: SI 1983 No 1553). In short, the document signed by Mrs Wilson did not, in the respect I have mentioned, contain the prescribed terms.
148. Mrs Wilson did not repay the loan, or pay the £250 fee, and claimed back her car which she had deposited with FCT as security. She contended that the loan agreement was unenforceable against her and that under section 113 of the Act she was entitled to have her car back. The case was heard in the county court and on 14 September 1999 judgment was given in favour of FCT. Mrs Wilson then appealed to the Court of Appeal.
149. The events to which I have referred took place after the Human Rights Act 1998 had been enacted but before the Act had come into force. The Act came into force on 2 October 2000. Mrs Wilson's appeal was heard in November 2000 and was successful. She obtained a declaration that the loan agreement with FCT under which she had received £5000 was unenforceable by FCT and an order for repayment by FCT, with interest, of the sum of £6900 that she had paid to redeem her car. But the Court of Appeal took the view that this result of the application of the relevant provisions of the 1974 Act might arguably be incompatible with the rights of FCT under Article 6 of the European Convention on Human Rights or under Article 1 of the 1st Protocol to the Convention. So they directed the requisite notice to be given to the Secretary of State (see section 5 of the 1998 Act) and adjourned the appeal in order for the point to be argued. An amicus curi' was appointed.
150. The renewed hearing of the appeal took place in March 2001 and in a judgment given on 2 May 2001 the Court of Appeal concluded that section 127(3) of the 1974 Act, which prevented the court from enforcing a loan agreement unless a document containing all the prescribed terms had been signed by the debtor, was incompatible with FCT's rights under Article 6 of the Convention and Article 1 of the 1st Protocol to the Convention. In reaching this conclusion the Court of Appeal examined and commented upon the contents of the Hansard reports of the deliberations in Parliament during the progress of the Bill.
151. On this appeal the following broad issues arise 1.
Can the court make a declaration of incompatibility under section 4 of the 1998 Act in relation to events which pre-dated 2 October 2000, the date on which the Act came into force?2.
If it can, were FCT's Convention rights under article 6 or under article 1 of the First Protocol infringed by the relevant provisions of the 1974 Act?3.
Was the use made by the Court of Appeal of the Hansard reports permissible?
152. The Attorney General, Lord Goldsmith QC, appearing on behalf of the Secretary of State, based his submissions on this issue on a simple, and plainly correct, proposition, namely, that prior to 2 October 2000 FCT had had no Convention rights. The 1998 Act, under which Convention rights became rights enforceable under domestic law, was not yet in force. The loan transaction between FCT and Mrs Wilson had taken place in 1999. So, at the time the loan was made and at the time Mrs Wilson's claim for a declaration that the loan was unenforceable against her and for the return of her car (or repayment of the sum she had had to pay FCT to get it back) was tried in the county court, the 1998 Act and Convention rights were irrelevant. They could not affect the rights and liabilities of FCT and Mrs Wilson respectively under the loan agreement. There can be no dispute but that this was the position prior to 2 October 2000.
153. It is, of course, open to Parliament, if it chooses to do so, to enact legislation which alters the mutual rights and obligations of citizens arising out of events which predate the enactment. But in general Parliament does not choose to do so for the reason that to legislate so as to alter the legal consequences of events that have already taken place is likely to produce unfair or unjust results. Unfairness or injustice may be produced if persons who have acquired rights in consequence of past events are deprived of those rights by subsequent legislation; or it may be produced if persons are subjected on account of those past events to liabilities that they were not previously subject to. There is, therefore, a common law presumption that a statute is not intended to have a retrospective effect. This presumption is part of a broader presumption that Parliament does not intend a statute to have an unfair or unjust effect (see Maxwell on Statutes, 12th edition p 215 and Bennion's Statutory Interpretation, 4th edition pp 265-266 and 689-690). The presumption can be rebutted if it sufficiently clearly appears that it was indeed the intention of Parliament to produce the result in question. The presumption is no more than a starting point.
154. The question, therefore, is whether Parliament intended the 1998 Act and the Convention rights thereby incorporated into domestic law to be applied to transactions and events predating the coming into force of the Act and so as to alter the legal consequences of those transactions and events?
155. Sections 3 and 4 of the 1998 Act are, in my opinion, neutral. Section 3 requires that "So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights". The 1974 Act must be so read. Section 4(2) says that "If the court is satisfied that the provision [of primary legislation] is incompatible with a Convention right, it may make a declaration of that incompatibility". These statutory provisions do not, in my opinion, assist one way or the other in answering the question whether Parliament intended the Act to be applicable to past transactions and events. At the least it may be said that they contain nothing to displace the presumption that Parliament did not so intend.
156. Section 6(1) of the Act says that "It is unlawful for a public authority to act in a way which is incompatible with a Convention right". And sub-section (3) says that a "public authority" includes "a court or tribunal". It is plain that section 6 is looking to the future. It is not purporting to make unlawful a pre 2 October 2000 act of a public authority. It was section 6(1) on which the Court of Appeal relied in the present case. The reasoning proceeded like this
This reasoning does not confront the issue of retrospectivity. It avoids it by concluding that if the trial, or, as in the present case, the appeal, takes place after 2 October 2000, the court is bound by section 6(1) to apply the 1998 Act without regard to whether the transactions or events in question predate or postdate the coming into force of the Act.
157. My Lords, in my opinion, this conclusion cannot be accepted. The function of the court in civil litigation between private citizens is to adjudicate on their rights and obligations in issue in the case and to grant the relief, if any, requisite to reflect those rights and obligations. If the rights and obligations of the parties require a particular result to be reached, whether by dismissal of the action, an award of damages, the making of a declaration, the grant of an injunction, or otherwise, it is the duty of the court to deal with the case accordingly. For the court to do so cannot be an unlawful act under section 6(1).
158. The retrospectivity issue in this case is whether the coming into force of the 1998 Act on 2 October 2000 has altered the rights and obligations inter se of FCT and Mrs Wilson arising out of their loan transaction in 1999. Let it be supposed that the relevant provisions of the 1974 Act are, prima facie, inconsistent with the Convention rights of moneylenders; but let it be supposed also that the inconsistent provisions can be read down so as to give the court a discretion to enforce a loan agreement notwithstanding that a document containing the prescribed terms had not been signed by the borrower. On that footing, a loan agreement post-dating 2 October 2000 would, subject to the court's discretion under section 127(1), be enforceable. But would a loan agreement pre-dating 2 October 2000 be similarly enforceable? Only if the Act were to be given a retrospective effect would that be so. If the Act is not to be given a retrospective effect, if the pre 2 October 2000 rights and liabilities of lender and borrower are not altered by the coming into effect of the Act, then it would be the duty of the court, post 2 October 2000 as before, to hold the loan agreement to be unenforceable. In so holding the court would not be committing an unlawful act under section 6(1) for in relation to the pre-2 October 2000 transaction the parties would have no Convention rights.
159. Section 7(1)(a) of the 1998 Act says that a person who claims that a public authority has acted in a way which is made unlawful by section 6(1) may bring proceedings against the authority. Section 9 says that proceedings under section 7(1)(a) in respect of a judicial act may be brought only by exercising a right of appeal. But every appeal court, including your Lordship's House, must, in dealing with an appeal, give effect to the rights and obligations of the parties in issue on the appeal. If these rights and obligations arise out of pre 2 October 2000 events, the appeal court is no more entitled than the court below to alter the parties' rights and obligations in order to give effect to a reading down of some relevant statutory provision unless the conclusion is justified that the 1998 Act was intended to have that retrospective effect.
160. The only positive indication as to whether or not the 1998 Act was intended to have retrospective effect is to be found in section 22(4) of the Act. Section 22(4) says 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 but that otherwise sub-section (1) does not apply to acts taking place before 2 October 2000. This express indication of a specific retrospective effect that the Act was to have in relation to proceedings brought by a public authority is, in my opinion, a fair indication that in no other respect was the Act intended to have a retrospective effect.
161. The arguments against allowing the Act to have a general retrospective effect seem to me very powerful. The legal consequences under the civil law of a transaction or of events ought to be established by reference to the law at the time they take place. When events apt to create rights or obligations take place citizens affected by the events need to be able to ascertain the extent of their rights or obligations. They cannot do so if subsequent legislation may add to or diminish those rights or obligations. Where transactions calculated to continue for some considerable period are entered into, intervening legislation may in some respect or other affect the rights and obligations that accrue under the transaction after the legislation has come into force. Landlord and tenant legislation is a good example. If a lease is granted for, say, 99 years, there might well be intervening legislation capable of affecting the ability of the landlord to forfeit the lease, to operate a rent review clause, to claim damages for dilapidations or to recover possession on the expiry of the term. But it would be unusual for the legislation to alter the rights and obligations of the parties resulting from events that had already taken place, such as a forfeiture notice already served, a damages claim already instituted, rent review machinery already in train, and so on. However, whatever may be the position where there is an on-going transaction and intervening legislation, the present case involves a simple six-month loan transaction. All the relevant events, bar the completion of the appeal process, pre-dated the coming into effect of the 1998 Act. There is nothing to rebut the presumption that Parliament did not intend the Act to operate retrospectively so as to alter accrued rights or to impose obligations where none previously existed.
162. In my opinion, therefore, the Court of Appeal were in error in endeavouring to apply the 1998 Act to the loan transaction between FCT and Mrs Wilson. There was no occasion to attempt to read down the 1974 Act under section 3 and no occasion to make a section 4 declaration of incompatibility. I would accordingly allow the Secretary of State's appeal on this ground. My reasons are, I believe, substantially the same as those expressed by my noble and learned friends, Lord Nicholls of Birkenhead, Lord Hope of Craighead and Lord Rodger of Earlsferry, with which I respectfully agree.
Is section 127(3) of the 1974 Act compatible with the Convention?
163. The loan agreement between FCT and Mrs Wilson was an "improperly executed regulated agreement" because the document signed by Mrs Wilson misstated the amount of the credit and so did not contain all the prescribed terms. That is common ground.
164. Section 65(1) of the 1974 Act says that an "improperly executed regulated agreement is enforceable against the debtor on an order of the court only". It is to be noted that the agreement is not void or unlawful. It is merely unenforceable except on an order of the court. Section 127(1) of the Act says, inter alia, that in the case of an application for an enforcement order under section 65(1) the court "shall dismiss the application if, but (subject to subsections (3) and (4)) only if, it considers it just to do so ." Subsection (3) bars the court from making an enforcement order under section 65(1) in a case where there is no document containing all the prescribed terms that has been signed by the debtor. So, in the present case, the court was barred by section 127(3) from making an enforcement order in favour of FCT. Its discretionary power to make an enforcement order which otherwise would have been conferred by subsection (1) had been excluded by subsection (3).
165. It was contended before your Lordships that section 127(3) infringed article 6 of the Convention in that FCT was denied recourse to the court for the determination of the question whether the loan agreement should be enforced. This, in my opinion, is an impossible contention. Article 6, as each of my noble and learned friends has observed, provides a procedural guarantee of the right to have issues judicially determined. Article 6 is not concerned with the substantive law. True it is that the loan agreement between FCT and Mrs Wilson was a valid, lawful agreement. But the 1974 Act declared it to be unenforceable. Whatever the divide between substantive law and procedural law, and I respectfully agree that the line is sometimes difficult to draw, there is no doubt at all but that section 127(3) is a provision of substantive law denying the loan agreement the quality of enforceability.
166. Mr Hibbert counsel for the Finance and Leasing Association submitted that any statutory provision that rendered a valid agreement unenforceable infringed article 6 of the Convention. The extravagance of this submission became apparent when he extended it to contracts for the sale of land. If his submission were right it would follow that the familiar statutory provisions rendering contracts for the sale of land unenforceable unless in writing would be incompatible with article 6 Convention rights. In agreement with all of your Lordships I would reject the article 6 submissions.
167. Reliance was placed, in the alternative, on article 1 of the First Protocol. Section 127(3), it was submitted, deprived FCT of its right to enforce repayment of the £5000 loan and thereby deprived it of its "possessions". The deprivation was, it was argued, disproportionate. I would, for my part, reject the article 1 of the First Protocol point on two grounds.
168. First, article 1 of the First Protocol is directed to interference with existing possessions or property rights. FCT never had, at any stage in the history of the loan agreement, the right to enforce against Mrs Wilson the repayment of the £5000. Neither the 1974 Act as a whole nor section 127(3) in particular constituted an interference with a pre-existing right of FCT to enforce repayment by Mrs Wilson of the £5000. The Act, and section 127(3) prevented FCT from ever possessing that right. No authority has been cited to your Lordships for the proposition that a statutory provision which prevents a transaction from having the quality of legal enforceability can be regarded as an interference for article 1 purposes with the possessions of the party who would have benefited if the transaction had had that quality. In my opinion, the proposition should be rejected.
169. Second, the purpose or policy underlying the statutory bar on enforceability of a regulated loan agreement where no document containing all the prescribed terms has been signed by the debtor cannot, in my opinion, be categorised as disproportionate. The need to control moneylending transactions is as old as our civilization and I know of no legal system that has not imposed such controls. Indeed in some legal systems any lending of money on interest terms is barred. In this country there were strict statutory controls under the Moneylenders Acts 1900 to 1927. The 1974 Act represented a relaxation of the rigidity of the controls. The discretion allowed to the courts by section 127(1) of the Act was not to be found in its predecessors (see section 6 of the 1927 Act). These controls recognise the vulnerability of those members of the public who resort to pawnbrokers and moneylenders when in dire need of funds to make ends meet. They are open to exploitation; their bargaining power is minimal; their understanding of legal procedures and remedies is likely to be sparse. They need protection and part of the protection is the insistence by the Act that the "prescribed terms", representing the important terms of the loan transaction, must be set out in a document to be signed by the debtor if the repayment of the loan is to be enforceable. I do not accept that this protection, harshly though it may in some cases bear upon lenders, is disproportionate.
170. In my opinion, even if the 1998 Act were applicable to the loan transaction between FCT and Mrs Wilson there would have been no infringement of FCT's Convention rights.
171. One of the sub-issues argued before your Lordships was whether, when considering whether the provisions of the 1974 Act infringed FCT's Convention rights, the court should take into account other legal remedies which might be available to FCT. It was argued that under the general law a restitutionary remedy was available to FCT enabling recovery of at least the £5000. I am not clear whether the proposed remedy would be a common law remedy for money had and received or an equitable remedy based on Mrs Wilson's unjust enrichment, but identifying the correct description of the remedy is not for present purposes important.
172. My Lords there can, in my opinion, be no doubt at all but that in considering whether section 127(3), in rendering the £5000 loan unenforceable, constitutes an infringement of FCT's Convention rights, FCT's remedies in the round must be taken into account. If FCT is able under the general law to recover the £5000 by some means other than suing on the debt, the 1974 Act provisions preventing FCT from suing on the debt could not on any argument constitute an infringement of FCT's Article 1 rights. But it is, in my opinion, equally clear that no such alternative means of recovery are available to FCT. The decisions of this House in Orakpo v Manson Investments Ltd  AC 95 and, more recently, Dimond v Lovell  AC 384 stand in the way. Parliament's intention in enacting section 127(3) of the 1974 Act was to make a loan, made under a regulated agreement, unenforceable in certain events. The courts cannot defeat that intention by allowing some alternative means of recovery.
Use of Hansard
173. On this issue I am in complete agreement with, and cannot usefully add anything to, what has been said by my noble and learned friend, Lord Nicholls of Birkenhead.
LORD RODGER OF EARLSFERRY
174. On 9 November 1998 the Human Rights Act 1998 ("the 1998 Act") received the Royal Assent and, some twenty-three months later, on 2 October 2000 it came into force. The Act was intended to "bring home" rights under the European Convention for the Protection of Human Rights and Fundamental Freedoms ("the Convention") (1953) (Cmnd 8969). In terms of section 1(2), the Convention rights listed in the schedule have effect for the purposes of the Act. The main effect is to give people remedies in the domestic law of the United Kingdom if public authorities infringe their Convention rights - the so-called "vertical effect". The extent to which the Act also operates between private individuals - the so-called "horizontal effect" - is controversial. But it is recognised that, since courts are public authorities for purposes of the Act, a court order pronounced against one private party at the instigation of another may potentially infringe the first party's Convention rights. If giving effect to a Convention right under the Act means that the order has to be refused or modified, then that affects the rights of the party who sought it.
175. The present is said to be an example of that kind of case. Since my noble and learned friend Lord Nicholls of Birkenhead has given a full account of the facts, I need mention only the most important. In 1999 Mrs Wilson entered into a loan agreement with First County Trust Ltd ("First County"). The agreement was regulated by the Consumer Credit Act 1974 ("the 1974 Act"). Mrs Wilson pawned her BMW car as security. Under section 61(1)(a), if the debtor has not signed a document in the prescribed form containing all the prescribed terms, the agreement is "not properly executed", with the result that it "is enforceable against the debtor or hirer on an order of the court only": section 65(1). More particularly, in terms of section 127(3), if an agreement does not contain all the prescribed terms, the court is not to make an enforcement order unless the debtor has signed a document which does contain all the prescribed terms. Mrs Wilson's position was that the document in the prescribed form which she signed did not show the correct "amount of the credit", one of the prescribed terms. Moreover, she had signed no other document containing the prescribed terms. As a result, by reason of section 127(3) the court would not be able to make an enforcement order.
176. Section 142(1)(b) provides that, where a thing can be done by a creditor on an enforcement order only and the creditor has not made an application for such an order, an interested party may apply to the court for a declaration and
Where the court makes such a declaration, by section 113(3)(d), section 106 is to apply to any security provided in relation to the agreement. As a result, inter alia the security is to be treated as never having effect and any property lodged with the creditor solely for the purposes of the security is to be returned forthwith. Mrs Wilson sought a declaration which would have these effects.
177. The county court judge held that the loan agreement contained all the prescribed terms and he therefore refused to make the declaration which Mrs Wilson sought. She appealed, but in the meantime paid the necessary sum to recover her car. Mrs Wilson's appeal was heard after the 1998 Act had come into force. Reversing the county court judge, the Court of Appeal held that the agreement did not contain the prescribed term in question, the "amount of the credit". The agreement was therefore unenforceable by reason of section 127(3). See  EWCA Civ 633;  QB 407. The Court of Appeal eventually went on to hold, however, that section 127(3) infringed First County's rights under article 6(1) of the Convention and article 1 of the First Protocol ("article 6(1)" and "article 1" respectively). Since it was not possible to "read down" section 127(3) under section 3 of the 1998 Act so as to make it compatible with First County's Convention rights, the Court of Appeal gave effect to it by ordering First County to pay back the sum which Mrs Wilson had earlier paid to them to get her car back. But the Court of Appeal also made a declaration under section 4 of the 1998 Act that section 127(3) of the 1974 Act is incompatible with the rights guaranteed to the creditor by article 6(1) and article 1. See  QB 74.