Wilson v First County Trust Ltd (No 2)

Under the Human Rights Act 1998, a court deciding an appeal after the relevant provisions have commenced must assess compatibility by reference to the order it is making, even if the underlying agreement predates commencement. Primary legislation must be read compatibly with Convention rights so far as legally possible, but the court cannot give words a meaning they cannot bear. A statutory rule which removes all judicial control over enforcement of contractual rights, without regard to prejudice, culpability or the circumstances of the case, may be disproportionate. Section 127(3) of the Consumer Credit Act 1974 was incompatible with article 6(1) and article 1 of the First Protocol because it imposed such an inflexible bar. A declaration of incompatibility records that conclusion without invalidating the legislation.

Mrs Penelope Wilson appealed against an order made on 24 September 1999 by His Honour Judge Hull QC in the Kingston upon Thames County Court. The dispute concerned a regulated pawnbroking agreement which stated the loan as £5,250, although £250 was a document fee and the actual credit was £5,000. The Court of Appeal had held in interim judgments that the agreement was improperly executed because the amount of credit was misstated.

At the further hearing, the court considered whether the Human Rights Act 1998 applied to an order made after 2 October 2000, whether section 127(3) of the Consumer Credit Act 1974 was incompatible with article 6(1) and article 1 of the First Protocol, whether a compatible interpretation was possible, and whether a declaration of incompatibility should be made.

1. The appeal was allowed. The document fee formed part of the total charge for credit, not the amount of credit. The agreement therefore misstated the prescribed term and was not properly executed under the Consumer Credit Act 1974. Sections 65(1) and 127(3) prevented enforcement of the agreement and, at least prima facie, enforcement of the pledged security.
2. The relevant provisions of the Human Rights Act 1998 applied. The relevant event was the making of the appellate order after 2 October 2000, rather than the making of the agreement in 1999. Section 22(4) concerned the retrospective application of the remedial provisions in section 7 and did not prevent the court applying sections 3, 4 and 6 to its present order.
3. An improperly executed agreement could still create contractual rights, and delivery of the pawn could transfer possessory rights. The statutory scheme restricted enforcement rather than eliminating those rights. The restrictions therefore engaged article 6(1) and article 1 of the First Protocol. Section 127(3) imposed an absolute bar without allowing consideration of prejudice, culpability or possible compensation, unlike the discretionary scheme in section 127(1). The court applied the proportionality principles in (1998) 29 EHRR 245, (1982) 5 EHRR 35, (1986) 8 EHRR 123 and (1986) 9 EHRR 1.
4. Although consumer-credit regulation pursued legitimate social-policy objectives, deference did not require unquestioning acceptance of an unexplained legislative choice. The preparatory materials disclosed no sufficient policy reason for excluding all judicial consideration in cases involving omitted prescribed terms. The inflexible prohibition was disproportionate.
5. Section 3(1) required the court to adopt any legally possible interpretation which avoided incompatibility, but did not permit words to be given a meaning they could not bear. Section 127(3) contained an irreducible minimum requirement that a document signed by the debtor contain all prescribed terms. No compatible interpretation was available. The court also rejected the suggested distinction between prohibited enforcement of security and retention of the pledged property.
6. The incompatibility lay in the primary legislation, not in the existence or content of the prescribed terms. A declaration of incompatibility was appropriate under section 4(2). The court expressed no view on whether any unjust-enrichment claim had become viable. The appeal was allowed, a declaration of incompatibility was made, judgment was entered for the claimant for £6,900, and costs were awarded.

• Court of Appeal (Civil Division): Interim judgments were handed down on 23 November 2000, reported at [2001] QB 407. Following further submissions, the court allowed the appeal, made a declaration of incompatibility and refused permission to appeal to the House of Lords.
• Kingston upon Thames County Court: His Honour Judge Hull QC made the order dated 24 September 1999 from which the appeal was brought.