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England and Wales Court of Appeal (Civil Division) Decisions

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Cite as: [2002] EWCA Civ 634

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Neutral Citation Number: [2002] EWCA Civ 634

(His Honour Judge Havelock-Allan QC)

Royal Courts of Justice
London WC2
Thursday, 18th April 2002

B e f o r e :





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Miss S Carr (instructed by Messrs Weightmans, Liverpool) appeared on behalf of the Appellant Defendants.
Mr R Slade (instructed by Messrs Ross Aldridge, Stroud, Glos) appeared on behalf of the Respondent Claimants.



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  1. LORD JUSTICE BROOKE: I will invite Sir Christopher Staughton to give the first judgment.
  2. SIR CHRISTOPHER STAUGHTON:The defendants in this action, Branton Edwards, appeal, with leave, from an order made by Judge Havelock-Allan QC at a case management conference in the Bristol Mercantile Court.
  3. The claimants are two companies which carried on the business of hiring out cars on credit to motorists whose means of transport has for the time being been removed from circulation by an accident. Although there are two companies, we are told that the second named, Car Crash Line UK Limited, are not (currently at any rate) participating in the action and can be disregarded for the moment. Nevertheless, I shall refer to the claimants as the "finance companies".
  4. In February 1997 the claimants engaged Messrs Branton Edwards, a firm of solicitors in Manchester, to advise them, so they say, in the operation of their business. It was part of the operation of the finance companies that the customers, as I will call them (that is to say, the people who needed cars when their means of transport had broken down), were supposed to pay for the hire of the cars when there had been a recovery from the insurers of the third person who had been responsible for the accident. In practice, that was the time when the hire charges were paid. However, as I understand it, in theory they were supposed to be paid whether there was a recovery from third parties or their insurers or not.
  5. It turned out that these transactions were governed by the Consumer Credit Act 1974. They were regulated consumer credit agreements. The Consumer Credit Act, as we all know, is an Act of some complexity, particularly in the detailed provisions of its statutory instruments. The finance companies had not complied with that legislation. The contracts that they made were in consequence unenforceable under section 127 of the Act. What is more, by subsection (3) of that section the court did not have power to authorise enforcement, so it is said. The defendant solicitors, charged with negligence in arranging the documentation for the finance companies to use, say that, even if the contractual charges had not been enforceable because of the Consumer Credit Act, nevertheless there is a restitutionary remedy which the finance companies must operate in order to mitigate the loss which they are claiming from the solicitors, if for no other reason. The first and major part of the claim relates to some 400 agreements where it is said that the customers have received, or will receive, compensation from the third parties or their insurers and decline to part with it in favour of the claimants. So it is said that this is a loss suffered by the negligence of the solicitors.
  6. There has been no dispute before us that under the Consumer Credit Act the contracts are not enforceable, subject only to the Human Rights Act. The question, however, is whether the claim for a restitutionary remedy would be enforceable. Such a claim, at first sight, would meet an obstacle in the form of a decision of the House of Lords, Dimond v Lovell [2000] 2 WLR 1121, where the key point was expounded by Lord Hoffmann. That also was a case of a regulated agreement under the Consumer Credit Act which was not enforceable as such. It was held that an alternative claim in unjust enrichment could not succeed in those circumstances. Lord Hoffmann, at p.1131, said this:
  7. "The real difficulty, as it seems to me, is that to treat Mrs Dimond as having been unjustly enriched would be inconsistent with the purpose of section 65(1) [the section which made the agreement unlawful]. Parliament intended that if a consumer credit agreement was improperly executed, then subject to the enforcement powers of the court, the debtor should not have to pay. This meant that Parliament contemplated that he might be enriched and I do not see how it is open to the court to say that this consequence is unjust and should be reversed by a remedy at common law ..."
  8. The present action was started on 5th March 2001, after the coming into force of the Human Rights Act 1998 on 2nd October 2000.
  9. The case of Wilson v First County Trust Ltd [2001] QB 407 came before the Court of Appeal (consisting of Sir Andrew Morritt V-C, Chadwick and Rix LJJ) on 9th November 2000. The matter was adjourned for representations to be made by the appropriate Minister as to whether section 127(3) of the Consumer Credit Act was compatible with the Human Rights Act and, in particular, article 6 and article 1 of the First Protocol. The adjourned hearing happened on 19th March 2001. It is reported at [2002] QB 74. In that case it was a contractual claim. There was not a restitutionary claim, although attention was drawn to the fact that the position might be similar in the case of a restitutionary claim. The Court of Appeal concluded that section 127(3) was contrary to the Human Rights Act.
  10. Sir Andrew Morritt gave the judgment of the court. At paragraph 40 of the judgment it was said:
  11. "... we are satisfied that (subject to the application of section 3(1) of the 1998 Act) the provisions in section 127(3) of the 1974 Act are incompatible with the rights guaranteed by article 6(1) of the Convention and article 1 of the First Protocol."
  12. The court then went on to consider the difficult task required of judges by section 3, which is to search for some other legitimate interpretation of the statute which would be compatible with the Human Rights Act if it was legally possible. But the Court of Appeal concluded that it was not possible. They said in terms, at paragraph 45:
  13. "We conclude that it is not possible to read and give effect to the relevant provisions of the 1974 Act in a way which is compatible with the pawnbroker's Convention rights."
  14. They then went on to consider whether a declaration of incompatibility should be made. They held, in paragraph 47, that this would serve a legislative purpose under the 1998 Act, in that it provided a basis for a Minister of the Crown to consider whether there are compelling reasons to make amendments to the legislation.
  15. Then, at paragraph 49, they touched on the question of a restitutionary remedy. They said:
  16. "There is no counterclaim for unjust enrichment in the present proceedings. We express no view on the question whether the prospects of successfully pursuing such a claim - which may be taken to have been minimal in the light of Lord Hoffmann's observations in Dimond - have been affected, in any way, by anything which we have decided on the present case. It is unnecessary for us to do so. We are satisfied that, whether or not there is any substance in the submission that those prospects have been revived by this judgment, the point is irrelevant to the question whether a declaration of incompatibility should be made in this case."
  17. Their Lordships obviously thought it right to proceed with a considerable degree of caution.
  18. The case of Wilson v First County Trust Ltd is, we are told, to be brought before the House of Lords. We are led to believe that it may be heard next October. We are also told that the argument for the appellant in that case is to receive the support of the Secretary of State for Trade and Industry.
  19. Meanwhile, we return to the present action. His Honour Judge Havelock-Allan held a case management conference in November. He was asked to order a preliminary issue in the following terms: whether, as a matter of law, the claimant had
  20. "... a restitutionary remedy against its customers, that is the hirers, to recover (a) generally on a quantum meruit basis and (b) specifically all or any of the monies recovered by customers from third parties attributable to the customers' claims for loss of use of their vehicles."
  21. So in effect he was being asked to order a preliminary issue to decide whether the ruling of Lord Hoffmann in Dimond's case still applied to restitutionary claims or whether the bar on them in section 127 was contrary to the Human Rights Act.
  22. He said, in a very short judgment:
  23. "It seems to me that ... I am bound by that decision [in Dimond], notwithstanding that the Court of appeal, in Wilson v First County Limited, has now made a declaration of incompatibility of Section 127(3) with the Human Rights Act. The declaration of incompatibility of itself does not entitle me to depart from Section 127(3). I have to await the amending legislation.
    It seems to me equally that I am, therefore, bound also to accept for the time being that in so far as the agreements here are regulated agreements which do not comply with the prescribed terms under the 1974 Act, they are unenforceable by virtue of Section 127(3), and there is no right in point of contract of the claimant to pursue the hirers." [my emphasis]
    After judgment Mr Maher, the solicitor who was appearing for the defendant solicitors, said this:
    "MR MAHER:... there is one other outstanding matter, and that is that I think the effect of your Lordship's decision on the preliminary issue point may actually be to preclude me from pursuing the issue of restitution further beyond today.
    JUDGE HAVELOCK-ALLAN:The decision, in so far as I hold or take the view that I am presently bound by the decision in Dimond v Lovell, on the unjust enrichment point, until such time as Section 127(3) is modified by legislation in the light of the declaration of incompatibility in Wilson, means that you are precluded, until that time arises, in this action from pursuing it. That is absolutely right.
    MR MAHER:That being so, my Lord, my application is for leave to appeal on that issue. ...
    JUDGE HAVELOCK-ALLAN:Well, I refuse permission for two reasons. One because I am clear that I am bound by the decision of the House of Lords and it must be for a Lord Justice of Appeal, I think, to take a different view, were you to apply to him; and secondly, because it is a case management decision, which does not finally shut you out from arguing the point as and when, in my judgment, it becomes permissible for you to do so with any success in this court."
  24. I would be the last person in the world to reproach a judge for expressing a forthright view on a point which he thought was perfectly clear. One could say that that is what judges are for. However, it is not the function of a case management conference in the ordinary way to decide issues in a case, although a judge can quite appropriately express a view on occasion. I can recall Lord Reid in the House of Lords saying on one occasion that my opponent, Mr Lloyd, was "going to have a hard row to hoe". If such an expression of view can be pronounced at so high a tribunal, why not in a case management conference in the Bristol Mercantile Court? It was in my opinion well within the judge's powers to say, if he thought fit, "I regard your point as hopeless, and so I do not order a preliminary issue."
  25. The order that was drawn up did not say anything about what the defendants would or would not be entitled to argue in any further proceedings. It merely said that the defendants' application for a preliminary issue would be dismissed. If any doubt remains, I would pronounce here and now that the defendants may argue any point which they rely on in future proceedings, even if the judge has expressed a view that it is not going to help them. We are told by counsel on one side that this was not fully argued before the judge. We are told by counsel on the other side that it was fully argued. We leave that undecided.
  26. That deals with the first point raised by Miss Carr on this appeal. Secondly, she raises again the question whether there should be a preliminary issue on that point. The situation (which was not known to Judge Havelock-Allan) is that Wilson is going to the House of Lords and will be before their Lordships probably in October. Meanwhile, the Minister has not put forward any new legislation under section 10 and the First Protocol. He is, as I have said, supporting the appeal. When that appeal is heard and when the Minister, if necessary, then decides whether he will or will not put before Parliament for affirmative resolution an amendment to the law, much that is now obscure will be revealed. In the Latin which we are not allowed to use, quicquid latet apparebit. It is, to my mind, preferable - I will not say essential, but preferable - that the resolution of this case, or at any rate that part of it, should await the determination of those questions.
  27. However, Miss Carr has another argument. That is, in effect, that it is not necessary that there should be any alteration of the law by the Minister for her claim in this case to succeed in respect of unjust enrichment. She says (and this is quite true) that Lord Hoffmann based the decision in Dimond's case on the parliamentary intention of the legislature in passing the Consumer Credit Act and, in particular, section 127 and section 65, which was no longer the parliamentary intention today. Parliament has passed the Human Rights Act and has a wholly different intention. This does not appear to have occurred to Judge Havelock-Allan, which is not surprising; I am not sure whether it was put before him. I will not express any view on that point, any more than on the major point in the case on the Human Rights Act. History shows that we should not do so at this stage.
  28. Finally, I say this. The judge may like to consider - and I emphasise "may" - whether the present fixture for an eight-day hearing of this case in September in the Bristol Mercantile Court ought perhaps to be reconsidered. I say no more than that.
  29. I would dismiss this appeal.
  30. LORD JUSTICE KAY: I agree as to the outcome of the appeal.
  31. I am not, however, persuaded that it is necessarily desirable for the case not to proceed at first instance in its entirety in September. However, that is a matter for the parties and the trial judge. I do not think it would help for me to express any more detailed view on the considerations which will determine what should happen in that regard.
  32. LORD JUSTICE BROOKE: I agree. I too would express no view as to the appropriateness of any other course being taken in September than that which is at present contemplated. That is very much a matter for the judge at Bristol to decide.
  33. I wish only to add one further matter in relation to Part 3 of the Civil Procedure Rules. CPR 3.1 gives the court a welcome range of powers to make orders on case management conferences. It may direct a separate trial of any issue; it may decide the order in which issues should be tried; it may exclude an issue from consideration, and so on. Part 23 sets out the form in which applications for orders should be made, and CPR 23.3(1) provides that the general rule is that an applicant must file an application notice. On this occasion the defendants were seeking an order that there should be a preliminary issue on the question whether:
  34. "... as a matter of law does the claimant have a restitutionary remedy against its customers ... to recover (a) generally on a quantum meruit basis and (b) specifically all or any of the monies recovered by customers from third parties attributable to the customers' claims for loss of use of their vehicles?"
  35. They were not seeking an order that the judge should decide there and then a preliminary issue in the case. The judge had no power to make an order of this kind of his own initiative without complying with the procedural rules set out in CPR 3.3; and Miss Carr has told us that, if any definitive ruling which would be binding on the trial judge had been contemplated, her side might well have wished to instruct counsel to go down to Bristol and argue the point fully.
  36. In those circumstances it is quite plain to me that the judge had no power at the case management conference to make a ruling on the issue which would be binding on the trial judge, although if (as seems likely) the same judge is the trial judge, it may well be that he will reach the same decision on the point as he reached at the case management conference.
  37. But for those matters, I agree that the appeal should be dismissed for the reasons given by Sir Christopher Staughton, with which I agree.
  38. Order:appeal dismissed; costs of appeal to be costs in the issue whether there is a restitutionary claim available.

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