[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> MRB Insurance Brokers Ltd, R (on the application of) v Kettering Magistrates' Court [2000] EWHC Admin 320 (4 April 2000) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2000/320.html Cite as: [2000] EWHC Admin 320

[New search] [Printable RTF version] [Help]

R v. KETTERING MAGISTRATES' COURT ex parte MRB INSURANCE BROKERS LIMITED [2000] EWHC Admin 320 (4th April, 2000)

Case No: CO/1721/99
IN THE SUPREME COURT OF JUDICATURE
QUEENS BENCH DIVISION
DIVISIONAL COURT
CROWM OFFICE LIST
Royal Courts of Justice
Strand, London, WC2A 2LL
Tuesday 4 April 2000

MR. JUSTICE DOUGLAS BROWN:
1. The applicant is a limited company carrying on the business of motor insurance broker. On 25 January 1999 the applicant company was convicted by Kettering Justices of one offence contrary to Section 20 (1) of the Consumer Protection Act 1987:
"On a date between the 8^th August 1997 and 31^st August 1997 at Kettering, in the County of Northampton, in the course of a business, you gave to Robin George Pulford, by means of an Instalment Payments agreement relating to the provision of credit for motor insurance, a price indication, namely the method of determining the sum to be repaid under the said agreement, was stated to be "Annual Percentage Rate (APR) 28.3%"' which was misleading in that the true annual percentage rate of charge was not less that 64%. Contrary to Section 20(1) of the Consumer Protection Act 1987".
2. On 11 February 1999 the applicant applied to the Justices to state a case pursuant to Section 111 of the Magistrates Courts Act 1980. The application was accompanied by a draft case stated. On 2 March 1999 the Clerk to the Justices certified pursuant to Section 111(5) of the Act that the magistrates were of the opinion that the application of the applicant company was frivolous and so certified in refusing the application. The applicant now applies with leave for judicial review of the Justices' refusal to state a case
3. The meaning of "frivolous" in section 111(5) was considered in R -v- Mildenhall Magistrates Court ex parte Forest Heath District Council (1997) 161 JP 401 where at 408 Lord Bingham CJ said:
"What the expression means in this context is, in my view, that the court considers the application to be futile, misconceived, hopeless or academic. That is not a conclusion to which Justices to whom an application to state a case is made will often or lightly come".
4. The circumstances were not entirely clear from the draft statement of case and have been amplified by affidavits. The circumstances were these. Two contracts were entered into, one of motor insurance and the other a credit agreement to facilitate the payment of the premium by instalments. The motor insurance agreement was entered into between the applicant and Mr Melvin Pulford acting as agent for his son, Mr Robin Pulford. Mr Robin Pulford entered into the credit agreement personally by signing the agreement in the appropriate place. The credit agreement bore the following information on the face of it:
a. Annual premium £252.60 ("cash price")
b. Total charge for credit £50.52 charged at 20% of the annual premium.
c. Total amount payable £303.12.
d. First payment £26.33 due 8.9.97
e. Total amount of credit £263. 12
f. Payable by 10 equal monthly instalments of £26.31
g. Annual percentage rate (APR) 28.3%
5. It is common ground that the stated APR was wrong. It is also common ground that the information given to the customer in the agreement, which I have set out and which was available to the prosecuting authority when they were formulating their charge, was wrong in the sense that material information was not mentioned. Firstly it did not include the information that Mr Pulford Senior had paid a deposit of £52 by means of his credit card when the motor insurance was arranged on the telephone on behalf of his son. Secondly, it did not include the fact, introduced into evidence before the Justices, that Mr Pulford's total insurance cover included £1 per month for personal accident cover and that these monthly payments of £1 were incorporated in the monthly payments to be made under the credit agreement. Further it was not immediately apparent, that the deposit of £52 included £12 paid in advance for the personal accident cover. It followed that the amount of the deposit in relation to the premium was not £52 but £40.
6. It was agreed that calculations using a computer programme designed by the Office of Fair Trading to calculate APRs, when applied to the figures set out in the credit agreement, produced an APR of not less than 64% which was how the information was framed. It is also agreed, although not agreed as the correct method of calculation, that if the figure of £263.12 is taken as the total amount of the credit and the APR is calculated excluding the personal accident cover, then the true rate is 46.8%. However, the respondent local authority say that this is an erroneous approach. If the APR is recalculated on the assumption that the personal accident cover is excluded from the computation, then the amount of credit was £252.60 and the true APR was 65.1%. This appears from the affidavit of Mr Smith, a Trading Standards Officer, who exhibited his detailed calculations to his affidavit. These calculations were not seriously challenged before us.
7. Turning to the grounds relied upon the first is that despite the fact that it is conceded the APR stated was wrong, if the true rate was 46.8% then, although it is a point of pure technicality, the difference between the two APRs represents such a substantial divergence from the particulars that the conviction cannot stand. This argument fails if the arithmetic is wrongly based and the true APR is 65.1% which obviously is not less than 64%. In my view the evidence of Mr Smith is compelling and his calculations unassailable. That disposes of the first ground.
8. The second ground is of more substance and that is that a statement of an APR is not an indication as to price and accordingly a conviction on a summons that alleges that it is a price indication must fail. Mr Philpott, counsel for the applicant, pointed out that there was no dispute that the instalment payments agreement was a regulated consumer credit agreement and paragraph 15 of Schedule 1 to the Consumer Credit (Agreements) Regulations 1983 required the APR to be stated in such an agreement. Any failure to do so resulted in the agreement being unenforceable except by court order: see section 65(1) of the Consumer Credit Act 1974. An APR is "information" required to be contained in regulated agreements pursuant to Regulation 2(1) of the 1983 Regulations. This provision is not complied with if the APR was wrong. The APR is a term of the contract and he submitted that Section 20 of the Consumer Protection Act 1987 under which the charge was brought makes it an offence to give an indication which is misleading and not a term of the contract. He submitted that `price' by Section 20(6) means "the aggregate of the sums required to be paid by a consumer for ..................the provision of services". The APR did not refer to the cost of the services but to the regular interest to be applied and it is stretching language too far to say that this was an indication of price. Finally, and he submitted that it was a compelling argument, it was agreed with the respondent that an indication must be a pre-contract indication. To quote from his skeleton argument:

"the contract had been made well before any question of an APR arose. The contract made on the telephone between Mr Pulford Senior and the applicants, had been concluded before any question of an APR arose".

9. Mr Scholz for the respondent accepted that the APR could be a term of the agreement. That did not however, preclude it from being an indication. The word "indication" casts the net widely. It is not a representation or a warranty. Every term is an indication for the purposes of the act; not every indication is a term of the contract. Section 20(1) was not confined to cases where a price higher than that previously indicated, was charged and he referred by way of example to Section 21(1)(e) of the 1987 Act:
"For the purposes of Section 20 above an indication given to any consumers is misleading as to a price if what is conveyed by the indication or what those consumers might reasonably be expected to infer from the indication or any omission from it, includes any of the following, that is to say (e) that the facts or circumstances by reference to which the consumers might reasonably be expected to judge the validity of any relevant comparison made or implied by the indication are not what in fact they are".
10. Mr Scholz drew particular attention to Section 20(6) where price in relation to any services means:
"(a). the aggregate of the sums required to be paid by a consumer for or otherwise in respect of the supply of the goods or the provision of the services, accommodation or facilities; or
(b). except in Section 21 below any method which will be or has been applied for the purpose of determining that aggregate".
11. Mr Scholz submitted that the applicant's argument was completely wrong where it relied upon the indication as to the APR being post-contractual. The argument overlooks the fact that there were in fact two agreements, the insurance agreement concluded on the telephone by Mr Robin Pulford's father as agent and the credit agreement entered into personally by Mr Pulford. Before Mr Pulford signed the credit agreement he would have available for his consideration the stated APR of 28.3% which, before he decided to commit himself and during the 5 day cooling off period, when he could resile from the bargain, he could compare with rates available elsewhere. In my view Mr Scholz' submissions are correct. The total amount payable under the contract which can properly be described as the price, should be arrived at by reference to the APR. The APR given was very substantially below the true APR and Mr Pulford Junior was given a totally false indication as to how the aggregate of the sums required to be paid would be determined. In those circumstances clearly a misleading indication as to price was given. The question as to the enforceability of the agreement is quite irrelevant.
12. A third ground relies on Section 170(1) of the Consumer Credit Act 1974
which provides:
"A breach of any agreement made (otherwise than by any court) by or under this Act shall incur no civil or criminal sanction as being such a breach, except to the extent (if any) expressly provided by or under this Act".
13. Mr Philpott submitted that this provision expressly prohibits any further sanction for a failure correctly to state an APR from a regulated agreement and this would include a criminal sanction under the 1987 Act. The 1974 Act does not make a failure to correctly state an APR on a regulated agreement a criminal offence and in those circumstances it clearly was not the intention of Parliament to make it such an offence. The 1974 Act in fact creates a substantial number of criminal offences set out in Schedule 1. He argued that even without Section 170(1) of the 1974 Act the 1987 Act should not be used to create a criminal offence in an area which is already completely codified by the 1974 Act. The misleading price indication provisions of Section 20 of the 1987 Act were designed to deal with advertisements, price tickets etc., not written terms of agreements. Mr Scholz submitted that the indication given to Mr Pulford of the true cost of the credit facilities being offered to him expressed as an APR of 28.3% amounted to a misleading price indication within the meaning of Section 20 of the Consumer Protection Act 1987. The applicant company was not charged with any breach of any requirement made by or under the Consumer Credit Act 1974. For the purposes of the charge laid it was irrelevant whether the agreement signed by Mr Pulford was a regulated agreement and whether it conformed to regulations made under the Act of 1974. The purpose of Section 170 (1) of the 1974 Act was to clarify (by disapplying) the common law rules relating to breaches of an Act of Parliament. In my view Mr Scholz' argument again, is correct. The section precludes proceedings on indictment as a common law misdemeanour of acts or omissions which are contrary to prohibitions or commands of a statute. An example of this is R -v- Lennox-Wright (1973) Criminal Law Review 529. The problem was considered in Brookes -v- Retail Credit Cards Ltd. (1986) CCLR 5. Retail Credit Cards Ltd. was charged with aiding, abetting, counselling or procuring offences committed by another person under the Consumer Credit Act 1974. Section 170(1) was raised as a defence.
14. At page 10 Lord Justice Lloyd said:
"The exclusion of civil sanctions other than those provided in the Act serves an obvious purpose. Exclusion of criminal sanctions is not so easy to understand. Whatever the reason for the exclusion and whatever it was intended to cover, I am clear that it does not exclude the liability of accessories".
15. Mr Scholz referred to passages in 2 text books which support his contention. Volume 1 of Professor Goode's work Consumer Credit Legislation paragraph 2770 contains this expression of view:

"It is true that Section 170(1) only precludes an action for breach of statutory duty as such (this is the significance of the words "as being such a breach" in the sub-section)"
and Bennion, Consumer Credit Control Volume 1 paragraph 10.190, described the purpose of Section 170(1) in this way
"the purpose of this provision is to clarify the position in relation to the application of the common law to breaches of the Act. Under common law rules evolved by the Judges, breach of an Act of Parliament may have certain consequences not spelt out in the Act itself (though the common law rules can be nullified or modified if the Act so provides) These rules arise from the basic fact that any act done in contravention of a statute must of its nature be an illegal act, and it is the policy of the common law to punish illegality and deprive its perpetrators of any advantage they might gain from it".
16. In my view the law is correctly stated by the authors of these text books. The examples given of the offences and proceedings covered by it are common law offences such as those to be found in R -v- Lennox-Wright and R -v- Hall (1891) 1 QB 747. In my judgment Section 170(1) is not an obstacle to a prosecution under the Consumer Protection Act 1987, where the provisions of Section 20 are apt to cover a factual situation such as that which arose in this case. I would dismiss this application: if in due course a case were to be stated on the lines of the draft case, it would be clear that the magistrates had arrived at a correct conclusion.
LORD JUSTICE SCHIEMANN:-
I agree with my Lord that this application ought to be dismissed. I would dismiss it on the basis that if a case were in due course to be stated in the form of a draft case it would show that the magistrates had come to the right conclusion as a matter of substance.
I agree with my Lord that the evidence before the magistrates did support the allegation that the APR was not less than 64%.
Turning to the point of substance I only add this. S.20 of the Consumer Protection Act 1987 states that a person shall be guilty of an offence if
"he gives (by any means whatever) to any consumers an indication which is misleading as to the price at which any ....services ...or facilities are available".
Services and facilities include credit facilities - s. 22(1). The consumer in the present case was Mr R.G. Pulford who wished to be given the credit and supplied with the insurance cover. He was presented with a document to sign which indicated that he would be given credit at an APR of 28.3%. and that the end price had been calculated on that basis. It is provided in s.21 that
"an indication given to any consumers is misleading as to a price if what is conveyed by the indication .... includes any of the following, that is to say -
(a) that the price is less than in fact it is;
........
(e) that the facts or circumstances by reference to which the consumers might reasonably be expected to judge the validity of any relevant comparison made or implied by the indication are not what in fact they are."
It is provided in s.21(2) that
" an indication given to any consumers is misleading as to a method of determining a price if .... what those consumers might reasonably be expected to infer from the indication ... includes .. that the method is not what in fact it is".
That appears to me to be precisely what happened in this case. The indication was misleading. It was given to a consumer before he signed the agreement. He would not be bound by any agreement until he did sign it. But during the period in which he was considering whether to enter into this or any other agreement he would be misled as to the APR which the applicants were offering. That is precisely the sort of thing which this Act is trying to prevent.
These applicants were on the agreed facts rightly convicted and I would therefore refuse the leave sought.