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Wilson v Howard Pawnbrokers

Court of Appeal 5 February 2005 EWCA Civ 147 CCLR 2

A sequence of 67 agreements was entered into by Mrs Penelope Wilson, covering 13 groups of items, periodically paying off the capital and interest on each one and then re-pledging the same items under a fresh agreement. She sued the pawnbroker on the grounds that the agreements were extortionate, and that some were unenforceable. At the lower court, the Judge found that some of the agreements were unenforceable, and that all but the first couple were extortionate, because the rate was exorbitant and was rolled-up to the lender's benefit at each re-pledging. He therefore considered that the extortionate agreements should be recalculated at 36% per annum and asked for accounts to be prepared on the basis that Mrs Wilson was to receive return of her goods, stating that he would make an order at a later date unless the parties could agree beforehand.

There was no meeting of minds, so the Judge made an order at the level originally requested by Mrs Wilson.

She then appealed, on the basis of s.106 of the Consumer Credit Act 1974 which states that "the security.shall be treated as never having effect" and property shall be returned and "any amount received by the creditor. on realisation of the security." is to be repaid. Mr Howard said this was unfair on the rolled-up agreements, since for a £100 loan rolled-up twice, Mrs Wilson would receive £300 as well as the goods.

The Court of Appeal considered that this was unacceptable, since the trial Judge had decided correctly that each successive agreement was a new, separate one, and that this was done for the pawnbroker's own additional profit, in that he was charging interest on interest. It was also noted that Mr Howard was not correctly licensed. Lord Justice Sedley concluded that "the moral for a pawnbroker such as Mr Howard is that if he wants the rewards of his trade he must operate strictly by the book, and that the failure to do so may be not merely to unravel agreements, but to reverse the indebtedness that they have purportedly caused." Appeal dismissed with costs.