1999.004 'Multiple Agreements
Under the Consumer Credit Act 1974'
I have written this article to explain the intended application
of section 18 of the Consumer Credit Act 1974, which deals with
multiple agreements. It seems desirable to do this in view of
the widespread misapprehension concerning section 18 1.
Purposes of section 18
Section 18 is both an anti-avoidance
provision and a clarifying provision. In pursuit of the first
purpose, it seeks to prevent credit grantors and hirers from evading
the Act by combining in one agreement transactions it intends
to regulate with others it does not. In pursuit of the second
purpose, it states the consequences of the obvious fact that the
whole or parts of a single agreement, even when it is not designed
for evasion of the Act, will often fall into more than one category.
It spells out what under earlier legislation had been left to
the court to divine, and should be taken as declaratory of what
the courts might have been expected to lay down even without its
guidance 2.
The expression ‘multiple agreement’
is defined by section 18(1) as an agreement whose terms are such
as-
‘(a) to place a part
of it within one category of agreement mentioned in this Act,
and another part of it within a different category of agreement
so mentioned, or within a category of agreement not so mentioned,
or
(b) to place it, or a part
of it, within two or more categories of agreement so mentioned.’
The clue to the meaning of this lies
in the fact that the Act and its accompanying subordinate legislation
make use of a large number of classifications of credit and hire
agreements. Section 18(1) refers to each of these as ‘a
category of agreement mentioned in this Act’, a phrase which
should also be taken to embrace categories of agreement mentioned
in subordinate legislation made under the Act
3. I will refer to all of these as ‘CCA categories’.
Section 18(1) also refers to categories of agreement not mentioned
in the Act, which I will refer to as ‘non-CCA categories’.
The wording of section 18(1) is highly
compressed statutory language. It applies cumulatively, that is
both paragraph (a) and paragraph (b) can apply to the same agreement.
Pulling the language apart, we can say that each of the following
is a ‘multiple agreement’.
1. An agreement whose terms are such
as to place one part of it (‘part A’) within one CCA
category and another part of it (‘part B’) within
a different CCA category 4.
2. An agreement whose terms are such
as to place one part of it (‘part C’) within a CCA
category and another part of it (‘part D’) within
a non-CCA category 5.
3. An agreement whose terms are such
as to place the whole of it within two or more CCA categories
6.
4. An agreement whose terms are such
as to place a part of it (‘part E’) within two or
more CCA categories 7.
The same agreement can fall into
two or more of these four classes. I will refer to agreements
falling within them as Class 1, Class 2, Class 3 and Class 4 agreements
respectively. It may be wondered why there is not a fifth class,
designating an agreement whose terms are such as to place the
whole of it within a CCA category and also within a non-CCA category.
This is ignored by section 18 because it does not need mentioning.
The fact that the whole of an agreement falls within a non-CCA
category is ex hypothesi irrelevant to the working of the Act,
whether or not the whole of the agreement also falls within
one or more CCA categories. There
is therefore no need for section 18 to say anything about it.
What is a ‘category of agreement’?
Section 18 can be understood only
if the nature of a ‘category of agreement’ is grasped.
The expression is not defined in the Act, and has caused difficulty.
It was not defined because it is intended to be infinitely flexible:
it means whatever the context requires it to mean.
The potential meaning of the phrase
can be grasped by supposing that a list were compiled of every
type of agreement ‘mentioned in the Act’, that is
every possible ‘CCA category’. The Act begins to mention
types of agreement in section 8. Starting the list there, one
would get the following CCA categories: personal credit agreement,
consumer credit agreement, regulated agreement and exempt agreement.
Going on to section 9 one would add hire-purchase agreement. Section
10 refers to ‘running-account credit’ rather than
‘a running-account credit agreement’. This variation
in wording does not make any difference to the operation of the
principle. A personal credit agreement which provides running-account
credit is a distinct ‘category of agreement mentioned in
this Act’ within the meaning of section 18. Wherever the
Act says something specific about a certain sort of agreement,
in whatever way it says it, that creates a ‘CCA category’.
This is perfectly plain, so it is
puzzling that commentators have had difficulty with it. Professor
Goode says that the phrase ‘category of agreement mentioned
in this Act’ is susceptible of two different interpretations,
one confined to agreements mentioned in Part II of the Act and
the other going wider.8 This view is untenable
under the principles applicable to statutory interpretation, since
there is no reason why the plain words ‘mentioned in this
Act’ should be construed as if they read ‘mentioned
in Part II of this Act’. Professor Goode’s suggested
alternative meaning, namely a class of agreement ‘accorded
distinct legal treatment by the Act’, is obviously the correct
one.
In their note to section 18 Guest
and Lloyd also seek to read in words that are not present in the
Act. The note says the reference to two or more categories ‘must
mean disparate categories, otherwise all agreements would be multiple’.
They go on to say that even the simplest credit agreement necessarily
falls within two or more categories, ‘e.g. personal credit
agreement, consumer credit agreement, regulated agreement etc’.
This is obviously correct, but it does not affect the plain meaning
of section 18 or hinder its operation in any way. It provides
no justifiable ground for reading in restrictive words not included
by the draftsman. Echoing Guest and Lloyd, A. H. Macdonald said-
‘Every regulated agreement
must be either fixed sum or running account: every regulated agreement
must be either debtor-creditor or debtor-creditor-supplier. If
those are categories, then every regulated agreement falls into
two categories and so every regulated agreement must be multiple.
The Act can’t mean that.’9
The Act does mean that. However the
effect is not as troublesome as these commentators think. All
section 18 says about say a fixed-sum debtor-creditor agreement
is that it is to be treated as an agreement in both of those categories.
It is a fixed-sum credit agreement, and it is a debtor-creditor
agreement. So any provision of the Act expressed in terms of fixed-sum
credit applies to it, and any provision expressed in terms of
debtor-creditor agreements applies to it. That is only what one
would expect. The agreement is a multiple agreement, but this
presents no practical problems.
What the Act says about each of the
relevant types of agreement has effect in relation to any multiple
agreement, and theoretically it (together with the subordinate
legislation) has to be considered in relation to each relevant
agreement in turn. In practice this is not necessary. The experienced
practitioner quickly perceives what is required. If for example
one of the relevant types of agreement is ‘exempt agreement’
nothing more is needed: the Act does not apply. If one of the
types is ‘regulated agreement’, then all that is needed
is to comply with the requirements relating to the relevant type
of regulated agreement. And so on.
What needs to be understood (and
has been misunderstood by many commentators) is that section 18
has a practical effect only where it needs to have one, and can
otherwise be ignored. It is a common technique of the parliamentary
drafter to operate in this way 10.
Subsections (2) to (4) of section
18
The sole purpose of mentioning a particular type of agreement
in the Act is to lay down rules for an agreement which lies within
the category indicated, but only so far as it lies within it.
A
1.
I am grateful to Professor Paul Dobson for help in updating an
early draft of this article, which I began writing some years
ago. 2. See,
e.g., Mutual Finance Ltd. v Davidson [1963] 1 WLR 134,
discussed below. 3. Here
I have to admit that as well as referring to categories of agreement
mentioned (or not mentioned) in the Act, section 18 should also
have referred to categories mentioned (or not mentioned) in subordinate
legislation made under the Act. Since however the section is,
as explained above, to be looked on as declaratory of the position
which the courts ought to arrive at without its benefit, it is
submitted that it would be a correct construction to regard the
phrase ‘mentioned in this Act’ as if it read ‘mentioned
in this Act or in regulations or orders made under this Act’. 4. Section
18(1)(a), first portion. 5.
Section 18(1)(a), second portion. 6. Section
18(1)(b), first portion. 7. Section
18(1)(b), second portion. 8. Consumer
Credit Legislation, paragraph 561. 9. Credit,
April 1986, page 20. 10. It
is known as weightless drafting: see Bennion, ‘Threading
the Legislative Maze - 6’ 162 JP [1998] 856.
