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Part II Related Doctrines, 11 New Horizons: Good Faith, Contractual Discretions, and Human Rights

From: McMeel on The Construction of Contracts (3rd Edition)

Gerard McMeel

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

Breach of contract — Construction of contract — Interpretation of contract — Performance of contract

(p. 391) 11  New Horizons

Good Faith, Contractual Discretions, and Human Rights

The Role of Good Faith

Orthodoxy revisited

11.01  The orthodox position is that English law does not recognize any over-arching obligation to act in good faith in either the negotiation or performance of contracts.1 The case usually cited for this negative proposition is the decision of the House of Lords in Walford v Miles, where Lord Ackner described a duty to negotiate in good faith is ‘inherently repugnant to the adversarial position of the parties (p. 392) when involved in negotiations’ and ‘unworkable in practice’.2 By way of contrast in a leading case of incorporation of trading conditions—Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd 3—Bingham LJ (as he then was) famously made some comparative observations:

In many civil law systems, and perhaps in most legal systems outside the common law world, the law of obligations recognises and enforces an overriding principle that in making and carrying out contracts parties should act in good faith. This does not simply mean that they should not deceive each other, a principle which any legal system must recognise; its effect is perhaps most aptly conveyed by such metaphorical colloquialisms as ‘playing fair’, ‘coming clean’ or ‘putting one’s cards face upwards on the table’. It is in essence a principle of fair and open dealing. In such a forum it might, I think, be held on the facts of this case that the plaintiffs were under a duty in all fairness to draw the defendants’ attention specifically to the high price payable if the transparencies were not returned in time and, when the 14 days had expired, to point out to the defendants the high cost of continued failure to return them.

English law has, characteristically, committed itself to no such overriding principle but has developed piecemeal solutions in response to demonstrated problems of unfairness. Many examples could be given. Thus equity has intervened to strike down unconscionable bargains. Parliament has stepped in to regulate the imposition of exemption clauses and the form of certain hire-purchase agreements. The common law also has made its contribution, by holding that certain classes of contract require the utmost good faith, by treating as irrecoverable what purport to be agreed estimates of damage but are in truth a disguised penalty for breach, and in many other ways.

The well known cases on sufficiency of notice are in my view properly to be read in this context. At one level they are concerned with a question of pure contractual analysis, whether one party has done enough to give the other notice of the incorporation of a term in the contract. At another level they are concerned with a somewhat different question, whether it would in all the circumstances be fair (or reasonable) to hold a party bound by any conditions or by a particular condition of an unusual and stringent nature.4

(p. 393) This supposedly ‘piecemeal’ approach distinguishes English law from many other legal systems, including the civil law countries of the European Union,5 and the United States of America under the Uniform Commercial Code.6 The duty appears in international restatements of contract law.7 In a much discussed judgment in 2013 Leggatt J in Yam Seng Pte Ltd v International Trade Corporation Ltd 8 observed that if the orthodox position was correct then: ‘In refusing, however, if indeed it does refuse, to recognise any such general obligation of good faith, this jurisdiction would appear to be swimming against the tide.’9

It was not always so. In the eighteenth century a general duty of good faith in contract law was pronounced in Carter v Boehm10 by the father of English commercial law, Lord Mansfield, in the seminal discussion of duties of disclosure in insurance law: ‘The governing principle is applicable to all contracts and dealings. Good faith forbids either party by concealing what he privately knows, to (p. 394) draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.’11 However, as recorded by Lord Hobhouse over two centuries later in The Star Sea: ‘Lord Mansfield’s universal proposition did not survive. The commercial and mercantile law of England developed in a different direction preferring the benefits of simplicity and certainty which flow from requiring those engaging in commerce to look after their own interests.’12

11.02  The recognition of a duty of good faith in the context of the performance of contracts would have an impact on the construction of those contracts. Most other legal systems would consider that good faith and fair dealing are highly pertinent to both the interpretation of express terms and the implication of terms in fact.13 At present the prevailing view is that English law is committed to a more pragmatic and piecemeal approach.14 Many doctrines, especially the implication of terms, and some principles of interpretation, such as strict construction of exemption clauses, may play a role analogous to that of an overarching duty of good faith in other systems.

11.03  Similarly in the context of a post-contractual duty of good faith relating to performance, Lord Steyn, writing extra-judicially, has observed that English law tends to use discrete doctrinal tools, rather than an overarching principle: ‘Thus the continental systems recognize an overarching duty of good faith in the performance of contracts. The common law achieves similar results by a resort to implied terms, rectification and estoppel.’15 Previously, with respect to the technique of implication, Sir Johan Steyn made these comparative observations:

Compared to the civil law, English law shows a considerable hospitality to implied terms. In civil law countries the existence of a generalized duty of good faith in the performance of contracts reduces the need for the implication of terms. In the absence of a doctrine of good faith English law has to resort to the implication of terms by reason of the nature of the contract … or by reason of special circumstances of a particular contract.16

(p. 395) A prominent example is the implication of terms which impose a duty to cooperate on the parties.17

Walford v Miles

11.04  The orthodox position in English law is closely associated with the decision of the House of Lords in Walford v Miles18 that an agreement to agree is not enforceable as a matter of English law. The agreement was a ‘lock out’ agreement, providing for an exclusive right to negotiate, in connection with the proposed sale of a photographic business. It was held to lack sufficient certainty because no time limit was imposed on the proposed vendor’s promise not to deal with third parties. The House of Lords also held that no term should be implied requiring the proposed vendor to continue to negotiate in good faith during the currency of the agreement. Lord Ackner stated that such a duty was itself too uncertain to be enforced because it was ‘inherently repugnant with the position of a negotiating party’.19

The decision has been criticized20 and it was distinguished by the Court of Appeal in Pitt v PHH Asset Management Ltd 21 where the parties agreed a fixed two-week period. Nevertheless the twin propositions that English law recognizes neither an agreement to agree nor any implied obligation to negotiate in good faith survive.22

11.05  The decision in Walford v Miles was further criticized in the decision of the Court of Appeal in Petromec Inc v Petroleo Brasileiro SA Petrobras (No 3)23 where a clause in an agreement relating to an oil-exploration vessel provided that one party would pay the reasonable cost of upgrading the vessel, and further provided (by clause 12.4) that the paying party ‘agrees to negotiate in good faith … the extra costs’. Longmore LJ noted that in Walford all negotiations were ‘subject to contract’ and there was no express duty to negotiate in good faith. In contrast the clause under consideration was not a bare agreement to negotiate.

It is not irrelevant that it is an express obligation which is part of a complex agreement drafted by City of London solicitors … It would be a strong thing to declare unenforceable a clause into which the parties have deliberately and expressly (p. 396) entered. I have already observed that it is of comparatively narrow scope. To decide that it has ‘no legal content’ to use Lord Ackner’s phrase would be for the law deliberately to defeat the reasonable expectations of honest men[24] … Lord Steyn hoped that the House of Lords might reconsider Walford v Miles with the benefit of fuller argument. That is not an option open to this court. I would only say that I do not consider Walford v Miles binds us to hold that the express obligation to negotiate as contained in clause 12.4 of the Supervision Agreement is completely without legal substance.25

By 2016 Goode’s Commercial Law submitted on the basis of Compass Group UK and Ireland Ltd v Mid-Essex Hospital Services NHS Trust26: ‘There can now be little doubt that an express term of a contract which requires the parties to act in good faith in the performance of contract is enforceable.’27

Yam Seng

11.06  Now in two first instance judgments Leggatt J has expressly advocated an over-arching principle of good faith. First, in Yam Seng Pte Ltd v International Trade Corporation Ltd,28 a first instance decision in 2013 which has been cited and discussed in over thirty subsequent cases. Secondly, in MSC Mediterranean Shipping Company SA v Cottonex Anstalt.29 In the former, in the context of distribution contract Leggatt J had no difficulty in implying a duty of good faith in an ordinary commercial contract based on the presumed intention of the parties on the basis of the implication of terms in fact. In particular a requirement that parties would behave honestly was necessary to give business efficacy to commercial transactions. Although its requirements were sensitive to context, the test of good faith was objective in the sense that it depended not on either party’s perception of whether particular conduct was improper but on whether, in the particular context, the conduct would have been regarded as commercially unacceptable by reasonable and honest people. What Leggatt J said in the key section of his judgment30 deserves careful study, but his principal observations started by noting three factors in English law—the preference for incremental development, the philosophy of individualism, and the preference for certainty—which underlay (p. 397) the traditional resistance to any over-arching obligation. He noted the prevalence of good faith in civil law systems, other common law countries, and international restatements. Leggatt J conceded: ‘I doubt that English law has reached the stage, however, where it is ready to recognise a requirement of good faith as a duty implied by law, even as a default rule, into all commercial contracts.’31 Nevertheless he considered that the modern case law on interpretation and implication permitted development by way of implied term a broader duty of honesty in ‘relational contracts’,32 being long-term contracts where openness and cooperation are required:

In some contractual contexts the relevant background expectations may extend further to an expectation that the parties will share information relevant to the performance of the contract such that a deliberate omission to disclose such information may amount to bad faith. English law has traditionally drawn a sharp distinction between certain relationships—such as partnership, trusteeship and other fiduciary relationships—on the one hand, in which the parties owe onerous obligations of disclosure to each other, and other contractual relationships in which no duty of disclosure is supposed to operate. Arguably at least, that dichotomy is too simplistic. While it seems unlikely that any duty to disclose information in performance of the contract would be implied where the contract involves a simple exchange, many contracts do not fit this model and involve a longer term relationship between the parties which they make a substantial commitment. Such ‘relational’ contracts, as they are sometimes called, may require a high degree of communication, cooperation and predictable performance based on mutual trust and confidence and involve expectations of loyalty which are not legislated for in the express terms of the contract but are implicit in the parties’ understanding and necessary to give business efficacy to the arrangements. Examples of such relational contracts might include some joint venture agreements, franchise agreements and long term distributorship agreements …33

Leggatt J was prepared to accept that in principle it would be open to the parties to modify or exclude the scope of the duty, but he considered it highly unlikely parties would attempt to exclude the core requirement to act honestly.34 Overall there was nothing ‘novel or foreign’35 in the concept of good faith and fair dealing and the supposed traditional English hostility is ‘misplaced’.36

(p. 398) Responses to Yam Seng

11.07  The decision has been cited in over forty subsequent English cases—with mixed receptions at first instance—and discussed briefly three times in the Court of Appeal (albeit once without express citation).37 First, it received a lukewarm response in Compass Group UK and Ireland Ltd v Mid-Essex Hospital Services NHS Trust.38 There, Jackson LJ insisted that there was no duty of good faith at common law, and if the parties wanted one they would have to do so expressly.39 Beatson LJ appeared more sympathetic.40

Two contrasting responses were handed down by the Court of Appeal in 2016. In Globe Motors, Inc (a corporation incorporated in Delaware, USA) v TRW Lucas Varity Electric Steering Ltd 41 Beatson LJ, again in the context of long-term or relational contracts, stated:

One manifestation of the flexible approach referred to by McKendrick and Lord Steyn is that, in certain categories of long-term contract, the court may be more willing to imply a duty to co-operate or, in the language used by Leggatt J in Yam Seng PTE v International Trade Corp Ltd at [131], [142] and [145], a duty of good faith. Leggatt J had in mind contracts between those whose relationship is characterised as a fiduciary one and those involving a longer-term relationship between parties who make a substantial commitment. The contracts in question involved a high degree of communication, co-operation and predictable performance based on mutual trust and confidence and expectations of loyalty ‘which are not legislated for in the express terms of the contract but are implicit in the parties’ understanding and necessary to give business efficacy to the arrangements’. He gave as examples franchise agreements and long-term distribution agreements. Even in the case of such agreements, however, the position will depend on the terms of the particular contract. Two examples of long-term contracts which did not qualify are the long-term franchising contracts considered by Henderson J in Carewatch Care Services Ltd v Focus Caring Services Ltd and Grace [2014] EWHC 2313 (Ch) and the agreement between distributors of financial products and independent financial advisers considered by Elisabeth Laing J in Acer Investment Management Ltd and another v The Mansion Group Ltd [2014] EWHC 3011 (QB) at [109].42

Most recently after Leggatt J again invoked the concept of good faith in a case concerning container demurrage, and in respect of contractual discretions, the Court of Appeal was more critical. In MSC Mediterranean Shipping Company SA v Cottonex Anstalt 43 Leggatt J returned to the fray and suggested in respect of the ‘legitimate interest restriction on keeping contracts alive:

(p. 399)

The principle can be seen in a wider context. There is increasing recognition in the common law world of the need for good faith in contractual dealings … One such more specific rule which is now firmly established in English law is that, in the absence of very clear language to the contrary, a contractual discretion must be exercised in good faith for the purpose for which it was conferred, and must not be exercised arbitrarily, capriciously or unreasonably (in the sense of irrationally).44

However in the Court of Appeal45 Moore-Bick LJ observed:

The recognition of a general duty of good faith would be a significant step in the development of our law of contract with potentially far-reaching consequences and I do not think it is necessary or desirable to resort to it in order to decide the outcome of the present case … In my view the better course is for the law to develop along established lines rather than to encourage judges to look for what the judge in this case called some ‘general organising principle’ drawn from cases of disparate kinds … There is in my view a real danger that if a general principle of good faith were established it would be invoked as often to undermine as to support the terms in which the parties have reached agreement. The danger is not dissimilar to that posed by too liberal an approach to construction, against which the Supreme Court warned in Arnold v Britton.46

11.08  Given English law’s preference for certainty and predictability in this field it remains unlikely, even in the wake of Yam Seng, that there will be a radical change in the court’s more restrictive approach to the role of good faith and reasonableness in the near future. In addition to Leggatt J’s sceptical approach to the orthodox position there has been some academic advocacy of change47 and some extra-judicial consideration of these questions.48 Overall the topic of good faith is one where English law maintains an exceptionalist position. What currently exist are pockets or islands of case law, together with statutory interventions, which may be said to functionally equivalent to good faith, and would be seen as united by the overarching theory of good faith and fair dealing in most other legal systems. Indeed all interventions in the twin principles of freedom and sanctity of contract are ultimately, as a matter of analysis referable to either public policy (such as private law illegality or competition concerns) or by reference to good faith and fair dealing. What follows is a brief survey of some of the (p. 400) principal bodies of law most relevant to this work which could be explained by a theory of good faith.

Statutory examples

11.09  Obviously there are statutory interventions in this field, for example the explicit recognition in Part 2 of the Consumer Rights Act 2015, and previously the Unfair Terms in Consumer Contracts Regulations 1999, regulation 5, of a ‘good faith’ control over unreasonable terms in consumer contracts.49 In this context, in the first House of Lords guidance on the earlier 1994 version of the Regulations, in Director General of Fair Trading v First National Bank plc Lord Bingham said of good faith that ‘since Lord Mansfield was its champion, it is not a concept wholly unfamiliar to British lawyers’.50 Lord Bingham was of course referring to Carter v Boehm51 in 1766, albeit that Lord Mansfield’s advocacy of general principle of good faith was over time narrowly developed and confined into a disclosure obligation on would-be insureds.52 In the commercial field, there is provision for mutual duties of good faith between principal and agent in commercial agency arrangements.53

11.10  For commercial contracts the obvious restraint is the requirement of reasonableness for exemption clauses under the Unfair Contract Terms Act 1977.54 These are provisions of substantive law and do not affect common law principles of construction. It is proposed here to survey briefly some prominent cases in this context which reflect the fact that considerations of good faith and reasonableness are not disregarded in English law, albeit the techniques used may differ from other systems.

Common law principles

Interpretation and unreasonable results

11.11  At present English principles of construction do accord a ‘long-stop’ role for reasonableness, or more exactly very unreasonable constructions may be rejected. (p. 401) This is encapsulated in Lord Reid’s famous dictum in L Schuler AG v Wickman Machine Tool Sales Ltd:55

The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear.

The practitioner and commentator Richard Calnan has conceded: ‘There is also no doubt that English judges use interpretation as a back-door way of bringing concepts of reasonableness and good faith into English law.’ And he described Lord Reid’s famous dictum in Wickman v Schuler ‘as a safety-valve to freedom of contract’.56 However there is no general principle of construction in English law that judges are equipped with a general power or discretion to override the clearly expressed intentions of the parties on the basis that the result contended for is unfair, unreasonable, or contrary to good faith. If clearly expressed it is clear that a proper construction may lead to a very unreasonable result for one of the parties.57

Incorporation and notice

11.12  In the leading modern case of incorporation of trading conditions—Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd 58—Bingham LJ made the comparative observations (quoted above)59 which clearly viewed the restrictive approach to onerous or one-sided terms as based on underlying concerns with good faith.60

Unreasonable termination clauses

11.13  The courts are hostile to one-sided termination clauses, especially those that purport to allow termination for any breach. In Rice v Great Yarmouth Borough Council 61 the claimant was awarded two four-year contracts for the maintenance of the local authority’s sports facilities and of its parks, gardens, and playgrounds, following a tendering process in which it had significantly undercut the council’s (p. 402) own direct services organization. Within seven months the council purported to terminate the contracts, having served a flurry of default notices under the contract. The claimant’s principal obligation was to carry out the services in a ‘proper skilful and workmanlike manner’, which was qualified to be ‘to the entire satisfaction’ of the council’s engineering and leisure services officer. Clause 23, headed ‘Termination’, provided that the council could terminate by giving notice in writing if the claimant committed ‘a breach of any its obligations under the Contract’.

11.14  The first instance judge held that the council was not entitled to terminate such long-term contracts, despite multiple breaches by the claimant, because a commonsense interpretation had to be put on literal words of clause 23, confining it to repudiatory breach.

11.15  On appeal to the Court of Appeal the council’s primary submission was that clause 23 should be ‘applied literally’ to allow it to terminate for any breach ‘other than the trivial’.62 It can be noted parenthetically that even the local authority’s argument was not strictly literal, as such a construction would have permitted termination for even trivial breaches. Hale LJ, delivering the sole reasoned judgment, pointed out that clause 23 did not purport to characterize any particular term as a condition, but nevertheless ‘appears to visit the same draconian consequences upon any breach, however small, of any obligation, however small’.63 Following The Antaios64 Hale LJ stated that this was ‘a classic example of an innominate term’.65

11.16  The Court of Appeal also rejected the council’s appeal that the totality of the breaches committed did amount to repudiatory breach. Hale LJ identified three categories:

(1) those cases in which the parties have agreed either that the term is so important that any breach will justify termination or that the particular breach is so important that it will justify termination; (2) those contractors who simply walk away from their obligations thus clearly indicating an intention no longer to be bound; and (3) those cases in which the cumulative effect of the breaches which have taken place is sufficiently serious to justify the innocent party in bringing the contract to an end.66

11.17  The third test was severe: the judge had been right to ask whether the cumulative breaches were such as to justify an inference that the claimant would continue to deliver a sub-standard performance. It was also necessary that the inference was that the council would thereby have been deprived of substantially the whole (p. 403) benefit of the contract.67 Overall her Ladyship concluded that the judge had been best placed to evaluate the significance of the various breaches over a lengthy trial. The local authority’s appeal was dismissed. This case evidences the reluctance to give literal effect to unreasonable and one-sided termination clauses, despite their express words. The fact that the party seeking to terminate was a public authority may also have been significant.

Contractual Discretion and Analogies with Public Law

11.18  A developing area is the problem of contractual discretions which are endemic in consumer contracts (especially with utility companies and in financial services contracts), but also appear as aspects of detailed commercial arrangements. Obviously in the consumer field the exercise of such powers is heavily constrained by public regulatory measures, principally Part 2 of the Consumer Rights Act 2015 (formerly the Unfair Terms in Consumer Contracts Regulations 1999). In addition, through the flexible device of the implied term some recent judgments have suggested a role for public law principles for constraining apparently unfettered discretions.68 In Yam Seng Pte Ltd v International Trade Corporation Ltd,69 and in MSC Mediterranean Shipping Company SA v Cottonex Anstalt70 Leggatt J explicitly made the link between this body of cases and an over-riding obligation of good faith.

The Equitable Life case

11.19  An important judgment is that of Lord Woolf MR in the case of Equitable Life Assurance Society v Hyman.71 It concerned an allegedly discriminatory bonus policy, which had the effect of rendering nugatory a ‘guaranteed’ benefit provided by another express term. Ultimately the House of Lords resolved the matter principally by reference to a ‘bespoke’ implied term in fact, albeit that implied term was read into some 90,000 contracts and had implications for Equitable’s 290,000 other policyholders. In the Court of Appeal a majority found for the policyholder.72 Lord Woolf MR held that it was an improper exercise of discretion, (p. 404) by analogy with classic authorities on public law discretion, including Associated Provincial Picture Houses Ltd v Wednesbury Corporation73 and Padfield v Minister of Agriculture, Fisheries and Food.74 Lord Woolf concluded:

The declarations of final bonus which are in issue in this case therefore involved an impermissible exercise of discretion. It was an exercise of discretion reducing the policyholder’s reasonable expectation that he would receive his asset share irrespective of how he exercised his rights under the policy.

Furthermore the power had been used for ‘a collateral purpose designed to negative a benefit to which the policyholder would otherwise be entitled’.75

11.20  In the House of Lords, whilst proceeding principally by way of an implied term, Lord Steyn agreed with the judgment of Lord Woolf MR in the Court of Appeal. So too did Lord Cooke of Thorndon, who insisted on the principle that ‘no legal discretion, however widely worded … can be exercised for purposes contrary to those of the instrument by which it is conferred’.76 His Lordship pointed out that the principle is not confined to public law, but also applied in various aspects of private law.77

Human Rights

11.21  The incorporation of the European Convention for the Protection of Human Rights and Fundamental Freedoms (‘the Convention’) into the United Kingdom’s domestic law was achieved by the Human Rights Act 1998, which came into force on 2 October 2000. Its significance in respect of this text is that contracts made by bodies which are ‘public authorities’ under section 6 of the 1998 Act will need to be construed and performed in a manner which is compatible with the rights of their counterparties under the Convention.78 This is most likely to have an impact on the exercise of contractual discretions by public authorities.79

11.22  The decision of the House of Lords in Wilson v First County Trust Ltd80 is the first major case on the interaction of the 1998 Act and contract (p. 405) law.81 It reversed the second decision of the Court of Appeal.82 Whilst it is not directly concerned with construction, it illustrates that the 1998 Act has the potential to operate where neither party is a public authority, albeit this is likely to be unusual in practice. The House of Lords firmly repudiated the view that the procedural rights enshrined in Article 6 of the Convention can be the source of new or modified substantive private law rights in this and other cases. Critically their Lordships’ speeches confirm that it is Article 1 of the First Protocol which is likely to have most impact in commercial cases.

11.23  The Court of Appeal had made a declaration of incompatibility in respect of section 127(3) of the Consumer Credit Act 1974. That section rendered agreements which did not comply with certain statutory requirements wholly unenforceable. In the view of the Court of Appeal this was disproportionate to the legitimate policy objective of the 1974 Act which required a signed agreement containing all the terms. A pawnbroker had made a relatively trivial error in the form of a pledge of a motor car which rendered the contract wholly unenforceable. The House of Lords allowed the appeal by the Secretary of State for Trade and Industry, setting the declaration of incompatibility aside.83 Its main reason for doing so was a short point on the limited retrospective effect of the 1998 Act so far as prior transactions are concerned. Nevertheless the Law Lords also laid down useful guidelines on the future impact of the 1998 Act in contract cases.

Article 6 (fair trial) and the substantive content of private law

11.24  Whilst the remaining questions did not arise, the Law Lords in Wilson v First County Trust Ltd nevertheless gave guidance on how the Convention rights affected the Consumer Credit Act 1974 so far as future qualifying transactions were concerned. In their unanimous opinion84 it could not be said in any event that the absence of a judicial discretion to enforce in appropriate cases defective agreements was a breach of Article 6 of the Convention. It was well-established that the right to a fair trial included an implicit right of access to the courts. (p. 406) However, the right was a right of access to the courts to determine whether or not particular rights and obligations were enforceable. The 1974 Act formalities on enforcement operated as a matter of substantive law, and were not a procedural bar.85 The finance company had access to the courts to ascertain that it had not complied with the applicable formal requirements to have an enforceable agreement. It is important to note that the decision of the Court of Appeal was influenced by the decision of the Strasbourg Court in Osman v United Kingdom86 which had suggested a potentially far greater impact of Article 6 on civil rights and obligations. In the meantime the Strasbourg Court signalled a retreat from Osman in its judgment in Z and others v United Kingdom.87 In the light of that case the House of Lords was emphatic that Article 6(1) conferred purely procedural protection. Lord Nicholls stated: ‘Article 6(1) may not be used as a means of creating a substantive civil right having no basis in national law.’88 Lord Hope was emphatic that ‘the precise scope and content of the individual’s rights is a matter for each state party to determine’89 and that it is ‘a matter for domestic law to define the nature and extent of any rights which a party acquires from time to time as a result of transactions which he or she enters into’.90

11.25  Lord Scott was scathing of a submission on behalf of the Finance and Leasing Association (which was an intervening party) that any statutory provision which rendered a valid agreement unenforceable infringed Article 6. This would suggest that the formality requirements for the sale of land91 were incompatible with the Convention.92 This case puts paid to attempts to use the domestic incorporation of Article 6 by the Human Rights Act 1998 as a vehicle to challenge statutory restrictions on the freedom of contract in various contexts where economic activity is prohibited or subjected to a greater or lesser degree of regulation and formality.

(p. 407) Article 1 of Protocol 1 (property and possessions)

11.26  Normally the state should not divest a person of property rights without compensation. A wide array of economic and pecuniary interests and assets has been held by the Strasbourg jurisprudence to fall within Article 1 of the First Protocol of the Convention, including debts and other things in action.93 This is reflected in Lord Nicholls’ view in Wilson v First County Trust Ltd that ‘ “Possessions” in article 1 [of the First Protocol] is apt to embrace contractual rights as much as personal rights’.94 Furthermore the Strasbourg Court has consistently identified the article as comprising three distinct rules: (a) peaceful enjoyment of possessions; (b) wrongful deprivation of possessions by a public authority; and (c) control of property in the public interest.95 The first appears broad enough to entail rights against fellow citizens, whilst the second and third more clearly focus on the actions of public authorities. In any event any deprivation here was clearly being done by a public authority—the Court of Appeal (pursuant to section 6(3) of the Human Rights Act 1998). Whichever of the three rules is in issue, the interference with property or possessions (including contractual rights) can only be justified if it satisfies a three-stage test: (1) does the restriction satisfy the requirement of legal certainty; (2) does the restriction pursue a legitimate aim in the public interest; and (3) is the restriction proportionate to its aim. Does it strike a fair balance between the interests of the general community and the fundamental rights of individuals?96

11.27  In approaching the issue of whether Article 1 of the First Protocol was prima facie infringed the House of Lords did not speak with one voice.97 Lord Nicholls and Lord Hobhouse clearly accepted that it could be said that there was a deprivation of possessions within the meaning of Article 1 of the First Protocol, so the question arose whether section 127(3) of the Consumer Credit Act 1974 was disproportionate. Lord Nicholls simply approached it as a matter of contractual rights.98 Lord Hobhouse took a different route to finding that the article was potentially infringed: section 65 of the 1974 Act could operate to deprive a pledgee of the special property in a pawned item which common law had long recognized.99 In contrast, Lords Hope and Scott insisted that Article 1 of the First Protocol (p. 408) could not be engaged as it was a matter for national law to determine what property rights existed, and the formal requirements for obtaining those rights. First Country Trust (FCT) had no existing rights due to the provisions of the 1974 Act.100 With respect to Lords Hope and Scott, it is submitted that their approach is much too narrow. FCT gave up £5,000 in return for which it intended to obtain a right to be repaid the principal sum, together with interest and a security interest over the car. It was left with nothing. Due to the formal requirements laid down (by the often byzantine 1974 Act) it was in effect deprived either of its property in the money or of some type of contractual expectations (the 1974 Act did not make the transaction void, merely unenforceable). If the view of Lords Hope and Scott prevails, too little protection will be given to proprietary rights by the 1998 Act. Furthermore, their Lordships’ approach is out of step with the broader approach of the Strasbourg Court. It may be complained that it is artificial to expand the literal protection of the Convention of ‘possessions’ to mere contractual expectations, but that is clearly the tenor of the Strasbourg jurisprudence, to which the House of Lords should have paid greater regard.

11.28  In any event the House of Lords was of the unanimous view that Article 1 of the First Protocol was not infringed applying the proportionality test.101 It was widely accepted that the consumer protection aim of the 1974 Act was legitimate. Section 127(3) did not employ disproportionate means to pursue the legitimate social aim of the 1974 Act, which was the protection of unsophisticated borrowers from exploitation by lenders. Lord Nicholls said that assessment of the appropriate regulatory technique was ‘primarily a matter for Parliament’102 even if it could be said that the mechanism used to compel compliance with these formal requirements could be ‘drastic, even harsh’ on a lender and would result in a ‘windfall’ to the borrower.103 It should be noted that Lord Nicholls warned that his conclusion was conditioned by a ceiling of £25,000 for the regulatory regime of the 1974 Act which then applied. Such a draconian result may not be acceptable where the level of borrowing (say a house mortgage) was £250,000 rather than less than £25,000.104

11.29  A further difficulty for the court here was the fact that the correct interpretation of the 1974 Act was not clear before the first decision of the Court of Appeal,105 and even it suggested that it was a question of some difficulty as to whether or not (p. 409) the sum of £250 was part of the credit. It is easy to sympathize with the Court of Appeal view that subsequent confiscation of the full amount of the loan (and interest) and the cancellation of the security was capricious and draconian. Lord Nicholls admitted that there was a question mark over whether the rules here met the standard for legal certainty laid down by the Strasbourg Court.106

11.30  The House of Lords can be criticized for not properly addressing the requirement of the jurisprudence of the Strasbourg Court that, whilst not explicitly required by Article 1 of the First Protocol, the deprivation of property should generally be accompanied by the payment of compensation: ‘under the legal systems of the Contracting States, the taking of property in the public interest without payment of compensation is treated as justifiable only in exceptional circumstances.’107 This was not a taking directly by the state, but a forced transfer to Mrs Wilson. The House of Lords in considering proportionality had considered whether the lender had in any event as a matter of private law a restitutionary claim against the borrower in respect of the money lent. However, it decided that the totality of the provisions of the 1974 Act (sections 65, 106, 113, and 127) made it clear that a lender in such circumstances was to be left with no legal remedy. Whilst the borrower was in the result enriched, she was not unjustly enriched as this was the clear intention of Parliament.108

Human Rights, Cultural Traditions, and Context

11.31  In Khan v Khan109 in the context of an alleged compromise arising out of a family partnership in the Muslim community, Arden LJ observed:

Where the parties are members of a particular community, then in my judgment the court must bear in mind that they may observe different traditions and practices from those of the majority of the population. That must be expected and respected in the jurisdiction that has received the European Convention for the Protection of Human Rights and Fundamental Freedoms. One of the fundamental values of the Convention is pluralism.110

11.32  Respect for different practices and traditions might form part of the matrix of fact which is admissible on the interpretation of a contract. However on the particular facts the evidence was equivocal that a full and final settlement was intended. Nevertheless in a clear case Arden LJ expressed the view that the cultural traditions of the parties might be relevant evidence against which the contract should be construed.


1  The literature on this topic is enormous. Some prominent discussions include: H Collins, ‘Implied Terms: The Foundation of Good Faith’ (2014) 67 CLP 297; R Brownsword, ‘Two Concepts of Good Faith’ (1994) 7 JCL 197; R Brownsword, ‘Good Faith in Contracts Revisited’ (1996) 49 CLP 111; R Brownsword, Contract Law: Themes for the Twenty-First Century (2nd edn, 2006); the essays in J Beatson and D Friedmann (eds), Good Faith and Fault in Contract Law (1995); M Bridge, ‘Good Faith in Commercial Contracts’ in R Brownsword, N Hird, and G Howells (eds), Good Faith in Contract: Concept and Context (1999), 139; and G Teubner, ‘Legal Irritants: Good Faith in British law or How Unifying Law Ends Up in New Divergences’ (1998) 61 MLR 11. See also G McMeel, ‘Foucault’s Pendulum: Text, Context and Good Faith in Contract Law’ [2017] CLP 1. See generally H Beale (ed), Chitty on Contracts (32nd edn, 2015) (‘Chitty’), paras 1–039 to 1–056.

2  Walford v Miles [1992] 2 AC 128, 138, HL (Lord Ackner). In Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB), [2013] 1 All ER (Comm) 1321, Leggatt J noted (at para [122]): ‘That case was concerned, however, with the position of negotiating parties and not with the duties of parties who have entered into a contract and thereby undertaken obligations to each other.’

3  [1989] QB 433, CA. See also T Bingham, ‘The Law as the Handmaid of Commerce’ (the 2001 Sultan Azlan Shah Lecture) in Bingham, Lives of the Law [-] Selected Essays and Speeches 2000–2010 (2011), 283. Compare O’Neill v Phillips (on appeal from In re a Company (No 00709 of 1992) [1999] 1 WLR 1092, 1101, HL, where Lord Hoffmann, in the context of s 459 of the Companies Act 1985, suggested that a legal culture had the choice of abandoning a literal approach to construction or ‘as in Continental systems, achieve the same result by introducing a general requirement of good faith into contractual performance’.

4  [1989] QB 433, 439. In Kowloon Development Finance Ltd v Pendex Industries Ltd [2013] HKCFA 35, (2013) 16 HKCFAR 336, para [20] Lord Hoffmann NPJ suggested the addition of rectification for unilateral mistake to the list of doctrines that would fall within good faith in civil law systems.

5  See the new French Civil Code § 1104; the German Civil Code, BGB § 157, instructs the judge to interpret contracts according to the requirements of good faith (and see the general provision in BGB § 242); R Zimmermann, The Law of Obligations—Roman Foundations of the Civilian Tradition (1990; paperback edn, 1996), 622 (for the Roman law roots); see also at 255–9, 637, and 672–7; B Nicholas, The French Law of Contract (2nd edn, 1992), 48, 69–71, 100–6, and 153–4; K Zweigert and H Kotz, An Introduction to Comparative Law (3rd edn, 1998, trans by T Weir), 400–9, and 424–7; S Vogenauer, ‘Interpretation of Contracts: Concluding Comparative Observations’ in A Burrows and E Peel (eds), Contract Terms (2007), 123; and and H C Grigoleit and G McMeel, ‘Interpretation of Contracts’ in G Dannemann and S Vogenauer (eds), The Common European Sales Law in Context [-] Interactions with English and German Law (2013), 341. Compare C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law—Draft Common Frame of Reference (DCFR) (2009), Art I-1:102(3)(b) (interpretation of DCFR) and DCFR, Art III-1:103.

6  UCC, section 1–203. Most recently, the Supreme Court of Canada has adopted an ‘over-arching principle’ of good faith in Bhasin v Hrynew, 2014 SCC 71; noted C Hunt [2015] CLJ 4. For other common law countries see Chitty, para 1–041.

7  UNIDROIT Principles of International Commercial Contracts 2004, Article 1.7; Principles of European Contract Law, Article 1.201. Compare the narrower role expressly assigned to good faith in the Vienna Convention on the International Sale of Goods 1980, Article 7(1). For discussion see R Goode, ‘International Restatements and National Law’ in W Swadling and G Jones (eds), The Search for Principle—Essays in Honour of Lord Goff of Chieveley (2000), 45–58; M Bonell, ‘The UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law: a Comparison’ in R Cranston (ed), Making Commercial Law—Essays in Honour of Roy Goode (1997), 91–101; and Disa Sim, ‘The Scope and Application of Good Faith in the Vienna Convention on Contracts for the International Sale of Goods’ in M Maggi (ed), Review of the Convention on Contracts for the International Sale of Goods 20022003; available at <http://www.cisg.law.pace.edu/cisg/biblio/sim1.html>.

8  [2013] EWHC 111 (QB), [2013] 1 All ER (Comm) 1321; noted (2013) 129 LQR 463 (Simon Whittaker).

9  Para [124].

10  (1766) 3 Burr 1905, 92 ER 1162. See also Bexwell v Christie (1776) 3 Cowp 395, 396; 98 ER 1050.

11  (1766) 3 Burr 1905, 1910. Originally codified in Marine Insurance Act 1906, ss 17–20. See now the Consumer Insurance (Disclosure and Representations) Act 2012 and the Insurance Act 2015.

12  Manifest Shipping Co Ltd v Uni-Polaris Ins Co Ltd (The Star Sea) [2001] UKHL 1, [2003] 1 AC 469, para [45].

13  On the relevant provisions in the DCFR and the proposed Common European Sales Law see H C Grigoleit and G McMeel, ‘Interpretation of Contracts’ in G Dannemann and S Vogenauer (eds), The Common European Sales Law in Context [-] Interactions with English and German Law (2013), 341.

14  MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2016] EWCA Civ 789, para [45] (Moore-Bick LJ); contrast [2015] EWHC 283 (Comm), para [79] (Leggatt J).

15  Lord Steyn, ‘Interpretation: Legal Texts and their Landscape’ in B S Markesinis (ed), The Clifford Chance Millennium Lectures (2000), 79.

16  Sir Johan Steyn, ‘The Role of Good Faith and Fair Dealing in Contract: A Hair-Shirt Philosophy?’ [1991] Denning LJ 131, 133. See also H Collins, ‘Implied Terms: The Foundation of Good Faith’ (2014) 67 CLP 297.

17  Mackay v Dick (1881) 6 App Cas 251, 263, HL (Lord Blackburn). Compare North Sea Energy Holdings NV v Petroleum Authority of Thailand [1999] 1 All ER (Comm) 173, 185–6, CA. See para 9.56.

18  [1992] 2 AC 128, HL.

19  Ibid, 138.

20  P Neill QC, ‘A Key to Lock-out Agreements’ (1992) 108 LQR 405; Lord Steyn, ‘Contract Law and the Reasonable Expectations of Honest Men’ (1997) 113 LQR 433, 439.

21  [1994] 1 WLR 327, CA.

22  See also Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274, [2002] 1 All ER (Comm) 737.

23  [2005] EWCA Civ 891, [2006] 1 Lloyd’s Rep 121.

24  Citing Lord Steyn, ‘Contract Law and the Reasonable Expectations of Honest Men’ (1997) 113 LQR 433, 439.

25  [2005] EWCA Civ 891, para [121]. Technically obiter dicta as it was not necessary for the disposal of the appeal: para [115]. Mance and Pill LJJ agreed.

26  [2013] EWCA Civ 200, [2013] BLR 265.

27  (5th edn, 2016), para 3.73. See further E Peel, ‘Agreements to Negotiate in Good Faith’ in A Burrows and E Peel (eds), Contract Formation and Parties (2010), and H Hoskins, ‘Contractual Obligations to Negotiate in Good Faith: Faithfulness to the Agreed Common Purpose’ (2014) 130 LQR 131.

28  [2013] EWHC 111 (QB), [2013] 1 All ER (Comm) 1321.

29  [2015] EWHC 283 (Comm), para [79] (Leggatt J); but note [2016] EWCA Civ 789, para [45] (Moore-Bick LJ). See also Astor Management AG v Atalaya Mining plc [2017] EWHC 425 (Comm), para [98] (Leggatt J).

30  Paras [119]–[153].

31  Para [131].

32  This is based on the scholarship of Ian McNeil, and subsequent authors: for example, D Campbell, H Collins, and J Wightman (eds), Implicit Dimensions of Contract—Discrete, Relational and Network Contracts (2003). Lord Steyn had previously alluded to ‘relational contracts’ in Total Gas Marketing Ltd v Arco British Ltd [1998] 2 Lloyd’s Rep 209 and Johnson v Unisys Ltd [2001] UKHK 13, [2003] 1 AC 518 (employment).

33  [2013] EWHC 111 (QB), [2013] 1 All ER (Comm) 1321, para [142].

34  Para [149].

35  Para [145].

36  Para [153].

37  See also Sir George Leggatt, ‘Contractual Duties of Good Faith’, Lecture to the Commercial Bar Association on 18 October 2016.

38  [2013] EWCA Civ 200, [2013] BLR 265.

39  Para [105].

40  Para [150].

41  [2016] EWCA Civ 396; [2016] All ER (D) 171 (Apr).

42  Para [67].

43  [2015] EWHC 283 (Comm).

44  [2015] EWHC 283 (Comm), para [97]; citing Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The ‘Product Star’) (No 2) [1993] 1 Lloyd’s Rep 397, 404; Paragon Finance Plc v Nash [2002] 1 WLR 685, paras [39]–[41]; Socimer International Bank Ltd v Standard Bank London Ltd [2008] 1 Lloyd’s Rep 558, 575–7; British Telecommunications Plc v Telefónica O2 UK Ltd [2014] UKSC 42, [2014] 4 All ER 765, para [37].

45  [2016] EWCA Civ 789.

46  [2016] EWCA Civ 789, para [45]; citing [2015] UKSC 36, [2015] AC 1619.

47  See note 2 above.

48  Sir Johan Steyn, ‘The Role of Good Faith and Fair Dealing in Contract: A Hair-Shirt Philosophy?’ [1991] Denning LJ 131; Lord Steyn, ‘Contract Law and the Reasonable Expectations of Honest Men’ (1997) 113 LQR 433, 438–9; Sir Anthony Mason, ‘Contract, Good Faith and Equitable Standards in Fair Dealing’ (2000) 116 LQR 66, 94.

49  SI 1999/2083. See H Collins, ‘Good Faith in European Contract Law’ (1994) 14 OJLS 229; and S Bright, Unfairness and the Consumer Contract Regulations’ in A Burrows and E Peel (eds), Contract Terms (2007), 173.

50  [2001] UKHL 52, [2002] 1 AC 481, para [17]. See also Office of Fair Trading v Abbey National plc [2009] UKSC 6, [2009] 3 WLR 1215.

51  (1766) 3 Burr 1905, 97 ER 1162.

52  Marine Insurance Act 1906, ss 17–20. See now the Consumer Insurance (Disclosure and Representations) Act 2012 and the Insurance Act 2015.

53  Commercial Agents (Council Directive) Regulations 1993 (SI 1993/3053) (as amended), regs 3 and 4.

54  As amended by the Consumer Rights Act 2015 which now exclusively governs unfair terms in its Part 2 in contracts between a trader and a consumer. The principal requirement of good faith is s 62.

55  [1974] AC 235, 251, HL.

56  R Calnan, Principles of Contract Interpretation (2nd edn, 2017), para 7.18.

57  For example, and most prominently, the decision of the majority of the Supreme Court in Arnold v Britton [2015] UKSC 36, [2015] AC 1619. For discussion see 1.174. See also Total Gas Marketing Ltd v Arco British Ltd [1998] 2 Lloyd’s Rep 209, HL, esp 223–4 (Lord Hope); B Davenport QC, ‘Thanks to the House of Lords’ (1999) 115 LQR 11. Contrast Amoco (UK) Exploration Co v Teesside Gas Transportation Ltd [2001] UKHL 18, para [50] (Lord Hope).

58  [1989] QB 433, CA.

60  [1989] QB 433, 439.

61  (2001) 3 LGLR 4, The Times, 26 July 2000, CA. See also Dominion Corporate Trustees Ltd v Debenhams Property Ltd [2010] EWHC 1193 (Ch). See also Lord Sumption, ‘A Question of Taste: The Supreme Court and the Interpretation of Contracts’ (Harris Society Annual Lecture, Keble College, Oxford; April 2017), p 11.

62  (2001) 3 LGLR 4, para [17].

63  Ibid, para [22].

64  Antaios Compania SA v Salen AB (The Antaios) [1985] AC 191, HL.

65  (2001) 3 LGLR 4, para [26].

66  Ibid, para [35].

67  Ibid, para [38].

68  See also Gray v Marlborough College [2006] EWCA Civ 1262, [2006] ELR 516, para [54] (Auld LJ: express duty of fairness on headmaster of independent school); and on contractual discretions, Socimer International Bank Ltd v Standard Chartered Bank London Ltd [2008] EWCA Civ 116, [2008] 1 Lloyd’s Rep 558, British Telecommunications Plc v Telefónica O2 UK Ltd [2014] UKSC 42, para [37] (Lord Sumption: ‘well-established’), and Braganza v BP Shipping Ltd [2015] UKSC 17, [2015] 1 WLR 1661, paras [17–32] (Baroness Hale). For further discussions of case law constraining contractual discretions see 9.12 and 9.58 et seq.

69  [2013] EWHC 111 (QB), [2013] 1 All ER (Comm) 1321, para [145].

70  [2015] EWHC 283 (Comm), para [79] (Leggatt J); but note [2016] EWCA Civ 789, para [45] (Moore-Bick LJ).

71  [2002] 1 AC 408, CA and HL. For fuller discussion of the facts and holdings see 9.61.

72  [2002] 1 AC 408, Lord Woolf MR and Waller LJ; Morritt LJ dissenting.

73  [1948] 1 KB 223, CA.

74  [1968] AC 997, HL.

75  [2002] 1 AC 408, para [54].

76  Ibid, 460.

77  Citing the corporate law authority of Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 (directors issuing shares to frustrate takeover bid was an unconstitutional and improper use of their powers).

78  See Chitty, paras 1–057 to 1–072.

79  See generally the comprehensive discussion in Chitty, paras 1–073 to 1–091.

80  [2003] UKHL 40, [2004] 1 AC 816, HL (Lords Nicholls, Hope, Hobhouse, Scott, and Rodger). See also Biggin Hill Airport Ltd v Bromley London Borough Council, The Times, 9 January 2001; revsd on other grounds at [2001] EWCA Civ 1089 where the court as a public authority was not required to construe a contract made before the 1998 Act came into force in accordance with Convention rights; Conister Trust v John Hardman & Co [2008] EWCA Civ 841, [2009] CCLR 4, paras [50]–[53] (Lawrence Collins LJ); McGuffick v Royal Bank of Scotland plc [2009] EWHC 2386 (Comm), [2010] 1 All ER 634, paras [38]–[73] (Flaux J); Carey v HSBC Bank plc [2009] EWHC 3417 (QB) for further consideration of Wilson.

81  For a helpful pre-1998 Act discussion of the impact of the Convention on commercial law see P Duffy, ‘The Protection of Commercial Interests Under the European Convention on Human Rights’ in R Cranston (ed), Making Commercial Law—Essays in Honour of Roy Goode (1997), 525–42.

82  [2001] EWCA Civ 833, [2002] QB 74.

83  [2003] UKHL 40, [2004] 1 AC 816.

84  [2003] UKHL 40, [2004] 1 AC 816, paras [32]–[37] (Lord Nicholls), paras [103]–[105] (Lord Hope), para [132] (Lord Hobhouse), paras [165]–[166] (Lord Scott), paras [215] (Lord Rodger concurring with Lord Nicholls).

85  [2003] UKHL 40, [2004] 1 AC 816, most emphatically per Lord Scott at para [165].

86  (1998) 29 EHRR 245. The second judgment of the Court of Appeal was handed down on 2 May 2001. Osman is cited by the Court of Appeal: [2001] EWCA Civ 833, [2002] QB 74, paras [9] and [31].

87  (2001) 34 EHRR 97, esp para [100], where the Strasbourg Court indicated that it had acted on an incorrect understanding of the relevant English law in Osman. It was delivered on 10 May 2001, eight days after the second decision of the Court of Appeal. See also Matthews v Ministry of Defence [2003] UKHL 4, [2003] 1 AC 1163, para [42] (Lord Hoffmann), para [129] (Lord Walker).

88  [2003] UKHL 40, [2004] 1 AC 816, para [33]; following Matthews v Ministry of Defence [2003] UKHL 4, [2003] 1 AC 1163 (a tort case). See H v Belgium (1987) 10 EHRR 39, para [40].

89  [2003] UKHL 40, [2004] 1 AC 816, para [105].

90  [2003] UKHL 40, [2004] 1 AC 816, para [106]. See also Lord Hope in Matthews v Ministry of Defence [2003] UKHL 4, [2003] 1 AC 1163, para [51].

91  Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

92  [2003] UKHL 40, [2004] 1 AC 816, para [166].

93  Stran Greek Refineries and Stratis Andreadis v Greece (1994) 19 EHRR 293, paras [60]–[62].

94  [2003] UKHL 40, [2004] 1 AC 816, para [39].

95  Sporrong and Lonnroth v Sweden (1982) 5 EHRR 35, para [61].

96  Ibid, paras [69], [73].

97  Whilst it is not clear, it is submitted that the view that Art 1 of the First Protocol was engaged commanded a majority of the House of Lords. In addition to Lords Nicholls and Hobhouse, Lord Scott’s speech at para [215] appears to assume that there was at least prima facie an infringement of property rights.

98  [2003] UKHL 40, [2004] 1 AC 816, paras [38]–[45].

99  [2003] UKHL 40, [2004] 1 AC 816, para [136]; although as his Lordship noted on the exiguous facts it was far from clear that there was ever any delivery of car here to perfect the bailment or pledge.

100  [2003] UKHL 40, [2004] 1 AC 816, paras [106]–[109] (Lord Hope); paras [167]–[168] (Lord Scott).

101  [2003] UKHL 40, [2004] 1 AC 816, paras [68]–[80] (Lord Nicholls), para 109 (Lord Hope, whilst thinking that the issue did not arise, agreed with Lord Nicholls), para [138] (Lord Hobhouse), para [169] (Lord Scott, who also thought the issue did not strictly arise).

102  [2003] UKHL 40, [2004] 1 AC 816, para [70].

103  [2003] UKHL 40, [2004] 1 AC 816, para [72].

104  [2003] UKHL 40, [2004] 1 AC 816, para [80]. See now the amendments to the 1974 Act introduced by the Consumer Credit Act 2006.

105  [2001] QB 407.

106  [2003] UKHL 40, [2004] 1 AC 816, paras [76], [77].

107  James v United Kingdom (1986) 8 EHRR 123, para [54].

108  Applying Orakpo v Manson Investments Ltd [1978] AC 95, and Dimond v Lovell [2002] 2 AC 384, 397–8 (Lord Hoffmann). See [2003] UKHL 40, [2004] 1 AC 816, paras [46]–[50] (Lord Nicholls), paras [119]–[123] (Lord Hope), paras [171]–[172] (Lord Scott).

109  [2007] EWCA Civ 399, [2008] Bus LR Digest D73.

110  [2007] EWCA Civ 399, para [46]; citing Kokkinakis v Greece (1993) 17 EHRR 397.