Case No: B2/2010/0839
Neutral Citation Number: [2011] EWCA Civ 67
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
(Mr. Justice Flaux)
[2010] EWHC 819 (QB)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 2 February 2011
Before :

LORD JUSTICE SEDLEY
LORD JUSTICE MOORE-BICK
and
LORD JUSTICE SULLIVAN
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Between :

	HSBC BANK PLC 	Claimant/
Respondent	
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	PATRICK BROPHY	Defendant/Appellant	
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(Transcript of the Handed Down Judgment of
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Ms Portia O’Connor and Mr. David Iles  (instructed by Pegasus LLP) for the appellant
Miss Sonia Tolaney and Mr. James MacDonald (instructed by Addleshaw Goddard LLP) for the respondent

Hearing dates : 29 November 2010
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Judgment
Lord Justice Moore-Bick : 
1.	This is an appeal by Mr. Patrick Brophy against the order of Flaux J. dismissing his appeal against the order of His Honour Judge Million giving judgment in favour of HSBC Bank Plc for the amount due in respect of a credit card debt. It represents another attempt by the holder of a credit card to invoke the terms of the Consumer Credit Act 1974 (“the Act”) in order to avoid paying debts incurred to the card issuer. 
2.	The facts giving rise to the proceedings may be described quite shortly. In March 1994 HFC Bank Ltd (“the Bank”) sent Mr. Brophy as part of an initial pack of material an unexecuted document headed ‘Priority Application Form’. The form invited him to provide various personal details as part of an application for a credit card to be issued by the Bank. In the top left hand corner there appeared the following words:
“Credit Agreement regulated by the Consumer Credit Act 1974. This Agreement is made between us [the Bank] . . . and You, the Customer(s) named below. Application subject to status.”
3.	A section on the face of the form headed ‘About your requirements’ stated that the applicant requested the Bank to issue him a GM credit card and invited him to indicate which kind of card he wanted (Visa or Mastercard). Next, there was a notice under the Data Protection Act by which the applicant agreed that the Bank could make enquiries about him from credit reference agencies and others before and during the currency of the agreement. Finally, in a box at the foot of the right hand column, in which provision was made for the applicant to sign, there was printed the following:
“This is a Credit Agreement regulated by the Consumer Credit Act 1974. Sign it only if you want to be legally bound by its terms.”
4.	On the back of the form were printed some detailed terms below the heading ‘The GM Card – Terms & Conditions’. They included the following:
“3. Credit Limit
Your credit limit will be determined by us from time to time and notified to you.”
5.	Mr. Brophy signed and returned the form which was countersigned by a representative of the Bank on 4th March 2004. In due course Mr. Brophy received from the Bank as part of a five‑page letter or series of documents a credit card which he continued to use until the Bank terminated the agreement towards the end of 2008. When the present proceedings were started in January 2009 the amount outstanding on Mr. Brophy’s card, including interest, was £12,413.63. The claimant in the present case, and the party in favour of whom judgment was entered, is HSBC Bank Plc, the Bank’s parent company, but it has not been suggested at any stage that anything turns on that. 
6.	On the appeal to this court Ms. O’Connor submitted on behalf of Mr. Brophy that the debt on his credit card was not enforceable for either or both of the following two reasons: (i) because there was no agreement in writing sufficient to satisfy the requirements of the Act and the regulations made under it, the form which he signed and returned to the Bank being no more than an invitation to treat, or at most an agreement to enter into a prospective regulated agreement which was void by virtue of section 59; (ii) because the agreement did not contain the terms prescribed by regulation 6 and schedule 6 of the Consumer Credit (Agreements) Regulations 1983, as required by section 61 of the Act.
The application form
7.	Ms. O’Connor submitted that since only the Bank was in a position to offer credit to Mr. Brophy, the completed application form could not constitute to an offer on his part, but amounted to nothing more than an invitation to treat. By sending him a credit card the Bank made him an offer of credit which he accepted by making use of the card. The contract was therefore made by conduct and therefore did not satisfy the requirements of section 61 of the Act and the relevant regulations. Moreover, insofar as the form itself contained an agreement on the part of Mr. Brophy to the Bank’s making him an offer of credit on the terms set out in it, it was an agreement which purported to bind him to enter into a future regulated agreement and so was void by virtue of section 59.
8.	Section 59(1) of the Act provides as follows:
“An agreement is void if, and to the extent that, it purports to bind a person to enter as debtor or hirer into a prospective regulated agreement.”
9.	I am afraid I have had some difficulty in understanding this limb of Ms. O’Connor’s argument, but, whichever way it is put, it cannot in my view succeed. Despite the wording of the opening section of the application form, which taken on its own might suggest that it contains an agreement, or will do so if signed and returned by the applicant, it is clear from the document read as a whole that it contains nothing more or less than an application for running account credit in the form of a credit card. The correct contractual analysis is that given by Flaux J. in paragraph 10 of his judgment. By signing the application form and returning it to the Bank Mr. Brophy applied for credit and offered to be bound by the terms and conditions set out in the form. The form itself made it clear that it contained a request for credit and that the applicant should not sign it unless he was willing to be bound. It cannot therefore be regarded as a mere invitation to treat on his part which might lead the Bank to make him a formal offer of credit. Nor, on the other hand, did it contain an agreement of any kind unless and until it was countersigned by the Bank. The Bank accepted Mr. Brophy’s offer by counter‑signing the form, at which point there came into being an executed agreement within the meaning of section 61 of the Act.
10.	Section 59 has no application in this context. As its terms indicate, it is concerned with agreements which purport to bind a person to enter into a prospective regulated agreement, for example, an agreement for the sale of goods under which the buyer agrees to enter into a credit agreement with a finance house in order to enable him to pay the price. By its very terms it renders void agreements that would otherwise be legally binding. It has no application to an offer that may, or may not, mature into a binding agreement.
11.	For these reasons this ground of appeal must in my view fail.
Failure to state essential terms
12.	Until its repeal by the Consumer Credit Act 2006 in relation to agreements made after the date it came into force, section 127(3) of the Act rendered unenforceable a consumer credit agreement that did not contain the terms prescribed by section 61(1)(a) and the regulations made under section 60(1). 
13.	The regulations in force when the agreement between Mr. Brophy and the Bank was made were the Consumer Credit (Agreements) Regulations 1983, the material parts of which provided as follows:
“2.—(1)  . . . documents embodying regulated consumer credit agreements . . . shall contain the information set out in Column 2 of Schedule 1 to these Regulations in so far as it relates to the type of agreement referred to in Column 1.
 . . .
6.—(1)  The terms specified in Column 2 of Schedule 6 to these Regulations in relation to the type of regulated agreement referred to in Column 1 (and no other terms) are hereby prescribed for the purposes of section 61(1)(a) of the Act . . . ”
14.	Paragraph 8 of schedule 1 required agreements for running-account credit to contain the following information:
“The credit limit expressed as:—
(a)	a sum of money;
(b)	a statement that the credit limit will be determined by the creditor from time to time under the agreement and that notice of it will be given by him to the debtor;
(c)	a sum of money together with a statement that the creditor may vary the credit limit to such sum as he may from time to time determine under the agreement and that notice of it will be given by him to the debtor; or
(d)	in a case not falling within head (a), (b) or (c) above, either a statement indicating the manner in which the credit limit will be determined and that notice of it will be given by the creditor to the debtor or a statement indicating that there is no credit limit.”
15.	Paragraph 3 of schedule 6 required agreements for running-account credit to contain
“A term stating the credit limit or the manner in which it will be determined or that there is no credit limit.”
16.	Ms O’Connor submitted that the agreement in the present case does not comply with the requirements of schedule 6 because it does not contain a term stating the manner in which the credit limit will be determined. She pointed out that schedule 1 is concerned with the provision of information, whereas schedule 6 is concerned with prescribed terms and that different forms of words are used to describe the different requirements. Clause 3 clearly complies with the requirements of paragraph 8(b) of schedule 1, but the expression used in paragraph 3 of schedule 6 – “the manner in which it will be determined” – is not the same. Rather, it reflects the language of paragraph 8(d), which applies to a case not falling within paragraph 8(b). Ms. O’Connor submitted that a difference in meaning must have been intended and that the same wording cannot satisfy these two different requirements. In any event, she submitted, clause 3 does not describe the manner in which the Bank will determine the credit limit, since it fails to identify any of the factors that it will take into account or the manner in which it will evaluate them.
17.	The wider purposes underlying the requirements of regulations 2 and 6 and the schedules to which they refer were discussed by Mr. Recorder Michael Douglas Q.C. in the case of Hurstanger Ltd v Wilson [2006] WL 4402848 in a lengthy passage which is cited in full in the judgment below and which I need not repeat here. For present purposes it is sufficient to note that regulation 2(4) imposes certain requirements in relation to the presentation of the information prescribed in paragraphs 3 to 19 of schedule 1 in order to ensure that it is effectively brought to the debtor’s attention. The policy behind that requirement is not the same as that which lies behind regulation 6, which merely requires certain terms of the contract to be set out in the document that embodies the agreement. However, there is no reason in principle why the same clause should not satisfy both requirements. The differences in the language used in paragraph 6 of schedule 6 and that used in paragraphs 8(b) and 8(d) of schedule 1 can be explained by the different purposes to which they are directed. Paragraph 8 as a whole sets out in some detail the information concerning the credit limit that must be provided in the agreement. Paragraph 8(b) deals with the simple case where the agreement provides that the creditor may determine the credit limit from time to time and notify it to the debtor. Paragraph 8(d) provides for the case where the agreement provides that the credit limit will be determined from time to time in some other manner, for example, by reference to some factor independent of the creditor, and will be notified to the debtor. Paragraph 3 of schedule 6 is deliberately worded in broad terms in order to encompass the whole range of terms that might be employed to fix the credit limit.
18.	However, I do not myself think that it is important to find a cogent explanation for the difference in the wording of the two paragraphs. Perhaps paragraph 8 of schedule 1 could have been expressed more economically, but there is nothing in its wording which supports the conclusion that paragraph 3 of schedule 6 has the meaning for which Ms. O’Connor contends. What ultimately matters is the meaning of that paragraph and whether it has been complied with. The purpose of section 61(1)(a) and Regulation 6 is to ensure that a term fixing the credit limit in one of the ways described in paragraph 3 is set out in the agreement, not to dictate to the parties what that term is to be. The expression “the manner in which it will be determined” is deliberately broad and is apt to cover any arrangements for the determination of the credit limit that may be agreed  between the parties in cases where there is neither a fixed credit limit nor the absence of any credit limit. In my view the meaning of clause 3 is clear: it provides for the Bank to determine the credit limit from time to time at its discretion by notifying the debtor of its amount. In the present case the manner in which the credit limit will be determined, within the meaning of paragraph 3, is by notification to the debtor. How the Bank decides what the limit shall be is a matter entirely for itself. The agreement does not require it to take any particular factors into account for that purpose, nor to does it require it to attach any particular weight to the various factors that it may consider relevant.
19.	Following on this ground of appeal, Mr. Iles submitted that paragraph 3 obliges the creditor to inform the debtor at the time he signs the application form of the amount of credit that will be made available to him, either by stating a figure or by providing a formula that will enable him to calculate for himself what the initial credit limit will be. The creditor can vary the limit from time to time, if the contract so provides, but the debtor must be made aware at the outset how much credit is to be made available so that he has the opportunity not to proceed, if he so wishes. 
20.	I can see no justification for construing paragraph 3 in that way. Section 61(1) is concerned with the form and contents of the agreement itself, not with the steps that precede it. By signing and returning the application form Mr. Brophy offered to accept whatever credit limit the Bank chose to allow him. It is apparent from the application form itself that the card issuer may make enquiries about the applicant before deciding whether to grant him credit and, if so, in what amount. Nothing in the Act precludes that. The agreement itself must be contained in a document in the prescribed form and must contain the prescribed terms. Regulation 6 and paragraph 3 of schedule 6 both refer to the agreement. They cannot be read as referring to anything other than the agreement under which the creditor agrees to make credit available to the debtor. The only question, therefore, is whether the agreement in this case complied with section 61(1). The application form, when executed by the Bank, became the agreement under which it made credit available to Mr. Brophy. The inclusion of clause 3 was sufficient to satisfy the statutory requirements.
21.	For these reasons, which are essentially the same as those relied on by the judge, I would dismiss the appeal.
Lord Justice Sullivan:
22.	I agree.
Lord Justice Sedley:
23.	I also agree.