British Credit Trust Ltd v Scotland
| Jurisdiction | England & Wales |
| Judge | Lord Justice Kitchin,Lord Justice Underhill,Lord Justice Moore-Bick |
| Judgment Date | 10 June 2014 |
| Neutral Citation | [2014] EWCA Civ 790 |
| Docket Number | Case No: B2/2013/1069 |
| Court | Court of Appeal (Civil Division) |
[2014] EWCA Civ 790
Lord Justice Moore-Bick
Lord Justice Kitchin
and
Lord Justice Underhill
Case No: B2/2013/1069
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEICESTER COUNTY COURT
HHJ HAMPTON
1NN00841
Royal Courts of Justice
Strand, London, WC2A 2LL
Adam Tolley QC (instructed by Blake Lapthorn) for the Appellant
Jonathan Butters (instructed by Michael Lewin) for the Respondents
Hearing dates: 4 December 2013 and 22 May 2014
Introduction
This is an appeal against the judgment of Her Honour Judge Hampton given on 19 November 2012 whereby she held the respondent claimants, Mr Mark Scotland and Miss Emma Reast, were entitled to compensation from the appellant defendant, British Credit Trust Limited ("BCT"), having found that the relationship between them was unfair within the meaning of s.140A of the Consumer Credit Act 1974 ("the Act").
BCT is a finance company. It has no sales team of its own but obtains its business through brokers to whom it pays a commission. In March 2005 it lent the claimants £8,563.08 comprising £7,430.00 to allow them to purchase double-glazed windows and doors, and a further £1,133.08 to allow them to purchase payment protection insurance ("PPI"). The term of the loan was 10 years.
In November 2011, over six years later, the claimants began these proceedings alleging that the loan was improperly executed; that BCT was liable for misrepresentations made by the salesmen about the PPI; and that the relationship between the claimants and BCT was unfair. The first allegation was withdrawn early in the proceedings and it was accepted at trial that the second was time barred. Accordingly the only allegation with which the judge had to deal was the third, that is to say whether the relationship was unfair.
The judge held that the relationship was indeed unfair by reason of the conduct of the salesmen and she made a consequential order varying the terms of the loan and directing BCT to repay to the claimants the sum of £2,165.52 being the insurance premium and the interest paid in respect of it.
The judge refused permission to appeal. On 27 March 2013 Bean J granted permission and directed that the appeal be transferred to this court pursuant to CPR 52.14 on the basis that it raised an important point of principle. He took that course primarily in the light of observations made by Tomlinson LJ in Harrison v Black Horse [2011] EWCA Civ 1128 at [31] that a misrepresentation was likely ordinarily to be irrelevant to the question whether a relationship was unfair. I must return to this decision and its relevance to the present case later in this judgment but for present purposes simply note that Bean J considered that it raised an issue which could only authoritatively be decided by this court and so merited the exercise of his discretion and the taking of what he recognised to be an unusual course. The appeal was accepted by this court on 23 April 2013.
The background
The background facts are not in dispute. In January 2005 the claimants were visited in their home by two double glazing salesmen who were acting on behalf of Bowater Windows Limited, a company which carried on business under the trading name Zenith Staybrite.
The visit lasted most of the day and during the course of it the claimants were shown DVDs of products which Zenith Staybrite was offering for sale. At the end of the visit the claimants decided to buy a full set of windows and doors. However, as a young couple with limited funds, they needed a loan, which the salesmen offered to arrange through an associated broker. The parties are agreed that, for the purposes of this appeal, Zenith Staybrite and the broker may be treated as one entity and so I shall refer to them together as "Zenith".
At this point the salesmen misled the claimants. They told them, wrongly, that in order to secure a loan they would need to purchase PPI. Moreover, the term of the proposed loan was ten years yet the PPI policy offered by the salesmen only provided protection for five years. Further, the claimants were both full time employees at Asda and in the event of any illness which prevented them from working were entitled to sick pay, a fact which the salesmen failed to take any steps to ascertain.
The claimants were turned down by the first finance company approached by Zenith. However, their application to BCT was accepted. As was explained to us during the course of the appeal, it was made by Zenith to BCT pursuant to an arrangement that BCT has with various brokers, including Zenith, under which the broker may submit an application to BCT electronically and, if it is accepted, BCT will pay the broker a commission. I would emphasise, however, that BCT was not at any time directly involved in the negotiations for the loan with the claimants, and Zenith was not BCT's common law agent. Further, BCT did not require any borrower to purchase PPI in order to be eligible for one of its loans, and BCT would have lent to the claimants the sum necessary for the purchase of the windows and doors without any PPI being purchased. In short, there was nothing to suggest that BCT acted culpably in its own dealings with the claimants.
The loan agreement was concluded on 11 March 2005 and the PPI policy was duly issued by Sterling Life Limited and Sterling Insurance Company Limited (together "the insurers") on 1 July 2005. Neither of the insurers was shown to be connected to BCT. However, BCT did receive a commission in respect of the sale of the PPI policy and it has received interest on the part of the loan which relates to it. But it did not receive the PPI premium itself.
These proceedings were issued on 4 November 2011, by which time Zenith, and here I mean both Zenith Staybrite and the broker, had ceased trading.
The judgment
The judge held that Zenith had made a misrepresentation to the claimants that it was necessary for them to take out the PPI policy in order to secure the loan. She also found that Zenith had sold them the PPI policy in breach of the ICOB rules. She reached that conclusion on two bases. First, the misrepresentation meant that Zenith had failed to communicate with the claimants in a way that was clear, fair and not misleading, contrary to rule 2.2.3. Second, the discrepancy between the term of the loan (10 years) and the term of the policy (5 years), and the failure by the salesmen to ascertain whether the claimants were entitled to sick pay meant that Zenith had failed to take reasonable steps to ensure that the policy was suitable, contrary to rules 4.3.1, 4.3.2 and 4.3.6. The judge also found that but for the misrepresentation and breaches of the ICOB rules, the claimants would not have taken out the PPI policy. There is no appeal against any of these findings.
The judge then proceeded to consider the operation of the Act. In this regard she held that the negotiations conducted by Zenith's salesmen were deemed to have been conducted by Zenith on its own behalf and also as agent of BCT as a result of the interplay between s.11(1)(b), s.12 and s.56(2) of the Act. Further, Zenith's conduct was therefore relevant as "things done (or not done) by, or on behalf of, the creditor" in determining whether the relationship between the claimants and BCT was unfair within the meaning of s.140A. Since the claimants would not have purchased the PPI policy but for the misrepresentation and breaches of ICOB, it followed that those matters created an unfair relationship and the court could therefore exercise the discretionary powers conferred by s.140B.
Finally, the judge exercised her discretion under s.140B by, in substance, requiring BCT to repay the loan payments referable to the PPI policy and varying the loan agreement so as to excuse the claimants from repaying the rest of the loan so far as it related to the policy.
The appeal
The course of the appeal
This appeal has taken a rather unusual course. It originally came on for hearing on 4 December 2013. On that occasion Mr Tolley, who appeared on behalf of BCT, submitted that the judge fell into error at a number of points in her analysis. First, he made the overarching submission that the deemed agency provisions of s.56(2) have no relevance to s.140A at all. There are, he submitted, provisions for the attribution of vicarious liability in s.140A which are quite different from those in s.56. Indeed, in the course of his submissions and in response to questions from the court, Mr Tolley argued that s.56(2) performed some kind of definitional function within the Act, but no more.
Second, and focusing now on the misrepresentation by Zenith, Mr Tolley argued that the judge was wrong to take this into account in any event. In that regard he submitted that the Act provides specific remedies for misrepresentation in s.75 such that there is no need to provide an alternative remedy for the same type of wrong by means of s.140A.
Third, and turning to the ICOB rules, Mr Tolley submitted that the judge fell into error in finding that the ICOB rules had any relevance to the claim based upon s.140A. The rules do not apply to a lender in the position of BCT which is neither an insurance product provider nor an insurance intermediary. Further, there are alternative remedies available in respect of a breach of these rules by a supplier or broker and the judge erred in failing to take these into account.
Fourth, and if, contrary to the foregoing, this court were to...
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