Canada Square Operations Ltd v MRS Beverley Potter
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jay |
| Judgment Date | 20 March 2020 |
| Neutral Citation | [2020] EWHC 672 (QB) |
| Date | 20 March 2020 |
| Docket Number | Case No: QA-2019-000262 |
| Court | Queen's Bench Division |
[2020] EWHC 672 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Jay
Case No: QA-2019-000262
Sean Snook and Patrick Dunn-Walsh (instructed by Hogan Lovells International LLP) for the Appellant
Jonathan Butters (instructed by HD Law Ltd) for the Respondent
Hearing date: 3 rd March 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Synopsis
The events forming the basis of this appeal all took place a while ago now. The point of law which they generate concerns the interaction of section 32 of the Limitation Act 1980 (“the 1980 Act”) with sections 140A-D of the Consumer Credit Act 1974 (“the 1974 Act”). It is a point of some general importance about which there is a diversity of first-instance opinion.
On 26 th July 2006 Mrs Beverley Potter (originally the Claimant and now the Respondent) entered into a regulated fixed-sum loan agreement with Egg Banking Plc which has changed its name to Canada Square Operations Ltd (originally the Defendant and now the Appellant). The loan was in the sum of £16,953 and was repayable over 54 months at an interest rate of 7.9% APR. At the same time, the Respondent entered into a PPI policy with an insurer within the Axa group, the aggregate premia for which, net of interest, amounted to £3,834.24. Unbeknownst to the Respondent, the Appellant received a commission which amounted to 95.24% of these premia.
In the event, the Respondent discharged her obligations under these agreements by making payments as and when they fell due, and in March 2010 her account with the Appellant was closed.
In April 2018 a complaint was made on behalf of the Respondent to the Appellant on the basis that the PPI policy was mis-sold to her. In due course, she received compensation, but this did not cover the entirety of her loss. In January 2019 the Respondent brought proceedings seeking to recover the balance of the premia she had paid together with contractual and statutory interest, in reliance upon the provisions of sections 140A-D of the 1974 Act. The quantum of her claim was subsequently agreed in the sum of £7,953.53.
In a reserved judgment handed down on 6 th August 2019, following an oral hearing which had taken place the previous day, Mr Recorder Rosen QC found for the Respondent. The Appellant now appeals with the leave of Stewart J.
Additional Essential Facts
The Appellant accepted below that the relationship between it and the Respondent was “unfair” for the purposes of section 140A(1) of the 1974 Act because the latter was not made aware of the commission and its amount. This obviated the need for any extensive inquiry into a matter which could only ever have led to one conclusion, and the Appellant called no evidence. However, it was in evidence that the ICOB Rules at all material times imposed no obligation on the Appellant to disclose the level of its commissions. This remains the position because when the FCA gave fresh guidance in PS17/3 all that was stipulated was a “single 50% tipping point for presuming unfairness” rather than any free-standing duty to make disclosure.
The Recorder accepted the Respondent's evidence that she was not aware of the commission until November 2018, and he found that she could not with reasonable diligence have ascertained the position earlier. This finding was necessary (albeit insufficient) for the Respondent's contention that the primary limitation period of six years could be disapplied.
The Statutory Framework
Sections 140A-D of the 1974 Act were inserted into that statute on 6 th April 2007 by relevant provisions of the Consumer Credit Act 2006. Section 140D, on which nothing turns, was removed in 2013. For present purposes I need set out only section 140A:
“ 140A Unfair relationships between creditors and debtors
(1) The court may make an order under section 140B in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following —
(a) any of the terms of the agreement or of any related agreement;
(b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement;
(c) any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement).
(2) In deciding whether to make a determination under this section the court shall have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor).
(3) For the purposes of this section the court shall (except to the extent that it is not appropriate to do so) treat anything done (or not done) by, or on behalf of, or in relation to, an associate or a former associate of the creditor as if done (or not done) by, or on behalf of, or in relation to, the creditor.
(4) A determination may be made under this section in relation to a relationship notwithstanding that the relationship may have ended.
(5) …” [emphasis supplied]
At this juncture I need interpose that the provision applicable to the instant case is s.140A(1)(c) (which I have highlighted) and that the 2006 Act has retroactive effect through Schedule 3. The Recorder decided that the Appellant “should at least have [disclosed its commissions] when section 140A-D came into force and thereafter” (para 30 of his judgment), and no appeal point in this respect has been taken.
Section 140B confers power on the court to impose various remedies, and these are not in issue.
Section 32(1) and (2) of the 1980 Act provide:
“ 32. Postponement of limitation period in case of fraud, concealment or mistake.
(1) Subject to …, where in the case of any action for which a period of limitation is prescribed by this Act, either —
(a) the action is based upon the fraud of the defendant; or
(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or
(c) the action is for relief from the consequences of a mistake;
the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.
References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.
(2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty .” [emphasis supplied]
I have highlighted section 32(1)(b) and (2) because the instant case does not engage paragraphs (a) and (c) of sub-section (1).
Key Jurisprudence on Sections 140A-D
In Harrison v Black Horse Ltd [2011] EWCA Civ 1128, [2012] E.C.C. 7 the Court of Appeal held that the absence of any breach of ICOB Rules was fatal to the borrowers' claims under these sections. The core reasoning was that the terms of the statutorily imposed regulatory framework were determinative of the ambit of section 140A.
In Plevin v Paragon Personal Finance Ltd [2014] UKSC 61, [2014] 1 WLR 4222 the Supreme Court came to a different conclusion. The facts were very similar to those of the instant case save that the undisclosed commission was a mere 71.8%. Lord Sumption JSC gave the sole reasoned judgment. He made it quite clear that section 140A was not concerned with the question whether the lender was in breach of any legal duty. The issue of unfairness generated separate and broader questions which fell to be addressed within the lexicon and parameters of the statutory scheme. Paras 19 and 20 of Lord Sumption's judgment contain the core of his reasoning:
“19. The next question is whether that state of affairs arose from something done or not done by or on behalf of Paragon [i.e. for the purposes of s.140A(1)(c)]. For this purpose it is enough to consider the acts or omissions of Paragon itself, without exploring the conduct of others acting on its behalf. Paragon owed no legal duty to Mrs Plevin under the ICOB rules to disclose the commissions and, not being her agent or adviser, they owed no such duty under the general law either. However, as I have already pointed out, the question which arises under section 140A(1)(c) is not whether there was a legal duty to disclose the commissions. It is whether the unfairness arising from their non-disclosure was due to something done or not done by Paragon. Where the creditor has done a positive act which makes the relationship unfair, this gives rise to no particular conceptual difficulty. But the concept of causing a relationship to be unfair by not doing something is more problematical. It necessarily implies that the Act treats the creditor as being responsible for the unfairness which results from his inaction, even if that responsibility falls short of a legal duty. What is it that engages that responsibility? Bearing in mind the breadth of section 140A and the incidence of the burden of proof according to section 140B(9), the creditor must normally be regarded as responsible for an omission making his relationship with the debtor unfair if he fails to take such steps as (i) it would be reasonable to expect the creditor or someone acting on his behalf to take in the interests of fairness, and (ii) would have removed the...
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