McWilliam and another v Norton Finance (UK) Ltd (trading as Norton Finance (in Liquidation))
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tomlinson,Mr Justice Mitting,Sir Robin Jacob |
| Judgment Date | 11 March 2015 |
| Neutral Citation | [2015] EWCA Civ 186 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2011/2199 |
| Date | 11 March 2015 |
[2015] EWCA Civ 186
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MIDDLESBROUGH COUNTY COURT
Mrs Recorder McMullen
9CH03845
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Tomlinson
Mr Justice Mitting
and
Sir Robin Jacob
Case No: B2/2011/2199
Andrew Clark (instructed by Miller Gardner Solicitors) for the Appellant
The Respondent did not appear and was not represented
Hearing date: 2 December 2014
This appeal raises the question whether a credit broker, Norton Finance UK Limited, "Norton", a member of the Finance Industry Standards Association, operating in the circumstances prevailing in 2006, owed to its consumer clients, Mr and Mrs McWilliam, "the Claimants", a fiduciary duty such that it is liable to account to its clients for commissions received without their informed consent.
The Claimants were looking for a loan of about £25,000 in order to refinance existing debt of about £18,000, mostly incurred on credit cards, and to fund the building of a conservatory for their house, expected to cost about £7,000. In the event Norton arranged on their behalf a loan of £25,500 from Money Partners Limited, "Money Partners." The Claimants also instructed Norton to place payment protection insurance, "PPI." The premium for that was advised as £3,745, and was added to the loan. On top of that, as the Claimants understood, they were to pay to Norton a "broker fee" of £750 and a "completion fee" of £500, the recipient of which was unspecified. So the total amount advanced became £30,495. What is in issue is two further commissions which were paid to Norton out of the total amount advanced. I shall call these "the additional commissions."
The first such commission, £2,675, was paid by the lender, Money Partners Limited, to whom Norton introduced the Claimants for the purpose of obtaining credit. That amounted to 8.77% of the loan advanced, £30,495. The second commission was £1,685.25 paid to Norton by the insurer providing the PPI, Pinnacle Insurance. That amounted to 45% of the PPI premium.
As it happens a yet further commission of £659.84 was paid by Pinnacle to Money Partners. That represented a further 17.6% of the premium. So of the £3,745 lent to fund the PPI premium, 62.6% comprised commissions. Indeed it is worth reflecting that out of the £30,495 advanced, £5,610. 25 or 18.4% represented fees or commissions. It is to the great credit of Mr and Mrs McWilliam that they repaid the loan in full in 2007.
In August 2009 the Claimants began proceedings in the Chester County Court seeking a variety of relief against Money Partners and Norton including a claim that Norton should account to them for the two additional commissions which they had received. By the time the matter came to trial in May 2011, at the Teeside County Court Money Partners had gone into liquidation and the claim against them had by then been discontinued. Other claims fell away at trial. In the event the Judge, Mrs Recorder McMullen, was concerned only with the claim that Norton should account to its clients for the two additional commissions of £2,675 and £1,685.25, and also with a claim for breach of statutory duty.
After a two day trial the Recorder dismissed all of the claims. She firstly held that the additional commissions had not in fact been received by Norton but by a different company, Fintel Limited, "Fintel", a Jersey based company which appears to have used "Norton Finance" as a trading name. Apparently there was a "Broker Agreement" between Money Partners and Fintel. Fintel is said to have outsourced the information gathering, processing and packaging of loans to other companies, including Norton. At all events the Judge accepted evidence given at trial which demonstrated that whilst Norton had acted as credit brokers in this loan transaction, the additional commissions in question had been paid not to Norton but to Fintel. This evidence contradicted admissions made by Norton both in correspondence and in the pleadings. This finding rendered it unnecessary for the Judge to decide whether Norton had owed to the Claimants a fiduciary duty, but she went on to indicate that had that point arisen she would have found that no fiduciary duty was owed. Indeed the Judge found that there was no contract between the Claimants and Norton. The Judge also dismissed the claim in respect of breach of statutory duty and there is no appeal against that part of her decision.
The first question on this appeal is whether the Judge was right to allow Norton to resile from its admission that it had received the additional commissions. The second question is whether the Judge should have found that Norton owed a fiduciary duty to the Claimants. The third question is whether, if such a duty was owed, there was a breach of that duty.
Permission to appeal on these points was granted by Sir Richard Buxton on 13 October 2011. The hearing of the appeal was fixed for 15 March 2012. Norton went into administration on 7 February 2012, following which the administrators notified the Court that, pursuant to paragraph 43 of Schedule B 1 to the Insolvency Act 1986, no legal process might be continued against Norton without the consent of the administrators or the Court. The decision was taken by the Claimants not to proceed with the appeal and a notice of dismissal was filed at court signed by their solicitor and by the administrators for Norton. The appeal was dismissed by order of Deputy Master Bancroft Rimmer on 12 April 2012.
On 24 January 2013 Norton entered Creditors Voluntary Liquidation. In such circumstances legal process against Norton is possible without the permission of the liquidators or the Court. On 4 March 2014 the Claimants applied to reinstate their Appellant's Notice of 12 August 2011 making clear that if permitted so to do, and if the appeal is successful, the Claimants intend to seek payment of compensation from the Financial Services Compensation Scheme. The liquidators consented. On 16 May 2014 at an oral hearing at which Norton was unrepresented, the Court, comprising Maurice Kay and Floyd LJJ, granted permission to reinstate the Appellant's Notice and set aside the order of 12 April 2012. The Court gave no reasons for that decision, or none which we have been shown. For my part I would not have regarded the consent of the liquidators as either a decisive or even, in the circumstances, a relevant consideration. It is said that the case raises issues of principle applicable to many other cases. If so this appeal is a very unsuitable vehicle for the resolution of those issues, since the liquidators made clear that they would take no part and have been unrepresented. The Court has had to resolve difficult and contentious issues without the assistance of adversarial argument.
The Admission Point
Paragraph 5 of the Particulars of Claim dated 18 August 2009 alleged that Norton, in breach of fiduciary duty owed to the Claimants, had received the additional commissions, payment of which was made without informing the Claimants either as to the fact of payment or as to the amount.
In its Defence of 30 September 2009 Norton denied receipt of the additional commissions. It acknowledged receipt of £750 from Fintel on completion of the loan "to cover Norton's packaging and processing costs." This is presumably a reference to the "broker fee."
On 12 March 2010 the Claimants' solicitors indicated to Norton's solicitors that the complexities of the issues in the case, including the relationship between Norton and Fintel, rendered it appropriate that the case be reallocated to the Multi Track and assigned a time estimate of two days for trial.
Norton's solicitors were concerned to reduce costs and in particular, to that end, to avoid reallocation of the case to the Multi Track. Accordingly, on 25 March 2010 they wrote to the Claimants' solicitors in these terms:-
"In relation to payments by the First Defendant in relation to the PPI, and for the purposes of these proceedings, Norton Finance UK Ltd are to be treated as having received the monies described in the Particulars of Claim as being "commission".
For that purpose therefore and whether acting as Principal or Agent in relation to the PPI, Norton Finance UK Ltd will bear any liability that the court considers arises in relation to the PPI as claimed by the Claimant in these proceedings.
On receipt of the "commission", there was a private arrangement between Norton Finance UK Ltd and Fintel Ltd as to the allocation of commission between them.
In the regard therefore and for the purposes of these proceedings, it is accepted therefore that Norton Finance UK Ltd received the "commission".
We therefore enclose an amended Defence to reflect the position as set out in this letter.
We would be grateful if you would please let us know whether you require our client to make an application to Court for the purposes of that amendment."
That seems to be an admission of receipt of the PPI commission, although not the loan commission, an impression borne out by the Amended Defence. The new paragraph 5 in that document read:-
"The Second Defendant denies that it owed the Claimants a fiduciary duty as claimed in paragraph 5 of the Particulars of Claim or at all. The Second Defendant admits that it received monies from the First Defendant which included a commission in respect of the Payment Protection Plan. No admission is made by the Second Defendant to the last...
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