Plevin v Paragon Personal Finance Ltd and another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Briggs,Lord Justice Beatson,Lord Justice Moses |
| Judgment Date | 16 December 2013 |
| Neutral Citation | [2013] EWCA Civ 1658 |
| Docket Number | Case Nos: B2/2012/2767/CCRTF linked with B2/2012/3147/QBENF |
| Court | Court of Appeal (Civil Division) |
| Date | 16 December 2013 |
[2013] EWCA Civ 1658
Lord Justice Moses
Lord Justice Beatson
and
Lord Justice Briggs
Case Nos: B2/2012/2767/CCRTF linked with B2/2012/3147/QBENF
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE MANCHESTER COUNTY COURT
RECORDER YIP QC
AND FROM THE HIGH COURT OF JUSTICE LEEDS DISTRICT REGISTRY
MR JUSTICE WILKIE
9CH00028 and MX1104
Royal Courts of Justice
Strand, London, WC2A 2LL
James Strachan QC and John Campbell (instructed by MILLER GARDNER LTD) for the Appellant (Plevin)
Nicholas Elliot QC and Ian Wilson (instructed by SGH MARTINEAU) for the Respondent (Paragon Personal Finance Limited)
Hodge Malek QC and James Strachan QC (instructed by MCHALE & CO) for the Appellant (Conlon)
David Bailey QC and Ruth Bala (instructed by SCM SOLICITORS) for the Respondent (Black Horse Limited)
Introduction
These two appeals raise issues about the interpretation and application of section 140A of the Consumer Credit Act 1974 ("the Act"), in the context of the selling of single-premium Payment Protection Insurance ("PPI") in connection with the lending of money under a credit agreement. They have been conjoined because they both raise questions as to the ambit and effect of the decision of this court (Lord Neuberger MR, Patten and Tomlinson LJJ) in Harrison v Black Horse Limited [2011] EWCA Civ 1128.
Section 140A (1) provides as follows:
"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 agreements;
(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.)"
Section 140B gives the court wide powers, in effect, to reopen the credit agreement or any related agreement, by ordering the creditor (or any associate or former associate of his) to make repayments, or to refrain from enforcing the agreement in whole or in part, or by requiring the terms of the agreement to be altered.
In the Harrison case, the question was whether the non-disclosure by the lender to the borrower of the existence and very large amount of commission which the lender received in connection with the simultaneous sale of PPI to the borrower was capable of rendering the relationship between them unfair. The sale of the PPI was regulated by the Insurance Conduct of Business Rules then in force ("ICOB"), made by the Financial Services Authority by way of implementation of the Insurance Mediation Directive in January 2005. After deliberation and consultation, it had been decided not to impose any such disclosure obligation. This court held that non-disclosure of the existence and amount of the commission could not therefore, on its own, give rise to an unfair relationship.
Tomlinson LJ, giving the leading judgment, acknowledged at paragraph 58 that the amount of the commission in that case was:
"on any view quite startling and there will be many who regard it as unacceptable conduct on the part of lending institutions to have profited in this way. I struggle however to spell out of the mere size of the undisclosed commission an unfairness in the relationship between lender and borrower. Moreover the touchstone must in my view be the standard imposed by the regulatory authorities pursuant to their statutory duties, not resort to a visceral instinct that the relevant conduct is beyond the Pale. In that regard it is clear that the ICOB regime after due consultation and consideration does not require the disclosure of the receipt of commission. It would be an anomalous result if a lender was obliged to disclose the receipt of a commission in order to escape a finding of unfairness under section 140A of the Act but yet not obliged to disclose it pursuant to the statutorily imposed regulatory framework under which it operates."
It is material to note that, in the Harrison case:
(a) 87% of the premium paid by the Harrisons for the PPI was received by the lender (Black Horse) as commission. It sold the PPI as intermediary for an associated company, Lloyds TSB General Insurance Limited.
(b) Black Horse was the lender under the credit agreement, selling the PPI directly to the Harrisons, rather than through any independent or tied broker.
(c) The Harrisons did not put forward evidence to prove that they would have acted differently had they known of the existence or amount of the premium: see per HH Judge Waksman QC giving judgment on the first appeal [2010] EWHC 3152 (QB), at paragraph 31.
In both the present appeals, the facts are the same, so far as concerns non-disclosure of very large commissions, although none of them was quite as large as the commission in the Harrison case. Apart from that the facts are alleged to be materially different. At the trial of Mrs. Conlon's claim she gave evidence, which the judge (Mr Recorder Atherton) accepted, that had she known of the amount of the commission she would not have proceeded with the PPI part of the transaction. In Mrs. Plevin's case, the composite loan and PPI transaction was arranged by an independent broker, LL Processing (UK) Limited ("LLP"). Although she complained of the non-disclosure of commission paid both to the broker and to the lender, Paragon Personal Finance Limited ("Paragon"), a major part of her case was that the transaction had been initiated by serious failures in the assessment of its suitability for her, and of her demands and needs. Her case about these failures was primarily aimed at LLP, but alleged to have amounted to "things done (or not done)… on behalf of…" Paragon, within the meaning of Section 140A(1)(c).
At first sight, it might be thought the Harrison case had little if anything to do with the question whether conduct by a broker consisted of things done or not done "by or on behalf of" the creditor. At paragraph 4 Tomlinson LJ described the ambit of that appeal as "very narrow" and focussed only upon an alleged failure by a lender to disclose commission payments to the borrower in a transaction arranged directly with the borrower. But paragraph 1.2.3(2) of ICOB provides that:
"Where there is a chain of insurance intermediaries between the insurer and the customer, ICOB applies only to the insurance intermediary in contact with the customer." (The italics denote defined terms)
In the context of the sale of PPI by a lender to a borrower, the lender is itself an intermediary within the meaning of ICOB, as is any broker intermediating between the lender and the borrower. In those circumstances it is the broker rather than the lender to which ICOB applies by reason of paragraph 1.2.3(2). If, as was submitted for Paragon, the "touchstone" for the identification of unfairness in a relationship created by regulated conduct is the standard imposed by the regulatory authorities, then it is at least arguable, as held by the trial judge in Mrs. Plevin's case (Ms. Recorder Yip QC) that the Harrison case is decisive of that question as well. It is probably for that reason that these appeals were conjoined.
Nonetheless, since both the relevant facts and the issues arising on appeal in the two cases are materially different in all but one respect (namely the non-disclosure of large commissions) I have not found it practicable to address the issues raised on these appeals in the abstract, leaving until the end the application of the ensuing principles to the facts of each appeal. It is necessary to address each appeal separately.
Conlon v Black Horse Limited
The facts
The uncontentious facts about Mrs. Conlon's transaction are set out with admirable precision and brevity in paragraphs 1 to 18 of the Recorder's judgment and need only to be summarised here. The credit agreement and associated PPI were entered into on 3 rd and 4 th April 2007. The amount lent was £17,500.00, to which was added the PPI single premium of £3,347.46. Leaving aside the PPI, the effect of the transaction was to repay the balance of two outstanding loans, and to provide an additional £1,267.26 to Mrs. Conlon, who was an auxiliary nurse employed by the NHS. Both the earlier loans had themselves been the subject of single premium PPI, so that those policies were both terminated early, along with their associated loans. Early termination of PPI gives rise to notoriously poor rates of premium refund.
The Recorder found that more than 40% of the premium was received by Black Horse as commission. Since the premium was itself lent to her by Black Horse, she would also be paying interest to Black Horse on the part of it which constituted that commission.
The judge accepted Mrs. Conlon's evidence (notwithstanding cross-examination) that:
"if she had known that she would be paying Black Horse's commission with interest she would have shopped around and searched the internet for a cheaper quotation."
The Recorder was shown internal policy and staff training documentation disclosed by Black Horse, together with the Report on PPI by the Competition Commission, the combined effect of which led him to infer that:
"The question as to whether to disclose the facts about commission would have...
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