Shop Direct Finance Company Ltd v The Official Receiver
| Jurisdiction | England & Wales |
| Judge | Stephen Houseman,Mr Stephen Houseman |
| Judgment Date | 06 June 2022 |
| Neutral Citation | [2022] EWHC 1355 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2021-000632 |
[2022] EWHC 1355 (Comm)
Stephen Houseman QC
Sitting as a Deputy Judge of the High Court
Case No: CL-2021-000632
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Javan Herberg QC & Oliver Assersohn (instructed by Weil, Gotshal & Manges (London) LLP) for the Claimant
Michael Gibbon QC & Maxim Cardew (instructed by the Legal Services Directorate, Insolvency Service) for the Defendant
Hearing dates: 24, 25 and 26 May 2022
Draft Judgment circulated on 1 June 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Stephen Houseman QC SITTING AS A JUDGE OF THE HIGH COURT
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Monday 06 June 2022 at 12:00.
Mr Stephen Houseman QC sitting as a Deputy Judge of the High Court:
INTRODUCTION
By this action under CPR Part 8, the Claimant (“SDFC”) seeks declaratory relief against the Defendant (“The Official Receiver” or ‘TOR’ for short) relating to the time limitation provision governing complaints referred pursuant to the Financial Ombudsman Service (“FOS”). The complaints concern payment protection insurance (‘ppi’ for short) which was allegedly mis-sold to consumers who since became bankrupt and whose respective estates duly vested in TOR by operation of law. TOR notified a bulk complaint during mid-2019.
FOS was created pursuant to Part XVI of the Financial Services and Markets Act 2000 (as originally enacted) (“ FSMA”). The relevant limitation regime in the scheme rules is contained in the Dispute Resolution: Complaints Sourcebook (“DISP”) which forms part of the FCA Handbook issued by the regulatory authority pursuant to its statutory rule-making powers and responsibilities. DISP is a piece of delegated legislation designed to set out a practical and coherent scheme for the operation of FOS. It is the product of a consultative process undertaken in conjunction with the enactment of the primary legislation. The key rule-making provision is s.226 FSMA.
The primary declaration sought by SDFC and the converse declaration sought by TOR in its acknowledgement of service raise an issue of construction as to whose actual or constructive awareness of relevant cause for complaint matters for the applicable limb of the limitation regime in DISP 2.8.2R(2)(b). More specifically, the question is whether the “ complainant” with “ cause for complaint” in such context is the bankrupt consumer whose eligibility is a precondition to bringing any complaint or TOR in whom such consumer's estate vested by operation of law upon bankruptcy and who is “ authorised by law” to bring such complaint pursuant to its statutory responsibilities under the Insolvency Act 1986 (“IA86”). Depending on the answer to this threshold issue, and subject to the constraints of CPR Part 8, SDFC seeks further declaratory relief as to the timing of relevant actual or constructive awareness on the part of TOR or the relevant class of bankrupt consumers, as the case may be.
This action was set down for trial together with Claim No. CL-2021-000400 brought by two former financial institutions against TOR. The claimants in that parallel action sought an identical declaration as sought by SDFC on the primary construction issue summarised above, but no further declarations. That separate action was compromised on confidential terms a few days before trial. The witness evidence filed in that parallel action stands as evidence in the present action; it explains, amongst other things, the high volume of complaints involved in that particular case. I have the benefit of the skeleton argument of leading and junior counsel filed prior to that action being settled. The three skeleton arguments with respective annexures cover over 100 pages in total.
This and the settled action are understood to be the first involving a standalone claim for declaratory relief as to the meaning of any part of DISP. The FCA and FOS are aware of the proceedings, but neither has so far intervened. It is common ground that the Court can and ought to grant declaratory relief resolving the primary construction issue. There is no dispute as to the standing of either party or the utility of such relief. SDFC is a “ respondent” within the applicable statutory rubric. TOR notified the bulk complaints on behalf of bankrupt consumers and would receive any financial redress as statutory trustee of the relevant bankruptcy estates. The primary dispute is whether TOR is the “ complainant” for the purposes of the limitation regime. Nothing turns on burden of proof or persuasion in this regard.
The primary construction issue arises at the intersection of two distinct statutory regimes: financial services regulation and personal insolvency. It raises questions as to the nature of TOR and its functions as well as the specific property which vests upon appointment. In view of the large number of complaints which may be involved or impacted by such decision, and its location at this specific statutory confluence, I consider the issue to be one of general public importance and will grant permission to appeal, if requested.
RELEVANT BACKGROUND & STATUTORY FRAMEWORK
SDFC operates the UK financial services business of The Very Group, a large and well-known multi-brand online retailer offering credit terms to consumer purchasers of its retail goods.
TOR is a statutory office created in 1883. Appointments are made by the Secretary of State pursuant to s.399 IA86. TOR is also an officer of the court with certain investigatory powers (s.400). The office is held and its functions discharged by 16 individuals at present. Although not an official title or distinct office, the Senior OR is David Chapman. Mr Chapman has provided four witness statements across both actions. For simplicity and convenience, I refer to TOR as a singular neutral personality.
Upon the making of a bankruptcy order, TOR becomes the first trustee in bankruptcy unless the Court appoints another trustee (s.291A). The bankrupt's estate vests in TOR immediately and automatically upon such appointment, i.e. by operation of law and without any conveyance or assignment or transfer (s.306). Like any trustee in bankruptcy, TOR holds the estate on a statutory purpose trust, but is not a trustee for the purposes of the Trustee Act 1925; it is not an agent of or for the bankrupt individual in any recognised sense; it steps into the shoes of the bankrupt individual, including for the purposes of bringing or defending legal proceedings in its own name and capacity. Such office differs in material ways from that of a liquidator of a corporate entity: see Gabriel v. BPE Solicitors [2015] UKCS 39; [2015] AC 1663 at [9].
TOR's paramount function is to “ get in, realise and distribute the bankrupt's estate” pursuant to s.305(2). The bankrupt's estate, so far as material, consists of “ all property belonging to or vested in the bankrupt at the commencement of the bankruptcy” (s.283(1)). The concept of “ property” is defined very widely. It includes “ things in action” as well as “ every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property” (s.436(1)). The ostensible circularity of this definition notwithstanding, it is accepted as being the widest possible formulation. It contemplates the present vesting of a future or contingent interest, for example.
It is assumed for present purposes that (a) consumers were mis-sold ppi by SDFC in circumstances which qualified each of them as an “ eligible complainant” for the purposes of making a complaint to and seeking financial redress from SDFC as “ respondent” in accordance with DISP; (b) the estate of such consumer vested in TOR by operation of law upon the latter's appointment at bankruptcy; and (c) TOR subsequently notified (to use a neutral term) such complaint to SDFC “ on behalf of” each bankrupt consumer on or by 29 August 2019. That date was the specific back-stop deadline for ppi mis-selling complaints inserted with two years' notice at DISP 2.8.9R(2)(a), as explained below.
As regards (b) above, it is common ground that any right to receive financial redress awarded pursuant to a complaint (a ‘right to redress’ as shorthand) would fall within the statutory definition of property and thus belong to TOR under statutory trust, not the bankrupt. An issue arises as to whether this entitlement forms part of or at any rate exists in addition to a distinct statutory right to bring a complaint (a ‘right to complain’ as shorthand) and whether or the extent to which that vests in TOR upon its appointment pursuant to the bankruptcy of an eligible complainant.
Section 226 FSMA covers the compulsory jurisdiction with which this case is concerned. (The voluntary jurisdiction is covered by s.227.) Section 226 sets various parameters or conditions for the rules made pursuant to it, i.e. what became DISP. This rule-making power is augmented by Schedule 17 (The Ombudsman Scheme): paragraph 2 imposes a statutory duty on the regulatory authority to make rules for the operation of FOS; paragraph 13 requires that such rules include a time limitation regime.
Such rules were made as delegated legislation in the form of DISP contained in the FCA Handbook after a process of consultation and iterative drafting. In its current form, DISP runs to over 230 pages including appendices and schedules. DISP 1 covers fair treatment of...
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The Official Receiver v Shop Direct Finance Company Ltd
...BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES COMMERCIAL COURT (KBD) Stephen Houseman KC (sitting as a Deputy High Court Judge) [2022] EWHC 1355 (Comm) Royal Courts of Justice Strand, London, WC2A 2LL Michael Gibbon KC and Maxim Cardew (instructed by Legal Services Directorate, Insolven......