The Official Receiver v Shop Direct Finance Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Singh,Lady Justice Carr,Lord Justice Nugee |
| Judgment Date | 05 April 2023 |
| Neutral Citation | [2023] EWCA Civ 367 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-001430 |
[2023] EWCA Civ 367
Lord Justice Singh
Lady Justice Carr
and
Lord Justice Nugee
Case No: CA-2022-001430
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Stephen Houseman KC (sitting as a Deputy High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Gibbon KC and Maxim Cardew (instructed by Legal Services Directorate, Insolvency Service) for the Appellant
Javan Herberg KC and Oliver Assersohn (instructed by Weil, Gotshal & Manges (London) LLP) for the Respondent
Hearing dates: 8 & 9 March 2023
Approved Judgment
This judgment was handed down remotely at 10 a.m. on 5 April 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
This appeal concerns the time limit for referring complaints to the Financial Ombudsman Service (“FOS”) under the Financial Conduct Authority (“FCA”) Dispute Resolution: Complaints Sourcebook (“DISP”) in respect of mis-sold payment protection insurance (“PPI”), in particular where a person to whom PPI was mis-sold has subsequently become bankrupt. DISP is a statutory scheme found in the FCA Handbook (“the Handbook”). It is delegated legislation made under the Financial Services and Markets Act 2000 (“the FSMA 2000”).
I will describe the scheme set out in DISP in more detail later but will refer to the key provisions on limitation now in order to explain the issue which arises on this appeal. DISP 1.8.1R provides that a respondent which receives a complaint outside the time limits for a referral to the FOS (as set out in DISP 2.8) may reject the complaint without considering the merits, but must explain this to the complainant in a final response.
The central provision which falls to be construed in this case is DISP 2.8.2R(2)(b). This provides that the Ombudsman cannot consider a complaint if the complainant refers it to the FOS more than “three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint; …” (emphasis added). The issue in this case is whether the reference to “complainant” in that provision is a reference to (1) the bankrupt or (2) the Official Receiver (“OR”), in his capacity as trustee in bankruptcy.
Mr Stephen Houseman KC, sitting as a deputy High Court judge (“the Judge”), agreed with the Respondent and granted a declaration that the relevant awareness is that of the OR. The OR now appeals and submits that the Judge should have concluded that the relevant awareness is that of the bankrupt. Permission to appeal to this Court was granted by the Judge himself in view of the importance of the legal issue and the fact that there is no previous authority on it.
At the hearing we heard submissions from Mr Michael Gibbon KC, who appeared with Mr Maxim Cardew for the Appellant, and from Mr Javan Herberg KC, who appeared with Mr Oliver Assersohn for the Respondent. I express the Court's gratitude to them all and those instructing them for the preparation and presentation of this appeal.
Factual Background
From the 1980s PPI was mis-sold to private customers by financial institutions on a massive scale. Between 2011 and April 2020, over 32.4 million complaints about PPI had been made and £38 billion had been paid in redress. A report by the FCA in 2020 described this as “by far the largest consumer redress exercise in the UK's history.”
Customers who were mis-sold PPI are entitled to redress under DISP. Numerous individuals who were mis-sold PPI subsequently went bankrupt, and it is common ground that any compensation obtained by way of redress falls into the bankrupt's estate, to be distributed in accordance with the provisions of the Insolvency Act 1986 (“the 1986 Act”).
The rules in DISP were amended in 2017 so as to insert a “backstop deadline” for PPI mis-selling complaints of 29 August 2019.
The Respondent is the UK financial services arm of The Very Group. It is a consumer credit lender, which from the mid-1980s to approximately 2014 sold various forms of PPI to its customers.
The OR is the trustee in bankruptcy of hundreds of thousands of bankrupts and in that capacity has referred mis-selling complaints to a large number of financial institutions which sold PPI. By the end of the 2020–21 financial year the OR had recovered over £500m in respect of mis-selling claims.
In May 2019 the Appellant indicated its intention to bring a significant number of PPI mis-selling complaints against the Respondent, seeking compensation for PPI policies held by bankrupts before their bankruptcy orders were made. On 29 August 2019, i.e. the backstop deadline, the Appellant requested that the Respondent treat its correspondence as an expression of dissatisfaction in relation to any PPI policy identified as held by the bankrupt prior to their date of bankruptcy.
The proceedings in the High Court
The Respondent brought a Part 8 claim in the High Court, seeking a declaration that the relevant awareness for the purposes of DISP 2.8.2R(2)(b) is that of the OR.
There was a second, parallel claim brought by Canada Square Operations Limited and Citifinancial Europe Limited, which raised the same primary issue as in the present case. That claim was compromised on confidential terms a few days before trial. The witness evidence filed in that claim stands as evidence in the present case.
In the Part 8 Claim Form the Respondent identified the dispute between the parties as to the correct construction of DISP 2.8.2R(2)(b) but then asserted in the alternative that:
“even if it is the bankrupt's awareness that is relevant for the purposes of DISP 2.8.2R(2)(b), the bankrupt would have become aware (or ought reasonably to have become aware) that he had cause for complaint at the time of bankruptcy or shortly thereafter (this arises from the attribution of the Official Receiver's knowledge to the bankrupt) …” (Emphasis added)
The Respondent confidently asserted that the claim did not give rise to any dispute of fact. Accordingly, it would appear that this alternative declaration, like the primary one, was sought as a matter of pure law.
In the High Court proceedings, which at that time included the parallel claim, the parties prepared an Agreed Case Memorandum for the purpose of the Case Management Conference to be held on 26 November 2021. The Respondent's alternative case was again set out, at para. 10 of that Memorandum.
In preparation for the hearing before the Judge, the parties, at that time still including those in the parallel claim, prepared an Agreed List of Common Ground and Issues. It was agreed, at para. 6, that a trustee in bankruptcy is not, as a matter of general law, the bankrupt's agent or authorised to act for the bankrupt. It was also agreed, at para. 8, that the rules establishing the eligibility of complainants to pursue complaints before the FOS are made under section 226 of the FSMA 2000.
In the list of issues, the primary issue was identified, at para. 1, as being whether the relevant awareness for the purpose of DISP 2.8.2R(2)(b) is that of the OR or that of the bankrupt. At para. 3(2), the issue raised by the Respondent's alternative case was summarised as follows:
“If the relevant awareness for the purposes of DISP 2.8.2R(2) (b) is that of the bankrupt, whether it is the case that the bankrupt would have become aware (or ought reasonably to have become aware) that he had cause for complaint at the time of bankruptcy or shortly thereafter.”
Further, at para. 4, it was said that points that may arise in answering those questions included, at sub-para. (2):
“If awareness of individual bankrupts is what is material, whether awareness (if any) on the part of the Official Receiver can or should be attributed to individual bankrupts, and if so on what basis.” (Emphasis added)
In the skeleton argument on behalf of the Respondent in the High Court, its alternative case was set out at paras. 87–93. The analysis advanced there was that if, contrary to its primary case, the relevant awareness for the purposes of DISP 2.8.2R(2)(b) is that of the bankrupt, then the knowledge of the OR ought to be “imputed” to the bankrupt. The analysis was conducted in terms of conventional agency law: for example the well-known textbook on the subject, Bowstead and Reynolds on Agency, was quoted.
It is clear therefore that the Respondent's case before the High Court was primarily that the relevant awareness is that of the OR; but that, in the alternative, even if the relevant awareness is that of the bankrupt, the awareness of the OR should be “attributed” or “imputed” to the bankrupt. It is common ground that the relationship between the OR and the bankrupt is not the conventional one between agent and principal. Nevertheless it is also common ground that the OR is “authorised by law” to act “on behalf of” the bankrupt in this context: see para. 19 of the judgment below.
However, the Respondent's alternative case was not pursued (at least not with any vigour) before the Judge; and it certainly formed no part of the Judge's reasoning. In the result the Judge granted the primary declaration sought by the Respondent but declined to grant any further declaratory relief in the exercise of his procedural management and/or equitable remedial discretion: see paras. 64–68. There has been no appeal to this Court against that aspect of the Judge's decision. Nor has the Respondent's alternative case as to attribution or imputation of the OR's knowledge to the bankrupt been revived in the Respondent's Notice (although...
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