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PPI: No ‘second bite of the cherry’, where customers have accepted PS17/3 redress in full and final settlement

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management

26-08-2020

Beverley Ann Taylor -v- GE Money Consumer Lending Limited, 20 July 2020, Leeds County Court

The Facts

Miss Taylor (the “Claimant”), represented by HD Law Limited, sought relief under s140B of the Consumer Credit Act 1974 as a consequence of the non-disclosure of commission received by GE Money Consumer Lending Limited (the “Defendant”) in connection with a single premium payment protection insurance (“PPI”) policy linked to a unsecured loan.

Prior to the commencement of proceedings, the Defendant informed the Claimant that it had received 79.96% of the premium for the PPI policy as commission and, it offered Mrs Taylor ‘Step 2’ redress, i.e. redress calculated in accordance with DISP App 3.7A.3E, being the difference between 50% and the actual commission percentage, historic interest in relation to that sum and simple interest on the whole amount. The Claimant accepted the Defendant’s offer by signing an acceptance form which stated that the acceptance of the redress was in full and final settlement of any claim or complaint concerning the PPI policy.

The Defendant’s offer had not been made in response to an ‘undisclosed commission complaint’ from the Claimant. The offer was made some 15 months after the Claimant had complained that the PPI policy had been mis-sold (a complaint which the Defendant had rejected).

The Claimant sought additional redress, specifically a full refund of the whole premium, plus contractual interest and compensatory interest thereon. The Defendant, represented by Eversheds Sutherland, relied upon the compromise agreement to defend the claim. The claim was dismissed at first instance in the Bradford County Court, before District Judge Hickinbottom in the small claims track.

The Claimant appealed the first instance decision, arguing that the compromise was not binding because:

1. there was a no consideration for the Claimant’s waiver of the claim, on the basis that:

a. the Defendant was required to pay redress under the FCA’s Rules; or

b. the Defendant was going to make the payment of redress as a matter of policy even if it was not required under DISP; or

c. the content of the offer letter was such that it represented that the Claimant was entitled to the redress; and

2. there was no dispute capable of compromise, because the Claimant had not made a complaint specifically about the existence of an unfair relationship due to the non-disclosure of commission.

Appeal dismissed

Her Honour Judge Belcher, sitting in the Leeds County Court dismissed the appeal for the reasons stated below.

1 (a): Was the Defendant required to make the payment by the FCA’s Rules such that there was no consideration?

  • No. The obligation the Defendant under DISP 1.4.1R was to assess the claim fairly and decide what remedial action or redress (or both) may be appropriate. Having decided redress was appropriate, the Defendant needed to offer redress (DISP 1.4.1(3)). The Defendant needed to comply promptly with any offer of redress accepted by the complainant (DISP 1.4.1(5)). The duty to pay redress only arose after the offer of redress was accepted. The Claimant was not entitled as of right to a sum under DISP (Arrale v Costain Civil Engineering Ltd [1976] 1 Lloyd’s Rep 98 had been correctly distinguished by the District Judge at first instance).

1(b): Was the Defendant going to make the payment in any event, so that there was no real consideration?

  • No. The Claimant argued that, even if not required to pay redress by DISP, the Defendant had already decided as a matter of policy to follow DISP App 3 and to make such redress payments to complainants, so there was no real consideration for the waiver. The Defendant’s evidence was that the payment was only made because of the acceptance of the offer and that payments would not otherwise be made to customers. The parties had agreed to dispense with witnesses and cross-examination at the small claims hearing, such that the Defendant’s evidence was unchallenged. There was no basis to doubt the Defendant’s evidence and the Judge had not erred in following the same.

1(c): Did the content of the offer letter estop the Defendant from raising full and final settlement?

  • No. The Claimant argued that the offer letter contained representations that the offer was made pursuant to DISP App 3, that the Defendant upheld her complaint and because of that, the Claimant was entitled to redress in the sum calculated under DISP App 3.7A.3E. The Judge accepted that each of those representations was made in the Redress Letter, but did not accept the submission that it would be inequitable to allow the Defendant to assert that the offer was not in fact what it purported to be, namely a commercial offer in full and final settlement. The acceptance form that accompanied the offer made it clear that acceptance was in full and final settlement of any claim or complaint including through the courts, the Financial Ombudsman Service or otherwise. The suggestion that the Claimant was ignorant of the terms of the offer was rejected.

2: Was there a dispute capable of compromise at the time the redress payment was made?

  • Yes. The Defendant’s offer of redress had been preceded by a complaint from the Claimant about the mis-selling of the policy, not a complaint about the existence of an unfair relationship due to the non-disclosure of commission. There was no actual dispute about unfair relationship, but there was a potential dispute. A reasonable person with all the relevant background information would have realised that the Defendant was making an offer in connection with a claim on an additional or alternative basis. It was a nonsense to suggest that the Defendant had to wait for the Claimant to articulate that alternative claim in order for there to be a dispute which was capable of being compromised.

Comment

HHJ Belcher’s decision will be unsurprising to many observers.

There is no support to be found within DISP or any FCA guidance for the proposition that lenders are compelled to pay (as opposed to offer) redress where they consider it appropriate, or that lenders are prohibited from making their offers conditional upon full and final settlement. When formulating its guidance on PPI commission complaints, the FCA indicated that it was providing for an alternative to litigation, a form of alternative dispute resolution[1]. The FCA did not provide for a statutory scheme that entitled customers to a set amount of redress as of right and to seek further redress through the courts.

It should be unsurprising that the courts upheld a contractual agreement for settlement, which was clear and unambiguous, particularly in circumstances where the Claimant had the benefit of being represented by professional advisors when entering into the settlement. It should also be noted that the decision in this case is not unique, but follows on from a number of other unreported decisions at District Judge level.

What many may be surprised at, is that there are claim management companies and/or law firms, who continue to advise clients that they can pursue court claims in these circumstances. A number of lenders are facing litigation in similar factual circumstances to those in Taylor. It remains to be seen whether the decision in Taylor will bring an end to these misguided claims and the attempts by claimant law firms to generate fees by litigating settled PPI complaints where redress has already been paid.

 


[1] PS17/3, page 34