Article by Katie Wilkinson
Acceptance of ‘PPI Complaint Redress’ can give rise to a valid compromise
Consumer practitioners will be familiar with the mass litigation that has ensued in recent years regarding claims of ‘Unfair Relationship’ following the Supreme Court Judgment in Plevin v Paragon Personal Finance Limited [2014] UKSC 61.
The basic crux of the claims centred on undisclosed commissions that were being retained by Banks from premiums being paid pursuant to the sale of Payment Protect Insurance (‘PPI’). A declaration of unfairness together with a claim for compensation pursuant to s.140A/B Consumer Credit Act 1974 was routinely sought.
One of the common points of Defence taken by the Banks was that the Claimant had accepted a compromise of their claim following a pre-action complaint having been made, and a payment of money accepted under the Financial Conduct Authority redress scheme.
Following a hearing held between 15 – 17 May 2024 Judgment was handed down by the Court of Appeal on 26 September 2024 in the matter of Self v Santander Cards UK Limited and Harrop v Skipton Building Society [2024] EWCA Civ 1106.
In the case of both Mrs Self and Mr Harrop (the ‘Claimants’) unfair relationship claims were brought, and the claims were defended by Skipton and Santander on the basis that the claims had already been compromised.
As is common in PPI cases that reach the Courts, the Claimants had accepted pre-litigation redress payments made in full and final settlement following complaints having been made. Skipton and Santander both successfully defended the claims at first instance, and also on appeal.
The Court of Appeal granted permission to appeal to the Claimants and both appeals were heard together.
As has been the case in hundreds of claims at first instance, the Claimants disputed that there could have been a valid compromise on the basis that:
- There was a lack of consideration to form a valid compromise given that offers of redress were in line with the FCA complaint process which obligated finance companies to make such offers
- The ‘settlement’ was in relation to the pre-litigation complaint and did not preclude a claim being issued under the unfair relationship provisions
- The ‘settlements’ were itself open to be considered under the unfair relationship provisions, and they were unfair to the Appellants
Those 3 issues were under appeal, and the Court of Appeal dismissed both appeals on a unanimous basis.
Giving the lead Judgment, Lord Justice Stuart-Smith recognised that the effect of the FCA’s Dispute Resolution Complaints sourcebook (“DISP”) App 3 imposed a mandatory obligation to ‘investigate and assess the complaint and offer redress or remedial action if and when it decides that is appropriate (paragraph 71). It was rejected by the Court of Appeal that the Respondents were obligated to make an offer of redress to complainants.
At paragraph 75, it was said ‘it is obvious that, on the respondent making an offer of redress, the complainant and respondent will be in the territory of (negotiated) consensual settlements’.
Unsurprisingly, the Court of Appeal held that whether the offer of redress and its acceptance gives rise to a legally binding agreement depends on the terms used by the parties, whether they intend to create legal relations and whether the offeror gives good consideration for the agreement (paragraph 81). In the cases of Santander and Skipton, given that they were not obliged to make offers of redress to Mr Harrop and Mrs Self, there was valid consideration in doing so. The Appellants’ reliance on Arrale v Costain Civil Engineering Ltd I[1976] 1 Lloyd’s LR 98, a case frequently relied upon by Claimants appearing in the County Court, was firmly rejected.
In respect of the argument that the settlement only compromised the complaint rather than any right to pursue a civil claim, Stuart-Smith LJ considered the position to be both unarguable and misconceived. It was held that both the redress letter and customer acceptance form which was signed by Mrs Self clearly set out that a claim for undisclosed commission was being settled. The claim that was brought before the Court mirrored the complaint that was made pre-litigation.
Whilst properly acknowledging that the Court retains jurisdiction to consider unfairness arising from a compromise of a CCA 1974 claim, the Court of Appeal adopted and endorsed what was said by Nugee J in Holyoake v Candy [2017] EWCA Civ 92, that the fact that a compromise had been reached was ‘highly relevant’ when considering what order, if any to make under s.140B. In line with Holyoake, it was held that a Court should be very slow to go behind a compromise reached in such circumstances where the terms of the offer were clear and unambiguous, with the offeree retaining the right to either accept or reject it. Skipton and Santander were held to have discharged the burden of showing the relationship was fair.
Whilst the number of cases involving PPI complaints has significantly decreased, the decision of the Court of Appeal has helpfully clarified the availability of ‘compromise’ defences to Finance Companies who may still be dealing with both ongoing and new claims.
