Result of Harrison
& Harrison vs Black Horse Limited of great importance,
says Russell Kelsall.
Go deeper with GlobalData
In October, the Court of
Appeal handed down its long awaited judgment in Harrison &
Harrison v Black Horse Limited (2011) dealing with the unfair
relationship provisions in section 140A of the Consumer Credit Act
1974.
The court dismissed the
Harrisons’ second appeal on whether an undisclosed commission
received from the sale of a payment protection insurance policy,
which was 87% of the premium, created an unfair
relationship.
The Harrisons applied for a
second charge loan with Black Horse in 2003. In 2006, they obtained
a further loan for £60,000 (which, in part, discharged the earlier
loan). The agreement was not regulated by the Consumer Credit Act
1974. The Harrisons also took further credit to pay for the
policy’s £10,200 premium.
During the course of
negotiations, Mr and Mrs Harrison received an initial disclosure
document, a demands and needs statement, a statement of price, a
summary of the policy’s terms and the policy’s terms.
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By GlobalDataEven though permission for
appeal was restricted to the issue of the unfair relationships, Mr
and Mrs Harrison sought to ‘cast the net wider’ and to challenge
the High Court’s conclusions that Black Horse had no obligation to
consider the policy’s cost or compare the policy with
others.
Dismissing the appeal, the
court decided:
- The county court decision of
Yates & Lorenzelli v Nemo Personal Finance Limited
(2010) (often cited by borrowers) was “wrong” and of “no
assistance”. - If an intermediary complied
with the statutory regulatory regime, it is not easy to see how
there is an unfair relationship. - The unfair relationship
provisions require the court to establish if the relationship is
unfair and, if it is, to balance the rights not just of the debtor
but also of the creditor. - There is no requirement for
commission disclosure. - The policy’s cost only needs
to be considered where the customer has indicated it is a relevant
concern (ICOB 4.3.6(2)R). - Even if it is a relevant
factor, the intermediary only needed to consider it against other
policies it advises on (ICOB 4.3.7(1)G). - The mere size of a
commission does not result in unfairness.
The Court of Appeal’s
decision is of great importance for the future of PPI
litigation.
It now provides, for the
first time, the authoritative criteria suggested by Professor Goode
in his evidence to the EU Select Committee. It importantly tightens
the boundaries of debtor’s claims, which we all know have been
spread as wide as possible by claims management companies and their
solicitors.
It is now clear that the
taking of a commission, no matter the size, does not result in an
unfair relationship.
Pulling all of the strands
together, it must be the case that (despite the apparently wide
statutory wording) a viable unfair relationship claim will be
difficult to bring.
The author is a solicitor
at Squire Sanders Hammonds
