The Supreme Court has given judgment in the milestone Payment Protection Insurance (PPI) mis-selling case, Plevin v Paragon Finance  UKSC 61.
Hodge Malek QC, James Strachan QC and James Potts successfully acted for Mrs Plevin, as the Supreme Court handed down a long-awaited decision overturning Harrison v Black Horse  EWCA Civ 1128 on the “unfair relationship” provisions in sections 140A to 140D of the Consumer Credit Act 1974.
Thousands of PPI claims in the county courts, which have been stayed pending the outcome of the appeal, are now likely to resume or to be settled by lenders. The decision has attracted significant commentary, as claimants and lenders alike weigh the implications of the judgment (including on Lexology here, here and here).
Lord Sumption’s explanation of the judgment can be viewed via this link.
Mrs Plevin’s case
Mrs Plevin took a personal loan of £34,000 from Paragon, with PPI of £5,780. Unbeknownst to her, 71.8% of the PPI premium was taken in commission. No-one advised Mrs Plevin on the suitability of the PPI for her needs.
The Court of Appeal felt it was bound by Harrison to find that this nevertheless did not make the relationship between Mrs Plevin and Paragon “unfair”.
In Harrison, it was held that non-disclosure of commission could not make a relationship unfair if the lender complied with the applicable regulatory rules. These included the Insurance Conduct of Business Rules (ICOB), which at that time did not require insurance intermediaries to disclose commission to their customers. Tomlinson LJ said that: “the touchstone must in my view be the standard imposed by the regulatory authorities pursuant to their statutory duties, not resort to a visceral instinct that the relevant conduct is beyond the Pale”.
The Court of Appeal in Plevin said it was “discomforted” and “dispirited” by this result, but considered it had to follow Harrison.
Supreme Court’s decision
The Supreme Court held Harrison was wrongly decided. The regulatory rules impose minimum standards of conduct, but s.140A of the Consumer Credit Act introduces a broader test of fairness in the relationship between borrower and lender.
Non-disclosure of the commission did make the relationship between Mrs Plevin and Paragon unfair. At some point the amount of non-disclosed commission becomes so high that the relationship cannot be fair. Wherever the “tipping point” lies, this case was “a long way beyond it”.
The Court held that the fact Paragon failed to conduct its own assessment of Mrs Plevin’s needs did not make the relationship unfair. Nor could the failure of the insurance intermediary to conduct a needs assessment be treated as something done “by or on behalf of” Paragon, because the intermediary was not acting as Paragon’s agent.
This, however, was not enough to change the overall result of the appeal. There was an unfair relationship as a result of non-disclosure of the amount of the commission, and this justified the Court reopening the credit agreement.
Conlon v Black Horse
On the first day of the Supreme Court hearing of Plevin and the linked appeal from the Court of Appeal’s decision in Conlon v Black Horse  EWCA Civ 1658, Lloyds subsidiary Black Horse settled its part of the appeal, as reported in The Lawyer. Hodge Malek QC and James Strachan QC acted for Mrs Conlon.