Facts
This was a conjoined appeal.
The claimant consumers claimed repayment of all sums paid for PPI from the defendant.
The defendants offered smaller sums on the basis that acceptance would settle the claims.
After acceptance, the claimants claimed for more than the settlement sums.
The claims were defended on the basis that any claims had been settled.
This was upheld by the trial judge.
It was also upheld by the (first) appeal court.
Issues
First, can a (potential) PPI claim be settled?
Secondly, if so, can that settlement exclude the court’s jurisdiction?
Discussion
Stuart-Smith LJ gave judgment (with whom Asplin LJ and Sir Julian Flaux agreed).
The Consumer Credit Act 1974 protects consumers from “unfair” relationships.
Four pieces of guidance were given.
First, to determine whether the relationship is unfair, the whole history of the relationship must be considered. Secondly, this consideration must be very broad and holistic.
Thirdly, proof of causation and loss are not necessary before the court will remedy an unfair relationship. This is therefore unlike causes of action based on contract and tort.
Fourthly, inequality of bargaining power is unlikely to be sufficient to find an unfair relationship.
Accordingly: “It is easy to conceive of cases where allowing a full refund of all premiums (including commissions and profit share) together with interest would be to do more than was required to remedy the causes of the identified unfairness. It is equally easy to conceive of cases where anything short of a full refund will fail to remedy them.”
Can a (potential) PPI claim be settled?
The ‘Dispute Resolution: Complaints’ sourcebook of the Financial Conduct Authority (“the DISP”) provides rules and guidance. It does not, however, oblige a financial institution to offer, or pay, any specific sum.
Moreover, “if a sum offered … is capable of being good consideration for the settlement of a complainant’s immediate claim, there is no good reason why it should not be good consideration for a wider settlement of claims.”
Furthermore: “Whether the process of the offering of redress and the acceptance of an offer that has been made gives rise to a legally binding agreement depends on the terms used by the parties, whether they intend to create legal relations, and whether, assuming the other criteria are met, [there is] good consideration for the agreement.”
The question, then, was whether the financial institution provided good consideration.
“Such a claim is quintessentially a claim for an unliquidated sum, the value of which is uncertain. The doctrine upon which the [claimant consumers] rely has no application to such a claim … The proper analysis is that the [financial institutions] provided good consideration for the compromises by making an offer of payment which, upon acceptance, created something to which the [consumers] had not previously been entitled, namely an enforceable contract giving them a right to payment of a specific sum.”
Can settlement exclude the court’s jurisdiction?
It was common ground that the court had jurisdiction to consider unfairness and redress, even after claims are compromised. The dispute was how the court should exercise the jurisdiction.
“Two factors will be highly relevant: first, the complexity and clarity (or otherwise) of the terms of the contemplated compromise and its consequences; and, second, whether the party has access to any necessary advice on the contemplated compromise from people other than lawyers.”
Disposal
The claimant consumers and financial institutions understood what was being settled.
The sums offered were good consideration for the settlements.
The appeals were dismissed.
Written by Dominic Bright.