Borrowers, claims management companies and claimant law firms suffered a potential knock-out blow this week in their quest for recovery of PPI premiums from lenders.
On 29 August 2012 the borrowers in Harrison and another v Black Horse Limited  EWCA Civ 1128 agreed to end their long standing battle with Black Horse in respect of their PPI claim which they maintained created an "unfair relationship" pursuant to s.140 Consumer Credit Act 1974.
The battle had been going on for the best part of three years, although it remains to be seen whether the events of this week will lead to an end in volume PPI claims.
The Court of Appeal decision in Harrison
On 12 October 2011 the Court of Appeal dismissed the borrowers' appeal from the High Court.
The borrowers alleged that an "unfair relationship" had been created on the basis that Black Horse (i) had breached a number of the Insurance Conduct of Business Rules (ICOB), (ii) the PPI policy was unsuitable due to the length of the cover and its cost, and (iii) had received a substantial commission from the insurer which it failed to disclose.
The Court of Appeal rejected these arguments and held that:
1. There had been no breach of the ICOB rules in this case. Black Horse was not obliged to consider/advise on the cost of the PPI policy given that it was only able to advise on a single product. Black Horse was not required to do a comparative exercise and advise that alternative cheaper cover was available elsewhere. Furthermore, Black Horse was not required to advise on the suitability of the policy in terms of cost because the Harrisons had not expressly indicated that cost was a relevant concern.
2. Although the level of commission received (87%) was "quite startling" this on its own did not render the relationship between the borrowers and the lender unfair. The Court noted that there was no requirement under the ICOB rules for lenders to disclose commission and therefore concluded it would be anomalous if lenders where required to disclose such figures in respect of the Unfair Relationship provisions. The Court also suggested that non-disclosure of commission would not give rise to an Unfair Relationship even when this was induced by misrepresentation.
The decision was emphatic to say the least but it did not stop borrowers from bringing PPI claims in the County Court.
Soon after the Court of Appeal decision the Coventry County Court heard the matter of Mr and Mrs Langley v Paragon Personal Finance Limited [unreported]. In that case the borrowers argued that the Court of Appeal decision was limited in scope and they sought to distinguish on the grounds that there was a broker involved. The Court rejected this interpretation and awarded Paragon indemnity costs.
In theory the events of this week should lead to thousands of PPI claims which have been put on hold pending the Supreme Court decision being withdrawn or struck out. However, as we have seen before, theory is not always followed.
Many borrowers sought to distinguish the Court of Appeal decision and argued that it was limited in scope. Mr and Mrs Langley failed in this respect and they were penalised by the Court for continuing with their action.
The approach of the Langley's demonstrates that borrowers may continue to seek ways of distinguishing the Court's decision however the latest turn of events shows that these borrowers will be ill-advised to do so and face an uphill battle which could prove costly.
Hopefully the insurers will take a more pragmatic approach in the future and think twice about financing these baseless claims.