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Black Horse wins landmark PPI case

10 August 2010

Mr and Mrs Speak (S) entered into a regulated fixed sum loan agreement with Black Horse Limited in 2006.

In addition to the loan, S took out Payment Protection Insurance (PPI). The PPI was also financed and payable over the same period as the loan and at the same interest rate.

S failed to maintain payments and in 2009 the bank issued court proceedings to recover the sums due. S contended that the PPI policy, which the bank had sold them along with their loan, had been mis-sold. The particulars of the alleged mis-selling were that the PPI was a condition of the loan and that it had been misrepresented as being compulsory, therefore if S wanted the loan they had to have PPI.

S claimed there was a breach of the bank’s statutory duty under ICOB and that as a result an unfair relationship had arisen under s.140A of the Consumer Credit Act 1974. The loan and the PPI were sold to S by one of the bank’s branch employees, Ms O’Halloran (Ms H).

Held

His Honour Judge Waksman QC concluded that the allegations were not true and ruled in favour of Black Horse Limited. The sales process employed by the bank was scrutinised by HHJ Waksman, who placed a heavy reliance on the testimony of Mr S and Ms H.

Mrs S was not present when the PPI was purchased, but had given her husband authority to act on her behalf.  After hearing all the evidence, HHJ Waksman stated that Mr S had given ‘inconsistent or implausible evidence’ compared to Ms H, whom he found to be ‘clearly more reliable’.

The judge ruled that Ms H’s evidence supported the claim that the bank had issued Mr S with an Initial Disclosure Document explaining that the bank would only offer PPI products from Lloyds. In addition, a demands and needs statement was signed by both Mr & Mrs S, which Ms H had explained clearly.

The conduct of the bank prior to the signing of the agreement was crucial in ascertaining whether the PPI was represented as optional or not. From the evidence given, it was found that prior to signing the agreement the bank had made it clear that it only recommended PPI.

During further discussions as to the terms of any loan, Ms H had gone through the features, benefits and exclusions of PPI and later went through the demands and needs statement with Mr S. As such, the judge concluded that the PPI had not been represented as a condition of the loan. It is worth noting that the Judge stated that if the Bank had represented that the PPI was a condition of the loan then the fact that the agreement stated that it was optional, would not make it optional.

The judge concluded that as there had been no misrepresentation, then there was no breach of ICOB. He focused on the actions of the bank’s representative and whether Ms H took reasonable steps under rule 4.3.1 ICOB to ensure that the demands and needs of the customer were met, rather than looking to the organisation’s actions as a whole. As a result, the agreement was enforceable and S were ordered to pay the amounts owed plus costs and interest.

Comment

It is clear from HHJ Waksman’s comments that conduct prior to the signing of any agreement is essential in determining whether PPI has been mis-sold.

The internal policies and procedures in place, along with the actions of any representatives will all be taken into account.

As a High Court Judgment this case will bind the county courts, where most PPI cases are currently being heard, meaning future PPI claims may only carry weight against banks on grounds of misrepresentation at an individual point of sale.

Black Horse Limited v Speak & Speak [2010] EWHC 1866 (QB)

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Natalie Evans

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