![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
United Kingdom Supreme Court |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> United Kingdom Supreme Court >> Smith & Anor v Royal Bank of Scotland plc [2023] UKSC 34 (04 October 2023) URL: https://www.bailii.org/uk/cases/UKSC/2023/34.html Cite as: [2024] 2 All ER (Comm) 1, [2023] UKSC 34, [2023] ECC 25, [2024] AC 955, [2023] 3 WLR 551, [2024] 1 All ER 97 |
[New search] [Printable version] [Buy ICLR report: [2024] AC 955] [Buy ICLR report: [2023] 3 WLR 551] [Help]
[2023] UKSC 34
On appeal from: [2021] EWCA Civ 1832
JUDGMENT
Smith and another (Appellants)
v
Royal Bank of Scotland plc (Respondent)
before
Lord Hodge, Deputy President
Lord Briggs
Lord Kitchin
Lord Hamblen
Lord Leggatt
JUDGMENT GIVEN ON
4 October 2023
Heard on 12 January 2023
Robert Weir KC
Jonathan Butters
(Instructed by Cheval Legal Ltd)
Respondent
John Taylor KC
Giles Robertson
(Instructed by Pinsent Masons LLP (Glasgow))
Lord Leggatt (with whom Lord Briggs, Lord Kitchin and Lord Hamblen agree):
A. Introduction
B. The claims
Karen Smith
“We [ie the bank] strongly recommend you take out this cover. For cover just tick this box.”
Ms Smith did so. What the bank did not disclose was their financial interest in making this recommendation. In fact, well over 50% of the money paid for PPI did not go to the insurer but was retained as commission by the bank. Even to this day the bank has chosen not to reveal the exact size of its commission.
Derek Burrell
The decision of the Court of Appeal
C. The legislation
The key provisions
“Unfair relationships between creditors and debtors
(1) The court may make an order under section 140B in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following—
(a) any of the terms of the agreement or of any related agreement;
(b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement;
(c) any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement).
(2) In deciding whether to make a determination under this section the court shall have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor).
…
(4) A determination may be made under this section in relation to a relationship notwithstanding that the relationship may have ended.”
How the regime operates
“… in determining whether, at the relevant date, the relationship is or is not unfair, the court is required to have regard to certain matters specified in section 140(A)(1) and to all other matters it thinks relevant, whenever those matters occurred. There is no possibility, therefore, if the court is entitled to make the determination of fairness at all and is not barred by limitation from doing so, of restricting the temporal scope of the inquiry.”
Plevin v Paragon Finance
“Any reasonable person in her position who was told that more than two thirds of the premium was going to intermediaries, would be bound to question whether the insurance represented value for money, and whether it was a sensible transaction to enter into. The fact that she was left in ignorance in my opinion made the relationship unfair.”
“Bearing in mind the breadth of section 140A and the incidence of the burden of proof according to section 140B(9), the creditor must normally be regarded as responsible for an omission making his relationship with the debtor unfair if he fails to take such steps as (i) it would be reasonable to expect the creditor or someone acting on his behalf to take in the interests of fairness, and (ii) would have removed the source of that unfairness or mitigated its consequences so that the relationship as a whole can no longer be regarded as unfair.”
D. The time bar issue
“(1) An action to recover any sum recoverable by virtue of any enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued. …”
It is common ground that this is the applicable limitation period in the present cases. The dispute is about when “the cause of action accrued”.
The bank’s contention
The “completed cause of action” argument
Why the “completed cause of action” argument is flawed
“crucially the fact that a relationship was unfair yesterday is not same fact as the relationship being unfair today. The facts necessary to make a claim for the unfairness on that given date cannot be said to have occurred until that given date.”
The previous regime
The absurdity argument
“… if there are matters relied on by the debtor which point to the relationship being unfair the court must clearly take into account any countervailing factors or other matters which put those matters relied on by the debtor into perspective and so may affect the assessment.”
Apart from the rate of interest, other matters capable of affecting the assessment would include what complaint, if any, about the interest charged in the first year or attempt to seek redress the debtor had made during the 25-year history of the relationship. In the absence of some extraordinary explanation, inaction by the debtor over such a length of time is likely to be regarded as an overwhelming factor pointing to the relationship not being unfair when it ended.
“if the Bank had not continued to keep her in total ignorance, and had written to her more than six years before the commencement of proceedings setting out the commissions it had received, then it would be open to a court either to conclude that after that period of time the relationship is now at the point of determination no longer unfair; or that it should be slow when exercising its discretion as to remedy to order the return of the sums paid.”
I agree with this observation. However, it does not assist the bank since, in fact, the bank did continue to keep Ms Smith in total ignorance until a matter of months before the proceedings were commenced. In these circumstances the fact that she did not make a claim for repayment sooner cannot be held against her. It cannot be said either that her inaction had the result that the credit relationship was no longer unfair when it ended or that it provides a reason why the court in exercising its discretion should decline to order the return of the sums paid. Indeed, for the bank to complain about delay in making the claim seems to me wholly unreasonable.
The “no unfairness” argument
“the court in assessing the fairness of the relationship between the debtor Ms Smith and the creditor the bank is entitled to take all relevant matters into account whenever they took place, and that will include a related agreement such as the PPI agreement even if that PPI agreement itself had come to an end before the point in time that the unfairness of the relationship is being assessed. So here, as the courts below did, one is entitled to assess the fairness of the relationship which came to end at the point it came to an end, ie 2015, and in doing so it is appropriate to take into account a related agreement which had ended before that.”
I agree with this statement, save to say that the court is not merely entitled but required to assess the fairness of the relationship between the bank and Ms Smith at the point in time when the relationship came to an end - that is, in 2015.
“There is nothing in the 1974 Act which somehow means that once a credit relationship was unfair for some reason, that unfairness always and necessarily has to persist for all time as long as the credit agreement persists, as a matter of law and irrespective of the facts.”
Birss LJ went on to say, at para 65, that, just as the court can find that a relationship was fair in the past but then became unfair, so the converse is possible and that, in a case where the relationship was unfair at a point in the past but where the source of that unfairness has ceased to have any effect, then when looking at what the state of the relationship “is” at a later date, the relationship may not still be unfair.
“The relationship was unfair in January 2000 when Ms Smith entered into the PPI agreement in ignorance of the commission and was unfair up to April 2006 because Ms Smith was still obliged to and was in fact making payments to [the bank] of sums which only arose because of that PPI agreement. However the relationship changed after April 2006 because the PPI agreement ended. There was no case, alleged or proved, that any economic effect or consequence of the PPI agreement for Ms Smith persisted after April 2006 or existed in 2015.”
From this the Court of Appeal drew the conclusion that April 2006 is the date when time started to run for the purposes of limitation.
E. The transitional provisions
“(4) In relation to an order made under section 140B after the end of the transitional period in connection with a credit agreement—
(a) references in subsection (1) of that section to any related agreement shall not include references to a related agreement to which this sub-paragraph applies;
…
and the order shall not under paragraph (g) of that subsection direct accounts to be taken … between any persons in relation to a related agreement to which this sub-paragraph applies.
(5) Sub-paragraph (4) applies to a related agreement … if—
(a) it was made … before [6 April 2007]; and
(b) it ceased to have any operation before the end of the transitional period.”
F. DECIsion
Lord Hodge (concurring):