Factual and Procedural Background
These second appeals arise from claims involving the mis-selling of payment protection insurance ("PPI") policies, specifically concerning recurring non-disclosure ("RND") of commission and profit share embedded in the premiums paid by purchasers. The purchasers (Claimants) paid periodic premiums without being informed that a substantial portion represented commission and profit share paid to intermediaries, leaving only a small fraction as the actual premium retained by insurers.
Each Claimant made written claims for repayment of all sums paid for PPI. The Defendants responded with smaller redress offers calculated according to Financial Conduct Authority ("FCA") rules and guidance, on the basis that acceptance would settle all claims. After accepting these offers and receiving payment, the Claimants initiated County Court proceedings seeking further sums under sections 140A and 140B of the Consumer Credit Act 1974 ("CCA"), alleging unfair relationships due to non-disclosure. The Defendants contended that the claims had been bona fide settled, a position upheld by both Deputy District Judges and County Court Judges on appeal.
The appeals to the current Court contest whether the settlement agreements preclude further claims and whether the Court retains jurisdiction to assess unfairness and grant relief notwithstanding such settlements.
Legal Issues Presented
- Whether the process of offer and acceptance of the redress sums by the Defendants and Claimants constitutes a legally binding settlement of all claims arising from the mis-selling and RND of commission in PPI policies.
- Whether there was good consideration supporting the purported settlements, given the Defendants' alleged pre-existing obligations under FCA rules and guidance.
- Whether the Court retains jurisdiction under sections 140A-140C of the CCA to examine and grant relief for unfair relationships notwithstanding the existence of a contract of compromise.
- Whether the terms and amount of the settlements were fair and reasonable such that the Court should uphold them and refuse to allow further claims.
Arguments of the Parties
Appellants' Arguments
- The Defendants were obliged to pay the redress sums calculated under the FCA's DISP App 3 formula, so the payments could not constitute consideration for a settlement.
- The redress offers were admissions of liability, precluding any dispute and thus no valid compromise could arise.
- The settlements did not cover all claims, particularly those arising under sections 140A and 140B of the CCA, and were limited to complaints under the FCA DISP scheme.
- The settlements were inadequate to remedy the unfairness alleged, as the Defendants retained excessive commissions beyond the redress amounts.
- The Court retains jurisdiction to assess unfairness and grant relief despite the existence of settlements.
- The Defendants failed to disclose the actual level of commission at the time of settlement, undermining fairness.
- The Claimants were not advised to seek legal advice before accepting settlements.
Respondents' Arguments
- The redress offers were made in good faith as part of a regulated dispute resolution process under FCA rules and constituted valid offers of settlement.
- The Claimants accepted the offers in full and final settlement of their claims, creating binding contracts supported by good consideration.
- The Defendants denied that the relationships were unfair under section 140A of the CCA, reserving all rights.
- The FCA's DISP App 3 scheme provides a systemic, consistent framework for assessing and resolving complaints, including a rebuttable presumption of unfairness where commission exceeds 50% of premiums.
- The Court should give weight to bona fide settlements reached with the assistance of regulated claims management companies or legal advisors and be slow to set them aside.
- The settlements were fair and reasonable in all the circumstances, and the Claimants had options to reject the offers and pursue further complaints or litigation.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 |
Non-disclosure of high commissions may create an unfair relationship under section 140A of the CCA. |
Established the "tipping point" concept for unfairness due to undisclosed commission; informed FCA's regulatory approach and the Court's assessment of unfairness in these appeals. |
| Smith v Royal Bank of Scotland plc [2023] UKSC 34 |
Interpretation and application of sections 140A-C of the CCA, including the broad and holistic assessment of unfair relationships and remedial discretion. |
Provided authoritative guidance on the Court's two-stage process for determining unfairness and appropriate relief, applied to assess the claims and settlements. |
| Holyoake v Candy [2017] EWHC 3397 |
The Court retains jurisdiction to consider unfairness and grant relief under the CCA even after a bona fide compromise of claims. |
Supported the principle that bona fide compromises are binding but do not oust the Court's residual jurisdiction to examine fairness and grant relief. |
| D & C Builders Ltd v Rees [1966] 2 QB 617 |
Payment of a lesser sum than a liquidated debt cannot be satisfaction unless there is additional consideration. |
Distinguished because the claims here are unliquidated and no pre-existing legal obligation to pay existed, so offers constituted good consideration. |
| Arrale v Costain Civil Engineering Ltd [1976] 1 Lloyd's LR 98 |
Payments made pursuant to pre-existing legal obligations do not constitute consideration for settlement. |
Rejected as inapplicable because the Defendants had no enforceable obligation to pay the sums prior to the offers and acceptances. |
| Newton Moor Construction Ltd v Charlton (1997) 13 Const LJ 275 |
Distinction between admission of debt and offer to compromise affects whether consideration exists. |
Applied to reject appellants' argument that the offers were admissions of debt rather than compromises supported by consideration. |
| Foakes v Beer [1884] UKHL 1 |
Part payment of a debt is not good consideration for a promise to discharge the whole debt. |
Distinguished as claims here are unliquidated, and no existing legal obligation to pay a fixed sum existed before the offers. |
| Ferguson v Davies [1997] 1 All ER 315 |
Offers to settle unliquidated claims can constitute good consideration. |
Supported the reasoning that the offers and acceptances here created binding compromises. |
| Binder v Alachouzos [1972] 2 QB 151 |
Bona fide compromises of genuine factual disputes are binding and should be enforced by courts. |
Analogously applied to support enforcement of bona fide compromises in these appeals. |
| Mionis v Democratic Press SA [2018] QB 662 |
Policy considerations favor enforcement of bona fide compromises and discourage courts from looking behind them without good reason. |
Supported the Court's approach to uphold the settlements absent evidence of unfairness or impropriety. |
| Official Receiver v Shop Direct Finance Company Ltd [2023] Civ 367 |
Interpretation of FCA DISP provisions as delegated legislation and the approach to construing rules and guidance. |
Guided the Court's interpretation of DISP rules and their binding effect on complaint handling and redress offers. |
Court's Reasoning and Analysis
The Court began by examining the factual and procedural context of each appeal, noting that the Claimants had made formal complaints alleging mis-selling and unfair relationships due to non-disclosure of commission in PPI policies. The Defendants responded with offers of redress calculated under the FCA's DISP App 3 scheme, which the Claimants accepted, purportedly settling their claims.
The Court analysed the nature of the offers and acceptances, concluding that the correspondence and conduct evidenced genuine compromises of unliquidated claims under sections 140A and 140B of the CCA. It rejected the argument that the Defendants had pre-existing legal obligations to pay the offered sums, distinguishing the cases relied upon (such as Foakes v Beer and Arrale) as inapplicable because the claims were unliquidated and contingent on the acceptance of offers.
The Court emphasised that the DISP scheme provides guidance and a systemic alternative dispute resolution framework rather than creating enforceable rights to specific sums absent agreement. The offers made were thus offers of settlement, and acceptance created binding contracts supported by good consideration.
Regarding the Court's jurisdiction, the Court accepted established authority (notably Holyoake) that it retains residual jurisdiction to examine the fairness of relationships and settlements under sections 140A-C of the CCA. However, it held that bona fide compromises reached with transparency and the benefit of regulated advice should not be lightly set aside. The Court found that the settlements were fair and reasonable in all the circumstances, noting that the Claimants had access to specialist claims management companies, had clear explanations of the calculations, and were informed of their rights to reject offers and pursue further remedies.
The Court also addressed the contention that the FCA's 50% commission tipping point was inherently unfair. It found that the FCA's approach was a regulatory judgment designed to balance consumer protection with practical resolution of widespread complaints. The Court held that individual settlements reached under this scheme should be respected unless there is clear evidence of unfairness or impropriety.
In sum, the Court rejected the appeals, holding that the compromises were binding and that the Court would not interfere absent compelling reasons. The Claimants failed to demonstrate that the settlements were unfair or that the Court should exercise its residual jurisdiction to grant further relief.
Holding and Implications
The Court's final decision is to DISMISS the appeals brought by the Claimants against the Defendants in relation to their PPI mis-selling and unfair relationship claims under sections 140A and 140B of the Consumer Credit Act 1974.
The holding confirms that:
- Offers of redress made under FCA DISP guidance, when accepted, constitute binding compromises supported by good consideration, even if the claims are unliquidated and contingent on acceptance.
- The Court retains jurisdiction to assess unfairness under the CCA notwithstanding settlements, but bona fide compromises reached with transparency and advice should not be lightly overturned.
- The FCA's regulatory framework, including the 50% commission tipping point, provides a systemic, fair, and practical basis for resolving widespread PPI complaints.
The direct effect is that the Claimants are precluded from pursuing further claims against the Defendants based on the settled complaints. No new precedent altering the legal principles or regulatory framework has been established.