Lender’s casebook: Court angered by “outrageous” costs CMCs charge
Claims management companies and their solicitors have been dealt a further blow by the courts in relation to claims of PPI mis-selling. Fiona Hayles, senior associate, dispute resolution group at SGH Martineau LLP, explains
In Barnes v Black Horse Limited, Mr Barnes had visited Motor Nation to purchase a car. He did so with the aid of finance provided by Black Horse. The price of the car was just over £9,000, plus £1,000 for a PPI policy.
Barnes claimed that the payment protection insurance (PPI) had been mis-sold to him; and his solicitors served lengthy Particulars of Claim despite the actual value of the claim being low at £1,500.
They claimed that Barnes had been induced to enter into the agreement by way of a negligent mis-statement; breach of the ICOB (Insurance Conduct of Business) rules and a consequential claim under s.150 of the Financial Services and Markets Act 2000; and unfair relationship under s.140 of the Consumer Credit Act 1974. Barnes claimed for the return of the monies paid for the PPI plus interest.
Barnes’ case was that although the fact that PPI had been included was clear from the face of the finance agreement, he did not know or realise this. His evidence was that he had “just glanced” at the agreement prior to signature.
The court found it “inconceivable” that Barnes would have taken out a loan for £1,000 more than the price of the car he was purchasing, without querying what this additional money was for. Barnes’ evidence was therefore rejected and it was found that the finance agreement reflected precisely the arrangement agreed with Motor Nation.
In dealing with the question of a breach of ICOB, the court first determined whether Motor Nation could be regarded as Black Horse’s agent. Following settled law, this was found not to be the case: Motor Nation had simply been acting as an intermediary.
The ICOB rules therefore had no application as they covered only the insurance intermediary in contact with the customer.
As Black Horse had not been in contact with Barnes, it could not be liable for any alleged breach of ICOB. Given that there was no negligent mis-statement and no breach of ICOB, the claim for unfair relationship was also dismissed.
The court then dealt with the question of costs. This was a low value claim: some £1,500. It would usually have received an allocation to the small claims track but the length of the claim and alleged complexity meant that it was instead allocated to the fast track, where limited costs rules still apply.
Whilst not required to deal with them, given that Barnes’ claim had failed, the court examined the level of costs that his solicitors had incurred: some £30,000. Those costs included, as is usual with PPI, an ATE (after the event) insurance premium of £9,000, payable only if Barnes had succeeded.
The court was angered by the arrangement, found it “shady”, and asked for whose benefit the claim had really been brought given the level of costs incurred against a very low value claim.
A judicial comment that such costs were “outrageous” sends a clear message to the companies involved in mass PPI litigation that their conduct is not acceptable and will be subject to criticism.
For financial institutions involved in such claims, this is welcome and long overdue news.