Appeal dismissed in secret commission claim against insurer for PPI broker sale

Charlotte Eborall (instructed by Jonathan Cavill of Pinsent Masons LLP) acted on behalf of the successful respondent insurance company in an appeal before HHJ Kramer, the Designated Civil Judge of the Business and Property Courts in Newcastle made by two individual consumers who had brought a secret commission claim using the services of the claimant law firm, HD Law Limited.

The claimants alleged that the insurer had paid commission to the Claimants’ broker, “APS”, when they purchased a PPI policy and in so doing, had procured a breach of fiduciary duty, contrary to the Court of Appeal decision in Hurstanger v Wilson [2007] EWCA Civ 299. At first instance, District Judge Charnock-Neal in the County Court at Gateshead dismissed their claim, concluding that APS was not a fiduciary; that the Claimants had not proved that the commission had been paid by the insurer (and it was more probably paid by a third party not party to the claim); and that in any event the claim was statute-barred and could not be saved by section 32 of the Limitation Act 1980.

After a day’s appeal hearing in the Newcastle BPC, on 14 October 2019 HHJ Kramer dismissed the Claimants’ appeal. The Judge considered, in detail, the scope of the agency relationships between, on the one hand, the insurer and the administrator (who had paid the commission to APS) and the non-party and the administrator, and concluded that the district judge was correct that the non-party had paid the commission, not the insurer. The Judge further considered the extent of knowledge that would be required by the insurer to be liable for procurement of breach of fiduciary duty, although ultimately that point was not necessary for disposal of the appeal. Relying upon McWilliam v Norton Finance [2015] EWCA Civ 186, the Judge accepted the submission that APS was the claimants’ fiduciary, but concluded that there was no evidence of any knowledge on the part of the administrator (still less the insurer) that APS was a fiduciary, which was a further reason why the appeal and the claim failed. Finally, the Judge considered the claimants’ appeal in relation to the judge’s refusal to consider a late plea by the Claimants that s.32(1)(a) of the Limitation Act 1980 applied and concluded that the judge was right to decline to deal with it. The judge therefore upheld the district judge’s earlier decision and dismissed the appeal.

The decision is the only known authority to date in which the insurer (rather than the lender in a credit relationship) has been sued for an alleged commission payment in procurement of breach of fiduciary duty and it therefore considered in detail the scope of the agency between each of the players in the PPI sale. It is also the first occasion that the Court has had to consider the level of knowledge required for the accessory to the breach of fiduciary duty in a Hurstanger claim. Finally, the case provides another example in which section 32 of the Limitation Act 1980 did not assist the Claimants in bringing what was a very stale (over 15 years old) PPI commission claim.

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