McHale & Co. Solicitors Blog

Mis-selling is a relatively new term. It prominently derives from the banks selling products such as interest rate swaps, PPI and investments in the last ten years or so. One of the key pieces of legislation in this area is the new Consumer Credit Act. Sections 140A-C of the Act (the new Unfair Relationship provisions) are designed to enable a borrower to challenge a credit agreement in court on the ground that the relationship between the creditor and the borrower is unfair to the borrower.

Mrs Conlon's case was due to be heard by the Supreme Court of the United Kingdom on the 11th June. The case was settled by Blackhorse (part of the Lloyds group). The precise terms on the settlement are confidential but Mrs Conlon is delighted with the settlement as it represents a victory for her.

Mrs Conlon had entered into credit agreements and had been sold payment protection insurance (PPI). It was not disclosed to her at the time of sale that a large percentage of the premium payment would be paid in commission to the lender. At the trial of Mrs Conlon's claim, the Recorder accepted her evidence that had she known about the commission, she would have searched for a cheaper quotation. The court found that the relationship between the lender and Mrs Conlon was unfair based upon the non-disclosure of the commission. The lender appealed and, following Harrison v Black Horse Ltd [2011] EWCA Civ 1128, the lender's appeal was allowed by the High Court. In Harrison v Black Horse, it was held that the non-disclosure of the existence and amount of commission could not, on its own, give rise to an unfair relationship. Mrs Conlon's appeal to the Court of Appeal was dismissed. The main issue in the case is whether the approach in Harrison v Black Horse [2011] EWCA Civ 1128 is correct - Is the court prevented from finding the existence of an unfair relationship under section 140A of the Consumer Credit Act 1974 if there has been a breach of a regulatory rule in the conduct complained about?

Mrs Conlon was confident of winning her appeal in the Supreme Court. Indeed the Lord Justice Moses in the Court of Appeal was scathing of the Harrison judgement. Moses LJ agreed, with reluctance, that the court was bound by the decision in Harrison. However, he went on to state:

"This is a dispiriting conclusion. It means that, until the principle identified in Harrison is re-examined, compliance with those Rules excuses a deliberate decision not to disclose commission, taken in circumstances where the creditor appreciated that to do so would make it unlikely that the debtor would purchase a single premium PPI policy."

"I see no point, however, in dissenting in the light of my hope that the Supreme Court, if your lordships agree, will consider this court's decision in Harrison."

It is worth noting that the Harrison Judgment referred to above was a Judgement of the Court of Appeal. The Harrison's appealed to the Supreme Court. Similarly to Conlon, Blackhorse settled the case. The institution "bought off" the Harrison's appeal and paid all their legal costs (circa £650,000). This commercial decision disallowed the Supreme Court from overturning the Court of Appeal judgement. The settlement in Conlon has the same effect. We hope that this injustice is rectified soon.

We were delighted to have represented Mrs Conlon in this long running dispute and are very grateful to Hodge Malek QC and James Strachan QC of Thirty Nine Essex Street Chambers who were counsel in the case.