This High Court decision confirms that, despite previous case law indicating to the contrary, an allegation of an Unfair Relationship under s.140A-C of the Consumer Credit Act 1974 (“CCA 1974”) may be successfully disposed of by way of summary judgment. It also confirms that an intention to appeal and to seek a stay of any costs order is not, of itself, a “good reason” to depart from the general rule that costs should be summarily assessed at the conclusion of a hearing which has not lasted more than one day.
Mr and Mrs Axton (the “Appellants”) entered into four fixed sum loan agreements with GE Money Mortgages Ltd (the “Respondent”), which were secured by way of a first Legal Charge over the Appellants’ property. Each of the four agreements was sold to the Appellants by a broker (the “Second Defendant”). The loan agreements recommended that PPI insurance be taken out, but it was not compulsory and such policies were not arranged by the Respondent. Nevertheless, in respect of the first three loan agreements (but not the fourth), the Appellants, through the Second Defendant, obtained PPI policies, but subsequently sought to argue that they were mis-sold on the basis that: (1) the premium paid was grossly in excess of comparable policies on the open market; (2) only a small proportion of the premium actually contributed to its cost (the balance being commission); and (3) the Appellants had not been properly advised about the duration or extent of cover provided by the policies.
At first instance, the Appellants argued that the PPI policies were all “related agreements” for the purposes of s.140A CCA 1974 and applied for an order under ss.140A-140C CCA 1974, alleging an unfair relationship between creditor and debtor in connection with a credit agreement. However, notwithstanding the fact that the judge accepted the Appellants had a real prospect of proving that the agreements were related, the Respondent successfully obtained summary judgment on the basis that there was no real prospect of the Appellants showing that the Respondent had done or failed to do anything which gave rise to an unfair relationship. The Appellants appealed.
On appeal, in reliance on the decision in Bevin v Datum Finance Limited  EWHC 3542, it was argued by the Appellants that the judge should not have attempted to determine the issue of unfairness summarily. Further, it was argued that the judge had erred in his finding that the Appellants had no real prospect of proving that the Respondent’s conduct had been causative of an unfair relationship. However, the Respondent argued that because the PPI policies were separate from the credit agreements, because there was no obligatory requirement to obtain the PPI policies and because, on the facts of this case, it was the Second Defendant’s responsibility to advise of the terms of the PPI policies, then it was difficult to see how their limited involvement could give rise to an unfair relationship between the creditor and debtor as required under the Act. The High Court agreed and upheld the first instance decision. Although s.140B CCA 1974 places the burden of proving the fairness of a relationship on the creditor, the Court considered that this did not mean that summary disposal could never take place.
This decision is interesting for three reasons. Firstly, it confirms that an allegation that an unfair relationship exists can be suitable for summary disposal; secondly, it confirms that for an unfair relationship claim to succeed it must be shown that it is the relationship between the creditor and debtor which is unfair and that there is some form of causative link; and finally it confirms that an intention to appeal is not a sufficiently good reason for the Court to refuse to summarily assess costs in the usual way.
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