Goodman & Anor v Central Capital Ltd

An insurance intermediary recommending payment protection insurance must take reasonable steps to communicate information clearly, fairly and without misleading the customer. Where a personal recommendation is made, the intermediary must also take reasonable steps to ensure that the policy is suitable for the customer’s demands and needs, having regard to the scope of service and matters including cover, cost and exclusions or limitations. Suitability is assessed at the time of recommendation, not with hindsight. In resolving factual disputes about historic sales calls, contemporaneous documents and objective probabilities may properly outweigh later witness recollections.

The claim concerned a payment protection insurance policy arranged by Central Capital in connection with a secured loan from Picture Financial Services Limited. The claimants alleged breaches of the Insurance: Conduct of Business Sourcebook concerning optionality, disclosure of the single premium and interest, and suitability of the cover.

The court considered the contemporaneous sales-call transcripts, loan documents, policy material and witness evidence. The central issues were whether the claimants had been told that the insurance was optional and whether the recommended five-year policy covering Mr Goodman was suitable for their demands and needs when recommended.

1. Fact-finding. The court adopted the approach that contemporary documents, independent evidence, admitted facts and overall probabilities are important in assessing witness credibility. The transcripts and documents were accurate and contemporaneous. Where the claimants’ later accounts conflicted with them, the court preferred the contemporaneous evidence.
2. Optionality and disclosure. ICOB 2.2.3R required information to be communicated in a way that was clear, fair and not misleading. The sales calls, recommendation documents and Picture credit agreement made clear that the insurance was optional. They also disclosed that the single premium was added to the loan and that interest was payable on it. The alleged breaches were therefore not established.
3. Suitability. Under ICOB 4.3.1R, a personal recommendation had to be suitable for the customer’s demands and needs and had to reflect the disclosed scope of service. ICOB 4.3.6R required consideration of the level of cover, relevant cost, and exclusions, excesses, limitations or conditions. Central Capital was entitled to recommend a product from a single insurer, having disclosed that limitation under ICOB 4.2.8R(6).
4. The claimants’ hindsight criticisms concerning the length and extent of cover did not establish unsuitability at the time of recommendation. The recommended cover protected the primary income servicing the loan, and its term and operation had been explained. The cost-related allegation was abandoned and was in any event answered by Harrison v Black Horse [2010] EWHC 3152 (QB) and Harrison v Black Horse Limited [2011] EWCA Civ 1128.
5. The claims were dismissed. Judgment was entered for Central Capital. Permission to appeal was refused, and the claimants were ordered to pay the defendant’s costs on the indemnity basis, including £15,000 on account.