Plevin v Paragon Personal Finance Ltd & Anor

For the purposes of section 140A(1)(c) of the Consumer Credit Act 1974, conduct may be done “on behalf of” a creditor without agency, vicarious liability or an existing legal responsibility for that conduct. The provision extends to a broker acting on the creditor’s side of the transaction. Payment of commission by the creditor will usually establish that connection.

The court must still determine whether the conduct caused an unfair relationship and whether discretionary relief should be granted. However, under the binding authority of [2011] EWCA Civ 1128, non-disclosure of commission alone could not establish unfairness where the applicable regulatory regime imposed no duty to disclose it.

These linked appeals concerned single-premium payment protection insurance sold with consumer credit. Both borrowers alleged that non-disclosure of substantial commissions made their relationships with their lenders unfair under section 140A of the Consumer Credit Act 1974.

In Conlon, a Recorder found the relationship unfair and ordered repayment of the PPI-related instalments. Wilkie J allowed the lender’s appeal because the claim was indistinguishable from Harrison v Black Horse Ltd [2011] EWCA Civ 1128.

In Plevin, an independent broker arranged the loan and PPI and received commission. The Recorder dismissed the unfair-relationship claim because the applicable insurance rules allocated responsibility to the intermediary dealing with the customer and the broker was not the lender’s agent. The central issue was whether the broker’s alleged failures could nevertheless be things done or omitted “on behalf of” the lender under section 140A(1)(c).

1. The Plevin appeal was allowed and the claim remitted for rehearing; the linked Conlon appeal was dismissed. Briggs LJ gave the leading judgment. Beatson and Moses LJJ agreed with both conclusions.

2. The court remained bound by Harrison v Black Horse Ltd [2011] EWCA Civ 1128. Where the applicable Insurance Conduct of Business Rules imposed no obligation to disclose commission, non-disclosure alone could not make the relationship unfair. Evidence that the borrower would have shopped around, or that the lender withheld disclosure for commercial reasons, did not distinguish Conlon. The same reasoning defeated Plevin’s commission-only ground. The judges nevertheless expressed substantial discomfort with the Harrison principle.

3. The words “on behalf of” in section 140A(1)(c) of the Consumer Credit Act 1974 required a broad, purposive interpretation. They were not confined to conduct for which the creditor was independently liable under agency law or a regulatory code. Conduct by a broker on the creditor’s side of the transaction could fall within the court’s examination. Payment of commission by the creditor for procuring the transaction would usually be sufficient, although a true fiduciary agency for the customer might point the other way.

4. This construction did not make the creditor automatically answerable for every broker default. The court must decide whether the conduct caused the relationship to be unfair. Even where unfairness was established, relief under section 140B remained discretionary. Relief might be inappropriate where the creditor bore no responsibility, had diligently monitored the intermediary, or the debtor had an adequate remedy against the intermediary.

5. The broker’s conduct could be “on behalf of” the lender even if it occurred before the lender was finally selected. The commission paid for procuring the transaction remained a sufficient connection. The reverse burden under section 140B(9) also supported a broad protective construction.

6. Alternatively, the insurance rules did not wholly absolve the lender from responsibility for the broker’s assessment in a composite lending and insurance transaction. They placed front-line responsibility for insurance matters on the intermediary dealing with the customer. The FLA and FISA codes nevertheless imposed shared lending and monitoring responsibilities. The Recorder had made no necessary findings about the alleged assessment failures, so Plevin’s claim required rehearing.

1. Court of Appeal (Civil Division): In Plevin, the appeal was allowed and the unfair-relationship claim remitted for rehearing. In the linked Conlon appeal, the appeal was dismissed. [2013] EWCA Civ 1658

2. High Court: In Conlon, Wilkie J allowed Black Horse’s appeal from the Recorder, holding that the claim was indistinguishable from Harrison v Black Horse Ltd [2011] EWCA Civ 1128.

3. Manchester County Court: In Plevin, Recorder Yip QC dismissed the claim under section 140A of the Consumer Credit Act 1974, having concluded that the broker’s conduct was not done on behalf of Paragon. In Conlon, Recorder Atherton had found the relationship unfair and ordered repayment of instalments attributable to the PPI premium.