Scotland & Anor v British Credit Trust Limited

When determining whether a continuing credit relationship is unfair under section 140A of the Consumer Credit Act 1974, the court must consider the whole relationship and all relevant matters. A material misrepresentation made on the creditor’s behalf may establish unfairness even though another remedy existed or has become time-barred.

Antecedent negotiations under section 56 are construed broadly. Where negotiations concerning an ancillary product form part of one transaction with the financed purchase, they may be deemed to have been conducted by the supplier as the creditor’s agent. Regulatory rules may provide a benchmark for assessing the intermediary’s conduct even where they do not apply directly to the creditor.

A finance company funded the respondents’ purchase of windows and doors and a payment protection insurance policy. The supplier’s salesmen falsely represented that the insurance was required to obtain the loan. They also sold an unsuitable five-year policy with a ten-year loan and failed to assess the respondents’ needs.

The Leicester County Court found the credit relationship unfair under section 140A of the Consumer Credit Act 1974. It varied the loan and ordered repayment of the insurance-related sums. The creditor appealed, contending principally that the supplier’s conduct could not be attributed to it and that misrepresentation and breaches of the ICOB rules were irrelevant to unfairness.

The central issues were the scope and effect of section 56, the meaning of conduct done “on behalf of” a creditor, the significance of a related agreement, and the proper assessment of unfairness.

1. Appeal dismissed. The County Court was entitled to find the relationship unfair and to grant the limited relief ordered. Kitchin LJ delivered the judgment, with which Underhill and Moore-Bick LJJ agreed.
2. Section 56(1)(c) of the Consumer Credit Act 1974 must be construed broadly. The representations about payment protection insurance formed part of the negotiations concerning the financed purchase of the windows and doors. The insurance and the purchase constituted one package because the respondents were told that they could not obtain the necessary loan without the insurance. All the relevant negotiations were therefore antecedent negotiations.
3. Under section 56(2), those negotiations were deemed to have been conducted by the supplier as agent for the creditor, irrespective of common-law agency. The misrepresentations were consequently things done by or on behalf of the creditor for section 140A(1)(c). Independently, the supplier’s conduct was done “on behalf of” the creditor within the broad meaning established in Plevin v Paragon Finance [2013] EWCA Civ 1658, because it played a material part in procuring the credit agreement.
4. The fact that the insurance policy might be a related agreement did not extend the deemed agency under section 56. That section contains no reference to linked transactions. The related-agreement argument therefore added nothing.
5. A misrepresentation is not excluded from the section 140A assessment merely because section 75 provides a specific remedy or because a misrepresentation claim is time-barred. The statutory inquiry concerns whether the continuing relationship is unfair. It requires consideration of all relevant matters whenever they occurred. The observations in Harrison v Black Horse Ltd [2011] EWCA Civ 1128 did not establish that misrepresentation is invariably irrelevant.
6. Although the ICOB rules did not apply directly to the creditor, they supplied a legitimate benchmark for assessing the supplier’s conduct. That conduct included a misleading statement, the sale of unsuitable cover and a failure to assess demands and needs.
7. The court must consider both parties’ positions and any countervailing circumstances. The creditor’s personal lack of culpability did not diminish the decisive facts: the respondents would not otherwise have bought the insurance, while the creditor received commission and interest arising from it. There was no basis to remit the case for reassessment.

1. Court of Appeal (Civil Division): The creditor’s appeal was dismissed by [2014] EWCA Civ 790. The finding of an unfair relationship and the resulting relief were upheld.
2. Leicester County Court: HHJ Hampton held on 19 November 2012 that the relationship was unfair under section 140A of the Consumer Credit Act 1974. She varied the loan and ordered repayment of £2,165.52 representing the insurance premium and associated interest.