Smith and another v Royal Bank of Scotland plc

The Supreme Court allowed the appeals and restored the district judge’s orders. The court held that a claim for a remedial order under section 140B of the Consumer Credit Act 1974 can be made at any time while the credit relationship complained of is continuing and that the period of limitation under section 9 of the Limitation Act 1980 begins to run only when that relationship ends. Sections 140A-C must be read so that the court assesses whether the relationship "is" unfair at the time of determination (subject to section 140A(4) where the relationship has ended), and the power to order repayment under section 140B(1)(a) extends to sums paid for payment protection insurance (PPI) where those sums were paid by virtue of the credit agreement. The Court rejected the bank’s “completed cause of action” argument and the Court of Appeal’s “no unfairness” analysis, and held that the transitional provisions in Schedule 3 to the Consumer Credit Act 2006 did not deprive the court of power to order repayment of PPI sums paid by virtue of the credit agreement.

Background and parties. The appeals concerned two small claims by former credit card holders (Karen Smith and Derek Burrell) against the Royal Bank of Scotland plc alleging that their relationship with the bank, arising out of credit card agreements taken with related PPI policies, was unfair because the bank did not disclose large commissions it retained from PPI premiums.

Procedural history. Both claimants succeeded before a district judge and on first appeal in the county court. The Court of Appeal allowed the bank’s appeals on limitation grounds ([2021] EWCA Civ 1832). The claimants obtained permission to appeal to the Supreme Court.

Relief sought and issues. Each claimant sought an order under section 140B(1)(a) of the Consumer Credit Act 1974 requiring repayment of sums paid for PPI (less sums already repaid under the FCA scheme) with interest. The principal issues were (i) when the cause of action accrues for limitation purposes under section 9 of the Limitation Act 1980, (ii) whether the claims were barred by the transitional provisions associated with the 2006 Act, and (iii) related questions about whether the relationship remained unfair when it ended.

Court’s reasoning. The court emphasised that sections 140A-C create a two-stage inquiry: first whether the relationship arising out of the credit agreement (taken with any related agreement) "is" unfair, and second what order (if any) to make under section 140B. The present-tense framing of section 140A(1) means that while a credit relationship subsists the entitlement to a remedy depends on the relationship being unfair at the time of determination; only when the relationship has ended can the court determine whether it was unfair at the point when it ended. Accordingly, there is no accrued cause of action while the relationship continues and the limitation period under section 9 runs from the date the relationship ends. The Court rejected the bank’s contention that the cause of action accrued on each PPI premium payment. It also rejected the Court of Appeal’s reasoning that the relationship in these cases ceased to be unfair when the PPI payments stopped, explaining that failure to disclose commissions and failure to remedy the unfairness meant the economic effect persisted until the credit relationship ended. On the transitional provisions, the court held that Schedule 3 para 16(4) does not exclude from section 140B sums paid by virtue of the credit agreement and so does not prevent repayment orders in these cases.

Other points. The court noted the broad remedial discretion under section 140B and that delay can be relevant to the exercise of that discretion; it also observed that neither claimant relied on deliberate concealment under section 32 of the Limitation Act 1980 in these appeals.

Appeal allowed. The Supreme Court held that for claims under sections 140A-C of the Consumer Credit Act 1974 a remedial order under section 140B may be sought while the credit relationship is continuing and the limitation period under section 9 of the Limitation Act 1980 runs from the date the relationship ends; the bank’s arguments based on a completed cause of action accruing on PPI premium payments and on the transitional provisions were rejected, and the district judge’s orders for repayment were reinstated.

District Judge decision (Bodmin) in favour of each claimant; affirmed on first appeal to the county court judge; Court of Appeal allowed the bank's appeals and dismissed the claims ([2021] EWCA Civ 1832, reported [2022] 1 WLR 2136); further appeal to the Supreme Court, which allowed the appeals and restored the district judge’s orders ([2023] UKSC 34).