Smith and another v Royal Bank of Scotland plc

A debtor may seek a remedial order for an unfair credit relationship at any time while that relationship continues. Where the relationship has ended, the cause of action accrues on the end date and the six-year limitation period then begins. The court assesses fairness at the hearing for a continuing relationship, or when the relationship ended, taking account of its whole history. The termination of a related insurance agreement does not itself end either the credit relationship or persisting unfairness caused by undisclosed commission. Transitional provisions excluding certain related agreements from the available remedies do not prevent repayment of sums also paid by virtue of the credit agreement. Knowing delay may nevertheless affect fairness or the court’s remedial discretion.

The appellants were former credit card holders who had purchased payment protection insurance from the respondent bank. The bank retained large undisclosed commissions from their premiums. Each insurance policy ended more than ten years before proceedings, but the associated credit card agreement continued until less than six years before the claim was issued.

The district judges found for the appellants under sections 140A and 140B of the Consumer Credit Act 1974, and the first appeals were dismissed. The Court of Appeal allowed the bank’s second appeals and dismissed the claims as time-barred: [2021] EWCA Civ 1832, [2022] 1 WLR 2136.

The Supreme Court considered when a cause of action for an unfair-relationship remedy accrues under section 9 of the Limitation Act 1980. It also considered whether the transitional provisions of the Consumer Credit Act 2006 prevented relief relating to insurance policies which had ended before the transitional period expired.

1. Disposition. The appeals were allowed unanimously and the district judges’ orders were restored. Lord Leggatt delivered the majority judgment, with which Lord Briggs, Lord Kitchin and Lord Hamblen agreed. Lord Hodge concurred.
2. Statutory process. Sections 140A and 140B of the Consumer Credit Act 1974 require two stages. The court first determines whether the relationship arising from the credit agreement, alone or with any related agreement, is unfair. It then decides what, if any, remedial order to make. The assessment concerns the relationship rather than merely the terms of an agreement and must take account of every matter the court considers relevant, whenever it occurred.
3. Accrual and limitation. While a credit relationship continues, the statutory condition for relief is that the relationship is unfair at the date of determination. No cause of action for that future state of affairs can accrue earlier. When the relationship ends, the court instead assesses whether it was unfair when it ended. The material facts are then fixed, the cause of action accrues and the six-year period under section 9 of the Limitation Act 1980 begins.
4. Continuing unfairness. The Court of Appeal wrongly conflated the end of unfairness with the end of the credit relationship. Termination of the insurance policies did not remove the financial consequences of the undisclosed commissions. The bank had neither disclosed the commissions nor repaid the affected premiums. Applying Plevin v Paragon Personal Finance Ltd [2014] UKSC 61, those omissions left both relationships unfair when they ended.
5. Remedy and delay. Section 140B confers a broad remedial discretion whose purpose is to remove continuing causes of unfairness and reverse their damaging financial consequences. A debtor’s informed and prolonged inaction may show that the relationship is no longer unfair or justify refusing relief. That principle did not assist the bank because it had kept the appellants ignorant of the commissions until shortly before proceedings.
6. Transitional provisions. Schedule 3 to the Consumer Credit Act 2006 excluded the expired insurance policies from references to related agreements in section 140B(1), but not from the fairness assessment under section 140A. The premiums were also paid by virtue of the continuing credit agreements. Section 140B(1)(a) therefore authorised their repayment despite the transitional provisions.
7. Concurrence. Lord Hodge agreed with the result and Lord Leggatt’s reasons. He emphasised that the present tense in section 140A(1) requires assessment at trial while the relationship continues, and that stale claims remain controlled by the remedial discretion.

1. United Kingdom Supreme Court: The court allowed the appeals in [2023] UKSC 34 and restored the district judges’ orders.
2. Court of Appeal: The court allowed the bank’s second appeals and dismissed the claims: [2021] EWCA Civ 1832, [2022] 1 WLR 2136. It rejected the bank’s transitional-provisions ground but held that the claims were time-barred.
3. County Court appeals: The county court judges upheld the first-instance decisions in favour of each claimant.
4. District judges: District Judge Stone upheld Ms Smith’s claim and ordered payment of £1,346.29 plus costs. A deputy district judge determined the material preliminary issues in Mr Burrell’s favour.