AXA France IARD SA v Santander Cards UK Limited

An agent selling insurance must comply with the applicable industry code and take reasonable steps to secure compliant sales. For payment protection insurance, this required the customer to be told about the product, its principal benefits and cost, relevant exclusions and restrictions, and the existence of the summary of cover before contracting. Systemic failures by the agent can establish breach, but a negligence claim requires proof that the breach caused loss in each individual case.

An indemnity covering liabilities caused by the agent’s acts or omissions may extend to regulatory redress and ombudsman fees, including liabilities relating to historic sales, where the contract applies to the parties’ continuing relationship. It does not ordinarily cover voluntarily incurred administrative costs or settlements made to forestall unasserted claims.

AXA, as successor to the insurers, claimed against Santander, as successor to the credit lender and insurance intermediary, for losses arising from historic mis-selling of payment protection insurance attached to store cards. The claims were advanced under an alleged settlement agreement, an indemnity in the parties’ agency agreement, the Civil Liability (Contribution) Act 1978 and common law negligence.

The trial concerned liability in principle and guidance for applying the findings to a representative complaints sample. The central issues included responsibility for sales compliance, the scope and timing of the contractual indemnity, whether regulatory redress constituted recoverable liability, contribution liability, and the causation and limitation of the negligence claim.

1. Settlement. No binding settlement was concluded at the June 2015 meeting. The parties objectively intended the package to be subject to contract. Liability could not be separated from unresolved operational and commercial matters. The later email exchange could not convert a non-binding agreement into a binding one.
2. Applicable selling standards. The ABI Code was the appropriate benchmark. Sales staff had to identify the product, obtain consent or explain the right to decline cover, ascertain eligibility, identify the insurer, explain the principal benefits and cost, mention relevant exclusions and restrictions, and direct the customer to the Summary before the sale. Later documents could not cure failure to provide the necessary explanation before contracting.
3. Systemic breach. GECB routinely failed to explain PPI adequately, draw attention to the Summary, and, in opt-out sales, explain that cover was being added and could be declined. The evidence established systemic breaches. FICL/FACL had not, however, failed to exercise their own best endeavours. GECB controlled the sales environment and knew its obligations.
4. Indemnity. The Agency Agreement applied to historic and later policies. Clause 12.2 covered liabilities caused by GECB’s acts or omissions while acting under the agency relationship. “Liability” included binding regulatory obligations to pay redress and FOS fees, even where the consumer could not directly enforce the redress obligation as a civil claim. The indemnity was triggered when liability was established and ascertained, practically on payment.
5. The indemnity did not cover voluntary internal administration costs or the Official Receiver settlement, which forestalled unasserted claims and did not establish an existing liability. The claim therefore succeeded against SISUK for redress payments and FOS fees only.
6. Contribution. The contribution claim failed because AXA’s regulatory obligation to pay redress was not a liability capable of being established in an action brought by the consumer within section 1(6) of the 1978 Act. The Official Receiver settlement likewise did not compromise an existing claim.
7. Negligence. GECB owed FICL/FACL a duty to exercise reasonable skill and care and comply with the ABI Code. The regulatory consequences were within the scope of that duty and were not too remote. AXA nevertheless had to prove causation and loss in each individual case. The negligence claim succeeded in principle, subject to limitation, but not for the Official Receiver settlement. FOS fees relating to dismissed complaints were irrecoverable; further argument might be required on other fees and administrative costs.
8. The settlement claim and contribution claim were dismissed. Santander’s counterclaim for contribution was dismissed. The indemnity claim succeeded against SISUK for redress and FOS fees. The negligence claim succeeded in principle subject to the stated qualifications.

First-instance decision in the High Court Commercial Court. No prior appellate decision is stated in the judgment.