1 User Commentary
28 September 2015
Case Digest: Plevin (Respondent) v Paragon Personal Finance Limited (Appellant)  UKSC 61
Whether the respondent's relationship with Paragon Personal Finance Limited ("Paragon") was unfair within the meaning ofsection 140A of the Consumer Credit Act 1974.
Judgment was handed down in the case of Plevin (Respondent) v Paragon Personal Finance Limited (Appellant)  UKSC 61 on 12 November 2014. The appeal was about the application of sections 140A to 140D of the Consumer Credit Act 1974 to a PPI policy with Norwich Union (Paragon's designated insurer), sold to the respondent alongside a personal loan from Paragon on the recommendation of LLP Processing (UK) Ltd ("LLP"). LLP are no longer party to these proceedings but remain important to the facts.
The issue being adjudicated arose because Mrs Plevin was not informed of the amount of commission or identity of the recipients of the "commission... paid by the lending company" Paragon. The fact that commission would be paid to the lending company was outlined in the Financial Industry Standards Association Guide provided to her by LLP, but she argued that her relationship with Paragon was unfair within the meaning of section 140A(1)(c) of the Consumer Credit Act because of something "done (or not done) by, or on behalf of, the creditor". This unfairness arose from two factors (i) the non-disclosure of the amount of commission and (ii) the failure of those involved to asssess and advise upon the suitability of PPI to her needs. She claimed that LLP committed these defaults on behalf of Paragon.
Both Manchester Crown Court and the Court of Appeal held that the non-disclosure of the commission by LLP and Paragon, and Paragon's failure to assess her suitability for PPI did not make the relationship unfair, in accordance with the decision in Harrison v Black Horse Ltd  Lloyd's Rep IR 521. The Court of Appeal nevertheless held that LLP's failure to conduct a needs assessment of Mrs Plevin was something done "by or on behalf of" Paragon. This made the relationship unfair and was in breach of the ICOB rules.
In a unanimous judgment, Lord Sumption addressed the following questions (i) whether the non-disclosure of the commissions payable out of the respondent's PPI premium made her relationship with Paragon unfair; (ii) whether the state of affairs arose from something"done or not done" by or on behalf of paragon; (iii) was it reasonable in the interests of fairness to expect paragon to assess her needs themselves; (iv) whether in the relevant aspects LLP were acting on behalf of paragon under section 140(A(1)(c).
- As to the first, he decided that the non-disclosure of the commissions made the relationship unfair and that Harrison was wrong. Section 140A introduced a broader test of fairness, a matter for the court's judgment, than the ICOB rules that imposed a minimum standard of applicable conduct and providing damages in case of breach. These statutory schemes ask different questions. Applying section 140A, Lord Sumption found that there was a risk that the commission becomes so large that the relationship is unfair, if she is kept in ignorance. There was an "extreme inequality" of knowledge and understanding between the two parties, a classic source of unfairness.
- On the second point he found that the unfairness arose from the non-disclosure of the amount of the commissions, something which was the responsibility of Paragon. They must necessarily have known the size of both commissions and could have disclosed this to her. This would have removed the source of unfairness because she could have made a properly informed judgment about the value of the policy.
- On the third question, Paragon could not have reasonably been expected in the interests of fairness to conduct their own needs assessment and give Mrs Plevin advice about it, when under the ICOB rules this was expressly assigned to another. This failing did not make its relationship with her unfair.
- Finally, and in relation to the fourth question, he agreed with Briggs LJ in the Court of Appeal ( Bus LR 553) that unfairness in section 140A does not have to involve a breach of duty. The Court of Appeal was wrong to conclude that the acts or omissions of LLP were capable of making the respondent's relationship with Paragon unfair. LLP was not acting as Paragon's agent and there was no coherent criteria for determining an alternative connection, other than agency, between the credtior and the acts/omissions causing the unfairness. Discarding Harrison therefore allows us to see section 140 as providing extensive protection to the debtor where the creditor has made the relationship unfair.
Appeal dismissed. The non-disclosure of the amount of the commissions made by Paragon's relationship with Mrs Plevin unfair is enough to justify the reopening of the transaction under section 140A. Case to be remitted to Manchester County Court on questions of relief, if any, under section 140B and the Court of Appeal's order remitting the case for rehearing generally to be varied accordingly.
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