Court of Appeal rules on transitional provisions and limitation for consumer credit unfair relationship claims

In Smith and Burrell v RBS [2021] EWCA Civ 1832, the Court of Appeal (Macur LJ, Coulson LJ and Birss LJ) held that the transitional provisions at paragraphs 14-16 of schedule 3 to the Consumer Credit Act 2006 did not preclude PPI mis-selling claims brought for an unfair debtor-creditor relationship under sections 140A-C of the Consumer Credit Act 1974, where the credit agreement subsisted beyond the end of the transitional period on 6 April 2008 even though the related PPI agreement ended before that date. 

The court rejected the defendant’s argument that for the purpose of the accrual of the cause of action further to section 9 (or 8) of the Limitation Act 1980, time ran from when the claimants made payments in respect of PPI or when sections 140A-C came into force. 

The court nevertheless allowed the defendant’s appeal on limitation, holding that time ran from when the unfair relationship ended and that on the pleadings and evidence in each case, that time was when the PPI agreement ended, which date was more than 6 years from the bringing of proceedings.  The potential application of section 32 of the Limitation Act was not in issue on the appeal. 

In reaching its decision on limitation, the Court of Appeal held that it was possible to ‘compartmentalise’ a debtor-creditor relationship, and determine fairness at any given point during its existence.  The court rejected the analysis of George Leggatt QC (as he then was) in Patel v Patel [2010] All E.R. (Comm) 864 that the requirement to consider the whole relationship when determining the question of fairness, which analysis the court appears to have agreed with and which was approved by the Court of Appeal in Scotland v British Credit Trust PLC [2015] 1 All E.R. 708, meant that fairness could only be determined as at the endpoint or as at trial.

In reaching its decision on the fairness of the relationships, the court held that, as a matter of law, certain facts could not contribute to an unfair relationship or must be held to extinguish an unfair relationship. In the view of Robert Weir QC and Jonathan Butters, this approach is contrary to the broad terms of the test under section 140A, and its interpretation by the Supreme Court in Plevin v Paragon Personal Finance Limited [2014] 1 W.L.R. 4222.

Permission to appeal to the Supreme Court is being sought.

Robert Weir QC and Jonathan Butters appeared for the claimants, instructed by Steven McGarry of Cheval Legal Limited, London.

To read the judgment, please click here.

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