Binns v Firstplus Financial Group Plc [2013] EWHC 2436 (QB)

Case No 3KH50005[2013] EWHC 2436 (QB)IN KINGSTON UPON HULL CIVIL APPEAL CENTREThe Combined Court CentreLowgateKingston upon HullHU1 2EZDate 24 th July 2013
Before
HIS HONOUR JUDGE JEREMY RICHARDSON QC
Between
FIRSTPLUS FINANCIAL GROUP PLCAppellant
Mr Alexander Milner (instructed by Simmons and Simmons LLP) for AppellantMr David Willink (instructed by Wixted and Co) for RespondentHearing Hearing dates: 13 th June 2013
JUDGMENTHis Honour Judge Jeremy Richardson QC:Introduction
[1]Payment Protection Insurance (PPI) has given rise to a considerable volume of litigation. This appeal is another chapter of the PPI litigation saga. One day it will end. This chapter of the saga involves consideration of the circumstances when a civil court may terminate a claim when there has already been an award pursuant to alternative dispute resolution (ADR) which has not been accepted by the claimant.[2]The problem in stark form (stripped of much detail) comes to this:(1) The claimant was mis-sold PPI relating to a credit agreement.(2) The claimant (via solicitors) made a claim under an ADR scheme against a defendant reserving the right to make a county court claim.(3) The ADR scheme made an award giving full monetary compensation for the losses incurred, but no legal costs.(4) The claimant commenced a county court claim for damages arising from the mis-selling of PPI asserting additional damages will be awarded in court.(5) The defendant applied to strike out the claim and/or summary judgment.(6) Should the court summarily end the county court claim?[3]In this case the district judge allowed the claim to proceed. The purpose of the appeal is to test whether she was right to do so.[4]This is an appeal against a decision of District Judge Sarah Richardson at Kingston upon Hull County Court on 1st March 2013 when she refused to strike out a PPI mis-selling claim brought by Mr and Mrs Binns (claimant) against Firstplus Financial Group PLC (defendant). The district judge additionally declined to give summary judgment against the claimant. The district judge appreciated there were public policy issues involved in this case and that the issue she was asked to resolve was novel in the context of PPI litigation. Accordingly, she granted permission to appeal.

The Facts

[5]In 2007 and 2009 the claimant applied for and was granted two loans by the defendant. The purpose of the loans was to provide finance for home improvements. The 2007 loan was for £16,000 and the 2009 loan was for £22,500. In respect of each loan it is averred (and I must accept this to be true for the purposes of this appeal) the claimant was told it was compulsory to take out PPI. Consequently, additional sums were added to each credit agreement to represent payment for PPI. The sums were quite large. The 2007 loan was engorged to £19,188.80 (£3188.80 representing PPI) and the 2009 loan was engorged to £26,984.25 (£4484.25 representing PPI).[6]The claimants assert they were mis-sold PPI – in common with many others. It is alleged they would never have incurred the extra expense of PPI but for the representation of it being a compulsory component of the loan agreement.[7]In simple terms the claimants want their money back in respect of the PPI that was unlawfully forced upon them. A variety of other assertions were also made to which I shall return later in this judgment. The defendant is prepared to give them their money back under the terms of the ADR.[8]Why the claim? The claimants have instructed solicitors and desire their costs, whereas under the ADR scheme the claimants are not entitled to costs.[9]The mis-selling of PPI has given rise to much litigation. In 2010 a scheme was set up under the auspices of the Financial Services Authority (FSA) to deal with PPI claims. I shall cover some of the history later in this judgment, but for present purposes it suffices to say the claimant was able to make a complaint under Chapter 3 and Appendix 3 of the Complaint Handling Procedures of the Financial Ombudsman Service (Handling Payment Protection Insurance Complaints) to which I shall refer hereafter as the FSA scheme or ADR as appropriate.[10]The claimants were rightly incensed by what had happened and instructed solicitors to pursue redress for the wrong done to them. Their solicitors (Wixted and Co) wrote to the defendant on 21st May 2012 setting out the claim in some detail. The letter included this passage:
“The relationship between (the claimant and the defendant) was an unfair one within the meaning of section 140A of the Consumer Credit Act 1974. (The defendant) took advantage of (its) position as a credit provider in order to sell (the claimant) an over priced and unsuitable product upon which (it) could charge interest. As a result (the claimant has) suffered financial loss and intend(s) to claim damages from you. (The claimant) intend(s) to claim the cost of the PPI policy, interest and/or alternatively any such order under section 140B of the Consumer Credit Act 1974 as the court thinks just, so as to right the unfairness caused by the sale of the insurance.”
[11]A little later in the letter the solicitors wrote:
“We require this matter to be investigated in accordance with the standard guidelines set by the (FSA). We, therefore, expect a final liability decision from you or your insurers within 8 weeks of this letter.”
[12]It was made clear the claimant intended litigation unless the claim was accepted. There was a prompt response by the defendant when it was made clear the complaint was accepted. The letter of 14th June 2012 (less than one month after the letter of complaint) was in these terms: “Having reviewed your complaint, we are not satisfied that the Payment Protection Insurance (PPI) was suitable for your needs or that it was adequately explained to you when you took out the policy. As a result we have upheld your complaint. We wish to put your loan account back into the position it would have been in had you not taken out the PPI policy. Thereafter, the letter gives much detail of how the defendant intended to recompense the claimant for the losses incurred. It is unnecessary to set out the detail, but the global compensation would have amounted to £8797.06. The procedure for accepting the offer was explained and a draft acceptance form was included.[13]On 25th June 2012 the claimant’s solicitors replied that they were desirous of costs being included in the settlement as it was reasonable to instruct solicitors. This was rejected on 16th July 2012. A county court claim was issued shortly thereafter.

The Claim

[14]The claim form and the Amended Particulars of Claim set out the assertions of the claimant in great detail. There were a variety of heads of claim which need not be set out save in summary form:(1) Negligent Misrepresentation and/or misstatement;(2) Negligence relating to misrepresentation by partial non-disclosure.(3) Breach of the Insurance Conduct of Business (ICOB) rules.(4) Unfair (second) loan under section 140A of the Consumer Credit Act 1974 (1974 Act).[15]Following all of this at paragraph 45 (et seq) on page 18 of the Particulars of Claim the claimant set out the particulars of loss. That was one of the shorter components. The pecuniary losses were all set out and the final prayer seeks damages and an order under section 140B of the 1974 Act. Interest is also claimed. Furthermore there is a claim purportedly under the case of Wilson v Howard Pawnbrokers [2005] EWCA Civ 147. No further particulars are given. Of importance; no details are given as to what extra orders are sought under section 140B beyond financial compensation for the losses incurred.

The Strike-out and Summary Judgment application

[16]The defendant made an application for the claim to be struck out and summary judgment based upon the simple proposition the claimant has already secured recompense under the ADR/FSA scheme and, in consequence, this claim is an abuse of the process of the court. A witness statement of Miss Elizabeth Read Chittenden was filed on behalf of the defendant setting out much detail. It is unnecessary for me to refer to that for present purposes. The defendant was prepared to pay the full redress amount of £8797.06 made up of PPI premium on both loans plus interest of 8% to place the claimants in the position they would have been had the PPI not been entered into (see paragraphs 13, 14 and 15). Miss Chittenden asserts:
“This offer ----- (is) the most the claimants’ could ever expect to receive if they were ever successful in litigation.”
[17]The basic and bald argument of the defendant advanced before the district judge was that the amounts offered under the ADR were exactly that which they would have received if totally successful under the county court claim. In those circumstances it is wrong for the county court litigation to proceed further. The claimant’s riposte is the amount on offer would be exceeded if the case should be tried.[18]District Judge Sarah Richardson took the view there was a prospect of further damages under section 140A of the 1974 Act, but warned the claimants they might be exposed to an adverse costs order if they did not recover more than was on offer under ADR. The judge admitted she reached her decision with some reluctance. She indicated she was mindful of the judgment of His Honour Judge Waksman QC in Andrew and others v Barclays Bank PLC and Carroll v Egg Banking PLC [2012] EWHC B13 (Mercantile) [to which I shall refer hereafter as the Andrew case]. In that case the court gave guidance about staying PPI cases pending ADR. The judge also set out a very useful summary of PPI litigation at paragraphs 8 – 11 of his judgment. Basically, a compensation scheme was established and a great number of cases before the courts were stayed pending consideration under the scheme.[19]It is right to observe, but for the section 140A claim the judge indicated she would have struck out the claim.[20]It is argued the judge below was wrong.[21]I forbear to set out the competing arguments advanced by each side which have been reduced to writing. I have read them with care and have additionally fully considered the expansion of the written submissions in oral argument. Put very shortly the claimant says there is a material advantage and that is the question of costs which were reasonably incurred. The defendant argues there is a perfectly adequate ADR scheme that has proved its worth by awarding the claimant everything sought and has done so at a fraction of the cost of litigation. As a by-product the court should not encourage expensive and unnecessary litigation ahead of ADR which, under CPR, where appropriate the court should encourage.

CPR Part 3.4 (2) (a) and (b)

(a) and (b)

[22]CPR Part 3.4 (2) (a) and (b) provide:
“(2) The court may strike out a statement of case if it appears to the court – (a) that the statement discloses no reasonable grounds for bringing or defending the claim; (b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings.” (a) that the statement discloses no reasonable grounds for bringing or defending the claim; (b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings.”
[23]It seems to me the fundamental point within sub paragraph (a) is the concept of there being no reasonable grounds for bringing the claim. That must import the notion of having already achieved a just result in the case. If a person has already achieved all that they could upon any reasonable assessment of the case, it cannot be reasonable to add to the burden of the court or the defendant by continuing the litigation. Overtures and blandishments about potential cost penalties are, frankly, likely to be comprehensively ignored by such a litigant. The court is entitled to act and must do so.[24]Under sub paragraph (b) the core feature is the abuse of the process of the court. This must also embrace a situation where a litigant is desirous of pressing on when he has achieved everything he reasonably could and that is simply an unwarrantable use of court resources.[25]This case is not about an absence of a case or there being no cause of action. It is simply where it is asserted there is (and in this case has been – albeit not accepted) redress.[26]Striking out a claim before trial is a powerful component of the court’s artillery; it is a power that needs to be used with care, but robustly when justified. In this case there was plainly a cause of action which absent any other form of redress is plainly open to litigation and judicial redress via the trial process. The issue in the appeal is whether there are reasonable grounds for bringing the claim when it is averred there is more than adequate redress under the ADR scheme.

The Andrew Case

[27]The history of the PPI litigation is helpfully summarised between paragraphs 8 – 11 of the judgment of Judge Waksman QC. I can distil it further:(1) By 2010 there were many PPI claims in various county courts. Order needed to be injected into the litigation as a whole.(2) At that time the FSA were drafting a scheme to deal with PPI claims and compensation.(3) There was a judicial review of the FSA scheme which was unsuccessful.(4) The FSA scheme was instituted in 2011.(5) Many thousands of claims are being processed by the FSA scheme – an ADR scheme.[28]The FSA scheme is free for users and possesses the advantage of saving costs. The savings are considerable for all concerned including the banks and others. It was asserted, quite rightly in my judgment, that the costs of litigation via the court process would in most cases far outstrip the likely damages. The advantages of the FSA scheme are palpable. Quite apart from anything else the county court system is not burdened with a massive volume of work that can, and should, be diverted to the ADR offered by the FSA scheme.[29]Applications for a stay were made to the court (in advance of ADR) and the court gave guidance as to how to approach that problem. It is to be noted the problem in this case is slightly different. The guidance was prefaced by warnings (see paragraphs 19 – 21). Judge Waksman QC covered much territory and started his journey by reference to the overriding objective in CPR Part 1 which enjoins the court to actively manage cases and encourage the parties to use ADR if the court thinks fit. He also reviewed the Court of Appeal decision in Halsey v Milton Keynes NHS Trust [2004] 1 WLR 3002 where it was clearly stated that while the court cannot compel parties to use ADR it can and must use costs sanctions against those who do not use ADR when they should have. In the course of the judgment in Andrew Judge Waksman QC indicated at paragraph 38 that a claimant who starts a claim and does not use the FSA scheme by way of ADR is likely to be at serious penalty as to costs and may face a costs award on the basis the county court claim should never have been started.

The Principles in this case

[30]The Andrew case forms a very useful starting point for consideration of the principles to be applied in the problem found in this case. Here ADR has taken place and yet the claimant still pursues the county court claim. Is the costs penalty (as presaged by District Judge Sarah Richardson) the only sanction; and must the court simply sit by to await the outcome, at which point, if no more than the ADR award is awarded by way of damages, it may penalise the claimant? Is that really a proportionate use of the court valuable resources and an appropriate way to resolve a dispute? I venture to suggest it is not.[31]First, it is a principle of English justice – quite apart from European Convention jurisprudence – that no one must be deprived of access to the courts to resolve a civil dispute. It is equally axiomatic to declare the courts are masters of their own proceedings and plainly are entitled to devise procedures for dealing with cases that are in fact an abuse of the process of the court and, where appropriate, summarily dealing with cases either by way of striking them out or summarily giving judgment in a plain case. Providing always, when such decisions are made, the judicial process is fair, such decisions will be convention compliant.[32]Second, it is also clear the court has a duty under the overriding objective to encourage ADR. The proportionate management of cases is of cardinal importance. Here the award (albeit non binding) has been made. There can be little doubt the claimant will succeed in the claim.[33]It seems to me, having regard to the above two principles, that the court must possess the power to prevent litigation that has achieved its objective from continuing. Whilst the concept of alternative remedy, much favoured in the Administrative Court in judicial review litigation to prevent a claim where there is another perfectly acceptable means of redress, is not to be imported into ordinary civil litigation; nevertheless the civil court must not allow its process (and resources – limited and precious as they are) to be used unwarrantably when a civil litigant has already achieved full redress or has the option to achieve full redress via an effective alternative remedy. It is not the concept of alternative remedy that is being applied, rather more a branch of the overriding objective and the strict application of the strike-out rules in CPR Part 3.4.[34]If a party has the realistic prospect of obtaining a larger amount of damages, which is not fanciful or contrived, or some other material advantage relevant to the case itself (as opposed to costs) the claim should be allowed to proceed with a warning as to costs penalty if the ADR has been unreasonably avoided. However, where the advantage is merely an adjunct to the claim – in the shape of costs – the claim must not be allowed to proceed. The court’s process is then being used for an improper purpose. Where there is a perfectly good ADR scheme and it is free which will provide (or has already provided) proper redress the court should seek to encourage ADR in advance and if there is an award (but it has not been accepted) then the court is left with no alternative but to say the claim (in the shape of the statement of case) is not being brought reasonably and is also an abuse of the process of the court.

This Case

[35]In this case the claimant has pleaded section 140A (1) (a) as being a cause of action in that the relationship was unfair and took advantage of its position as a credit provider in order to sell an unsuitable product. It may well be that claim would succeed. I would certainly not say that disclosed no reasonable cause of action – plainly that is an aspect of the case that could be proved. That is not the point.[36]It has to be remembered the claim is accepted under the FSA scheme and redress is offered.[37]All that is pleaded by way of the claim for damages is the losses incurred. There is no additional financial advantage pleaded by a claim under section 140A. Indeed, in my judgment all that a claimant would achieve is exactly the same as would be achieved under ordinary contractual damages. The claimant invokes the case of Wilson v Howard Pawnbrokers [2005] EWCA Civ 147 where the Court of Appeal opined upon the unenforceability of certain agreements. Again, that might or might not have relevance, but that is also not to the point here. Assuming that was applicable it does not enhance the award of damages that would be likely.[38]In the result I have not the slightest hesitation in saying the only advantage in pressing on with this case is the possibility (far from a probability) of an award of costs. I feel that is, however, a highly speculative adventure in any event given that it is highly likely no more will be achieved by way of damages than under the FSA scheme and there almost certainly would be a determination at trial that the claimant should have used ADR and will be disallowed all – or nearly all – the costs. Even if there was a possibility of an award of costs – that is an illegitimate factor as it is not a part of the claim itself, but adjunctive to it.[39]The pleaded case does not set out anything more than a claim for full economic redress – nor could it. Full economic redress has been achieved already. It is a construct of fancy to suggest the claimant would obtain more in the litigation. Had there been some serious enhancement or another material advantage intrinsic to the claim itself that demanded adjudication (or some other extremely good reason for the claim to proceed) the case would and should have proceeded. That was not the case here.[40]I cannot see the advantage which the judge thought the claimants would obtain under section 140A. None has been identified to me that begin to meet the circumstances of this case.[41]For the sake of completeness I should add that the defendant has made it clear the FSA offer remains open for acceptance. Had that been revoked, the claim would have proceeded. The only advantage in this case was the far-fetched notion the claimant would obtain a costs order. That was highly unlikely in any event. A costs award is in my judgment adjunctive to the claim and not an intrinsic part of the claim in the factual matrix of this case.

Conclusion

[42]I am aware this was a case management decision and, as such, is not so easily cast aside by an appellate court. However, the judge in this case fell into error. I simply record she was not keen to allow the case to proceed; but felt she had to. I have identified that she was not so compelled for the reasons I have given.[43]In my judgment the moral of this case is that litigants should ordinarily follow the ADR route when there is a perfectly good scheme that offers(i) speedy justice; and(ii) full redress. In appropriate cases the court should and will strike out cases where there has been full redress already. Full redress relates to matters intrinsic to the case not costs adjunctive to it. Using the language of CPR Part 3.4 (2)(a) there is truly no reasonable ground for bringing the claim. How can it be reasonable to bring a claim when the claim has succeeded in every way via ADR? The court needs to encourage good ADR and not allow claims that have succeeded to carry on. I dare say this case will be fact specific to the PPI litigation, but there may be wider applicability to other forms of ADR. I do not see a potential costs advantage as being a legitimate reason to press on with a case of this kind. The mosaic presented to me in this case admits, in my judgment, of one answer – strike-out.[44]It will be seen I have addressed this case under the strike-out provisions and not the summary judgment route. Similar considerations obtain using that route. I forbear to repeat what I have already said and simply apply the analogous principles to summary judgment. There could not be the slightest advantage to the claim in allowing the case to proceed to full trial and judgment. With that said I prefer to decide the case on strike-out principles rather than summary judgment. I feel strike-out is more fitting to the factual matrix of this case.[45]For the reasons I have given I am satisfied the judge was wrong. I should add she was entirely right to give permission to appeal as the case raised truly important issues about the strike-out jurisdiction of the court.[46]The claim is struck out in its entirety. The order of this court on appeal must record:(i) the ADR offer under the FSA scheme is still open; and,(ii) the ADR offer provides full redress to the claimant for the PPI claim.[47]This appeal is allowed.

Cited in 1 later judgment