Better but not great news for intermediaries or lenders who have offered PPI and bad news for lawyers arrived in late July, in the form of a High Court decision delivered in the case of Binns v Firstplus Financial Group.
The claim centred on a PPI claim.
It’s common knowledge that there is an overwhelming success rate for such claims which come before the Financial Ombudsman and in some cases even when there would appear justification for the product and good practice has been exercised in the sale. Such agencies have a very wide remit, applying a fair and reasonable test in preference to one that is based on strict legal principles when claims come before the court.
In Binns, the claim was put before the scheme set up by the FSA to deal with such claims.
The Binns retained a firm of solicitors to put forward the claim through the scheme, even though the scheme is a no cost form of alternative dispute resolution, i.e. a mechanism for resolving claims without necessity for the formality and costs of court proceedings.
In June 2012 Firstplus made an offer to compensate Binns.
Binns rejected the offer. The Claimant wanted not only the compensation but also the costs of his solicitors.
In due course, the ADR made an award of the full compensation sought, but not the legal costs. Quite correctly, in my view, it was determined that the claimant would have achieved the same result going directly, and without need for lawyers, and without incurring lawyers costs.
The Claimant then decided to issue a claim in the county court for damages (these being in effect the costs incurred by them in pursuing the claim). These costs, it was said, would have been recoverable had the claim progressed through the county court.
The lender in this case (or an intermediary seller of the PPI in other cases) applied to strike out the claim for abuse of process. This indeed was a fight not for compensation for a borrower, but for lawyer costs.
The lender argued that this was unnecessary and expensive litigation which the court should not encourage.
The court found the claim to be highly speculative. The claim was unlikely to realise more than was awarded at the ADR. The Court struck out the claim.
It is hoped that the industry which has arisen out of the PPI “scandal” will have been taught a salutary lesson. Whilst arguments may continue as to the integrity of PPI sales, there is a proven no-costs mechanism in place to deal with such complaints at no cost to the seller and the buyer of such policies. Such claims should not be hijacked by claims companies or their lawyers seeking significant fee and cost rewards for unnecessary work. And if the claims industry and their lawyers’ business models (which may include the payment of referral fees for such claims fails because the golden egg of a costs reward is no longer available), then we may well be at the beginning of the end of the PPI misselling industry.
By Jonathan Newman, Principal Partner at Brightstone Law
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