Smith & Anor v Royal Bank of Scotland plc [2023] UKSC 34 (04 October 2023)
Citation: Smith & Anor v Royal Bank of Scotland plc [2023] UKSC 34 (04 October 2023)
Rule of thumb: Stare-decisis: In a commercial action does time-bar run from the illegal & wrongful act being done? No, the general rule is that the 6 year time-bar limit runs from the final communication provided by the other party, such as a document, invoice, or receipt, providing wrongful information about the illegal act being done by them, and it does not run from the actual act itself being done.
Background facts: The facts of this case were that Smith entered into a loan contract to borrow money. As part of this loan, Smith also had to buy PPI from an insurer. RBS got significant commission on this insurance without disclosing this to Smith, meaning that this was an illegal payment.
RBS stopped taking this commission on the loan in 2008. The loan then finished in 2014. In 2018 Smith sought to sue RBS for the commission RBS had wrongly taken.
Parties argued: RBS argued that the time-bar limit in commercial claims is 6 years. They argued that they stopped doing this in 2008, so this time-barred in 2014.
Court held: The Court held that this was not time-barred. The Court affirmed that where there is an on-going relationship between the 2 parties, the time-bar runs out at the end of the relationship – when this has been done earlier in the relationship it technically means that every bill sent from that point on wrong, so time-bar runs from the final wrong bill sent under the relationship. RBS had to pay Smith the value of the commission they had taken.
Ratio-decidendi:
‘1…. What is the time limit for applying to the court for an order under section 140B of the Consumer Credit Act 1974 to remedy unfairness in the relationship between a creditor and a debtor? This question is raised by the two cases under appeal. Both are small claims brought against the Royal Bank of Scotland plc (“the bank”) by former credit card holders who were sold payment protection insurance (“PPI”) policies by the bank on which the bank received very large undisclosed commissions. In each case the claim was brought over 10 years after the PPI policy was terminated and the last payment relating to it was made, but less than six years after the claimant’s credit card agreement with the bank had ended…
4. Karen Smith applied (successfully) for a credit card with the bank in January 2000. The same application form offered her PPI “to protect your … card payments in the event of death, accident, sickness or involuntary unemployment” and stated: “We [ie the bank] strongly recommend you take out this cover. For cover just tick this box.” Ms Smith did so. What the bank did not disclose was their financial interest in making this recommendation. In fact, well over 50% of the money paid for PPI did not go to the insurer but was retained as commission by the bank. Even to this day the bank has chosen not to reveal the exact size of its commission.
5. The customer was entitled to terminate the PPI policy at any time. Ms Smith did so in March 2006 and made her last payment relating to her PPI policy in April 2006. However, her credit card agreement with the bank continued for another nine years until 2015.
6. The bank never informed Ms Smith that it had received commission out of her PPI payments until February 2018, when it paid her back £529.80 under a redress scheme for PPI mis-selling established by the Financial Conduct Authority (“FCA”). This payment was said to represent the commission received by the bank insofar as it exceeded 50% of the PPI premiums paid by Ms Smith, plus interest on the principal sum refunded.
7. In August 2019 Ms Smith issued a claim against the bank in the county court seeking relief under section 140B of the Consumer Credit Act 1974….’
Lord Leggatt
86. ‘I am very grateful to Lord Leggatt for setting out the facts in his judgment and do not repeat them in this concurring judgment…
88. The bank states that, if the relationship between the bank and the debtor continues, this interpretation exposes banks to continuing claims relating to PPI policies long after the PPI mis-selling scandal has become stale. The Limitation Act 1980 has no relevant longstop date. Notwithstanding that people have been aware of the PPI mis-selling and the provision of regulatory compensation for such mis-selling for many years, it is feared that a continuing relationship between the debtor and the bank would give a green light to a claim. The answer to this concern, to my mind, lies in the discretion which Parliament has given the court in relation to the appropriate remedy, if any, which it chooses to give. If a debtor sits on his or her hands in knowledge of the relevant facts, it would be, as Lord Leggatt states, inconceivable that a court would think it just to make an order under section 140B of the 1974 Act. This is so, both during the currency of the relationship and in the six years after that relationship has ended’.
Lord Hodge
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.