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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Figurasin & Anor v Central Capital Ltd [2014] EWCA Civ 504 (16 April 2014) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2014/504.html Cite as: [2014] EWCA Civ 504

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MANCHESTER COUNTY COURT
Mr Recorder Mahmood
1CH02951

		Royal Courts of Justice Strand, London, WC2A 2LL
		16 April 2014

Lord Justice Patten :

1. This is an appeal by Central Capital Limited ("CCL") against a judgment of Mr Recorder Abid Mahmood in favour of the claimants, Mr and Mrs Figurasin, following a trial in the Manchester County Court. The Recorder ordered CCL to pay damages in the sum of £13,000 (inclusive of interest) for mis-selling payment protection insurance ("PPI") in conjunction with a loan of £25,000 which Mr and Mrs Figurasin applied for in order to consolidate their existing debts. The secured loan agreement which the claimants entered into on 17 October 2005 was for a period of ten years during which the loan was repayable (including interest) at a cost of £291.61 per month. In addition, they were required to repay what was described as a payment protection loan of £8,750 at a rate of £102.07 per month which represented the cost of funding the premium for the PPI which they had agreed to take out. This brought total their monthly payments to £393.68.
2. In their amended particulars of claim ("APC") the claimants alleged a number of breaches by CCL of the Insurance Conduct of Business Rules ("ICOB") and, in particular, ICOB 2.2.3(1) R which provides:

"(1) When a firm communicates information to a customer, it must take reasonable steps to communicate in a way that is clear, fair and not misleading.

(2) Paragraph 1 does not apply to a firm when it communicates a non-investment financial promotion in circumstances in which ICOB 3 (Financial promotion) applies to the firm."

3. ICOB 2.2.5 G states:

"ICOB 2.2.3 R covers all communications with customers, for example, any oral or written statements, telephone calls and any correspondence which is not a non-investment financial promotion to which ICOB 3 (Financial promotion) applies."

4. A contravention of an ICOB rule by an authorised person such as CCL is actionable in damages at the suit of the person who suffers loss as a result of the contravention: see Financial Services and Markets Act 2000 s.150(1).
5. At the trial the Recorder dismissed all of the claimants' complaints except for that pleaded in paragraph 6(c) of the APC. This stated:

"It was not made clear to the Claimants that the PPI was being purchased by a further loan of £8,750 to finance an advance payment of the premium to an insurance company. The Claimants were not asked if they wanted to pay in advance for PPI. They were not given any reason for so doing, then (or even now). The decision of these financially constrained Claimants to put an insurance company in funds by advance payment was made exclusively by the First Defendant or Paragon without reference to the claimants."

6. The claimants' evidence at the trial was that they were not told and did not realise that the cost of the PPI would be an extra £8,750. Mrs Figurasin said in her witness statement that she and her husband (who work as nurses in the National Health Service) wanted to borrow £25,000 in order to consolidate their existing debts. They carried out a search on the Money Expert website and came across CCL as a possible provider. After an employee of CCL had rung Mr Figurasin, it was Mrs Figurasin who then telephoned CCL and spoke to a customer account manager, Ms Laura Sartin. It is this conversation (which was recorded) which forms the basis of the damages claim.
7. The conversation took place on 14 September 2005. It began with Ms Sartin taking down details of the claimants' address, property value and outgoings, employment, income and the amount of the proposed loan. She was told by Mrs Figurasin that they both worked as nurses in a Salford hospital, owned their home subject to a mortgage, and wanted to borrow £25,000. Mrs Figurasin was asked a number of detailed questions about her and her husband's financial position and was then put on hold while Ms Sartin used her computer to generate various loan offers based on the information provided. Ms Sartin then said:

"Hello there. Right, well that's really good news. Now the system's actually generating those offers. Um, now, while it's actually generating those offers, um, because we are regulated by the Financial Services Authority, there are some questions that I do need to ask you and your husband first.

Mrs Figurasin: Right.

Ms Sartin: Okay, now, these questions apply to both you and your husband, and if you could just answer yes or not to me then that would actually be great. Now, if you were unable to work, I assume like everyone else you'd like to know that your loan repayments would be made, is that correct?

Mrs Figurasin: Yes.

Ms Sartin: Alright, now do you have any existing arrangements which would provide for this at all?

Mrs Figurasin: No."

8. Mrs Figurasin was then asked a series of questions as to whether she and her husband had any existing life or other insurance cover for the loan, whether they had any medical conditions which might affect their employment and whether they had ever been refused cover on their lives. These were, of course, standard enquiries for any insurance proposal. Ms Sartin then said:

"I'm pleased to let you know that there are offers actually available for you today. Now, erm, the system is going to generate 3 offers. Like I said, the first one is going to be the amount that you've actually requested from us today, the second offer is designed to save you as much money as possible by cutting your monthly outgoings and the third offer will be the maximum that we can actually offer you today.

Mrs Figurasin: Right.

Ms Sartin: And is based on the information that you have given me. Ok, now the first offer that we have available today is for the amount that you were looking for, now we've got to wait for that offer to come up on the screen, it's a little bit slow at the moment but it's really good news because it is actually there and it is actually available for you. Ok it's actually a really really good one. It's £25,000.

Mrs Figurasin: Yeah.

Ms Sartin: It's done over a 10 year term.

Mrs Figurasin: Right.

Ms Sartin: For you and that's come in with a payment of £393.68.

Ms Sartin: How does that seem to you?

Mrs Figurasin: Yeah, that sounds good.

Ms Sartin: Does that sound ok?

Mrs Figurasin: Yeah.

Ms Sartin: Alright, ok, erm, now basically it's the amount that we have actually requested and we can offer that to you today. Now, erm, would you like me to extend the term to see if we can get the payment down for you a little bit or do you want me to shorten it, it's entirely down to you."

9. Ms Sartin then gave Mrs Figurasin quotations for the cost of the borrowing spread over 7 and 12 years but Mrs Figurasin indicated that she would opt for a ten year loan at a monthly cost of £393.68. There was then a discussion of what loans the claimants were seeking to consolidate and whether they wished to borrow more than the £25,000. But Mrs Figurasin said that a loan of £25,000 would be enough:

"Mrs Figurasin: I think it'll be the £25,000 for 10 years.

Ms Sartin: That's no worries so you're happy with the 25 over a 10 year term and the monthly payment on that one was £393.68.

Mrs Figurasin: Yeah.

Ms Sartin: Alright now the monthly payment also includes your payment protection and that is tailor made for the loan product and it's actually erm underwritten by erm London and Edinburgh Insurance Company and your life cover is underwritten by Norwich Union Life and Pensions Limited. Now how does that sound to you?

Mrs Figurasin: Yeah that's fine.

Ms Sartin: Ok that's fine, erm, in fairness the insurance policy is good so obviously if you're out of work due to sickness, accident or redundancy or god forbid should anything happen to you during the term of the loan then the, erm, payment would either kick in or the life cover would actually kick in and the loan would actually be repaid.

Mrs Figurasin: Right.

Ms Sartin: Alright now with your sickness, accident and unemployment cover if you keep the policy for a 10 year term they are going to give you all of your premiums back.

Mrs Figurasin: Right.

Ms Sartin: So the premiums they would actually in 10 years time they would basically give you £8,750 back.

Mrs Figurasin: Right.

Ms Sartin: If you decided to keep the loan for 10 years or more.

Mrs Figurasin: Right.

Ms Sartin: Alright.

Mrs Figurasin: Ok."

10. This was the only time in what was a long conversation that Ms Sartin made any reference to the cost of the PPI as a separate item. With the benefit of hindsight, it can be seen that the £8,750 was a reference to the single premium cost of the insurance which had to be financed by an additional loan in that amount. But Ms Sartin did not spell that out in terms. What she told Mrs Figurasin was that the £393.68 included the cost of PPI and that after ten years the premium would be refundable. But £102.07 per month over ten years amounts to £12,248.40 so that there was a significant additional cost involved even were the loan to run for its full term.
11. No breakdown of this kind was provided by Ms Sartin. The most that she did in terms of further detail was to say at the end of the conversation that Mrs Figurasin should discuss the matter with her husband and that they would be sent the paperwork very shortly:

"Ms Sartin: Once you've signed the papers, send them back the same day. It's best to send them back by special delivery if possible and this will guarantee next day delivery through to us here.

Mrs Figurasin: Alright.

Ms Sartin: Now there are two important leaflets that I need you to have a good look through. The first one is the Finance Industry Standards Association booklet, which explains how the loan works now we follow FISA regulations and all regulations are set up to inform and protect you as the customer. Now we also adhere to the Financial Services Authority regulations. Have a read through the key facts illustration for all the important information about the insurance that we discussed with you earlier on.

Mrs Figurasin: Alright."

12. On the same day Ms Sartin sent to the claimants a letter with a number of enclosures. These included a loan application form which had already been filled in by CCL with the claimants' personal and financial details that Mrs Figurasin had supplied during the telephone conversation. The letter asked them to ring Ms Sartin on the number supplied to confirm receipt of the documents. She would then be "able to talk you through the documents and answer any questions you have". The letter, on its face, contains a box with the "loan amount" stated as £25,000 payable over 120 months at £393.68 per month. There is then a reference to the claimants having chosen joint cover with life over a ten year term. The application form contains no further details of the loan but in an accompanying document headed "Important Information" it is stated:

"The cost of the optional insurance included in the enclosed agreement includes Insurance Premium Tax:

Premium £8,333.33

Insurance Premium Tax £416.67

Total Premium £8,750.00"

13. The enclosed agreement in the bundle of documents was a draft copy of the regulated loan agreement which, as Ms Sartin explained in the telephone conversation, would follow for signature after the claimants had completed and returned the loan application form. The draft agreement is important because it was the first document received by the claimants which contains a complete breakdown of the cost of the loan and the PPI. The relevant part of the document contained a box which (so far as material) was in the form set out below:

Key Financial Information		Key Financial Information (Premium Loan)		Summary
Amount of Credit for cash loan Duration (months) Monthly payment ….. Other Financial Information Total charge for Credit: ……	£25,000 120 £291.61 £9,993.20	Amount of Credit for Payment Protection Loan Duration (months) Monthly payment ….. Other Financial Information Cash Price of Payment Protection Premium: Total charge for Credit: …..	£8,750 120 £102.07 £8,750 £3,498.40	Total Borrowed £33,750 Total Monthly Payment £393.68 Your total borrowed comprises your Cash Loan, your Payment Protection Premium Loan opposite (if any) and an arrangement fee (if any) of £ 0.00 …. Your insurance … 5. The total fees, charges and taxes payable in addition to the premium is shown as the total charge for credit in the premium loan column opposite. There are no additional fees, charges or taxes payable and the total price you will pay for cover is £12,248.40

14. One can see that the "Amount of Credit for Payment Protection loan" is £8,750 repayable over a ten year period at a cost of £102.07 per month and that the "Total borrowed" is £33,750 with a "Total Monthly Payment" of £393.68. The total cost of the insurance cover (£12,248.40) is also included.
15. Approximately eight days later CCL sent the regulated credit agreement to the claimants for signature. This is the only document which the claimants specifically refer to in their written evidence as having been received after the telephone conversation but the Recorder accepted evidence from CCL's litigation department that the other documents I have referred to were sent to them and that several days expired before they were called upon to sign the loan agreement. Mr and Mrs Figurasin complained in their witness statements that CCL did not explain to them that the cost of PPI was part of the credit provided and that, by not taking it, they could have avoided a cost of £12,248.40 over the life of the loan. It was therefore put to them at the trial not only that Ms Sartin had told them that the cost of PPI was included in the monthly charge of £393.68 but also that the breakdown showing the full cost of the insurance was included in the documents sent out by CCL on 14 September. There is no suggestion or any evidence that the claimants contacted Ms Sartin on receipt of these documents to query any of the details which they contained.
16. One of the original complaints was that the £25,000 loan was only sufficient for a partial consolidation of the claimants' debts. Mrs Figurasin accepted in cross-examination that this was not correct but out of this line of cross-examination emerged her evidence that she and her husband did not realise from what she was told on the telephone that the PPI would involve them in further borrowing. She had assumed that the £393.68 represented the cost of borrowing £25,000 and that PPI was included. She did not realise that, by declining the offer of PPI, she and her husband would save £102.07 per month by not having to borrow the cost of the premium. Had she known of the extra cost generated by PPI, she would not, she said, have taken it.
17. There is, I think, no real case for saying that the presentation of the information in the box on the draft loan agreement, if considered on its own, was anything less than clear, fair and not misleading as required by ICOB 2.2 3 R. It contained all the necessary details of the cost of the loan and the PPI and any reasonable reader would have had no difficulty in comprehending that he was paying an extra £102.07 per month to finance the cost of the insurance cover. Although the test is an objective one, both Mr and Mrs Figurasin accepted in cross-examination that had they read the loan agreement carefully at the time, as they were asked to do, they would have understood that the PPI was optional and was available at the additional cost indicated. But their case was that Mrs Figurasin (who had the conversation with Ms Sartin) was led to believe that the PPI was included in the £393 per month (which it, of course, was) and did not generate an additional cost in the form of the loan of £8,750 for the payment of the premium. She thought she was borrowing £25,000, not £33,750. Neither she nor her husband therefore bothered to read the documents they were sent in full and did not therefore become aware of the information contained in the draft loan agreement.
18. The Recorder held that the information communicated to Mrs Figurasin by Ms Sartin during their telephone conversation was not clear and fair and was misleading because the £8,750 cost of the PPI was not mentioned. All that Mrs Figurasin was told was that the cost of the £25,000 loan was £393.68 per month and included PPI. He found that Ms Sartin was authorised by CCL to tell potential customers the cost of the PPI but that this was not done in practice in order to avoid customers declining the offer of insurance and therefore of further business for CCL in the form of the additional borrowing. The withholding of the information was, he inferred, deliberate rather than accidental. Ms Sartin was following a script (although not one approved by the FSA) and the omission of the cost of the insurance was, on the evidence, part of CCL's marketing strategy. The Recorder said:

"135. I conclude that the transcript conclusively shows a failure to refer to the cost of the PPI as being a separate cost. The Claimants were misled. I have struggled to understand why it took so long for Ms Sartin to even hint that she was speaking about insurance when asking the various questions that she did. Ms Cooke was unable to give me a sufficient explanation as to why that was. Mrs Figurasin was understandably confused by the situation she found herself in and thought that she was getting an additional free item because the loan was 'only' in the amount of £25,000 and with no additional costs or items.

…

137. I note that by the end of page 96 [of the transcript of the telephone conversation] the First Claimant is still not told that the PPI policy and interest charges amount to some £12,248.40, nearly one half of the loan of £25,000 that the claimants were seeking.

138. In my judgment this was not clear. It was not fair and it was misleading. Ms Cooke tended to agree that this was so, and that is not the end of the matter because the First Defendant's case is that it is the whole process of communication that needs to be looked at, including the written documents that were subsequently sent to the Claimants for them to read and consider and indeed for the Claimants to ask questions of Ms Sartin about.

139. In my judgment, the facts of the influence of the telephone call between Ms Sartin and Mrs Figurasin cannot be underestimated. Mrs Figurasin trusted what she was being told. She believed that she had been told the loan she was going to take out was a £25,000 loan with repayments of some £393.68 per month. She knew nothing of the PPI or its cost. I accept her evidence. She was an honest and persuasive witness. She would not have taken out the PPI had she realised its cost and had she been told in clear terms that there was an additional cost for it which amounted to over £12,000.

…

141. Therefore if Ms Cooke is right when the whole of the communication is taken into account, then there was, to say the least, considerable hesitation by Ms Sartin (the saleswoman) in informing the First Claimant that they were being given a quote for very expensive PPI. This led to a lack of clarity and to unfairness and it misled the Claimants. In turn after they had placed their trust in the telephone call, it is not surprising that they merely looked at only certain parts of the paperwork that was sent to them. They saw the £25,000 figure (the loan they wanted) and they saw the £393.68 repayment monthly figure. After what they were told over the telephone, it was hardly surprising that they did not read the document in full. Similarly, it is hardly surprising they did not call Ms Sartin back either. They found themselves 'approved' for the £25,000 loan that they thought they were getting."

19. The Recorder was entitled to find on the evidence that Mrs Figurasin was misled by the terms in which the cost of the loan was explained to her on the telephone. He was also right in my view to conclude that the information which Ms Sartin provided was not communicated in a way that was clear, fair and not misleading. Although, as I said earlier, the assessment of those matters is necessarily an objective one, there was clearly an inadequate explanation of how the PPI was to be funded and, in particular, a failure to mention that it would cost an additional £8,750. Ms Sartin's statement that the cost of the £25,000 loan was £393.68 per month was incorrect and her subsequent reference to the refund of £8,750 in premiums after ten years, whilst it might prompt obvious questions from the financially-alert customer, was not sufficient to provide Mrs Figurasin or, I suspect, other typical borrowers with a proper understanding of what they were committing themselves to. The only question therefore is whether the reference in the same conversation to the sending of the "important leaflets that I need you to have a good look through" and the contents of those documents were sufficient to remedy the inadequacy of the oral explanation which Mrs Figurasin received in the telephone conversation.
20. It is important to notice that the requirements of ICOB 2.2.3 R have to be satisfied when (and therefore whenever) a firm communicates information to a customer. If the telephone conversation and the subsequent delivery of the draft loan agreement fall to be treated as separate communications of information for this purpose then there was a clear breach of the rule in relation to the first communication regardless of how clear, fair and not misleading the second communication was. The only question then is whether the second communication and, in particular, the terms of the loan agreement was effective to break the chain of causation in relation to the earlier breach.
21. Mr Hardwick for CCL submitted that the Recorder should have treated the telephone conversation and the documents that followed as a single process during the course of which Mr and Mrs Figurasin received a full and clear breakdown of the cost of the PPI. He pointed out that both Mr and Mrs Figurasin accepted in evidence that they should have read the documents in full and that the loan agreement would have disclosed to them the true cost of the PPI. This argument has its obvious attractions not least in its emphasis on the need for people to read contracts before they sign them. And there are reported cases where even in the present context of consumer protection judges have treated a failure to read as fatal to a claim for mis-selling. An example cited to us was the decision of HHJ Simon Brown Q.C. in Goodman v Central Capital Limited [2012] CTLC 158, [2012] EWHC 8 (QB). But in that case the sales representative had told the claimant during the course of their telephone conversation that the PPI was a single premium policy the cost of which would be added to the loan and provided the figures for the extra borrowing involved. It was therefore impossible for the claimant to contend that he had not been informed of or had been misled about the cost of PPI and his subsequent failure to read the details contained in the loan agreement could not be attributed to being misled about what he was buying.
22. The present case is very different. Mrs Figurasin was given a misleading explanation about the terms of the loan which, on the judge's findings, caused her and her husband not to bother to read the detail contained in the documents which followed. They were content with the monthly cost quoted for a loan of £25,000 with PPI and did not appreciate that the PPI generated an additional loan of £8,750 which they could avoid. Although told that they should read the documents, the Recorder found that that was not sufficient in this case to remedy the defects in the telephone communication. It is worth repeating that the covering letter addressed to Mr and Mrs Figurasin thanks them for choosing CCL to arrange their loan which is stated to be a loan of £25,000 at a cost of £393.68; a repetition of the misleading statement made in the earlier telephone conversation. Only much later in the bundle of documents is the true cost revealed.
23. The ICOB rules are not required to accommodate any level of irresponsibility on the part of a consumer. But they are there to protect consumers from being misled. Although the court makes an objective judgment as to the possibility of that occurring, the fact that the consumers were actually misled in the present case is strong evidence that the Recorder was entitled to take into account in deciding whether the communication of information by CCL was in this case unclear and misleading.
24. Mr Hardwick's submissions that the claimants were the victims of their own irresponsibility is, in my judgment, contradicted by the Recorder's factual findings. The system, he found, was calculated to mislead. Even if one treats the sending of the documents as part of one overall process, it seems to me highly unattractive for CCL to contend that a positively misleading account of the loan arrangements was cancelled out by the financial details contained (but only contained) in the draft loan agreement. In these circumstances, the Recorder was entitled in my view to find that there was a breach of ICOB 2.2.3 R and there are no grounds for interfering with his judgment.
25. Mr Hardwick also took a number of points about causation but the Recorder rejected them on the evidence. If the method of communication (including the documents) was unfair and misleading, as the Recorder held it to be, there are no other factors which can properly disturb his finding that it caused the claimants to buy the PPI. Arguments that they purchased it because they believed it was mandatory or that the additional cost was immaterial to them were matters for the trial judge to assess. They are not matters to be re-argued on an appeal.
26. For these reasons, I would dismiss the appeal.

Lord Justice Vos :

27. I agree.

Lord Justice Laws :

28. I also agree.