EWJ FEB 59 2025 web - Flipbook - Page 44
Kennedys Professions and
Financial Lines Brief: Latest
Decisions December 2024
A roundup of the latest court decisions touching on the following issues:
Application of the Civil Liability (Contribution) Act 1978 on third party claims, discretionary
commission arrangements, reliance under S.90A, Financial Services and Markets Act 2000,
and cost awards.
“an insurer does not inflict damage on anyone and that the
only damage it is capable of inflicting is in refusing to meet its
obligations under the policy of insurance”
The interaction between two Acts
Riedweg v HCC International Insurance Plc [11.11.24].
The claimant (C) contracted to purchase a property
valued by Goldplaza Berkeley Square Ltd (Goldplaza)
in 2016. C contended that the property was negligently overvalued, rendering her unable to complete
on the purchase, or assign the sale contract. C was
sued by the seller of the property, but agreed terms of
settlement giving rise to a liability. Goldplaza entered
into voluntary liquidation in 2021. C accordingly pursued a claim to recover the liability sum (£2.2 million)
from Goldplaza’s professional indemnity insurers (H),
by operation of the Third Parties (Rights Against
Insurers) Act 2010 (the 2010 Act).
Authors: Ciara Burrows, Paul Lowe
Related item: The interaction between the Third
Parties (Rights Against Insurers) Act 2010 and the
Civil Liability (Contribution) Act 1978
Lenders & credit brokers liable in motor finance
commission cases
Johnson v FirstRand Bank Limited, Wrench v FirstRand
Bank Limited and Hopcroft v Close Brothers [25.10.24]
In all three related cases, the claimants entered into
credit agreements arranged by motor dealerships and
provided by the defendants, to purchase vehicles. In
each case, the dealer made a profit from the sale and
received a commission from the lender, which was not
disclosed to the consumer claimants. The claimants
brought proceedings against the lenders, arguing that
the dealers were receiving “secret commissions” from
banks without their knowledge and that they were not
in a position to give fully informed consent. They argued that this was in breach of the dealers’ duty to
provide them with information, advice or recommendation on an impartial and disinterested basis.
H sought the court’s permission to join C’s solicitors
(F) and the claimant’s advisor (Ms Johns) in the underlying transaction, pursuant to the Civil Liability
(Contribution) Act 1978 (the 1978 Act). In the context
of this application, the court was asked to decide
whether the damage allegedly caused by F and Ms
Johns was the “same damage” for which insurers, H,
were potentially liable to C.
Dismissing H’s application, the judge found that H
was not potentially liable for the “same damage” for
which F may be liable pursuant to the 1978 Act. The
judge also held that the 2010 Act merely provides a
route for claimants to pursue insurers as it relates to
the potential liability of an insured to a third party.
The Court of Appeal held that the dealers, acting as
sellers as well as credit brokers, owed the claimants disinterested and fiduciary duties. In order for the
claimants to have given informed consent, the Judges
held that the consumers would have needed to have
been informed about the commission paid by the
lenders and how it was calculated. The commissions
lenders paid to the dealerships were therefore held as
unlawful, in what could be a landmark ruling. The
lenders sought permission to appeal to the Supreme
Court on an expedited basis which has since been
granted.
The judge concluded the analysis, commenting “The
issue was argued before me as a pure point of law, and it was not suggested that the analysis set out above might depend upon the determination of any facts which are in dispute”. The issue as to whether
H may, if ordered to make payment to the claimant,
then be subrogated to the claimant’s rights was not
pleaded and did not arise in the current facts. Criticism was made of H’s failure to engage with existing
authorities, including the observations of Lord Hope
in Royal Brompton Hospital NHS Trust v Hammond
[2002] .
The impact of this decision could be felt beyond the
motor finance market. The principles outlined in the
judgment may have application more broadly to any
goods and services purchased via credit brokers. Such
might include, for example, a range of household
goods, holidays, mortgages and insurance products.
In any arrangement where commission is paid, it
must be fully disclosed.
This case is significant in providing guidance as to the
interaction between the 1978 Act and the 2010 Act.
Of particular significance are the judge’s findings that
an insurer cannot in the situation described above,
rely upon the 1978 Act for the purpose of bringing
third party claims. In reaching that conclusion, the
judge expressed the view that:
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