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IN THE COVENTRY COUNTY COURT

Case No: 1IQ57522

The Law Courts

140 Much Park Street

Coventry

West Midlands

CV1 2SN

23rd March 2012

BEFORE:

HIS HONOUR JUDGE GREGORY

B E T W E E N :

Mr Graham Barnes

Claimant

- and –

Black Horse Limited

Defendant

APPROVED TRANSCRIPT OF JUDGMENT

Transcript provided by:

Posib, Y Gilfach, Ffordd y Pentre, Nercwys, Flintshire, CH7 4EL

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Tel: 01352 757273

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APPEARANCES:

For the Claimant: Miss Niamh Katrina O'Brien

Lamb Chambers, Elm Court, Temple, London EC4Y 7AS

Instructed by Wixted & Co Limited trading as "Claims for you", 57, Putney Bridge Road, London, SW18 1NP.

For the Defendant: Mr James William Ross

Gough Square Chambers, 6-7 Gough Square,

London EC4A 3DE

Instructed by SCM Solicitors, Holbrook House,

116 Cockfosters Road, Barnet, Hertfordshire. EN4 0DY

JUDGMENT

23rd March 2012

HIS HONOUR JUDGE GREGORY:

1. On 11th June 2006, Mr Graham Barnes signed a contract with Black Horse Limited for a fixed sum loan in order to finance the purchase of a new (albeit second-hand) motorcar; a Vauxhall Signum diesel hatchback, Registration Number FP53 NDG, it was then about two and three quarter years old. The document which he signed is to be found at page 70 of the trial bundle. Although he entered into one loan, it had two purposes: firstly, to finance the purchase of the motorcar for just over £9,000 and, secondly, to finance the purchase of Payment Protection Insurance ('PPI') for just over £1,000. The total amount of credit was £10,114.82, as is apparent from that page.
2. On 20th May 2011, Mr Barnes issued proceedings against Black Horse Limited seeking a variety of types of relief, but, in essence, financial relief in the sum of about £1,500 upon the basis that he had been mis-sold the PPI, the loan for which was embodied in the agreement to which I have just referred. The insurance agreement itself was provided by another limited company. The role of Black Horse Limited was to make one loan, as a consequence of which Mr Barnes was able to pay the supplier of the motorcar (namely Motor Nation, part of Bristol Street Motors Limited) and was also enabled to pay the premium (because it was a single premium) for the PPI. Once that premium had been paid, both Motor Nation and Black Horse received back from the insurers some commission on the £1,000 premium, which they shared between them.
3. This case has come before me today to resolve liability and quantum. The claim is pleaded in a statement of case, which is the amended Particulars of Claim; it is no less than twenty-three pages long and runs to sixty-five paragraphs. There are, in effect, three elements to the case. First, it is alleged that Mr Barnes was induced to enter into this contract by reason of a negligent misrepresentation and, had he not been so induced, the only contract into which he would have entered with Black Horse would have been a loan of £9,000 for the car. Therefore, his loss is the liability which he incurred for the other element of the loan to pay for the PPI and the interest he has paid upon it, a shade under £1,500. Secondly, it is alleged that the Defendant is liable to him by reason of a variety of breaches of Rules known as the Insurance Conduct of Business Rules (this is all pleaded from paragraph 26 of the amended Particulars of Claim onwards at page 13). It is said that the sale of the PPI was governed by the ICOB Rules; that there were breaches of Rules 4.3.1(1); 4.3.2; 4.3.6(2) and 4.3.7, as particularised and that those breaches give rise to a cause of action pursuant to Section 150 of the Financial Services and Markets Act 2000. As a consequence of those breaches, he entered into this agreement for a larger loan than he otherwise would have entered into and so he can recover the cost to him of it. Thirdly, it is said that there was an unfair relationship between Mr Barnes and the Defendant within the meaning of Section 140C(4)(c) of the Consumer Credit Act 1974 and the relief, which he ought to be granted by reason of that unfair relationship, is an Order requiring reimbursement of the monies that he has paid that he should not have paid, and it amounts to the same thing as the first two claims.
4. The first matter which I have to consider is the nature of the alleged misrepresentation in this case. I also have to consider whether, when Mr Barnes entered into this agreement with Black Horse Limited, that company was utilising Motor Nation as its agent so as to make Black Horse Limited (the Defendant) responsible for the conduct of Motor Nation in the manner in which it dealt with Mr Barnes in the course of this particular piece of business.
5. So, let me turn to the nature of the misrepresentation that is alleged. In short, Mr Barnes' evidence to me was this: he visited the premises of Motor Nation on one occasion only, on 11th June 2006, to test drive and view a car which he had previously seen on the company's website. Having done so, he decided he wanted to buy it; the price was nine thousand pounds odd. Somebody (he cannot say who) on behalf of Motor Nation, prepared the contract for him (which is at page 70 of the bundle) and showed him where to sign it. He signed it in three different places. Reading up from the bottom, Mr Barnes signed it in the box in the bottom right hand corner because that was providing instructions to his bank to make the monthly repayments, which were going to continue at the rate of £230 over a period of five years (sixty months). He signed it twice above that; the top signature he signed to acknowledge that he was legally binding himself to a credit agreement regulated by the Consumer Credit Act. Beneath that box, there is another box which reads as follows:

"I wish to purchase the following insurance (tick relevant box)…"

The words "Payment Protection" appear, and the box to the right of that is ticked. Mr Barnes said he did not place that tick in that box, he does not know who did but it had nothing to do with him. Underneath that statement and tick, appears the following:

"I understand that I am purchasing the product ticked above on credit provided by you and that the terms relating to the credit for the products can be found in each of the terms of this agreement. Your signature…"

Mr Barnes has signed that. Underneath that, is a box headed

"Important: Use of Your Information"

and underneath that, the heading

"Payment Protection Plan Type: Bronze; interest payable: £419.43; total cost of payment protection plan: £1462.07."

Then, to the left, on the same page, under "Key Financial Information", there is

"Amount of credit: £10,114; duration of the agreement: 60 months; total amount payable: £14,079."

Then, under

"Other financial information", "Cash price of goods: £9,071;

cash price of Payment Protection Plan (optional) [emphasis added] £1,043; total cash price £1,114."

So, all of that information was on this document when Mr Barnes signed it.

6. In his evidence, Mr Barnes stated that he did not know that he was entering into a contract which made any reference to a Payment Protection Plan or insurance of that nature. When he was cross examined, Mr Barnes was asked whether he had read the agreement and he his evidence was:

"Obviously I read it",

then he said:

"Well, I just glanced at it; I didn't realise what it was I was signing for; I didn't realise that the Payment Protection was optional; I've not had this document."

Mr Barnes told me that he was not given a copy of this document when he left the dealers; of course, he should have had a copy and the provisions of the Consumer Credit Act and the Regulations thereunder require that he should be provided with another through the post, but Mr Barnes said that no document was ever sent to him in the post.

7. The evidence of Mr Steve Pritchard, on behalf of the Defendant, was that he has no specific knowledge of this particular transaction, but it is the practice of the Defendant to send out, from Head Office, a copy of the agreement, together with copies of any pertinent and relevant insurance, and the bundle contains the agreement at pages 70 and 71, and the Payment Protection Insurance documents from pages 72 to 74.
8. In his witness statement, Mr Barnes explains how it was that he came to embark upon this litigation, which is, of course, all about the miss-selling of Payment Protection Insurance, when his case is that, from the outset, he had no idea that he had entered into a contract for Payment Protection Insurance. His witness statement is to be found at page 54 of the bundle and, at paragraph 6, he says as follows:

"It was a couple of months before I contacted Wixted & Co in August 2010 [they are his solicitors in this case] that I discovered I had been sold a PPI policy with this loan. We were struggling financially and I was looking through the paperwork to see if there was any way my payments could be reduced. I noticed I had a Payment Protection Insurance Policy and telephoned in order to see whether I could make a claim on the same. I was told I was self-employed and so I couldn't."

He says that, during his meeting with Motor Nation, he had made them fully aware that he was self-employed.

9. Now, if it were the case that Mr Barnes had not been provided with a copy of the contract, either on the day he signed it or subsequently through the post, it is a little difficult to understand what paperwork he was looking through which informed him that he had Payment Protection Insurance. What he told me in his evidence was that the paperwork to which he is referring consisted of statements of account, which he received from time-to-time. He has not produced or disclosed any such statements of account. There is a statement of account to be found at page 160 of the bundle, dated 10th June 2010, so it would actually fit in with the date "…a couple of months before…" he contacted Wixted & Co, but nowhere upon this document is there anything other than information about how much he was paying under the agreement and what the balance was. There is nothing here whatsoever to say that he had been sold a Payment Protection Insurance Policy. Nowhere in the witness statement of Mr Barnes is there any suggestion that he was not provided with the first and second copies of the agreement, as he ought to have been, and, despite the sixty-five paragraphs of the Particulars of Claim, nowhere does any such averment appear. It would, of course, have been extremely relevant to the allegation of an unfair relationship because one of the matters that has to be taken into account is the behaviour of the creditor when one is considering that issue, and a creditor who so seriously breaches his obligations as not to provide the debtor with copies of the agreement, might have considerable difficulty over having failed to do so.
10. In those circumstances, I do not accept Mr Barnes' evidence to the effect that he never had a copy of the agreement. It is quite plain that he never disclosed a copy of the agreement because the only copy of which I am aware is the copy at page 70, which is described, on its face, as the "Finance company's copy." It is very difficult to make sense of Mr Barnes' evidence with regard to having read the agreement and not knowing what was in it insofar as signing up for Payment Protection Insurance is concerned. He has signed a box specifically in relation to that matter and it is impossible to miss, when one looks at it, what he has signed for. He was going to pay just over £9,000 for the car and he was going to borrow the full price of the car, yet the loan which he took to do so was £10,000, which begs the blindingly obvious question of what was the other £1,000 for? Mr Barnes is a mature man who has entered into Hire urchase Agreements in the past and runs his own business. It is frankly inconceivable, in my judgment, that he would take a loan for £1,000 more than the cost of the car that he was acquiring without having any idea what that extra £1,000 was for.
11. The Payment Protection Plan for which he signed up for was of a type referred to as "Bronze"; there were three types: Gold, Silver and Bronze. The Bronze policy provided him with cover in respect of critical illness or death; it did not cover him for loss of earnings and it could not because he was self-employed, so he was actually entering into a contract to provide for him benefits of the type from which he could benefit and this, because he was self-employed, was the suitable Payment Protection Policy for him to acquire. The suggestion has to be that, whomever dealt with Mr Barnes at Motor Nation, signed him up to a commitment for Payment Protection, which was the right type of Payment Protection, but did so without any reference to Mr Barnes whatsoever and, in doing so, took the risk that, when Mr Barnes looked at this document and was asked to sign it, he would very much wish to query what on earth was going on when they were attempting to sign him up for a benefit, which he had not requested and about which he had not been told and when they were trying to commit him to a larger loan than the one he wished to take. It is not quite a fanciful suggestion, but it certainly stretches credulity.
12. There is another difficulty with the evidence of Mr Barnes and it is this: he insisted in his evidence that he only went to the premises of Motor Nation once and that was on the 11th June, but the documentation disclosed by Black Horse shows that Motor Nation were in contact with Black Horse from 27th May onwards in relation to the sale of this particular motorcar to Mr Barnes. When one looks from page 148 (backwards through the bundle because it is in reverse chronological order) one can see a great deal of activity upon this proposed sale starting on 27th May. It involved decisions being made with regard to whether Black Horse would accept the risk (which was done apparently on a manager's decision) and it shows further communications with Motor Nation in relation to the goods, anticipated delivery date and matters such as that. There is even an entry for 30th May:

"Review date set for 22/08/06; contact customer to confirm when

documents will be received."

The submission on behalf of Black Horse is that this documentation should enable the Court to infer that Mr Barnes had been to Motor Nation on an occasion before the 11th June, and then gone back on 11th June when everything had been set up for him to have the motorcar. The submission on behalf of Mr Barnes is that all it establishes is that there had been some contact between him and Motor Nation, not that Mr Barnes was able to tell me any more about that apart from the fact that he had been in touch with them and said that he would like to look at this car, and they had said they would get it from another of their dealerships. In my judgment, the obvious inference is that Mr Barnes had been to Motor Nation on an earlier occasion, given them all the information that they required to progress this arrangement, they then did so with Black Horse so that, when he went in on 11th June, he was able to sign the paperwork and take away the motorcar, which is what happened.

13. So I do not accept Mr Barnes' evidence that the only occasion upon which he went to Motor Nation was on 11th June and I do not accept his evidence that nobody ever said anything to him about Payment Protection Insurance. I am entirely satisfied that, had he been presented with this document at page 70, completed in a manner about which he had not been told and to which he had given no agreement and which he then proceeded to read, he would not then simply have signed it. He would have, in my judgment, queried what on earth was going on and nothing of that nature happened and the reason, in my judgment, that he signed this document, in three different places, on that particular day, was that it reflected precisely what had been agreed between him and Motor Nation and been prepared for him for the day that he went to collect the motorcar. I find as a fact that no misrepresentation was made to him; that he entered into the contract that he intended to enter into knowing precisely what he was doing.
14. The next issue to which I have to turn is this: whether or not Motor Nation acted as the agent of the Defendant when this contract was executed. I have been reminded of the decision in Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 and I have been referred to the speech in particular of Lord Morris and his citation from Mercantile Credit v Hamblin [1965] 2 QB 242, 269 as follows:

"There is no rule of law that in a Hire Purchase transaction the dealer never is or always is acting as agent for the finance company or as agent for the customer. In a typical Hire Purchase transaction, the dealer is a party in his own right, selling his car to the finance company and he is acting primarily on his own behalf and not as general agent for either of the other two parties. There is no need to attribute to an agency in order to account for his participation in the

transaction. Nevertheless, the dealer is, to some extent, an intermediary between the customer and the finance company, and he may well have in a particular case some ad hoc agencies to do particular things on behalf of one or the other or, it may be, both of those two parties."

15. Now, in the case with which I am dealing, these points were made to support the assertion of agency. First, Motor Nation had the appropriate stationery to deal with customers who required loans and to provide those loans from Black Horse Limited. Secondly, there was a contractual arrangement between Motor Nation and Black Horse Limited by which Motor Nation promised to give Black Horse Limited first refusal for any customer who might need finance. Thirdly, somewhere in the premises of Motor Nation there were things like cardboard signs advertising the services of Black Horse Limited. Fourthly, there was a commission sharing arrangement between Black Horse Limited and Motor Nation. All of those matters seem to me to be no more than a reflection of a commercial arrangement between these two concerned and certainly do not of themselves clothe Motor Nation with the status of agent and there is no suggestion in this case that Black Horse did anything to hold out Motor Nation as its agent so as to create any ostensible agency or apparent agency.
16. In making those observations, I am encouraged by the comments of Lord Moss in Branwhite where he said this:

"On the facts of this case, I do not consider that the mere possession by way of the Respondent's forms was enough to constitute agency."

And Lord Upjohn at page 577S stated as follows:

"It is argued that in having possession of a finance company's forms and the ability to settle and fill in all these essential figures, he showed that he was acting in the transaction generally as the agent of the finance company but I do not myself think that this is a realistic approach. The motor dealer must have, if he is to be successful, one or more finance companies willing to enter into bone fide Hire Purchase agreements with purchasers, many of whom cannot pay the cash

price. They must therefore supply him with forms and tell him, as a matter of common sense, the terms upon which they are prepared to do business."

He goes on to say:

"I cannot see that this makes him an agent of the finance company. In any event, all he is doing is to fill in a document which he submits on behalf, as I think clear, of the would be hirer which contains a proposal for Hire Purchase."

17. Now, there is, it is said, a distinction between the two in that in the Branwhite case the facts concern the first time the dealer acted in that manner, whereas this is an established relationship. I cannot see that it makes any difference whether it was the first or fiftieth occasion upon which such a transaction had been carried out; either there was in law an established relationship of agency or there was not.
18. But the other point that is relied upon could potentially, it seems to me, have considerable weight. The document at page 70 is signed apparently on behalf of the finance company; the signature appears to say "S A Prestige". The arrangement between Black Horse Limited and Motor Nation required Motor Nation, on the day that the contract was to be entered into, was to fax it to them, and that is to be found at page 75 of the bundle. This is part of the so called "dealer pack" and it gives Motor Nation commentary instructions upon what they are to do if they want to get paid for the car and it includes faxing or posting to Black Horse the signed and correctly completed legal agreement. In the course of sitting in the County Courts, I have had to deal with many cases involving consideration of documents of this nature in cases involving Hire Purchase and alleged miss-selling of Payment Protection Insurance, and I know, from that experience, that, as a general rule, the document signed by the debtor is sent to the finance company, the finance company then appends a signature to it and in that way the contract comes into being. I am asked to conclude in this case that the signature, "S A Prestige", was appended to page 70 at the premises of Motor Nation by an employee of Motor Nation and if the effect of doing so was to commit Black Horse Limited to his agreement, then that must have been done on behalf of Black Horse and can only have been done if the person doing it, through his or her employment with Motor Nation, was acting with the authority of Black Horse Limited because Motor Nation was its agent for the purposes of entering into a contract.
19. The difficulty is that I have no evidence before me to establish that this document was signed on behalf of Black Horse Limited by anybody at the premises of Motor Nation; Mr Barnes has said no such thing. Mr Pritchard was asked whether page 70 is the document that was faxed to Black Horse Limited and he said that it was. Well, of course it was, but I have no idea in this case whether it already had the signature on behalf of the finance company upon it or whether that was added afterwards. What I have before me is only a photocopy of a document after it had been signed by both parties. What has not been disclosed is Mr Barnes' own copy of this agreement, that is to say the one he took away with him and I am satisfied that he did take one away with him because I am entirely satisfied that, had he not taken one away with him, it is a matter which would have found its way into the remarkably prolix Particulars of Claim and in his witness statement and would not have become apparent only during the course of cross-examination in this hearing. Had that document been produced and had it been signed, I would have been able to find as a fact that it was signed in the premises of Motor Nation, but it has not been. As I say, all I have is the finance company's copy.
20. I propose to be guided by the decision of Branwhite v Worcester Works Finance Ltd and I should say that all the findings of fact that I make are upon the balance of probabilities. I am satisfied and find, on the balance of probabilities, that Motor Nation did not act as the agent of the Defendant finance company, but were acting upon their own behalf as an intermediary just as described by their Lordships. Even had there been a misrepresentation, then that would have disposed of the cause of action in misrepresentation. It also disposes of the claim in relation to a breach of the ICOB Rules because it is common ground that those rules only apply to the insurance intermediary in contact with the customer (that is 1.2.3(2)) and, in my judgment, Black Horse Limited was not an insurance intermediary in contact with the company. The position might have been different had Black Horse been using Motor Nation as its agent in order to fulfil its obligations as an intermediary in contact with the customer, but since it was not, the insurance intermediary in contact with the company was Motor Nation, an entirely separate legal entity and not acting as the agent, in my judgment, of Black Horse Limited.
21. I am required to consider whether there was an unfair relationship in this case, that requires me to consider all of the circumstances and specifically I am looking at Section 140A(1) of the Consumer Credit Act 1974 as follows:

"…(a) any of the terms of the agreement or of any related agreement;

(b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement;

(c) any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement)."

22. Well, the terms of the agreement were that Mr Barnes would be provided with a form of insurance cover for the term of the loan, and the cost of that was £1,000. It may or may not have been possible to get that more cheaply but there is no evidence about that. There is no criticism being raised of the manner in which the creditor "…exercised or enforced any of his rights…"; a few default notices were sent, but, in the main, Mr Barnes simply made the payments due under the agreement. Nothing of which any criticism can be laid at the door of Black Horse Limited was done by or on behalf of it. Had Mr Barnes been deceived into entering into an agreement to which he had not properly consented because he had been conned into signing for Payment Protection Insurance when he had no idea that was what he was doing, that would no doubt have been a relevant consideration, but I am satisfied that no such thing happened as I have already set out. Commission was payable, that is a matter of which I am aware. I think the case of Harrison v. Black Horse Limited^[1] through the decision of His Honour Judge Waksman QC sitting as a High Court Judge, makes it plain that that is not a matter of any significance in deciding that there was an unfair relationship and the Court of Appeal in Harrison^[2] I think it made it fairly plain that nor is the fact that the product sold was expensive, if indeed it was. I do not propose to deal with the ICOB breaches or unfair relationship in any greater deal than that because the findings that I have already made dispose of each of these matters adequately.
23. So, in those circumstances, the claim must fail and will be dismissed.

[Discussions on costs ensued]

24. I am now required to deal with the issue of costs. This claim has failed and there is no reason why costs should not follow the event and the contrary has not been argued by Miss O'Brien on behalf of the Claimant, although it should be said that Miss O'Brien has presented this claim extremely well and argued all the points that could be argued in favour of Mr Barnes extremely well. I have carried out a summary assessment of the Defendant's costs based upon their schedule; their schedule was £6,880.30. I have had to reduce it to £4,582.34 to take account of the appropriate fee for counsel and the fact that the hourly rate claimed for a Grade B fee earner was far too high. Even at just under £7,000, this schedule pales into insignificance in comparison to the schedule served on behalf of the Claimant. That schedule (bearing in mind that this is a case conducted upon the basis of a Conditional Fee Arrangement) came out at £29,876.18
25. The value of this claim was just about £1,500 so this Court has been engaged on a number of occasions to deal with litigation which fell well within the small claims limit, but was ascribed to the fast track by reason of the apparent complexity of it, a complexity wholly created by the prolixity of the Particulars of Claim, to which I have already made reference, no less than sixty-five paragraphs. The schedule of costs is based upon a fee earner charging out at £270 per hour, no less than £65 or so above the rate payable in the Coventry County Court and it has always been known that this was a case that would be tried in the Coventry County Court. I note that counsel's brief fee today has been over charged at £640, not the fixed fee and I note that an allocation hearing included a brief fee for counsel of £655, substantially more than the fee payable upon the final hearing given the value of the claim. But, what is most startling and what I find deeply disturbing, is the fact that this schedule includes a claim for payment of an 'after the event' insurance premium of £9,187.50. I struggle to conceive of the circumstances in which a solicitor or counsel. properly advising a client with a claim for £1,500. would advise that client to incur a liability of in excess of £9,000 when the claim might fail.

[Interjection by Miss O'Brien who confirms the exact details of the Conditional Fee Agreement]

26. I find the whole arrangement extremely shady because what Miss O'Brien on behalf of the Claimant is effectively telling me is "If we win, we want an after the event insurance premium of over £9,000 but, if we lose, the client will not have to pay it" and the certificate on the bottom of this statement of costs is as follows:

"The costs estimated do not exceed the costs which the Claimant is liable to pay in respect of the work which this estimate covers."

So, in reality, I would have been asked had the claim succeeded to Order payment of over £9,000, which is not going to be required I am told because the claim has failed. It begs the question of for whose benefit this litigation has been run. It has seemingly not been for the benefit of Mr Barnes and it is a bill of costs drawn like this that strikes me as precisely the sort of behaviour which has caused the Court of Appeal and others to be so concerned about the disrepute into which the law has fallen as a consequence of the problems over costs and the reforms that are to be brought in by Jackson LJ. It is, quite frankly, outrageous that a claim of £1,500 should produce a bill of costs of nearly £30,000, howsoever it might be justified.

End of judgment