The Supreme Court has ruled that a claim over the misselling of a payment protection insurance policy was not time-barred as the commercial lender failed to disclose that it was charging a ‘substantial commission’ on the policy.

In Canada Square Operations Ltd v Potter, Lord Reed, Lord Hodge, Lord Kitchin, Lord Sales, and Lord Lloyd-Jones unanimously dismissed the lender’s appeal.

The customer, Beverley Potter, entered into a loan agreement with Canada Square Operations, then Egg Banking plc, for a cash amount of £16,953 and a PPI premium of £3,834.24. The premium related to Potter’s purchase of a PPI policy.

The 54-page judgment said over 95% of the amount described in the agreement as the PPI premium constituted Canada Square’s commission. Only £182.50 was paid to the insurer and Potter was not informed that Canada Square would receive or retain the commission.

She completed the payments under the agreement, which came to an early end in March 2010.

In April 2018, Potter complained she had been missold PPI. She received compensation in accordance with the redress scheme established by the Financial Conduct Authority for the misselling of PPI. In November 2018, she consulted solicitors who advised her the payments ‘were likely to have included substantial commission’.

The county court found in Potter’s favour. Canada Square unsuccessfully appealed to the High Court and the Court of Appeal.

The Supreme Court referred to Canada Square as a test case, ‘there being said to be approximately 26,000 active claims of a similar nature’.

The judgment said: ‘Although the defendant deliberately decided not to disclose the commission, and must have been aware that there was a risk that by doing so it was making its relationship with the claimant unfair within the meaning of section 140A of the 1974 [Credit] Act, it has not been shown that it knew or intended that the nondisclosure would have that effect.

‘Accordingly, although its failure to disclose the commission gave rise to the claimant’s right of action, and can therefore be regarded as a breach of duty for the purposes of section 32(2) [of the Limitation Act 1980], it cannot be shown that the defendant knew that it was committing a breach of duty or intended to do so.’

Although Lord Reed said he found himself in ‘respectful disagreement with the reasoning of the Court of Appeal, I conclude that it was correct’ to find Canada Square was ‘deprived of a limitation defence’.

He added: ‘It follows that the claim is not time-barred and that the defendant’s appeal should be dismissed.’

 

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