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Case law round-up

Although by far the most high-profile case this year to date is the Court of Appeal’s decision in Clark v In Focus, referred to above, there have been other decisions which will be of interest to financial advisers and their insurers which  we summarise below.

Saville & Saville v Central Capital Limited [2014] EWCA Civ 337

On 24 March 2014 the Court of Appeal dealt with a claim concerning payment protection insurance (“PPI”), which is of particular interest because of how unusual it is for such claims to get to Court; they rarely make it past the firm’s internal complaints process or the Financial Ombudsman Service.

Mr and Mrs Saville had approached Central Capital Limited (“CCL”), a credit broker, in 2006.  They wished to take out a loan in order to refinance their credit commitments and entered into a £54,500 loan with FirstPlus that was repayable over 25 years.  They also took out a PPI policy with CCL at a premium of £13,347.05, with a five-year term.

Mr and Mrs Saville subsequently claimed, among other things, that CCL had implied to them that the PPI policy was compulsory if they wanted the loan.   Mr and Mrs Saville also asserted that if they had wanted PPI cover at all then they would have wanted it for the entire 25-year term of the loan.  In 2013 their claim was dismissed by the County Court.

The Court of Appeal considered that the old Insurance: Conduct of Business (“ICOB”) rules in force at the time created a two-stage process for CCL in advising the Savilles.  First, CCL was obliged to enquire about the Savilles’ demands and needs, and to take reasonable steps to discover them.  Secondly, CCL needed to assess whether its recommendation was suitable in light of the Savilles’ demands and needs.

CCL accepted that it had failed adequately to enquire whether the policy met the Savilles’ demands and needs, but did not accept that they would not have bought the policy even if it had not failed in its duties.  However, the Court of Appeal concluded that if CCL had complied with ICOB then it would not have sold the policy to the Savilles and so their claim succeeded.

Whilst it raises no new points of law, this case reinforces the paramount importance of advisers complying with the conduct rules that are in force.  It also emphasises the key role of causation in any claim and the need to prove that a particular act of negligence led to the loss being claimed.

Asset Land Investment Plc & Banner-Eve v Financial Conduct Authority [2014] EWCA Civ 435

On 10 April 2014 the Court of Appeal handed down judgement in a case concerning a “land banking” scheme, upholding the decision at first instance in favour of the Financial Conduct Authority (“the FCA”).

At first instance, the Court found that Asset Land Investment Plc (“ALI”) had engaged in land banking by purchasing a site of land and dividing it into smaller individual plots, which it sold to individual investors.  Moreover, the Court found that ALI was engaged in an unauthorised collective investment scheme (“UCIS”) because ALI told the investors that it would have the site re-zoned or secure planning permission for it, and that after developers bought the site then each investor would receive a proportion of the proceeds of sale.  As ALI was not authorised by the FCA, this contravened section 235 Financial Services and Markets Act 2000.

On appeal the Court upheld the decision at first instance and held in particular that “arrangements” for the purposes of section 235(1) was to be given a very wide interpretation.  It therefore included agreements and understandings that did not have legal force.  Moreover, whether or not there was an “arrangement” did not depend on what ALI had intended to represent to the investors, but whether, objectively, a reasonable investor would understand that there was an “arrangement” under section 235(1) on the basis of what ALI told them.

It is clear from this decision that the Court will assist the FCA in bringing claims about land banking UCISs and give a wide interpretation to the relevant statutory provisions accordingly.  It also shows how the FCA is cracking down on such schemes.  Even the criminal Courts have now become involved, as on 14 February 2014 one individual involved in a UCIS, Benjamin Wilson, was sentenced to seven years in prison after pleading guilty to operating a UCIS and to three counts of dishonesty (18 months of the sentence related to his not being authorised by the FCA).

Barclays Bank Plc v Graiseley Properties Limited & Ors [2013] EWHC 3093 (Comm)

Readers with long memories may recall this case, which had been heralded as the “test case” for claims involving interest rate swaps, being discussed at last year’s Financial Services Seminar,.

However, on 8 April 2014 it was reported that the claim had settled.  Whilst details are confidential, it seems that Graiseley Properties agreed to drop the claim in return for Barclays restructuring the £70m that it owed for the swap.  It therefore seems that we will need to wait a little longer for a decision by the Courts in this area.

FOS Longstop

Finally, in its 2014/15 business plan the FCA has indicated that it is considering whether to place a 15-year longstop on complaints to the Financial Ombudsman Service (“the FOS”).  This would introduce a smilar longstop to that which operates in civil law.

If it is introduced, the longstop will no doubt be welcomed by financial advisers and their insurers; however, it is by no means certain that the position will change: it was also considered by the Financial Services Authority and rejected on at least two separate occasions, in 2007 and 2012.


For further information please contact Jonathan Hyde, Senior Associate on 0207 280 8927.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.