Goodman & Anor v Central Capital Ltd

The Claim, by way of a recently Amended Particulars of Claim, is for damages in relation to a policy of payment protection insurance (“the PPI Policy”) which the Claimants took out in connection with a loan agreement with Picture Financial Services Limited (“Picture”) dated 23 January 2007 and in the total sum of £63,724.50 (“the Loan Agreement”).

The Particulars of Claim raise 2 primary allegations against Central Capital namely that negligently and/or in breach of duty and/or in breach of statutory duty:

The Claimants rely upon:

Central Capital, in a Defence dated 19 April 2011, denies the Claimants’ claim and relies upon:

The Claimants, like many other young couples, sadly found themselves saddled with increasing debts after buying their family home in 2004 for £144,950 and with Mrs Goodman taking a substantial pay cut upon returning to part time work following her maternity leave. Over reliance on credit cards led them to taking out a loan of £15,000 from Lloyds Bank to pay off their debts at a cost of £312 per month between 2005 and 2010. In 2006, they had to take out a second loan of £25,000 with a second charge on their home with GE Capital. By the end of 2006, their financial plight was increasingly dire.

On 27^th November 2006, Mrs Goodman contacted Central Capital whose broker (intermediary), Bridget Ghitaka, calculated that their debts were £48,000 and they were paying £892 per month on servicing everything. She offered a 25 year loan of £48,000 at £574 per month inclusive of additional five years £12,000 PPI cover as a solution. Mrs Goodman, however, did not take up this offer.

On 16^th January 2007, Mrs Goodman telephoned Central Capital again. This time Stephen Tysick was the broker (intermediary). Like Bridget Ghitaka, Mr Tysick followed a tightly scripted process of fact finding and recommendations that had been approved by Central Capital’s regulator, the FSA. This time, the suggested offer was with Paragon. He offered a 25 year loan of £49,500 at £500.44 per month inclusive of additional £13,765.95 five years PPI. At the conclusion he sent out the paperwork for signing.

On 22^nd January 2007, Steven Tysick telephoned Mr Goodman who took the call whilst in his car with his young son. He explained that Paragon were unwilling to make the suggested offer to his wife because of his employer’s reference about his earnings. This time the suggested offer was with Picture the loan for 25 year loan of £50,000 at £598.40 inclusive of an additional £12,724.50 five years PPI. At the conclusion he sent out the paperwork for signing by both husband and wife.

The essence of the allegation is that Central Capital failed to advise that the PPI was optional and otherwise failed to take reasonable steps to communicate information about the PPI Policy to the Claimants in a way that was clear, fair and not misleading.

The provisions of ICOB and Central Capital’s obligations to comply with the same are common ground between the parties. The position is that from 14 January 2005 (and as a consequence of the Insurance Mediation Directive (Miscellaneous Amendments) Regulations 2003 (SI 2003/1473) and the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2003 (SI 2003/1476)) any person undertaking insurance mediation activities was required (i) to be authorised by the FSA and to meet the regulatory requirements of the FSA Handbook; and in particular (ii) to comply with the rules of the FSA’s Insurance: Conduct of Business Sourcebook (“ICOB”).

ICOB have (since January 2008) been superseded by the New Insurance: Conduct of Business Sourcebook (“ICOBS”). However ICOB remain the relevant rules for the purposes of this claim against Central Capital.

A breach of a rule in ICOB (or ICOBs) gives a private person a right to claim damages under s150 of the Financial Services & Markets Act 2000 (“FSMA 2000”).

ICOB 2.2.3R (under the subheading “Clear, fair and not misleading”) provided:

A number of miscellaneous points are made in relation to this alleged breach both in the Particulars of Claim and the Claimants’ statements.

The Claimants have produced undated lengthy witness statements about these events over 5 years ago. According to their costs budget, their lawyers spent 16 hours drafting them at a cost of over £3,000.

The Defendant submits that the allegations to the effect that PPI was a compulsory product stand to be judged objectively in the light of the accurate and contemporaneous sales calls and the loan documentation, not the subjective rewriting of history by unreliable witnesses.

The guidance given in the extra-judicial writing of the late Lord Bingham of Cornhill approved by the courts is apposite. In “The Judge as Juror: The Judicial Determination of Factual Issues” published in “The Business of Judging”, Oxford 2000, reprinted from Current Legal Problems, vol 38, 1985 p 1-27, he wrote:

“. . . Faced with a conflict of evidence on an issue substantially affecting the outcome of an action, often knowing that a decision this way or that will have momentous consequences on the parties' lives or fortunes, how can and should the judge set about his task of resolving it ? How is he to resolve which witness is honest and which dishonest, which reliable and which unreliable? . . .

The normal first step in resolving issues of primary fact is, I feel sure, to add to what is common ground between the parties (which the pleadings in the action should have identified, but often do not) such facts as are shown to be incontrovertible. In many cases, letters or minutes written well before there was any breath of dispute between the parties may throw a very clear light on their knowledge and intentions at a particular time. In other cases, evidence of tyre marks, debris or where vehicles ended up may be crucial. To attach importance to matters such as these, which are independent of human recollection, is so obvious and standard a practice, and in some cases so inevitable, that no prolonged discussion is called for. It is nonetheless worth bearing in mind, when vexatious conflicts of oral testimony arise, that these fall to be judged against the background not only of what the parties agree to have happened but also of what plainly did happen, even though the parties do not agree.

The most compendious statement known to me of the judicial process involved in assessing the credibility of an oral witness is to be found in the dissenting speech of Lord Pearce in the House of Lords in Onassis v Vergottis [1968] 2 Lloyds Rep 403 at p 431. In this he touches on so many of the matters which I wish to mention that I may perhaps be forgiven for citing the relevant passage in full:

''Credibility' involves wider problems than mere 'demeanour' which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person telling something less than the truth on this issue, or though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by over much discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.”

Every judge is familiar with cases in which the conflict between the accounts of different witnesses is so gross as to be inexplicable save on the basis that one or some of the witnesses are deliberately giving evidence which they know to be untrue . . . . more often dishonest evidence is likely to be prompted by the hope of gain, the desire to avert blame or criticism, or misplaced loyalty to one or other of the parties. The main tests needed to determine whether a witness is lying or not are, I think, the following, although their relative importance will vary widely form case to case:

(1)

the consistency of the witness's evidence with what is agreed, or clearly shown by other evidence, to have occurred;

(2)

the internal consistency of the witness's evidence;

(3)

consistency with what the witness has said or deposed on other occasions;

(4)

the credit of the witness in relation to matters not germane to the litigation;

(5)

the demeanour of the witness.

The first three of these tests may in general be regarded as giving a useful pointer to where the truth lies. If a witness's evidence conflicts with what is clearly shown to have occurred, or is internally self-contradictory, or conflicts with what the witness has previously said, it may usually be regarded as suspect. It may only be unreliable, and not dishonest, but the nature of the case may effectively rule out that possibility.

The fourth test is perhaps more arguable. . . .”

The following guidance of Lord Goff in Grace Shipping v. Sharp & Co [1987] 1 Lloyd’s Law Rep. 207 at 215-6 is also helpful:

“And it is not to be forgotten that, in the present case, the Judge was faced with the task of assessing the evidence of witnesses about telephone conversations which had taken place over five years before. In such a case, memories may very well be unreliable; and it is of crucial importance for the Judge to have regard to the contemporary documents and to the overall probabilities. In this connection, their Lordships wish to endorse a passage from a judgment of one of their number in Armagas Ltd v. Mundogas S.A. (The Ocean Frost), [1985] 1 Lloyd’s Rep. 1, when he said at p. 57:−

“Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.” [emphases added].

That observation is, in their Lordships’ opinion, equally apposite in a case where the evidence of the witnesses is likely to be unreliable; and it is to be remembered that in commercial cases, such as the present, there is usually a substantial body of contemporary documentary evidence.”

In that context he was impressed by a witness described in the following terms.

“Although like the other main witnesses his evidence was a mixture of reconstruction and original recollection, he took considerable trouble to distinguish precisely between the two, to an extent which I found convincing and reliable.”

That is so important, and so infrequently done.”

This approach to fact finding was amplified recently by Lady Justice Arden in the Court of Appeal in Wetton (as Liquidator of Mumtaz Properties) v. Ahmed and others [2011] EWCA Civ. 610, in paragraphs 11, 12 & 14:

In this case, the court is fortunate to have the accurate and contemporaneous transcripts of the calls and the contemporaneous documentation and they cast grave doubts upon the reliability of the Claimants as witnesses. Where those witness statements are at variance, the court will inevitably chose the contemporaneous evidence over them. Whether it is the fault of the Claimants or their lawyers for the inaccurate variances can be difficult to assess. Witness statements are expected to be true and accurate (CPR32) and in the ‘witnesses own words’ (32PD.18). It is the duty of the witness to sign it off thus claiming responsibility for it in his confirmatory evidence in chief under oath.

The Defendant points to a number of instances where it was demonstrably communicated to the Claimants that PPI was optional.

First, Mr. Tysick their telephone sales representative, in the course of the sales call on 16 January 2007, expressly introduced PPI as an “...optional...” insurance product and it is clear from Mrs. Goodman’s questions both to Ms Githaka and Mr. Tysick that she understood that this was an additional and optional product.

Second, the “Information about our recommendation” document which the Claimants received from Mr. Tysick immediately following the calls both on 16 January 2007 and 22 January 2007 stated unequivocally:

Third, the fact that PPI was optional was made entirely clear both (1) in the copy credit agreement from Paragon Personal Finance Limited (“Paragon”) which Mr. Tysick provided to the Claimants following the 16 January 2007 sales call and (2) the copy credit agreement from Picture the Loan (“Picture”) which Mr. Tysick provided to the Claimants following the 22 January 2007 sales call. In particular the Picture loan which the Claimants ultimately entered into :

The Claimants’ answer to this is that Mr Goodman did not concentrate during his phone call and he ‘did not consider the forms in any great detail and signed the forms where indicated….’ This is a lamentable explanation by an intelligent adult with experience of finance and it ignored the clear warning he ought to have heeded in Central Capital’s short letters of 16 January 2007 and 22 January 2007 both of which urged in simple and clear terms:

This allegation is similarly unsustainable in the light of the unchallengeable contemporaneous evidence.

First, in the course of the sales call on 22 January 2007 Mr. Tysick advised Mr. Goodman that:

“...The insurance is a single premium policy added to your loan, making the total borrowing £63,724.50. That figure incorporates the Insurance Premium of £12,724.50. Including the interest you will pay £23,122.50 over the term of the loan...”.

Second, the single page “Information about our recommendation” document which was provided by Mr. Tysick to the Claimants following both the 16 January 2007 sales call and the 22 January 2007 sales call stated clearly:

“…the premium will be added to the net loan borrowing and form part of the loan amount…”.

The document spelled out that the cost of the premium was £12,724.50 and that monthly interest was payable on that sum of £42.42.

Third, the copy loan agreement sent by Mr. Tysick to the Claimants immediately following the 22 January 2007 sales call (1) stated that the “Total Amount of Credit” was £63,724.50 and comprised the “Amount of advance” of £50,000 and the “Optional Picture Protector Insurance” of £12,724.50; and (2) stated that there was monthly interest on that sum of 0.8690% (an APR of 11.2% variable).

Unsuitability and breach of ICOB 4.3

The essence of this allegation is that contrary to Rule 4.3 of ICOB Central Capital failed to take reasonable steps to ensure that the PPI was suitable for the Claimants’ demands and needs.

Again the requirements of Rule 4.3 of ICOB, and the fact that Central Capital was bound to comply with the same in the context of this claim, are common ground. ICOB 4.3 provided, in summary, that, where an “insurance intermediary” (such as Central Capital) made a personal recommendation to a customer to take out PPI, the intermediary was bound take reasonable steps to ensure that its recommendation was suitable.

ICOB 4.3.1R and 4.3.6R, in particular, provided:

As to the scope of Central Capital’s duty, the position is that:

The specifics of the Claimants’ complaints were as follows.

This allegation was abandoned in the middle of the trial even though their main gripe in the witness statements was about its cost: “extremely expensive”, “shocking amount of money” and “paying a fortune for it”. The reason for its abandonment was that the allegation was unsustainable in fact and in law in the light of the authority of Harrison v Black Horse [2010] EWHC 3152 (QB) (Mercantile Court), recently endorsed by the Court of Appeal in Harrison v Black Horse Limited [2011] EWCA Civ 1128.

Moreover the reference to cost (“at a significantly lower price”) introduces another important and now well-established point of law – and the Claimants repeatedly criticise the cost of the PPI in their witness statements (see Mr Goodman, paras. 38 (“extremely expensive”) and 40; and Mrs Goodman, paras. 33 (“shocking amount of money” and 51 (“paying a fortune for it”)).

The authoritative analysis of HHJ Waksman QC (sitting as a Judge of the High Court) in Harrison v Black Horse [2010] EWHC 3152 (QB) (Mercantile Court), as recently endorsed by the Court of Appeal in Harrison v Black Horse Limited [2011] EWCA Civ 1128, provides a complete answer to these general cost related complaints.

First the allegation at subparagraph 13 j. that Central Capital “…failed…to advise the Claimants that the term of the PPI Policy was only for 10 5 years…” is plainly wrong. In fact:

Second, Mr. Tysick and Mrs. Goodman specifically discussed the question as to taking out further insurance upon the expiry of the term of the PPI policy in the context of the Paragon loan and policy. Mrs. Goodman was thus well aware both (i) that upon expiry of the PPI policy there was an option to take out further insurance; or (ii) upon early cancellation of the PPI policy (upon early repayment of the loan) there was a non-proportionate rebate upon the PPI premium. If the Claimants were not content with a 60 month PPI policy term the Claimants had every opportunity to telephone Mr. Tysick upon receipt of the final documentation (as they were urged to do in the event of any queries in the 22 January 2007 covering letter with a view to “…revis[ing] the loan offer…”).

The thrust of these various subparagraphs is that Central Capital failed to take reasonable steps to ensure that the PPI was suitable for the Claimants’ demands and needs. In particular, wider PPI coverage to protect against the loss of Mrs Goodman’s modest earnings as well as her husband’s and longer than 5 years to cover the length of the 25 year loan.

The Claimants and the Defendant now accept that with the benefit of hindsight greater PPI protection should have been taken out in the light of Mrs Goodman’s redundancy on 31^st December 2008 and the financial pressure on them in 2009 in the light of the general economic climate.

However, in the circumstances in 2007 where the Claimants were proposing to borrow (i) a very substantial sum of money £63,724.50; (ii) which was secured on their home; and (iii) which Mrs. Goodman’s monthly income of £583.33 would plainly not cover (the monthly repayment alone of £598.40 was greater than that), Central Capital made a recommendation that they take out PPI cover for Mr. Goodman (as the primary wage earner @ £2,166.67) and life cover for them both in respect of the proposed loan. That written recommendation stated unequivocally that insurance was not a condition of the proposed loan and that “…you are entirely free to make such arrangements as you consider appropriate…”.

In their witness statements, Mr and Mrs Goodman contended that they would not have taken out PPI if they had known it was optional because of the cost and they did not need it as Mr Goodman was in secure employment. In evidence before the court, they abandoned this case and contended that they would have taken PPI out for both of them if offered for a whole 25 years.

In my judgment, these breathtaking volte faces are classic examples of witnesses giving evidence on oath to suit their case which had to be seismically shifted in the light of the upheld decision in Harrison v. Black Horse.

In my judgment, Mr and Mrs Goodman were not truthful in either their witness statements or their evidence on oath in court. The truth is to be found in the contemporaneous documents and the agreements they knowingly and knowledgeably signed up to after being carefully and informatively handled by the intermediaries of the Defendant. They had previous experience of PPI and they obtained the only PPI on offer that was suitable for their needs in January 2007. The length of the term of PPI was amply discussed with the intermediaries and they understood how it worked with rebates at the end of the period of cover and the option of taking out another period of coverage at the end of it should their personal circumstances change by then. It was only Mr Goodman’s income that needed protection – it was his income servicing the loan. Their only concern was its added costs.

Accordingly, the Claims by Mr and Mrs Goodman are dismissed and judgment be entered for the Defendant.

The Claimants’ claim be dismissed.

The Claimants’ application for permission to appeal is refused.

The Claimants do pay the Defendant’s costs of and occasioned by the Claim, to be assessed on the indemnity basis, and to be the subject of a detailed assessment if not agreed.

The Claimants do pay to the Defendant the sum of £15,000 on account of those costs pursuant to CPR 44.3(music) by 4pm on 8 August 2012.