PPI claims and bankruptcy: Shop Direct Finance Company Ltd v Official Receiver [2022] EWHC 1355 (Comm)

Introduction

The Official Receiver ("OR") notified Shop Direct Finance Co Ltd ("SDFC") of multiple complaints regarding payment protection insurance (PPI), seeking to recover any repayments due back into various bankrupt estates in its capacity as Trustee in Bankruptcy (TiB). SDFC submitted a claim seeking relief against the OR relating to time limitation.

The Court considered how financial services regulation and personal insolvency interact and whether the OR was the "complainant" with standing to submit complaints. If so, the Court looked at whether the OR was within the limitation period to bring such notifications of mis-sold PPI under the scheme relevant to the Financial Services Ombudsman, to which PPI claims are made.

Background

SDFC is the operator of The Very Group's financial services in the UK, offering credit terms to consumers purchasing goods from online retailers Very.co.uk and Littlewoods.com.

The consumers of SDFC in question (which then became bankrupt) were mis-sold PPI in a way which made them "eligible complainants" under the Dispute Resolution Complaints Sourcebook ("DISP"), which details the relevant limitation regime for the Financial Services Ombudsman, who govern PPI complaints.

Eligible Complainant

The OR viewed that it was not the "eligible complainant" as that is limited to the bankrupt individual themselves; the OR is merely authorised by law to bring the complaint on behalf of the bankrupt individual.

Under DISP 2.8R(2)(b), the eligible complainant is subject to a limitation period during which it must bring a complaint for the mis-sold PPI. The OR submitted that because it was not the eligible complainant, the timing of its knowledge of the claim did not affect limitation. Instead, it was argued, that the knowledge of the claim by the bankrupt individual was what mattered, and if the bankrupt individual wasn’t aware of the claim for mis-sold PPI, the limitation clock had not started to run and the complaints could not be out of time.

The Court favoured SDFC's position that the OR was the complainant, and their knowledge of the claim was what started the limitation clock.

Limitation

The Court declined to consider whether or not the OR was within the limitation period because this action covered multiple complaints which needed to be heard separately on their own facts.

However, it found that the burden of proof for actual or constructive awareness of a claim by the OR fell to SDFC. SDFC must therefore prove in each case whether the OR was out of time to bring a complaint.

Conclusion

The decision, in this case, arises from the position that the OR, or an appointed TiB, assumes certain rights of the bankrupt, but does not act "on behalf" of the bankrupt. The OR/TiB is not an agent of the bankrupt, which is dissimilar to the situation in a corporate insolvency where a liquidator is appointed.

In addition, it acts as a reminder that PPI is still a live issue, and investigations should be made at the earliest opportunity to determine whether a claim could be made which would benefit the bankruptcy estate. In such cases, care should be taken to note when knowledge of such complaints arose and to ensure they are submitted within the relevant limitation period.

We note that permission to appeal this decision has been granted and will provide an update in a future bulletin as and when the appeal is heard.