Compromise – When are PPI redress payments truly final?

Article by Jamie Hughes

Practitioners instructed in any Plevin claims are well versed in the common arguments that arise in almost every matter. One such argument that repeats is that of compromise. Following the decision in Plevin, many finance providers provided redress payments in accordance with the FCA guidance released at the time and DISP App 3.1 in the FCA Handbook. 

Often cited by financial institutions is the unreported case of Taylor -v- GE Money Consumer Lending Limited (20 July 2020, Leeds County Court) in which it was concluded that there was no obligation to make payment under the FCA guidance, that there was valid consideration given when such payments were made, that the Defendant could rely on the offer in full and final settlement, and that there was a dispute at the time capable of compromise. 

Surprisingly, however, parties often fail to consider the application of the leading authorities on compromise agreements generally to Plevin claims. A number of recent cases provide some helpful analysis. 

His Honour Judge Keyser QC recently provided a comprehensive overview of the relevant principles in Maranello Rosso Ltd v Lohomij BV & Ors [2021] EWHC 2452 (Ch). HHJ Keyser QC summarised the principles established in the leading authority of Bank of Credit and Commerce International SA v Ali [2001] UKHL 8 as follows:

“1) The normal principles of construction apply to the interpretation of contractual releases.

2) No special principles of construction apply to the interpretation of contractual releases.

3) Lord Bingham’s “cautionary principle” is not a rule of law….

4) … As the “principle” is not one of law, I paraphrase it as follows: If the plain meaning of a release would appear to indicate that a party was agreeing to give up rights of action of which he was not aware and of which he could not reasonably have been aware, the court, before concluding that that is indeed what the release does mean, ought to pause, ask itself whether that is really what the release means, and carefully examine the context to see whether the words more appropriately bear some more restricted meaning…

5) As there are no special principles of construction applicable to releases, the private knowledge held by one party to a release but not by the other parties is irrelevant to the interpretation of the release.

6) It is arguable (the point was considered obiter in BCCI v Ali and was addressed only by Lord Nicholls and Lord Hoffmann) that there is an equitable “sharp practice” principle that will in suitable circumstances prevent a party from relying upon a release in general terms if he knew that the other party had a claim and knew that the other party was not aware that he had a claim.” [91]

The question as to “sharp practice” will certainly cause Plevin practitioners’ ears to prick up.  Most claims that are prima facie time barred include an assertion that the usual time limit on limitation does not apply as a result of ‘deliberate concealment’ on the part of financial institutions. However, In Tchenguiz v Grant Thornton UK LLP [2016] EWHC 3727 (Comm) at paras [54] – [58] the court confirmed that when negotiating a settlement of specific claims (rather than a general release), it is not considered sharp practice to withhold the existence of a claim not known to the other party.  Arguably, therefore, the compromise argument may prevail notwithstanding the strength of any limitation argument that a Claimant may run.

The ambit of claims that are capable of being compromised is similarly wide. Provided that the language used is clear, “…it is possible for parties in English law to enter into a contract to release claims which they do not know that they have, or which have not yet been recognised by English law. The only question is whether, as a matter of construction, that is what they intended to do” (Bank of Scotland Plc v Hoskins [2021] EWHC 3038 (Ch) at [54]). 

Claimants in these matters will often argue that, regardless of the wording used, redress payments are accepted in part payment of any sums they are due. In doing so, they face a potential uphill battle. As per Global Display Solutions Limited v NCR Financial Solutions Group Limited [2021] EWHC 1119 (Comm), the burden lies with the party arguing against the compromise agreement to show that it does not reflect what the parties agreed. 

Where the wording of the offer is clear and there is no evidence of contemporaneous equivocation at the time of acceptance, claimants may struggle to meet this burden. This hurdle is even higher for Claimants who have received a redress payment by cheque which has then been cashed. As per Joinery Plus Ltd (In Administration) v Laing Ltd [2003] EWHC 3513 (TCC) and Stour Valley Builders v Anor (21 December 1992), the cashing of a cheque is always strong evidence of acceptance, especially if not accompanied by immediate rejection of the offer. 

In light of the above principles, an argument on compromise will be much stronger if supported by a clearly worded offer letter which outlines what claims are being settled. In the event that the original complaint letter explicitly references a Plevin claim, it is arguable that the logical conclusion from the chain of correspondence is that any claim between the parties arising from the decision in Plevin has been settled in full. 

Much will depend on the exact wording of each compromise agreement, but these recent authorities serve as a helpful reminder that the general principles on compromise are sharply relevant and readily applicable to PPI claims. An analysis of these principles should form part of any practitioners’ arsenal when seeking to argue whether a claim has been settled in full by the acceptance of a redress payment.