Black Horse Limited has once again, successfully defended a varied array of payment protection insurance (PPI) mis-selling claims in the Liverpool County Court. The "menu of orders" which the borrower sought related to the lender's alleged failure to communicate the existence of an unfair relationship, and improper execution and unenforceability of the loan agreement.  

This decisive result for the lender follows on from an earlier victory for Black Horse in the same court in May this year. The judgment was a reserved judgment from an experienced circuit judge, HHJ Wallwork. This decision, as with others, confirms the courts' robust rejection of PPI mis-selling claims while underlining the strong position of lenders who adopt compliant procedures.  

In this case the relevant employee did not give evidence. Notwithstanding this, the judge accepted evidence of the lender's standard procedures which conflicted with the borrower's evidence. Additionally, the decision is significant because the judge ordered the borrower to pay the lender's legal costs and indicated that those costs would be awarded on an indemnity (enhanced) basis.


The borrower took out a loan together with PPI. He claimed that he was mis-sold the PPI on the basis that the lender led him to believe that the PPI was mandatory. In so doing, the borrower argued that the lender breached its statutory duty, fiduciary duty, and common law duty owed to him. The borrower had taken out two previous loans with the lender; both accompanied by PPI.

Borrower's complaints

Failure to communicate

The borrower alleged that the lender failed to communicate with him in a way which was clear, fair and not misleading, contrary to 2.2.2R of the Insurance: Conduct of Business Sourcebook (ICOBS) and/or 6.4.2(R) of the Financial Services Authority (FSA) handbook. Specifically, the borrower alleged that the lender failed to provide him with price information relating to the PPI so as to enable him to relate it to a regular budget (contrary to ICOBS 6.4.6R) and so as to enable the borrower to understand the additional payments relating the purchase of the PPI policy and its total costs (contrary to ICOBS 6.4.9R).  

The borrower submitted that he would not have entered into the PPI agreement had the ICOBS been followed. Pursuant to section 150 of the Financial Services and Market Act 2000 (FSMA), he sought the cost of the PPI insurance premium, interest and any other remedy under the FSMA.  

Unfair relationship

The borrower also alleged that the PPI gave rise to an unfair relationship pursuant to section 140A of the Consumer Credit Act 1974. Specifically, the lender failed to ensure the suitability of the insurance having regard to the borrower's needs, the borrower's employment benefits and his impending retirement.  

Execution of the agreement

The borrower's final claim related to alleged improper execution of the PPI agreement. Specifically, the borrower alleged that the PPI loan amount should have been included as part of the total charge for credit pursuant to regulation 4(C) of the Consumer Credit (Total Charge for Credit) Regulations 1980.

Factual dispute

There was ultimately a factual dispute concerning the telephone negotiations and discussions between the borrower and the lender before execution of the loan agreement. The employee who had actually dealt with the borrower was no longer employed by the lender, but the lender's logs together with the ex-employee's experience, employment record (which was "exemplary and unblemished") and reliability as an employee were produced to the court.

The lender's primary argument was that its employees were fully aware that PPI was voluntary and not compulsory and this was reflected in the script used by all employees with prospective applicants. Further, the script was ICOBS compliant and had had been found to be so by previous court judgments which were binding in the present dispute. Additionally, the loan application made it clear that PPI was voluntary.  

The issue

The issue for consideration by the judge was whether the borrower could prove (on the balance of probabilities), that the lender had failed to explain the optional nature of the PPI.  

The borrower alleged that at no point was PPI mentioned to him. He also alleged that the lender had told him (when the documents were returned to him because he had not signed for PPI) that if he wanted to take out the loan, he had to take out PPI. However, the claimant was referred to an Initial Disclosure Statement which is a script used by the lender in telephone discussions. The judge referred to the section of the script which refers to PPI and which states that "this product is optional". The borrower said he did not recall PPI being mentioned. The judge emphasised that the lender's employee would not have gained personally from the sale of PPI.  

In relation to completion of the Demands and Needs Questionnaire, again, the borrower alleged that PPI was not mentioned. The borrower believed that the monthly repayment instalment was for the loan only and did not include the PPI element. However, at the same time the borrower maintained that he had been told he had to take out PPI.  

According to the evidence of the lender, by following the script, all employees were required to inform borrowers that PPI was optional. Further, an assessment was made of demands and needs and where PPI was recommended, borrowers were informed of the cost of the loan - with and without PPI. Borrowers were also informed of the benefits and exclusions under the PPI policy.

Judge favours lender's evidence on factual dispute

The judge found that the borrower to be unimpressive as a witness. In contrast, despite the original employee of the lender not giving evidence, the judge found the lender's procedures to be highly pertinent. Indeed, the judge had no "hesitation in finding that the script is clear in so far as it outlines the voluntary nature of any insurance."  

The judge was faced on the one hand with the original employee's unblemished and exemplary record and the judge's finding that it was unlikely the employee would have departed from the script. On the other hand, the judge had the benefit of the borrower's testimony and the borrower was adamant that insurance was never discussed.  

However, the judge found that the borrower had not satisfied him on the balance of probabilities that the lender had not fully explained and discussed the optional nature of insurance and the borrower's requirements for cover. In particular, the judge questioned why the borrower had not queried the fact that the insurance was stated to be optional on the face of the agreement, while believing that the insurance was compulsory.

Unfair relationship

The borrower alleged that the lender had:

  • failed to ensure the suitability of the PPI to the borrower's needs, including suitability in terms of cost and failing to consider suitability in view of breaches of statutory duty (which the judge had already found to be unsubstantiated); and
  • failed to ensure the suitability of the PPI to the borrower's needs, including suitability in terms of costs and failing to consider suitability in view of a number of factors. These were namely the borrower being employed and entitled to full pay for six months, followed by half pay for a further six months in the event of falling sick, and also the fact that the borrower intended to retire within a few months.  

The judge found that there was no unfair relationship, for the following reasons:

  • the PPI included life cover and the recommended cover was not unreasonable. The borrower had had the benefit of life cover since 2008 and could have cancelled the agreement without charge within 30 days.
  • PPI was mentioned as "optional" twice on the face of the loan agreement.
  • There had been compliance with ICOBS.
  • It was likely that the script had been delivered.
  • The documents which had been sent to the borrower provided all relevant information.  

Loan agreement properly executed and enforceable

In addition to arguing that the loan agreement was improperly executed because the PPI loan amount should have been included as part of the total charge for credit, the borrower also attempted to persuade the judge that the loan agreement was unenforceable. The claim for unenforceability was based on the allegation that the cost of credit in the principal loan appeared to be considerably less expensive than the reality of the transaction. Additionally, contrary to section 61(1)(a) of the Consumer Credit Act 1974, the lender led the borrower to believe that the PPI was a precondition for taking out the loan agreement.

The judge found that the loan agreement was properly executed and enforceable. The borrower had failed to satisfy the judge that the lender had told him the purchase of PPI was a mandatory pre-condition to the approval of the loan. The judge also found that the loan agreement clearly separated the financial information relating to the personal loan and PPI respectively into two parts, with two signatures required.


Not only did the borrower fail in relation to all of his claims, but he was also ordered to pay all of the lender's legal costs on an indemnity (enhanced) basis. In what appears to be an emerging trend, indemnity costs were also awarded by HHJ Simon Brown QC in Central Capital's favour in the Goodman case in July. This case serves as yet another warning against bringing weak claims of this nature.  

Time after time, judges have preferred evidence of the lender's standard procedures to the evidence of the borrower. This fact highlights the strength of the lender's position, because it can still demonstrate compliance with relevant statutes and regulations; despite not having the relevant employee give evidence.