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In Shop Direct Finance Company Limited v The Official Receiver, the Commercial Court confirmed that it's the customer’s trustee in bankruptcy - in this case the Official Receiver (OR) - whose knowledge is relevant for the purpose of the time limit rule in DISP 2.8.2R(2). This is likely to be good news for firms facing complaints brought by the OR around historical mis-selling allegations (including PPI).
It is also understood to be the first standalone claim brought for declaratory relief as to the meaning of any part of Dispute Resolution: Complaints Sourcebook (DISP).
Following a bankruptcy order, the OR takes control of the insolvent estate, managing and collecting the assets of the bankrupt, including (normally) the right to receive redress for mis-selling complaints (or other types of complaints) against financial institutions.
In this case, Shop Direct Finance Company Ltd (SDFC) sought declaratory relief against the OR relating to the time limit under DISP 2.8.2R(2) for referring complaints to the Financial Ombudsman Service (FOS). The OR had notified a bulk complaint in August 2019 about the alleged mis-sale of payment protection insurance (PPI) to customers who since became bankrupt (and therefore their estates vested in the OR).
The issue in this case was whose actual or constructive awareness of the relevant cause for complaint mattered for the limitation regime in DISP 2.8.2R(2)(b), given that this clause is drafted with reference to the limitation period starting on the date “on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint”.
As the Court put it, the question was whether the “complainant” with “cause for complaint” in such context is the bankrupt consumer (whose eligibility is a precondition to bringing any complaint) or the OR. Although the bankrupt customer’s eligibility is a precondition to bringing a complaint (and it is the bankrupt customer who is the ”eligible complainant”), the OR is authorised by law to bring the complaint by virtue of the Insolvency Act 1986.
SDFC argued that the OR was the “complainant” in DISP 2.8.2R(2)(b), even if the OR could not itself by the “eligible complainant” under DISP. The OR said it cannot be the “complainant” because it is not (and could not be) the “eligible complainant” (as defined). The OR therefore argued that their awareness was irrelevant to the time limit question.
Further declaratory relief was also sought by SDFC in relation to the timing of the awareness – as that would be the start date for the limitation period.
The Judge, Stephen Houseman QC, preferred SDFC’s analysis of the DISP rules. He made a declaration that, for the purpose of the DISP time limit rules, it was the OR’s actual or constructive knowledge which is relevant, rather than that of the bankrupt customer. The Judge held that the statutory framework contemplates that a complaint may be “brought” by someone other than the “eligible complainant”. Permission to appeal was given in respect of this declaration.
On the issue of when the limitation period should start, by reference to the date of awareness, no declaration was made, although this is unsurprising given that it seems this is an issue which would turn on the facts and the evidence available.
The OR has brought a large number of complaints on behalf of bankrupt customers in respect of PPI redress and, no doubt, the OR and other Trustees in Bankruptcy may bring future complaints in relation to other types of mis-selling allegations.
This judgment provides some welcome clarity that it is the Trustee in Bankruptcy’s knowledge that is relevant in determining the time limits under DISP 2.8.2R(2). Put simply, where the event complained of was more than six years ago, if the Trustee in Bankruptcy became (or ought to have become) aware that there was cause for complaint more than three years ago, the FOS will not normally be able to consider the complaint.
Whilst each case will turn on its facts, often the Trustee in Bankruptcy may have the requisite knowledge to start the time period running earlier than the bankrupt customer. Overall, this is therefore likely to be a positive outcome for financial institutions, although there will remain some questions about the extent to which a customer’s pre-bankruptcy knowledge may still be relevant to the time limit analysis. It also remains to be seen if the OR will pursue the appeal.
A copy of the judgment can be found here.
Authors: Sam McCollum and Amy Earlam
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16 June 2022