Smith & Anor v Royal Bank of Scotland plc [2023] UKSC 34

Credit card holders sued RBS for repayment of PPI premiums, claiming unfair relationships due to undisclosed commissions. The Supreme Court held that limitation periods for section 140B claims only begin when the credit relationship ends, not when PPI payments were made. Claims brought within six years of relationship ending were not time-barred.

Facts

Karen Smith and Derek Burrell were credit card holders with Royal Bank of Scotland who purchased payment protection insurance (PPI) policies through the bank. The bank received substantial undisclosed commissions exceeding 50% of the PPI premiums paid. Both claimants terminated their PPI policies (Ms Smith in 2006, Mr Burrell in 2008) but their credit card agreements continued until 2015 and 2019 respectively. The bank only disclosed the commission receipt in 2017-2018 under an FCA redress scheme, partially refunding amounts exceeding 50% commission.

Procedural History

Both claimants issued proceedings in August 2019 seeking remedial orders under section 140B of the Consumer Credit Act 1974. District judges found in favour of both claimants, decisions upheld on first appeal. The Court of Appeal allowed the bank’s appeals, holding the claims were time-barred under section 9 of the Limitation Act 1980.

Issues

The central issues were: (1) When does the limitation period begin for claims under section 140B of the Consumer Credit Act 1974? (2) Did the transitional provisions of the Consumer Credit Act 2006 preclude the claims?

Judgment

The Supreme Court unanimously allowed the appeals, restoring the district judges’ decisions.

The Time Bar Issue

Lord Leggatt, delivering the main judgment, rejected the bank’s argument that time began running when PPI payments were made. He explained that under section 140A(1), the court must determine whether the relationship ‘is’ unfair at the time of determination, not whether it ‘was’ unfair at some past date:

for as long as the credit relationship lasts, no cause of action accrues for which the debtor then has a period of time in which to sue for a remedy under section 140B. Any entitlement to a remedial order arises from a set of facts which is complete only at the time when the order is made.

The Court held that the limitation period only begins when the credit relationship ends, with claims permissible for six years thereafter. Since both credit card agreements ended within six years of proceedings being issued, the claims were not time-barred.

Continuing Unfairness

The Court rejected the Court of Appeal’s reasoning that unfairness ceased when PPI payments ended. Lord Leggatt stated:

the economic consequence that Ms Smith was financially worse off as a result of having paid PPI premiums which she would never have paid if the bank had disclosed the amount of its commission persisted throughout that period of around nine years. Indeed, her loss was exacerbated because she did not have the use of the money during this period.

Transitional Provisions

The Court dismissed the bank’s argument based on transitional provisions, finding that since PPI payments were made ‘by virtue of’ the credit agreements (not merely the related PPI policies), the court retained power to order repayment.

Implications

This judgment significantly affects PPI mis-selling claims and consumer credit litigation generally. It establishes that limitation periods for section 140B claims run from when the credit relationship ends, not from individual payments or when unfair conduct occurred. The decision emphasises the broad, discretionary nature of the unfair relationship jurisdiction, contrasting it with conventional cause of action analysis. Courts retain discretion to refuse relief where debtors delay unreasonably with knowledge of relevant facts. The judgment protects consumers who remained unaware of undisclosed commissions while preserving judicial discretion to address stale claims.

Verdict: Appeals allowed. The orders of the district judges in favour of the claimants were restored. The claims for repayment under section 140B of the Consumer Credit Act 1974 were not time-barred.

Source: Smith & Anor v Royal Bank of Scotland plc [2023] UKSC 34