7KBW and 39 Essex Street settle Lloyds PPI mis-selling battle

7KBW and 39 Essex Court have settled a payment protection insurance (PPI) mis-selling battle between Lloyds subsidiary Black Horse and a customer on the day it was to appear in the Supreme Court.

The appeal brought by Shelagh Conlon against Black Horse was due to be heard last week in the Supreme Court but the case settled for an undisclosed sum on the court steps, bringing a two-year battle to an end.

39 Essex Street’s Hodge Malek QC and James Strachan QC were instructed by Manchester-based McHale & Co partner Michael Muldoon for for Conlon. 7KBW’s David Bailey and Gough Square Chambers’ Ruth Bala were instructed by SCM Solicitors’ David Bowden for the bank.

Conlon had argued that she was mis-sold PPI in 2007 when she took out a £17,500 loan with Black Horse. She argued she had entered into an unfair relationship with the bank as she was not informed that 40 per cent of the £3,347 premium on the policy would be paid back to Black Horse as a commission.

Conlon claimed that she would not have taken out the loan if the commission had been disclosed to her. She triumphed in a 2011 Manchester County Court hearing when Mr Recorder Atherton held that there was unfairness in the relationship.

However an almost identical case being waged between Black Horse and another borrower changed the fate of the case and led to the bank successfully appealing in Leeds High Court.

The borrowers in Harrison & anor v Black Horse Ltd alleged that they had been mis-sold PPI as part of a loan agreement. However in that case it was held that the non-disclosure of the existence and amount of commission could not, on its own, give rise to an unfair relationship.

Both the High Court and Court of Appeal (CoA) in December last ruled in favour of Black Horse in the case, paving the way for Black Horse’s success in the Conlon matter. The bank’s appeal against Conlon’s County Court victory was stayed pending the outcome of the Harrison case. In 2012, Mr Justice Wilkie, sitting in Leeds High Court, ruled there was no unfairness in that relationship.

The case went to the CoA in December last year, conjoined with an appeal in a similar case, Plevin v Paragon Personal Finance Ltd & Anr. Giving the leading judgment, Lord Justice Briggs dismissed Conlon’s appeal and said the same principles should be upheld as in the Harrison case.

The Conlon and Harrison claims constitute just two claims in a mountain of PPI litigation levelled at the bank. In February this year it announced it had put aside another £1.8bn to pay out compensation, bringing the total PPI compensation bill to around £10bn.

At the end of last year the bank replaced Freshfields Bruckhaus Deringer with Linklaters as its regulatory adviser dealing with PPI mis-selling. Freshfields led the battle against the FSA and Financial Ombudsman Service (FOS) over the handling of payment protection insurance (PPI) claims for the British Bankers Association (BBA) in 2011. The High Court dismissed the application forcing the banks to compensate customers who bought the flawed insurance policy (20 April 2011).

Lloyds is not the only bank facing a mammoth bill for fighting claims. Consumers have been queuing up to argue they were mis-sold products such as interest rate swaps, PPI and other investments over the last 10 years. Earlier this month a BBC report claimed that banks have underpaid compensation for mis-sold PPI by around £1bn.