The history of this case goes back some way. In 2015, Axa, the French insurance giant, purchased two subsidiary companies from Genworth Financial. Both of these subsidiary companies underwrote Personal Protection Insurance (‘PPI‘) policies that Santander, the Spanish financial services firm, marketed and sold to the public. Over the next two years Axa settled many PPI misselling claims made against Santander (some claims going back many years) and subsequently sought reimbursement from Genworth. Axa claimed that, as part of the original share purchase deal, Genworth had agreed to pay 90% of all relevant distributor misselling losses and all liabilities, penalties, fines and costs associated with that misselling. Genworth countered that it should not have to pay for any compensation claims which had not been fully contested by Axa. They sought a declaration from the court that it was also not liable for any charges payable under a claims handling agreement, nor for any claims made under an agreement between Santander and the two subsidiary companies promising not to claim damages from each other.
The salesman knows nothing of what he is selling save that he is charging a great deal too much for it.”
Oscar Wilde
As part of its evidence Axa sought to rely on a Financial Services Authority (‘FSA‘) (now the Financial Conduct Authority (‘FCA‘)) Final Notice which had been issued to Santander in 2007 setting out its findings of sloppy sales practices by Santander. Santander argued that this was inadmissible as evidence and that it fell within the Hollington v Hewthorn rule. This states that “findings of fact made by another decision maker are not to be admitted in a subsequent trial because the decision at that trial is to be made by the Judge appointed to hear it“. Claimants must prove their own cases independently and cannot simply rely on the findings of a regulator. The opinion of someone who is not a trial judge is therefore, as a matter of law, irrelevant and not one to which he ought to have regard. Deputy Judge Sir Richard Field agreed that the Final Notice was inadmissible evidence, thus extending the Hollington v Hewthorn rule beyond its original scope of applying only to court and tribunal decisions.
Obstacles are necessary for success because in selling, as in all careers of importance, victory comes only after many struggles and countless defeats.”
Og Mandino
In another argument, Genworth attempted to bring Santander into the dispute. Genworth alleged that there was an agreement between Santander and the two subsidiary companies, that Santander would be responsible for any losses resulting from PPI sales as they were marketing and selling them. Santander disagreed, stating that the agreement did not include any subrogation terms, and further that the agreement had not been “finalised or executed“. Subrogation is a right held by most insurers to legally pursue a third party that cause an insurance loss to the insured. The insurance company is said ‘to stand in the shoes of’ its insured to pursue a legal remedy. There was considerable argument in Court regarding this agreement. Counsel for Santander relied on email correspondence between the two sides to argue that the bank and insurer were “a million miles away from a position that could be described as a binding settlement” and “that there was still much in the air to be resolved” before the settlement was concluded and signed. Axa had also, according to Counsel, conceded at an earlier hearing that a settlement agreement had never actually been reached, and that Axa should not therefore now be allowed to rely on the agreement.
Axa responded that the settlement agreement was binding “based on the conduct of both sides” even if no actual paperwork had been signed.
After listening to all the arguments the Court found that Genworth was “…obliged to pay on demand an amount equal to 90% of all the relevant distributor misselling losses, which … means on a demand by Axa in the amount equal to the costs incurred“. It added that there was “no express provision” requiring Axa to accompany its demand with evidence that it had taken “all defences reasonably available to them.“
This decision is an important reminder that parties to civil proceedings cannot rely on FCA enforcement findings and have to prove their cases independently.
Link: AXA France IARD SA & Anor v Santander Cards UK Ltd & Anor [2022] EWHC 1776 (Comm) (12 July 2022)
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