Thread: Retrospective claim??

Originally Posted by wandajane

Hi,

Just a quick question. Is it possible to claim mis-selling of PPI after the loan (business) has been repaid?

wj

The simple answer is Yes.

The longer answer is Yes, but it depends on the circumstances of the claim and the manner in which it was mis-sold (which determines the legal basis of any claim).

The fact that the PPI contract has ended does not, of itself, prevent a claim... but, in practice, it may represent a hurdle you have to overcome to make a successful claim.

Originally Posted by wandajane

Thankyou Skeptic for your reply, but what if the business is no longer trading?

I am not clear whether your question refers to:

• a business that you were involved which is no longer trading OR
• a business that provided the PPI is no longer trading

But, assuming, the first of these possibilities is the relevant one.

PPI is normally sold to individuals, not businesses.

If you think about what PPI is, it would be pretty unusual for it to be sold to anything other than a person (and whilst I wouldn't be flabbergasted if you said the Policy was sold to a Company on a business loan... this would be very, very unusual and would raise a lot of questions).

On that basis, I think, it is more likely the PPI was sold to a person connected with the business (rather than business itself).

The 1st issue here is to make sure that the correct legal entity is (still) in a position to commence legal proceedings and is the one that brings the claim.

If the PPI was sold to you, in connection with a Loan to your business, you (not the business) were the person to whom the duty not to mis-sell is owed. (and it is irrelevant, whether or not the business is still trading).

If the PPI was sold to the business... We need to know whether the business was:

1. A limited Company
2. A partnership or
3. A sole trader

and what caused it to cease trading?... e.g. if it was a Company, was it dissolved or did it go into Liquidation?

before we can answer the question helpfully.

It might be easier, if you could provide a summary of the facts giving rise to the potential claim, (without disclosing anything that identifies you as an individual), so that we can try to narrow down and identify the issues.

Originally Posted by wandajane

Here's the situation:
My husband formed a ltd co. with A N Other in 2000.

1st Principle: The Ltd Co. is a separate legal entity, from the people involved in running it.

2nd Principle: The Officers of the Company i.e. the Directors and the Co. Secretary, have legal duties to fulfil when running the Company, these included duties to the Company itself, duties to each other, duties to the shareholders and general duties imposed by law to the protect the public e.g. not to permit the Co. to trade fraudulently etc.

• Was AN Other a Officer of the Company and/or a shareholder?
• Were you an Officer of the Company and/or a shareholder?

Originally Posted by wandajane

They applied to the bank for a start up loan which was offered providing they took PPI.

If this is correct, the PPI was missold. PPI should always be optional. Furthermore, loans ought not be made contingent on the sale of PPI. If your husband was expressly told that he would not get the loan UNLESS he bought the PPI, there may be grounds to attack the loan; aswell as seek to reclaim the costs of the mis-sold PPI.

Originally Posted by wandajane

The PPI premium was added to the business loan

OK, was the "business loan"

1. a loan made to the Limited Company or
2. a loan made to your Husband (which he subsequently used to fund the Limited Company) or
3. a loan made jointly to your Husband and AN Other (which they subsequently used to fund the Limited Company)

If the answer is 1) then this is where Dorothy leaves Kansas and things get a bit weird. Unless the T&C's of the PPI policy are manifestly different from the norm, the policy couldn't possibly be of any use to the Limited Company. Rhetorically, how exactly does a Co. insure itself against sickness, loss of employment etc?

If the answer is 2) then the whole issue of the Limited Co is only of peripheral significance. Here, your husband was mis-sold a PPI policy, he is the potential Claimant and he is free to pursue a claim, if he wishes.

If the answer is 3) then presumably 2 different PPI policies existed: 1 for your husband and 1 for AN Other. Here, both were individually mis-sold a PPI policy, each is the potential Claimant and each is free to pursue a claim, if he wishes.

Originally Posted by wandajane

which was repaid from the ltd co's a/c.

This is/was largely an accounting issue for the Co.

The only legal significance which I can see may attach to this relates to what should happen to the funds which result from any PPI claim... this is getting way ahead of ourselves, but if the Ltd Co paid the premiums on behalf of your husband (because he was a Director of the Co.) there is a possibility that the Ltd Co. itself might have some claim over any refunded money. Sorry, to skim over this point, but this area is potentially wildly complicated and I don't want to go to far into something that may be irrelevant. Furthermore, since the Co. is now in liquidation, in practice (rather than in law) the only entities potentially interested/affected by this would be AN Other and the Tax Man... and both would probably need to resurrect the Co. to do anything about it.

Originally Posted by wandajane

Although my husband was a director of the ltd co, he retained his self-employed status and did not draw a salary until sometime later when he ceased self-employment.

It is quite normal for a Director of the Ltd Co. to be self-employed and drawing a "salary" does not, of itself, necessarily render a Director an employee of the Co. Your husband's employment status should be clear (and provable) from his tax affairs.

Originally Posted by wandajane

The business was voluntarily wound up by my husband last year

I am somewhat confused by this statement, as it appears to be inconsistent with other parts of your post(s).

If the business was voluntarily wound up by your husband; this would have been a Members' voluntary liquidation - which is when the shareholders of a company decide to put it into liquidation and there are enough assets to pay all the debts of the company, i.e. the company is solvent.

Ordinarily, companies are subject to a Members' voluntary liquidation, because they are insufficiently profitable, but not insolvent.

However, it appears that the Borrower(s) did not or could not repay the Bank in full otherwise the spectre of the Personal Guarantees would not have been raised now.

• Was AN Other still involved with Co. when it was wound up?
• Is there any litigation ongoing or pending as a result of the Co. being wound up?
• Are all the financial matters relating to the Winding Up now resolved?
• Is the Tax Man happy?

Originally Posted by wandajane

but we were foolish enough to have given Personal Guarantees to the bank who have now called upon us to 'honour' them.

There is nothing foolish about giving Personal Guarantees, if you understood the consequences of doing so at the time you gave them. So, don't feel bad about this. The cold, hard truth is that Banks won't lend money to start up companies, without personal guarantees, to secure the loans.

I am not clear on what is still owed to the Bank and by whom. (Your 1st post suggests the loan was repaid, as does the Members' Voluntary Liquidation... but then there would be nothing for the Bank to call upon from the guarantees.)

How much, roughly, is owed to the Bank?
Is your home at risk?

Depending on your involvement with the Co. and the extent of the guarantees, there may be legal issues arising from whether you (personally) should have been asked to guarantee the Co's debts or the manner in which they were given.

Have you (and or your husband) had any formal legal advice, at any point in this venture?

Originally Posted by wandajane

So, I was just wondering if we can prove the PPI was mis-sold then presumably any refund could be off-set against the amount claimed by the bank under the PG's?

(I have also had the same thoughts regarding account charges.)

If the PPI was mis-sold, the Claimant is entitled to, at least, a refund of the premiums (and any interest charged on those premiums). What happens to the refunded money is up to the Claimant. So, yes, broadly you could off-set it against any liabilty to the bank... but this may not be the best way to deal with things.

The accout charges are a separate matter... but the principle is the same.

Your circumstances appear to raise many issues, some of them sufficiently outside the norm, that ultimately you may need to get some formal, independent legal advice.

I know I've asked more questions than I've answered but I think answering them will be worthwhile.

Originally Posted by wandajane

Thanks for your time Skeptic.

No problem.

Wanda,

I've read the whole of Personal Guarantees for Business Debt. I was sorry to read that you have found yourself in such difficult circumstances, through no fault of your own...

Sometimes, it is hard to see anything but an overwhelming gloom when faced with these sorts of problems, but whatever happens, in the grand scheme of things, this is only an argument about money. That might sound unbelievably trite and crass, at the moment... but it is true.

Being happy, has nothing to do with being rich or poor. I know.

I was pleased to see that you now have the benefit of some independent legal advice. This really is your best course of action, at the moment.

The PG's for Business Debt thread, obviously, raises serious issues; but, I think, it'll be better for us to keep this thread as focussed on the potential PPI claim as possible. Like you say you have a lot of things to think about at the moment.

So, focusing on the PPI issues:

What we know:

1. The PPI was mis-sold because your husband was told by the Bank that he would not get the loan unless he bought the PPI and/or because he was self-employed at the time.
2. The PPI policy was bought in 2000.
3. The PPI premium(s) were paid from the Co's business account.
4. The PPI claim is a separate legal issue which turns on its own merits and exists, I'd suggest, outside the scope of the triable issues in any litigation connected with the Personal Guarantees. That said, because your Husband is potentially the Claimant in the PPI claim (but perhaps not any bank charges claim) and the Bank are the Defendant. The PPI claim therefore represents a very significant element of the issues between you and the Bank, and at the very least a significant "chip" in the bargaining process. Accordingly, your advisers, should be pursuing this aspect.
5. Any Bank Charges claim is a separate legal issue which turns on its own merits but it exists, I'd suggest, within the scope of the triable issues in any litigation connected with the Personal Guarantees. This is complicated, but as I see it the (dissolved) Company is (or would be) the correct Claimant in respect of any Bank Charges claim... Therefore, an such claim goes directly to the proper level of the Company's indebtedness to the Bank and thus the extent of your potential liability under the Personal Guarantees. [However, since the Company has been dissolved, it would need to be resurrected before it could be a party to any claim... and I am not sure to what extent, if any, therefore such an argument advances your position.]

What I suspect, but need you to confirm:

1. There are, at least, 3 different "business loans" in your story. The loan in 2000 which was the one with the PPI policy attached taken out by your husband and I shall refer to it as the "Startup Loan" to distinguish it from the others. The 2 other loans were loans to the Company, the 1st in 2005 & the 2nd in 2007 and it is these loans which gave rise to the Personal Guarantees.
2. The PPI policy insured your husband (not the company) and he was (one of) the borrowers of the Start up Loan;
3. The Startup Loan was lent on the basis that the monies would be used to fund the (then newly formed) Co. and therefore and ONLY as a matter of expediency, the Bank paid the balance of the loan funds into the Co's business account.
4. The Startup Loan was treated as "capital introduced" by the Director's in the Co's accounts.

What we don't know (yet, and for certain):

1. Which legal entity bought the PPI
2. Which legal entity was insured by the PPI policy
3. What the terms of the PPI policy were
4. What the cost of the PPI premium(s) was (and what interest was charged on those premiums)
5. When the "Startup Loan" was repaid (although presumably it was somewhere near the time of the 2005 loan).

If I have anything helpful to add to the situation with the PG's, I'll post it in that thread.

Originally Posted by wandajane

I have now found a copy of the insurance certificate.

That has to be helpful.

Originally Posted by wandajane

It is called "Business Loan Repayment Insurance", states our business name as the insured customer with my husband and co-director as nominated persons.

Business Loan Repayment Insurance BLRI

Hmmmm, "Business Loan Repayment Insurance" sounds like PPI by another name, but (and I think its a pretty big but, in your case) as this was a Business to Business transaction most, if not all, of the arguments usually made in relation to the mis-selling of PPI just do not apply.

In normal PPI claims, the sale is business to consumer, and the legal basis for the claims arising from mis-selling, largely (but not exclusively) depend on protections afforded to consumers.

Unfortunately, these protections are not generally available to businesses. In particular, arguments as to the "fairness" of contractual terms under the various relevant bits of legislation, do not normally apply business to business.

The Legislature and the Courts are/have been extremely reluctant to interfere in the capacity of businesses to contract with each other on whatever terms they see fit, unless there are over-riding policy considerations at stake i.e. to prevent crime, monopolist practices etc.

Without seeing the terms of the policy, the following is a guess, but from what you have said and what is on the Bank's website, the terms of the BLRI, will probably be akin to "key man" insurance with some PPI-like elements thrown in. Accordingly, the terms of the "Business Loan Repayment Insurance" are, I suspect, subtley but materially different from those found in a typical consumer PPI Policy.

If my understanding is correct; what the BLRI policy did was insure the Company against it being unable to make loan repayments due to the sickness, accident or death etc of its key men. Accordingly, despite his pivotal role within the company, as I see it, your husband never had any personal interest in either payments for or the benefits to be derived from the policy.


Therefore, irrespective of the merits of your claim, you are faced with a number of difficulties arising from this including:

1. The Company (rather than your husband) is the proper potential Claimant;
2. The Company no longer exists.
3. The decision whether or not to pursue litigation for and on behalf of the Company, no longer rests with its (former) officers.
4. Even, if the Company successfully gets any money back, this repayment will need to be accounted for in the context of the Company's liquidation.

Looking around the web, it appears there is some limited anecdotal evidence to suggest that people have received refunds relating to BLRI see Keith22 and ataction : however, neither of these posters seem to have been reclaiming BLRI sold to a company, but rather BLRI was sold to them personally (albeit in a business capacity, as sole traders).

Originally Posted by wandajane

The insurance commenced March 2000 and ceased March 2007.

In the context of the wider, more troublesome issues, the fact that the contract for the BRLI, on the face of it, "ran its course" is somewhat secondary.

Originally Posted by wandajane

It states that nominated persons must be "in active employment in your business" and their definition of employment is:

"Permanent paid employment including self-employment, or where applicable on statutory maternity leave, of at least 16 hours per week."

Clearly, the BLRI, both envisaged and permitted providing cover to self-employed directors. So, from a mis-selling perspective, the value of this argument is muted.

If (and, it is an if) a legal basis can be found for a claim in relation to a mis-sale to the Company, I think that your advisers will need to be looking at possibility of negligent misstatement and/or misrepresentation and/or the uberrimae fidei angle...


However, it occurs to me, that even if the facts tend to support such a claim, there may be other problems to overcome including:

1. That the the Terms of the BLRI Policy are likely to include an "entire understanding" clause which (seeks to) effectively preclude claims based on everything but the most outrageous (e.g. fraudulent) pre-contractual statements and or
2. That the Company's claim appears to already be statute barred under the limitation act - and I have doubts that, by virtue of its dissolution, it is open to the Company to put forward the s.32 arguments normally advanced to counter this.
3. That the costs of establishing a valid claim, resurrecting the Company and pursuing the litigation are such the cost/risk/benefit analysis of the potential Litigation does not stack up. This factor seems particularly acute, when one considers that it will not be carried out by you, with reference to potential benefit to you... but rather by those empowered to conduct Litigation on behalf of the dissolved Company, by reference to the potential benefit to the (dissolved) company and its Creditors.
4. Any claim instituted by a formerly dissolved, insolvent is likely to be met by a raft of procedural and financial hurdles, which would need to be overcome before the claim could proceed to trial including a Security for Costs application by the Defendant

Originally Posted by wandajane

I can not unfortunately find the repayment schedule but the premiums were definately front loaded.

I don't doubt it... and I bet when you add up the cost of the premium(s) + the interest on them... its an awful lot of money.

I wish I could be more positive, but I think it would be wrong of me to simply put these concerns aside and raise your hopes.

This matter needs to be considered by your advisers, even if ultimately it is not pursued, for the same reason I mentioned in relation to a potential bank charges claim in my earlier post.

I would also want them to exhaust the non-litigous avenues for complaint e.g. the Bank themselves and the fos; because even though there are clearly major hurdles in seeking legal redress, it is equally clear that morally speaking your husband was mis-sold a product that contributed in no small way to the collapse of the business.