The court ruled the 2000 indemnity did not cover policies sold before the agreement.
The Court of Appeal has allowed Santander’s appeal in a dispute over historic payment protection insurance (PPI), ruling that a contractual indemnity did not cover policies sold before a 2000 Agency Agreement was signed. The decision overturns the High Court’s award of approximately £677 million to AXA under the indemnity.
The case, AXA France IARD SA and AXA France Vie SA v Santander Cards UK Limited and Santander Insurance Services UK Limited, concerned PPI sold with store cards from the 1970s until January 2005. The relevant insurance businesses were subsequently acquired by AXA, while the lender became part of the Santander Group.
A formal Agency Agreement was executed on 1 December 2000. It governed the relationship between the parties in relation to the marketing and sale of insurance and included an indemnity under clause 12.2. That clause required GE-CB to indemnify the insurers for liabilities arising from acts or omissions, including negligence, while performing duties under the agreement.
The central issue was whether that indemnity also covered liabilities arising from PPI policies sold before the agreement took effect.
The Court of Appeal concluded that it did not. Lady Justice Cockerill said the wording referring to acts or omissions occurring “while performing their duties under this Agreement” was prospective. GE-CB had duties under the Agency Agreement only from its effective date, meaning earlier acts and omissions fell outside the indemnity.
The court also considered the agreement as a whole. Clauses dealing with GE-CB’s duties were expressed in future terms, while clause 17 stated that the agreement covered the marketing and sale of insurance “from and including the Effective Date”. The court found that the contractual drafting therefore pointed towards prospective rather than retrospective operation.
The court also dismissed AXA’s cross-appeal concerning contribution under the Civil Liability (Contribution) Act 1978. It held that AXA’s regulatory obligation to pay PPI redress did not amount to a “liability” of the kind contemplated by section 1(6) of the Act. The relevant payments arose from regulatory requirements rather than a liability that had been, or could have been, established in an action brought by the consumers.
The Court of Appeal emphasised that, at the time the redress was paid, PPI customers had not brought civil actions against AXA and could not establish the relevant liability through the regulatory complaints process. The court also rejected the argument that hypothetical future events could create the necessary liability retrospectively.
The appeal therefore succeeded and the judgment on the indemnity claim against Santander Insurance Services UK Limited was set aside. AXA’s cross-appeal was dismissed. Lord Justice Holgate and Lord Justice Lewison agreed with the judgment.