Background
AXA’s predecessors underwrote payment protection insurance sold with store cards by Santander’s predecessors from the 1970s until January 2005. The parties operated within the GE Capital group for much of that period, but did not execute a written Agency Agreement until 1 December 2000. Clause 12.2 required GE Capital Bank to indemnify the insurers against liabilities arising from its acts or omissions while performing duties under that agreement.
After widespread PPI complaints, AXA paid nearly £500 million in customer redress, more than £70 million in Financial Ombudsman Service fees, and substantial administration costs. Dias J held that Clause 12.2 covered liabilities arising from sales throughout the parties’ relationship, including sales before December 2000, and awarded AXA approximately £677 million including interest. She rejected AXA’s alternative claim for contribution under the Civil Liability (Contribution) Act 1978. Santander appealed the indemnity ruling, and AXA cross-appealed the contribution ruling.
The Court’s Holding
The Court of Appeal unanimously allowed Santander’s appeal. Reading the Agency Agreement as a whole, it held that Clause 12.2 operated prospectively and did not cover policies sold before the agreement took effect. The words “while performing their duties under this Agreement,” the future-facing duties imposed elsewhere in the contract, and the entire-agreement clause all pointed to that result. Clause 1.2 brought future sales under existing schemes and ongoing administration of existing policies within the agreement, but did not retrospectively govern earlier marketing and sales.
The court dismissed AXA’s cross-appeal. AXA’s payments under the regulatory complaints regime did not discharge a liability that had been or could have been established in an action brought by the consumers, as required by section 1(6) of the 1978 Act. At the time of payment, consumers had made regulatory complaints rather than actionable civil claims against AXA. The court therefore did not need to decide AXA’s remaining contribution grounds. It set aside the judgment on the indemnity claim against the second appellant.
Key Takeaways
- An indemnity for acts or omissions committed while performing duties “under” an agreement ordinarily does not reach conduct predating that agreement without clear retrospective language.
- Contractual continuity and commercial context could not override the agreement’s consistently prospective wording, particularly where no indemnity had existed previously.
- Regulatory redress payments do not support contribution under the 1978 Act unless they discharge a liability that was actionable by the person who suffered the relevant damage at the time of payment.
Why It Matters
The decision overturns a judgment worth approximately £677 million and limits Santander’s contractual indemnity exposure by excluding PPI policies sold before 1 December 2000. It underscores the need for explicit drafting when parties intend a newly created indemnity to cover historic conduct.
The ruling also draws a firm boundary between regulatory obligations and the common liability required for statutory contribution. A regulated firm cannot obtain contribution merely because its redress payments economically resemble compensation that another party might have owed under a different cause of action.