England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Claim No 2028 of 2006 Royal Courts of Justice Strand, London, WC2A 2LL
		05/06/2015

Mrs Justice Andrews:

Introduction
 


1. Payment Protection Insurance ("PPI") is a form of insurance that protects a consumer against the risk of being unable to repay instalments of a loan or credit agreement if he dies, becomes seriously ill or disabled, loses a job, or faces other circumstances that may prevent him from earning sufficient income to service the debt. The insurance product is typically sold at the same time as the customer enters into the underlying loan or credit agreement.
2. Historically, PPI was a lucrative business for insurers and their intermediaries. Insurers provided incentives to sell it by paying substantial commissions to brokers, or entering into profit-sharing arrangements with the financial institutions or retailers who sold the policies to customers on their behalf. The ratio of premium income to successful claims heavily favoured the insurers, and the sale of PPI policies could often make more money for the party selling the insurance than the interest earned on the underlying credit agreement.
3. However, in recent years there has been a great deal of controversy about the allegedly widespread mis-selling of PPI, for example to people who did not meet the eligibility criteria, or who did not even appreciate that they were paying for it. This has led to the fining of a number of well-known financial institutions by the regulator, the Financial Conduct Authority ("FCA"), and to a vast number of complaints being made to the Financial Ombudsman Service ("FOS"). A whole new claims industry has grown up, with a concomitant proliferation of nuisance calls by so-called specialist claims handlers eager to capitalise on the business opportunities generated by the controversy.
4. From 1990 until 2004 the Claimant ("PAGI"), which was then a wholly-owned indirect subsidiary of Royal and Sun Alliance Group Plc ("R&SA"), sold creditor insurance policies. As part of that insurance portfolio it sold PPI policies through third party agents. Among these was Next Plc ("Next"), the well-known clothing retailer, which sold the policies in connection with its store card accounts.
5. Next entered into a successive series of Master Policies with PAGI, each of which enabled Next to bring its customers within its ambit whenever they signed up to a credit agreement. The sample Master Policy in evidence, for the period from October 1991 to January 1993 defined the "Policyholder" as Next (and its subsidiaries) and the "Insured Person" as "the account customer or the family breadwinner." Mr Moore QC, on behalf of PAGI, told the Court that it could assume that the terms of the sample Master Policy were "fairly typical". Premiums were deducted whenever the individual store account was in debit. In the event of a successful claim under the insurance, PAGI would make payments to Next (or to its relevant subsidiary) to clear the outstanding credit balance owed to the retailer by the insured customer. Under a profit-sharing agreement between Next and PAGI, Next was entitled to receive 85% of the underwriting profit from the PPI business it sold. Next ceased selling PPI insurance on PAGI's behalf, in 2004, although then-extant insurance agreements remained in force for some time thereafter.
6. In April 2003, R&SA sold its healthcare and assistance insurance operations to the Second Defendant ("Cigna"), which was established as part of a management buy-out from R&SA, under a Business Transfer Agreement ("the BTA"). The BTA was not an insurance business transfer scheme under Part VII of the Financial Services and Markets Act 2000 ("FSMA") and therefore did not operate as a statutory novation of the policies written by R&SA (or its subsidiaries) to Cigna. Instead, the BTA provided for the economic benefits and burdens of certain classes of insurance business (including, on PAGI's case, creditor insurance) to be transferred to Cigna. It was agreed that R&SA and its subsidiaries would continue to underwrite those categories of insurance, subject to their being reinsured under a Treaty Quota Share Reinsurance Agreement between R&SA, Cigna, and a German reinsurer, and that Cigna would administer the business. In consequence of those arrangements, since April 2003 any claims made under the PPI policies underwritten by PAGI, or complaints about them, have been handled by Cigna.
7. On 30 September 2004, R&SA sold the entire issued share capital of PAGI to Resolution Life Limited ("Resolution Life"). It was a term of the sale that R&SA and Resolution Life would use reasonable endeavours to obtain the transfer of PAGI's general insurance business back to R&SA by means of an insurance business transfer scheme under Part VII of the FSMA ("a Part VII scheme"). This was because the group to which Resolution Life belonged did not write general insurance. Following the sale, as an interim measure pending the then intended transfer of PAGI's general insurance business back to R&SA, liabilities in respect of such business were ceded to R&SA under reinsurance arrangements. PAGI continued to underwrite general creditor insurance business on this basis until 31 May 2006.
8. In 2005, PAGI's life insurance business was transferred to a company within the R&SA Group which became known as Phoenix Life Limited, under a Part VII scheme. The scheme ("the 2005 Scheme") was sanctioned by Evans-Lombe J on 31 October 2005, and took effect on 31 December that year. It is not disputed that the life component of the PPI business was transferred to Phoenix Life under that Scheme.
9. In 2006, the decision was taken that instead of transferring PAGI's creditor insurance business back to R&SA, it would be transferred to another insurer. Accordingly, pursuant to a further Part VII scheme, ("the 2006 Scheme") PAGI transferred to the First Defendant ("Groupama") the non-life component of the PPI business in question, and various other lines of business. The 2006 Scheme was sanctioned by Order of Mann J dated 17 May 2006 ("the Order") and became effective on 31 May that year, after certain preconditions had been fulfilled.
10. Various other types of non-life business written by PAGI were also transferred in 2006 to different insurers under separate Part VII schemes; for example, its private medical insurance business was transferred to Standard Life Healthcare.
11. In 2013, there was a further Part VII transfer of the portfolio from Groupama to Ageas Insurance Ltd ("Ageas"). It was agreed that for the purposes of this application, I should assume that whatever liabilities were transferred to Groupama under the 2006 Scheme were transferred on to Ageas. Ageas is not formally a party to these proceedings, but has agreed to be bound by the Court's decision on PAGI's application, subject to rights of appeal.

This application

12. An insurer's liability for mis-selling an insurance policy could arise in tort, (for negligence or negligent mis-statement at common law, or in deceit); or under the Misrepresentation Act 1967; or possibly for breach of statutory duty under s.138D FSMA or its predecessors. If such a liability arose in contract, which seems rather unlikely, it would arise under a collateral agreement to give advice about the suitability of the insurance, rather than under the contract of insurance itself. Subject to sections 14A and 32 of the Limitation Act 1980, all such claims in respect of the PPI policies underwritten by PAGI are likely to be time-barred. However, an insurer may also be liable to pay compensation under a complaint made to the FOS scheme, which can arise independently and irrespective of any legal liability, and is not subject to such a statutory limitation defence. In this judgment the expression "mis-selling liability" is to be understood as including any such liabilities imposed by the FOS.
13. Since around 2012 several hundred customers of Next have complained to the FOS that PPI was mis-sold to them. New complaints continue to be made, and could continue for years to come. In correspondence with the FOS in the course of 2014, PAGI contended that any potential mis-selling liabilities arising from PPI sold by Next had been transferred by the 2006 Scheme to Groupama, and therefore the FOS should treat Groupama, rather than PAGI, as the responsible insurer and the correct respondent to the complaints. However, the FOS has provisionally decided that the 2006 Scheme did not transfer such liabilities to Groupama. In order to challenge that provisional decision, this application was issued by PAGI pursuant to a general liberty to apply granted in the Order.
14. The issue that I have been asked to determine is whether any liabilities in respect of the alleged mis-selling of the PPI policies underwritten by PAGI were transferred to Groupama under the terms of the 2006 Scheme. The answer turns on a short point of construction of the definition of "Transferred Liabilities" in the terms of the 2006 Scheme and in the Order.
15. Paragraph 10 of the Order states:

"On and with effect from the Effective Date, the Transferred Liabilities shall, by virtue of this Order and without any further act or instrument be transferred to and become liabilities of the Transferee and in each case shall cease to be liabilities of the Transferor."

16. The terms of the 2006 Scheme were set out in Schedule B to the Order, and the Order uses expressions which are defined in Part A, Clause 1 of those terms. Clause 1.1 provides (so far as relevant) that:

"Transferred Liabilities" means all liabilities of the Transferor (other than the Residual Liabilities and any liabilities under or relating to the Excluded Policies) under or attaching to the Transferred Policies and the Transferred Reinsurances…… but excluding, for the avoidance of doubt, the Excluded Liabilities and the Life Component Liabilities."

"Transferred Policies" means Products (but for the avoidance of doubt excluding the Excluded Policies and the Life Component of all Composite Policies).

"Products" means those Creditor Insurance Policies written by [PAGI] (including…the General Component of any Composite Policies) in connection with or which are attributable to the Creditor Business.

"Composite Policy" means any Policy which comprises both General Business and Life Business."

17. It is common ground between PAGI and Groupama (but not Cigna) that the expression "Transferred Policies" includes the non-life component of the PPI policies underwritten by PAGI as described above. I am not otherwise concerned with the identity of the policies that were transferred under the 2006 Scheme.
18. Any liability for historic mis-selling would initially fall upon PAGI, and it is for PAGI to establish that it was the objective intention of PAGI and Groupama that such liability would pass to Groupama under the 2006 Scheme.
19. Cigna was made a party to the application by order of Newey J, as it has a legitimate interest in the outcome: both PAGI and Groupama have potential claims to be indemnified by Cigna in respect of any claims made against them for mis-selling these policies. I am not concerned with the interpretation of the provisions on which they would rely to claim such an indemnity, but their existence is a material factor to be taken into account in the construction of the terms of the Scheme and the Order.
20. Mr Moore very properly accepted that if the FCA were to levy a fine on PAGI for mis-selling PPI policies, the responsibility for paying that fine would remain with PAGI, regardless of any transfer of other liabilities to Groupama.

The nature of a Part VII scheme

21. The legal framework and the principles on which the Court exercises its discretion when approving an insurance business transfer scheme under Part VII of the FSMA have been helpfully summarised by Birss J in Re Prudential Annuities Ltd and Prudential Assurance Ltd [2014] EWHC 4770 (Ch) at [18]–[23] and [38]-[40] respectively. The salient points to note for present purposes are that:

i) The legislation requires particular material to be put before the Court to enable it to determine whether the scheme it is asked to approve is "fair";

ii) The regulator plays an important role, inter alia in ensuring that policyholders and others affected by the scheme have received sufficient information about it;

iii) The role of the scheme actuary (the independent Expert) is vital, because the question engaging the Court is primarily a matter of actuarial judgment;

iv) The starting point is that the actuary and the Court are concerned with contractual rights (arising under contracts of insurance) and the reasonable expectations of policyholders as to the ability of the relevant insurer to meet their obligations in respect of those contracts.

22. The fact that the scheme is primarily concerned with the transfer of contractual rights and liabilities does not exclude the possibility of also transferring non-contractual or extra-contractual liabilities pertaining to the insurance business in question. However one would expect, in such event, that the regulator (in 2006, the Financial Services Authority) and the scheme actuary would be told about the proposed transfer of such additional liabilities, so that they could consider the implications. An intention to make provision for the transfer of mis-selling liabilities would qualify as an unusual feature which might have a material financial impact on the scheme, and which one would therefore expect to be expressly disclosed in the context of the application for a transfer under a Part VII scheme. One would also expect the actuary's report to make some attempt to quantify these further liabilities, and consider the potential financial impact of transferring them.
23. Despite this, neither the 2006 Scheme nor the Order nor any of the contemporaneous materials put before Mann J in 2006 made express provision for (or even referred to) any possible liabilities for the alleged historic mis-selling of the policies which were to be transferred to Groupama. Even Leading Counsel's skeleton argument on the application for the sanction of the 2006 Scheme was silent on the topic.
24. Significantly, there is no mention of the transfer of such liabilities in the report of the independent Expert, Dr Gibson, which considers the financial and non-financial impact of the proposed transfer. Mr Moore sought to persuade me that the description of the scheme in Dr Gibson's report was implicitly consistent with a transfer of such liabilities to Groupama, but in my judgment the highest that PAGI can put it is that her report is neutral. Indeed, if PAGI's case is right, a statement in Dr Gibson's report that "all the Transferred Liabilities are reinsured" would be incorrect.
25. Contrary to Mr Moore's submissions, the general tenor of Dr Gibson's report appears to be founded on an assumption that the "Transferred Liabilities" are all contractual. Thus for example, paragraph 7.3 states that "I understand that the [PAGI] Transferred Liabilities are all very short-tailed, with minimal residual liabilities expected beyond one year after the Effective Date of the Transfer." That statement is wholly inapt to describe mis-selling liabilities.
26. As Mr Davis QC, for Groupama, pointed out, all the information before the Court regarding the 2006 Scheme was about the book as it stood in 2006 (there were then around 125,000 policyholders). There is nothing in the documentation regarding historic, lapsed policies. Moreover, the reserve that was transferred to Groupama under the 2006 Scheme was a general claims reserve, with no apparent separate reserve for mis-selling claims.
27. Bearing in mind the legal framework and the principles that the Court must apply when sanctioning such a scheme, it is inherently unlikely that if the parties did have an intention to transfer liability for mis-selling claims to Groupama, they would have kept quiet about it.

The construction of the definition of "Transferred Liabilities"

28. The applicable principles of contractual interpretation are so well-known that it is unnecessary for me to set them out here. The classic modern statement of principle is to be found in Lord Hoffmann's speech in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912F-913E, amplified in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900. In Rainy Sky, Lord Clarke indicated that the iterative process of construction should begin with the ordinary, natural and grammatical sense of the language used by the parties, but that must be checked against the other provisions of the contract and its overall scheme, and the commercial consequences of adopting the rival interpretations.

The natural meaning of the words used

29. However it arises, it is plain that liability for mis-selling would not arise "under" the contract of insurance. The insurer's primary liability under an insurance policy is its liability to pay claims in the event of an insured loss: see e.g. Sprung v Royal Insurance (UK) Ltd [1997] CLC 70 at [80].
30. Therefore the issue I have to determine turns on whether a liability for mis-selling falls within the ambit of the expression "all liabilities of the Transferor… attaching to the Transferred Policies." It is a short point, and frankly it did not require two days of oral argument on top of three skeleton arguments exceeding 20 pages, two lever arch files of authorities that were barely referred to, and the plethora of other documentation that was put before the Court.
31. Mr Moore submitted that the expression "attaching to" was apt to capture mis-selling liabilities because the entry of the assured into the contract of insurance is an essential ingredient of any claim for mis-selling. The complaint arises from the fact that the complainant has been sold a policy that he did not want, or on terms that were unsuitable for him. Moreover any damages or compensation would almost certainly equate to the premium payments made under the impugned policy.
32. Both Mr Davis, and Mr Tolley QC, on behalf of Cigna, submitted that if it had been intended to transfer liabilities for mis-selling to Groupama, that could have been achieved much more simply, either by spelling it out expressly or by using a wider expression such as "liabilities relating to" or "liabilities in connection with" the Transferred Policies. Whilst that is true, it does not necessarily follow from the fact that matters might have been more clearly drafted that the expression that the draftsman actually decided to use was inapt or ineffective to achieve that aim. However, in my judgment the construction for which PAGI contends is an unnatural interpretation of the language he did use, and liabilities for mis-selling do not "attach to" the Transferred Policies.
33. As a matter of natural interpretation, a "liability attaching to" a contract would be understood as a reference to a liability that is directly connected with, or emanates from, the contract itself, arising after that contract has come into existence. It would not readily be understood as referring to a liability for an actionable wrong which preceded or gave rise to the contract. In the context of a statutory novation of a book of insurance contracts, the natural interpretation makes sense, as it is consistent with the passing of insurance liabilities to the transferee, who is replacing the original insurer as the other contracting party.
34. Although it might be said that this interpretation adds little or nothing to "liability under" a policy, it is important to remember that the context was one in which a Master Policy was written in favour of a retailer, and individual risks attached to it in the future, as and when customers entered into credit agreements under their store card accounts. Each new risk that attaches to the policy carries with it a prospective corresponding liability on the part of the insurer to the customer.
35. Groupama will stand in the shoes of PAGI as if it had written the business itself; objectively it must have been the intention of the contracting parties that Groupama would take over responsibility for all contractual insurance liabilities, whether they arose directly under the Master Policy on its inception, or in consequence of the attachment of further individual risks to that policy whenever customers bought goods on credit using their store card accounts. Viewed in that context, the phrase "liabilities attaching to" the Transferred Policies appears to be a reference to contractual liabilities to those who come within the extended definition of "insured persons".
36. I am fortified in this conclusion by the fact that the draftsman of the Scheme terms used the wider expression "liabilities relating to" in the very same definition of "Transferred Liabilities", to exclude "liabilities under or relating to the Excluded Policies" from its ambit. It is generally to be assumed when construing a contract that where a draftsman uses two different expressions in the same clause, he intends them to mean something different. Therefore, on the face of it "attaching to" does not mean the same thing as "relating to". However, PAGI's construction effectively requires the expressions to be treated as synonymous.

Does the natural interpretation make sense in context and commercially?

37. The natural interpretation makes sense in the context of the 2006 Scheme, which is primarily concerned with the passing of contractual risks and rewards. It also makes commercial sense. It must be borne in mind that the liabilities in question would already have arisen long before the time of the 2006 Scheme, as PAGI had ceased writing PPI insurance two years earlier. Therefore Groupama would receive no premium income in respect of that business, other than that in respect of renewals of extant policies.
38. Although Groupama was taking on a certain level of risk in relation to events occurring before the transfer, those risks were quantified by Dr Gibson's Report. Groupama's financial exposure in respect of the claims for payment under the Transferred Policies was capable of at least an estimated calculation, which would enable it to balance the risk of having to meet such claims against the likely profit to be made from its share of the renewal premiums. However, each successful claim for mis-selling would be likely to result in the insured customer receiving back all the premiums paid over the years of the policy, with interest (which could be as high as 8% per annum under the FOS compensation scheme).
39. From an economic perspective, therefore, if Groupama took over these historic liabilities, it would face the prospect of having to pay out possibly millions of pounds, most of which had been received by someone else, as well as substantial amounts of interest, for that other person's wrongdoing. It is inherently unlikely to have agreed to have done so, let alone tacitly. That is yet another reason why, if PAGI is right, one would have expected to see some express provision to that effect in the terms of the Scheme, or at the very least some clear reference to it in the Scheme documentation or in the advertisements about the 2006 Scheme.
40. In support of PAGI's construction, Mr Moore relied in particular upon:

i) The description of the complaints procedure in the terms and conditions supplied to account holders by Next pursuant to the terms of the Master Policy;

ii) The prior disposal of PAGI to Resolution Life, whose business model as a specialist consolidator of closed funds was incompatible with the retention of any general business;

iii) The fact that PAGI was engaged in a "clear out," and therefore would have a diminishing asset base from which to meet any retained liabilities;

iv) The express inclusion of liabilities for mis-selling in the definition of "Transferred Liabilities" under the 2005 Scheme;

v) The tenor of the information sent to policyholders at the time of the 2006 Scheme, which he submitted was to the effect: "for PAGI, substitute Groupama", and the absence of any reference to liability for mis-selling of the policies remaining with PAGI; and

vi) The fact that the 2006 Scheme was conditional upon the execution of certain other agreements, including what in the event became a Deed of Warranty and Indemnity between R&SA and Cigna, and a Scheme Agreement between Groupama, Cigna, R&SA and FirstAssist Group Ltd ("FAGL"). The provisions of the latter agreement included, in Clause 8.1.1, an express indemnity in favour of Groupama in respect of mis-selling claims.

41. In my judgment the only one of these points that had any substance was the last. Although neither the Deed of Warranty and Indemnity nor the Scheme Agreement was before Mann J when the Order was made (indeed neither was explicitly described to him), both were in draft form at the time, and it can reasonably be inferred that the drafts were in materially similar form to the versions executed on 31 May 2006. It is legitimate to take them into account as part of the factual matrix.
42. One might well ask the question why Groupama should go to the trouble of contemporaneously obtaining an express indemnity from Cigna and FAGL in respect of:

"All and any expenditure, losses or liabilities which may be suffered or incurred by Groupama and which arise as a result of ...

any claims or allegations by any regulatory or other authority or body or by or on behalf of any policyholder, insured or beneficiary under any Transferred Policy of mis-selling or alleged mis-selling or the provision of negligent or misleading advice in each case in connection with the sale of any Transferred Policy..."

if it was contemplated that those liabilities should remain with PAGI.

43. However, the argument is effectively neutralised by the fact that PAGI itself (or R&SA) have arguable routes for claiming an indemnity from Cigna in respect of such liabilities under the BTA, or under the Deed of Warranty and Indemnity, by which Cigna warranted that PAGI would have "no further obligation or liability" in connection with the transferred creditor insurance business (Clause 2(e)).
44. There is a further argument, which Mr Tolley outlined, to the effect that all liability for mis-selling the policies concerned had already been transferred to Phoenix Life under the 2005 Scheme. The definition of "Transferred Liabilities" under that Scheme, so far as material, was "all liabilities whatsoever of a Transferor comprised in or attributable to the Transferred Business including... (D) all liability for compensation and other costs in respect of the mis-selling of Policies". Interestingly, the expression used is "Policies" not "Transferred Policies", although the latter is a defined expression in the terms of the 2005 Scheme, and confined what was transferred to the non-life element of composite policies.
45. Mr Tolley submitted that even though a PPI policy may be composite, with a life and non-life element, one cannot split the liability for mis-selling between the different risks insured under the policy. The only liability that could be transferred is the original insurer's liability, as principal, for Next as its agent doing or saying something which caused the assured to enter into the contract of insurance, not specific risks covered under it. That is what was expressly transferred to Phoenix Life under the 2005 Scheme. Thus, he submitted, if a claim for compensation were brought against Phoenix Life before the FOS, the assured could not bring a further claim against PAGI in respect of the same PPI policy.
46. Mr Moore's riposte was that there is nothing to preclude two insurers agreeing to be jointly and severally liable in respect of a mis-selling claim made by an assured in respect of one policy, and that the arrangement made between PAGI and Phoenix Life was akin to co-insurance, whereby Phoenix Life agreed to bear a share of the financial responsibility for any mis-selling claim, which could be calculated by reference to the life element reflected in the premiums. That arrangement would not preclude PAGI from subsequently transferring its liability for the non-life element to a third insurer. Whilst that may well be right, I do have some concerns about how the transferee of the non-life element of the PPI business, Groupama, would be in a position to claim contribution from Phoenix Life (and vice versa) in the absence of a further agreement between them, since it could not succeed to PAGI's rights and obligations as Transferor under the 2005 Scheme merely by virtue of the statutory novation effected by the 2006 Scheme.
47. It is unnecessary for me to resolve this argument in order to decide the issue of construction before me. I doubt if it would be possible to do so without more information about the 2005 Scheme, and in any event it would be unfair to do so in the absence of submissions by Phoenix Life. Suffice it to say that the evidence before me establishes that Groupama was not the only party to the relevant arrangements for the 2006 Scheme who took precautions against facing the financial exposure of mis-selling claims being made against it in respect of the Transferred Policies.
48. In any event, the Court cannot draw too strong an inference from the fact that Groupama sought an indemnity from Cigna, since there was always a risk that someone might argue that Groupama was liable because of the transfer, and that might cause Groupama to incur costs and expenses even if it won the argument. Therefore, at the end of the day, the fact that Groupama sought an indemnity from Cigna is neutral so far as the construction of "Transferred Liabilities" is concerned.
49. Mr Moore used the express transfer of mis-selling liability under the 2005 Scheme as a further factor pointing towards the intention of PAGI that such liability should transfer together with the non-life element of the PPI policies themselves to another insurer, consistently with the "clear out" of PAGI's own general insurance business. However, it is conversely arguable that the fact that express language was used around six months earlier in connection with the 2005 Scheme suggests that if that had also been the parties' intention in respect of the 2006 Scheme, similar express language would have been adopted. Like the taking of the indemnities, there are arguments favouring each side, and the result is neutral.
50. As to the remaining points raised by Mr Moore, the first adds nothing to PAGI's argument that no liability for mis-selling could arise unless the insured took out a PPI Policy. The Master Policy required Next, as Policyholder, to issue to its store account customers "written information in the form provided by [PAGI] which written information is deemed to be incorporated herein". I was shown various examples of such information issued over the years. Next's customers were told that if they had any "enquiry" or "complaint" regarding their policy they could (or should) first address it to Next, and if they were not satisfied with the way the complaint had been dealt with they should please write to PAGI (or, from 2002, to R&SA), and if they were still not satisfied they could refer the matter to the relevant Ombudsman.
51. It by no means follows that because the policy included information as to where complaints should be directed, there was a contractual right of complaint, let alone that in consequence any liability for mis-selling somehow became attached to the policy. There is no such thing as a "right of complaint," and anyway, one does not need a contract in order to be able to complain. The terms and conditions did no more than tell the customer who they should write to if they had a complaint. I accept that the right to take the matter to the FOS or its predecessors would only arise if the complainant had taken out a PPI policy, but that right is not conferred upon him by the policy. It would arise regardless of what the policy said. In any event, there is no contractual liability to pay an award by the Ombudsman, even one made by the FOS.
52. The sale of PAGI to Resolution Life is mentioned as part of the background in Dr Gibson's Report; but the fact that PAGI was effecting the transfer of its existing book of creditor insurance business to Groupama as part of a plan to divest itself and R&SA of any further exposure to such business, is not incompatible with its retaining the liability for historic mis-selling. I do not accept that it would have made little or no commercial sense for PAGI to have retained those liabilities, in circumstances where it would already have received the lion's share of the premium income from the policies concerned, and all of the premium income from those which had lapsed prior to the transfer (subject, in both cases, to the profit-sharing arrangement with Next).
53. The fact that PAGI had ceased to write business and was divesting itself of its general insurance business in the context of a reconstruction, does not necessarily mean that it would have insufficient money left with which to meet non-contractual liabilities if they materialised. In the absence of any relevant financial information about PAGI, other than what appears in Dr Gibson's Report, I am not prepared to draw any inference about its remaining asset base. In any event, PAGI would not necessarily have to find the money itself. Quite apart from the new Group to which it belongs, on PAGI's own case, there is the prospect of a claim for an indemnity against Cigna (or indeed Next) to provide financial back-up in the event that such claims arose. I do not accept Mr Moore's submission that in the light of PAGI's "clear out", the failure to mention PAGI's retention of liability for mis-selling in the 2006 Scheme is more startling than the absence of any reference to the transfer of such liability. In the absence of reference to a transfer, one would naturally expect the status quo to be maintained.
54. An objective reading of the advertisements of the 2006 Scheme as well as of the other Scheme documents would have led to no other assumption than that the contractual rights and liabilities under the policies of insurance were to be transferred to Groupama. I do not accept that a policyholder would or even might have gained the impression from reading any of those documents that liabilities for mis-selling PPI policies had transferred to Groupama. On the contrary, I consider the average lay person would expect liabilities for historic wrongdoing to remain with the wrongdoer unless the converse was expressly spelled out.
55. Groupama would be able to raise any defences to claims under the insurance, including material misrepresentation. At first sight it might seem unlikely that the parties to the 2006 Scheme intended that Groupama should be able to rely on pre-contractual misrepresentations, but the assured should not be able to do so as against Groupama. However, it must be borne in mind that Groupama's right to raise such a defence is a direct result of its being treated as the contracting insurer in consequence of the transfer of the business to it, whereas any mis-selling claim arises independently of any subsequent assignment or novation of the contract of insurance, and the liability for it does not automatically transfer. If the fact that a transferee insurer is entitled to rescind for misrepresentation in and of itself gave rise to the implication that a reciprocal right was intended to be conferred on the assured as against him, then every Part VII Scheme would have the effect of transferring mis-selling liabilities to the transferee, which is not the case.
56. In short, the natural interpretation of the phrase "liabilities attaching to the Transferred Policies" accords with the overall purpose of the 2006 Scheme and business common sense. There is nothing in the factual matrix or as a matter of commercial imperative to require the Court to adopt PAGI's alternative interpretation.

Conclusion

57. In my judgment, it would be contrary to business common sense to suppose that the parties to a transfer of insurance business for nil consideration implicitly intended, without referring to it in any document, to pass to the Transferee with the Transferee's consent an open-ended liability for mis-selling PPI, to which conventional limitation would not apply. The natural construction of the definition of "Transferred Liabilities" in the 2006 Scheme terms does not produce that result.
58. For the reasons set out above, the "Transferred Liabilities" under the 2006 Scheme which were transferred to Groupama by Clause 10 of the Order do not include any liability for the alleged mis-selling of PPI. It follows that the insurer "responsible" for any claims before the FOS is PAGI, not Groupama.