County Court considers limitation period for unfair relationship claim in secret commission case

The County Court has partially allowed an appeal against the decision of a District Judge to dismiss unfair relationship claims under s.140A of the Consumer Credit Act 1974 (CCA 1974) by two borrowers against a lender/its assignee, in respect of allegedly secret commissions paid by the lender to a third-party credit broker: Howard & Anor v GE Money Mortgages Ltd & Anor [2025] EWCC 18.

This is the latest in a line of decisions concerning "secret" and "half secret" commissions payable to third party intermediaries (see our previous blog posts here). It underscores the distinction between limitation periods for breach of fiduciary duty and unfair relationship claims brought under s.140A of the CCA 1974. The decision is a timely reminder for financial institutions, particularly those awaiting the Supreme Court's decision in Johnson v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance) [2024] EWCA Civ 1282 (referred to as Hopcraft) (see our blog post), of the risk of longer limitation periods for unfair relationship claims.

This decision highlights that even if the limitation period in respect of a breach of fiduciary duty claim has expired, there is a risk that the limitation period for an unfair relationship claim has not, particularly where the credit relationship is ongoing, has been assigned or has recently ended. That said, the decision gives some comfort that this risk may be mitigated by the exclusionary rule in Barnes v Black Horse Limited [2011] EWHC 1416 (QB), which disallows the making of a separate unfair relationship claim by a debtor where that claim could have been brought in the context of earlier proceedings by a lender to enforce a loan.

We consider the decision in more detail below.

Background

In 2004, the claimant borrowers entered into a credit agreement secured against their house with the first defendant, a lender. The credit agreement was obtained through a broker, to whom the borrowers paid a fee of £1,250, and the lender paid a commission of £4,261.25. In 2007 the borrowers defaulted, and the lender commenced possession proceedings, which were later suspended. In September 2015, the lender transferred the credit agreement to the second defendant, the assignee. By September 2019, the payments under the credit agreement were completed and the charge on the borrowers' home was removed in October 2019.

In 2023, the borrowers brought proceedings against the lender and assignee alleging that: (i) the commission paid to the broker by the lender was a secret commission; (ii) the lender was an accessory to the broker's breach of fiduciary duty due to the non-disclosure of the commission; and (iii) the relationship between the borrowers and both the lender and assignee was unfair under s.140A CCA 1974.

At first instance, the District Judge dismissed the claim, finding that:

• the commission was half-secret, not fully secret, as the borrowers had signed documents referencing the commission and were therefore on notice of its existence;
• the half-secret commission claim was time-barred as it was brought 19 years after the commencement of the credit agreement, beyond the 6 year primary limitation period. Also, the start of the limitation period was not delayed under s.32 Limitation Act 1980 (which has the effect of delaying the start of the limitation period where a fact relevant to the claimant's right of action has been deliberately concealed by the defendant) as the borrowers could have discovered the amount of the commission when the credit agreement was signed in 2004; and
• the unfair relationship claim under s.140A CCA 1974 repeated previous unsuccessful arguments, so it must also fail.

The borrowers appealed to the Birmingham County Court, arguing (among other things) that the unfair relationship claim under s.140A CCA 1974 was not time-barred as the limitation period did not run from the date of the agreement but from the end of the relationship.

Decision

The County Court allowed the appeal in part, finding that the unfair relationship claim under s.140A CCA 1974 was time-barred against the lender but not against the assignee.

The key points which will be of interest to financial institutions are set out below.

Limitation

The County Court acknowledged that the primary limitation period for a breach of fiduciary duty claim starts to run from when the breach occurred, in this case when a credit agreement was entered into. The primary limitation period for an unfair relationship claim under s.140A CCA 1974, however, starts to run from the date when the credit relationship ends and expires after 6 years (as per Smith v Royal Bank of Scotland [2023] UKSC 34). In the County's Court view, the District Judge had failed to take into account this distinction in its decision.

The County Court therefore reconsidered whether the unfair relationship claim under s.140A CCA 1974 was, in fact, time-barred as against the lender and assignee. It highlighted that applying the ordinary and natural meaning of "relationship", the assignment of the credit agreement to the assignee brought the relationship between the borrowers and the lender to an end in September 2015. This was consistent with Link Financial Ltd v Jones [2012] EWHC 2402 (QB) and the definition of creditor in s.189 CCA 1974 as "the person providing credit under a consumer credit agreement or the person to whom his rights and duties under the agreement have passed by assignment or operation of law". The lender was the "person providing credit" until their rights and duties under the agreement passed by assignment to the assignee. Accordingly, the primary limitation period for the unfair relationship claim against the lender expired in September 2021. Further, the County Court said that the District Judge's reasons for finding that s.32 Limitation Act 1980 did not extend the limitation period for the breach of fiduciary duty claim in its opinion applied equally to the unfair relationship claim. Thus, the unfair relationship claim against the lender was time-barred.

However, the County Court noted that the relationship between the borrowers and the assignee for the purpose of the unfair relationship claim commenced upon assignment of the credit agreement and ended in September 2019, when the agreement was paid off, or at the latest in October 2019, when the charge was removed. Therefore, the limitation period in respect of this claim did not expire until six years later, namely September/October 2025. Consequently, the unfair relationship claim as against the assignee was not time-barred. In the view of the County Court, the District Judge was wrong to dismiss the unfair relationship claim against the assignee and remitted the matter back to be heard by the District Judge.

Exclusionary rule

It was also submitted by the lender and assignee that the borrowers' unfair relationship claim was precluded by the exclusionary rule in Barnes, which disallows the making of a separate unfair relationship claim under s.140A CCA 1974 by a debtor where one or both of them had the opportunity to make that claim (or a claim under prior, equivalent, legislation) in the context of earlier proceedings brought by a lender to enforce a loan.

The County Court held that it was bound by the decision in Barnes in the absence of any higher authority to the contrary. Applying Barnes, it noted that the borrowers had been defendants to possession proceedings brought by the lender in 2007 and they had not raised any issue regarding unfairness in those proceedings. Therefore, the borrowers were also and in any event prevented by the exclusionary rule from bringing an unfair relationship claim against the lender such that the County Court upheld the District Judge's decision dismissing the claim.

The borrowers' unfair relationship claim against the assignee was remitted to the District Judge for further consideration.

Accordingly, the County Court allowed the appeal in part, finding that the unfair relationship claim was time-barred against the lender but not against the assignee.

Note: In May 2025, the claimants applied to the Court of Appeal for permission to appeal. However, in October 2025, the application was withdrawn.