No liability, no contribution: Court of Appeal shuts the door on seeking contribution from another party to PPI redress under the 1978 Act

In AXA France IARD S.A. and another v Santander Cards UK Ltd and another [2026] EWCA Civ 1185 the Court of Appeal has concluded that redress payments made by a regulated firm under the FCA’s complaints-handling regime do not discharge a “liability” within the meaning of the Civil Liability (Contribution) Act 1978. 

The firm therefore cannot seek contribution from another party responsible for the same underlying mis-selling to which the redress was directed. This is a noteworthy case in the context of the increasing use of regulatory redress schemes and the financial burdens these schemes place on the institutions responsible for them.

While not the focus of this article, the Court of Appeal also overturned the High Court finding that indemnification provisions in an agency agreement had retrospective effect. In concluding that the indemnification was forward looking only, the Court of Appeal has annulled an award of approximately £677m.

Background

The case concerned the historic sale of payment protection insurance (PPI) between the 1970s and 2005 by GE Capital Bank, which later became known as Santander Cards UK Limited after its acquisition by the Santander Group in 2009 (Santander). 

GE Capital Bank sold PPI policies underwritten by two of its group companies, Financial Insurance Company Limited (FICL) and Financial Assurance Company Limited (FACL), who were acquired by AXA in 2015. 

Around 95% of net premium from the PPI sales went to GE Capital Bank (now Santander), with about 5% retained by FICL/FACL (now AXA). 

Despite this, when the regulatory regime was introduced to address mis-selling complaints, it placed the bulk of the responsibility for certain sales on AXA. Accordingly, AXA paid nearly £500m in customer redress and more than £70m in Financial Ombudsman Service (FOS) fees, among other redress. 

AXA sought to recover its losses from Santander by four alternative claims at first instance. Those claims included a contribution claim under the Civil Liability (Contribution) Act 1978 (the Contribution Act). 

At trial, the High Court dismissed the contribution claim on the basis that AXA’s regulatory obligations did not amount to a ‘liability’ to consumers within the meaning of the Contribution Act. AXA appealed.

Contribution 

The Contribution Act provides in section 1(1) that a party liable to another person may recover contribution from a third party which is liable for the “same damage”. Section 1(6) then explains that for these purposes, liability must either have been, or be capable of being, established in a court action. 

The Court of Appeal agreed with the High Court that regulatory redress liability did not fall within the section 1(6) definition of liability. This meant that the regulatory redress payments AXA had made were not sums for which it could seek a contribution from Santander under the Contribution Act.

The Court of Appeal’s reasoning was as follows:

1. There was no civil action which had been or could have been brought by PPI customers against AXA. They brought complaints and were paid redress. AXA paid because it was a regulated entity and had a regulatory responsibility to do so, not because it was liable to pay damages to customers. The Court of Appeal considered PPI redress to be “entirely different to a liability which has been or could be established in an action” (as required under the Contribution Act).

2. The obligation to pay redress arose because a complaint was upheld through internal processes or the FOS complaints process, neither of which amounts to a legal claim entitling a party to damages. The legislation prescribed a specific complaints mechanism for PPI complaints, and the FOS regime allowed the Ombudsman to make determinations by reference to what is “fair and reasonable” as opposed to applying the law. These payments arose from an obligation owed to a regulator, not because of any liability owed to the consumer which could be enforced by that consumer directly in court. 

3. The only claims that could have been asserted by customers would have been for breach of rules 1.4.1 or 1.4.4 of DISP (regarding how UK regulated firms must investigate and resolve customer complaints and interact with the FOS) in certain circumstances. Even in such circumstances, those claims would only establish a right to damages for failure to comply with obligations owed to the regulator, not liability for PPI mis-selling itself. 

4. Even if liability could have been established against AXA breach of rules 1.4.1 or 1.4.4 of DISP, that would not be the “same damage” for which Santander was liable to customers for mis-selling. 

Comment

The decision provides clarity on some key limits to recovery under the Contribution Act: there must be an underlying cause of action at the time of payment in order to establish a contribution claim. And the underlying cause of action must concern a liability which could be established in court – a regulatory obligation alone to make payment to a customer does not qualify.

AXA raised the policy argument in the appeal that firms who comply promptly with regulatory obligations should not be worse off than those who wait to be sued. It also pointed to the inherent unfairness of not being able to seek a contribution under the Contribution Act from Santander, when it benefited from 95% of the mis-sold premiums. 

The Court of Appeal’s answer to this was that contribution has historically been allowed only in limited circumstances, and has developed through “a process of accretion”. Whilst the Contribution Act has widened the categories of liability, it was not intended to remove all boundaries, and a wide approach to contribution was expressly disapproved in Royal Brompton Hospital NHS Trust v Hammond (No 3) [2002] 1 WLR 1397. Unless and until the scope of the Act is amended by Parliament, there will therefore be limits on firms who have paid into regulatory redress schemes from seeking a contribution from others, unless that firm can show a direct liability to customers who received the redress. 

The judgment also demonstrates some of the challenges in establishing that there has been “same damage” under the Contribution Act. What seems at face value to be a relatively straightforward concept is often a complex and hotly contested element of any contribution claim. This decision shows that the harm caused to the customer by both the firm seeking contribution and the firm from whom a contribution is sought must be the same. If not, and the damage caused by each firm is different, a Contribution Act claim will be difficult to establish even if a civil claim by the customer against the paying entity could be identified.

Finally, the decision reinforces the financial burden on firms who bear the regulatory responsibility to administer and finance redress schemes. Those costs may not be passed on to third parties as a form of contribution, even where the third parties may have financially benefited from the regulatory breaches in question.