Regulatory redress under DISP cannot invite contribution – a note on AXA France IARD SA v Santander Cards UK Ltd
Introduction
The English Court of Appeal’s decision in AXA France IARD S.A. and another v Santander Cards UK Ltd and another [2026] EWCA Civ 1185 makes the significant finding that redress payments made under the FCA’s Dispute Resolution: Complaints sourcebook (“DISP”) do not fall within scope of the Civil Liability (Contribution) Act 1978 (“1978 Act”). The Court also found that an agency agreement between the litigants’ predecessors did not have retrospective effect.
Background to the dispute
The dispute arose from the historic sale of payment protection insurance (“PPI”) linked to store cards between the 1970s and 14 January 2005. The policies were underwritten by Financial Insurance Company Limited (“FICL”) and Financial Assurance Company Limited (“FACL”), predecessors of AXA, and sold by the predecessor of Santander Cards UK Limited. For much of the relevant period, the predecessors of AXA and Santander were part of the same group and reported into the same profit centre.
The above arrangement was formalised by an Agency Agreement executed on 1 December 2000. Santander’s predecessor acted as agent in marketing and selling the insurance, while FICL/FACL underwrote it. Santander’s predecessor typically retained approximately 95% of premiums remaining after claims, while FICL/FACL retained approximately 5%. The Agency Agreement included an indemnity in Clause 12.2, under which Santander’s predecessor agreed to indemnify the insurers against liabilities arising from acts or omissions while performing its duties under the Agreement.
PPI mis-selling complaints increased sharply from around 2011–2012. Although the insurers retained only a small share of the premiums, AXA (as successor to FICL/FACL) bore the overwhelming regulatory burden of responding to complaints and paying redress for pre-2005 sales. It paid nearly £500 million in customer redress and more than £70 million in Financial Ombudsman Service fees, in addition to substantial complaint-handling costs. AXA consequently claimed approximately £677 million from Santander under Clause 12.2.
The dispute centred on pre-2005 sales because before 2005 credit lenders were not directly regulated under the Financial Services and Markets Act 2000 (“FSMA”) in respect of insurance mediation activities.
AXA advanced four alternative routes to recovery:
- a settlement claim;
- an indemnity claim under Clause 12.2;
- a contribution claim under the 1978 Act; and
- a negligence claim.
The appeal concerned the scope of the indemnity under Clause 12.2 with a cross-appeal concerning whether regulatory redress payments could support a statutory contribution claim (the “Contribution Claim”).
Procedural history of the Contribution Claim
In the High Court, the Contribution Claim was rejected on the basis that AXA could not satisfy the threshold requirement that it was liable to consumers for the same damage as Santander. In particular, the liabilities imposed upon AXA under the regulatory regime did not equate to liability to consumers for damages under the 1978 Act. Santander’s contingent counterclaim for contribution for monies they paid in connection with mis-selling claims was dismissed on the same basis.
When Santander appealed a point regarding the scope of the indemnity under Clause 12.2, AXA cross-appealed the dismissal of the Contribution Claim, arguing that its payments under the regulatory redress regime represented “liabilities” to customers for the purposes of the 1978 Act.
The Court of Appeal allowed Santander’s appeal and dismissed AXA’s cross-appeal.
The Court of Appeal’s decision
The judgment dealt with two distinct questions. The main appeal concerned contractual construction of the indemnity provision in the Agreement. The cross-appeal raised the broader question of whether a regulated firm that pays redress through the DISP and FOS framework can invoke the 1978 Act against another party said to be responsible for the underlying misconduct (the Contribution Claim).
Key findings on the Contribution Claim
The Contribution Claim turned on whether AXA’s payments under DISP constituted a “liability” for the purposes of the 1978 Act. Section 1(6) describes a liability that “has been or could be established in an action brought against [a person] in England and Wales by or on behalf of the person who suffered the damage”. The Court of Appeal agreed with the High Court that AXA could not satisfy this definition.
The PPI customers who received redress had complained under the DISP regime. They had not brought civil actions against AXA, and the payments were made because AXA was subject to regulatory obligations as a regulated insurer. That regulatory responsibility was materially different from a liability enforceable by the customer in an action. The fact that the payments compensated customers did not, without more, turn them into payments made in discharge of legal liability.
The Financial Ombudsman Service (“FOS”) scheme is a complaints mechanism, not a claims process. FOS determines what is “fair and reasonable in all the circumstances”, rather than deciding what the law requires. The resulting redress obligation is rooted in this statutory complaints-resolution scheme and the firm’s regulated status, not in a finding that the firm is legally liable for the underlying mis-selling.
Further, neither DISP nor enforcement supplied the necessary cause of action. AXA argued that a customer could have sued for breach of DISP rules 1.4.1 or 1.4.4. The Court rejected that submission. Such a claim would concern failure to comply with regulatory complaints-handling obligations; it would not establish liability for the underlying PPI complaint. Likewise, a FOS award may be enforced as if it were a court order under Schedule 17, paragraph 16 of FSMA, but that is an enforcement process. It does not constitute an action establishing liability for the purposes of section 1(6) of the 1978 Act.
The Court also tackled what it called “the “what if?” scenario”. Namely, AXA’s argument that, if it had not paid, the customer could have obtained equivalent compensation through the regulatory process and then enforced it. The Court considered that this required too many steps contrary to the facts: namely, no payment despite the regulatory obligation, a final determination, acceptance, and then a claim for breach.
Finally, the Court noted that the rules on contribution require the parties to be liable in respect of the same damage. Even if AXA’s above arguments were accepted, the damage would not have been the same. Any claim against Santander would have concerned loss caused by its predecessor’s alleged mis-selling. A hypothetical claim against AXA under the avenues described above would concern breach of regulatory complaints-handling rules. Those liabilities differ in nature.
The Court therefore dismissed the Contribution Claim.
Practical implications
- Regulatory redress is not legal liability for contribution purposes. Firms that pay redress under DISP cannot rely on the 1978 Act merely because another party may share responsibility for the underlying conduct. The payment must discharge a liability capable of being established in an action, and must relate to the same damage.
- The decision matters particularly for the insurance industry. Insurers that bore the regulatory burden of historic PPI redress cannot use the contribution route to pass those costs to distributors, even where the distributor marketed the product and retained most of the premium. Recovery will instead depend on the contract, a viable private law claim, or another route recognised by law.
Case: AXA France IARD S.A. and another v Santander Cards UK Ltd and another [2026] EWCA Civ 1185
