The Supreme Court today unanimously dismissed appeals by Digital Satellite Warranty Cover (DSWC), and Bernard Freeman and Michael Sullivan, trading as Satellite Services (Satellite).
The Financial Services Authority (FSA) had previously secured winding up orders from the High Court against DSWC and Satellite on 31 January 2011 on the basis that the firms were offering consumers extended warranty cover for satellite TV equipment, which amounted to contracts of insurance, without FSA authorisation.
DSWC and Satellite’s subsequent appeals against the High Court’s ruling were dismissed by the Court of Appeal in November 2011. On 28 March 2012 the Supreme Court granted permission to appeal and these were heard in December 2012. The ruling marks the end of the firms’ challenge to the FSA.
DSWC and Satellite were operated by Freeman and Sullivan, and offered Sky TV customers cover described as an ‘extended warranty’ for satellite television equipment in return for an insurance premium of between £6.49 and £11.49 per month. DSWC and Satellite promised customers unlimited call outs covering all parts and labour costs. DSWC made approximately £10m in profit in 2010 and Satellite turned over £2.1m worth of business in the same period.
An important feature of the cover was that neither DSWC nor Satellite were required to pay their customers money - the cover involved the repair or replacement of the equipment in the event of breakdown, malfunction or physical damage. However, the High Court ruled that the extended warranties amounted to contracts of insurance – something that requires FSA authorisation. The Supreme Court upheld that decision.
Tracey McDermott, director of enforcement and financial crime at the FSA, said:
“This is an important judgment. This is the first time the FSA has appeared in front of the Supreme Court in a case involving unauthorised business and we are pleased that it has agreed with our approach, and with the decisions of the High Court and Court of Appeal. The judgment will help protect consumers from inadvertently dealing with unauthorised businesses that offer similar cover.
“The Supreme Court’s decision will be of interest to other firms that offer warranties, helping them understand when they should speak to us about getting authorised.”
Both the firms remain in liquidation.
Notes for editors
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A copy of the Supreme Court’s judgment dated 13 February 2013 can be accessed from the Supreme Court website.
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The Supreme Court is the final court of appeal in the United Kingdom for civil cases and hears cases of the greatest public or constitutional importance.
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The FSA has previously issued consumer alerts (here and here) on satellite TV warranty cover and press releases in relation to the High Court and Court of Appeal decisions in November 2010 and November 2011.
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The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.
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The FSA will be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013 as required by the Financial Services Act 2012.