C&S Associates UK Ltd v Enterprise Insurance Company Plc

JurisdictionEngland & Wales
JudgeMr Justice Males
Judgment Date21 December 2015
Neutral Citation[2015] EWHC 3757 (Comm)
Docket NumberCase No: CL-2014-000400
CourtQueen's Bench Division (Commercial Court)
Date21 December 2015

[2015] EWHC 3757 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Males

Case No: CL-2014-000400

Between:
C&S Associates UK Limited
Claimant
and
Enterprise Insurance Company Plc
Defendant

Mr Jawdat Khurshid and Ms Clara Benn (instructed by Sidley Austin LLP) for the Claimant

Mr Timothy Dutton QC and Mr Richard Harrison (instructed by Ozon Solicitors Limited) for the Defendant

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Hearing dates: 30 th November – 3 rd December 2015

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Approved Judgment

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I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Males Mr Justice Males
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Introduction

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1. The claimant C&S Associates UK Ltd is a motor insurance claims handler based near Fareham in Hampshire. The defendant Enterprise Insurance Company Plc is an insurance company incorporated in Gibraltar which provides among other things specialist motor insurance for fleet vehicles, taxis and high value or classic cars.

6

2. With effect from 2 July 2012 C&S provided claims handling services to Enterprise pursuant to a Claims Management Delegated Authority Agreement. However, the contract between the parties was terminated in January 2014. Enterprise contends that it was entitled to terminate the contract for repudiation on one or both of two grounds: either because of C&S's refusal to send claims files to it for the purpose of an audit of open files which it was conducting or because of the seriously negligent performance by C&S of its services under the contract. C&S contends that Enterprise was not entitled to terminate the contract on either ground and that its conduct in doing so was itself a repudiatory breach, which C&S has accepted.

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3. This is my judgment following the trial of seven preliminary issues:

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Repudiation

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1. whether C&S committed a repudiatory breach of the contract by refusing to deliver a further batch of 1,500 claims files off-site to Enterprise's solicitors, Ozon Solicitors Limited;

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2. whether the pleaded allegations of breach of C&S's duties are sufficiently substantial (whether taken individually or in combination) to be capable of amounting to a repudiatory breach of the contract;

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3. if the answer to issues (1) and/or (2) above is 'no', whether Enterprise's purported termination of the contract by Ozon's letter dated 13 January 2014 was itself repudiatory;

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4. if Enterprise's purported termination of the contract amounted to a repudiatory breach of the contract, whether such repudiation was accepted by C&S;

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Variation

(5) whether the contract was varied by an exchange of emails in October 2013 so as to:

a. increase the fees payable to C&S; and

b. provide that the contract should continue for a minimum term of two years from 1 October 2013;

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Volume

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6. whether:

(i) by agreeing to the variation of the contract Enterprise impliedly represented that it would continue to pass claims to C&S in the ordinary course of business up to 1 October 2015; and/or

(ii) the contract as varied included an implied term that Enterprise would continue to pass claims to C&S in the ordinary course of business up to 1 October 2015; and

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7. whether Enterprise was entitled to:

(i) restrict the number of claims to be handled by C&S on its behalf to whatever level it saw fit;

(ii) refuse to allow C&S to handle any new claims on its behalf; and/or

(iii) withdraw from C&S claims which C&S had hitherto been handling on Enterprise's behalf.

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The contract

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4. C&S is a third party desktop motor insurance claims handler, acting mainly in relation to personal injury, property damage and credit hire claims. Its business was established by Christopher Chamberlain and Michael Smith in 1995. It provides its services to insurance companies who wish to outsource the handling of what are usually high volume and relatively low value claims.

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5. As a Gibraltar company, Enterprise is regulated by the Gibraltar Financial Services Commission. As it writes business in the United Kingdom, it must also comply with the requirements of the Financial Conduct Authority here. Until 2010 Enterprise's main business was legal expenses insurance. From 2010 it began to write other business including motor insurance, specialising in providing fleet cover and cover for taxis and high value and classic cars. Claims handling was outsourced. The main external handlers for motor business from 2010 to July 2012 were two companies, IV Assure Limited and GAB Robins UK Limited. Claims would be reported by policyholders to FNOL ("first notification of loss") agents appointed by Enterprise who would then provide notification details to one of the claims handling companies.

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6. The parties were introduced to each other in December 2011. C&S was told that Enterprise was dissatisfied with its existing motor claims handlers and that it was hoping to grow its business, which would lead to an increase in the volume of claims. It was therefore looking for a new claims handler with the capacity to handle its third party motor claims. Negotiations ensued which resulted in the conclusion of the Claims Management Delegated Authority Agreement. Although executed later in the month, the contract was stated to take effect from 2 July 2012.

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7. It provided for a continuing agreement with no fixed term which could be terminated by either party at any time on giving three months notice.

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8. The tasks to be performed by C&S were set out in clause 2 of Schedule 1:

"Following notification of a claim, C&S shall:

• Check that all claim documents are correctly completed;

• Ensure that the claim falls within the terms of the Enterprise policy;

• Investigate liability;

• Process the claim in a timely fashion;

• Liaise, as necessary, with the Enterprise Customer;

• Agree the validity and/or quantum of the claim;

• Defend claims where the Enterprise customer is not considered liable;

• Negotiate settlement;

• Arrange for settlement to be made with prior authorisation of Enterprise;

• Ensure and maintain a full and correct record of the claims details and amounts paid."

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9. In addition C&S was responsible for setting reserves. Clause 3.3 of Schedule 1 provided that:

"The claim reserve rationale will be documented in the file and supported by adequate information.

There will be appropriate scope of loss details.

Reserves will be set at notification based on the information known at that time. Accurate reserves recommended will be set as soon as practical for each feature but no later than 30 days from initial claims notification.

Reserve changes will be promptly made and rationale documented if circumstances are identified to support the change."

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10. Further provision as to reserves was contained in clause 1.3 of Schedule 3:

" Reserving: C&S will reserve all claims on a realistic basis and review the reserve when any new information comes to hand. Enterprise will be separately notified of any new claim where the overall reserve is £15,000 or more and of any claim where the existing total cost of the claim is increased by £10,000 or more. In the absence of information on which to base an accurate reserve, the following 'day one' reserves will be created until such time as further information becomes available:

— Third Party Property Damage —£1,002

— Third Part Credit Hire —£1,502

— Third Party Personal Injury —£2,500

— Third Party Legal Costs —£2,500"

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11. The standards which C&S was required to achieve in performing these services was set out in clause 7 of the contract which included the following provisions:

"7.1 C&S warrants that it shall provide the Services using all reasonable skill and care as is consistent with C&S being specialists in this field.

7.2 C&S warrants that it shall use competent, appropriately qualified skilled and experienced personnel in the provision of the Services.

7.6 Enterprise is regulated by the FSC in Gibraltar and as such is required to observe and comply with the standards issued by the FSC and in so far as and to the extent that C&S is providing the Services described in this Agreement it shall observe and comply with the FSC Standards as if it were regulated by the FSC itself. In the event of any conflicts or inconsistency between (i) the FSC (ii) the provisions of this Agreement, the provisions of the FSC Standards shall prevail.

7.7 C&S will observe and comply with the Association of British Insurers Insurance Claims Code (the "ABI Code") unless the standards set out in this Agreement are greater than those set out in the ABI Code, in which case the provisions of the Agreement shall prevail."

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12. Thus C&S held itself out as being a specialist in the field of claims handling, as indeed it was, and was required to perform accordingly.

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13. As both parties expressly recognised at the time, the contract contained no obligation on Enterprise to refer a minimum number of claims, or indeed any claims, for handling by C&S. It was understood also that C&S would not be the only motor claims handler used by Enterprise. The contract provided, by clause 1 of Schedule 3, that "C&S will handle all claims as required by Enterprise". It was therefore for Enterprise to choose how much (if any) business to send to C&S, although it was of course expected on both sides that Enterprise would transfer to C&S the files currently being handled by IVA and GAB Robins and that it would send at least some new business to C&S.

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14. The fees which C&S would earn for its services were set out in Schedule 2. There...

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