Andrew Wood v Sureterm Direct Ltd and Another
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 14 October 2014 |
| Neutral Citation | [2014] EWHC 3240 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | 2013 Folio 1632 |
| Date | 14 October 2014 |
[2014] EWHC 3240 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Building, Fetter Lane
London, EC4A 1NL
The Hon. Mr Justice Popplewell
2013 Folio 1632
Andrew Twigger QC (instructed by Birketts LLP) for the Claimant
Edward Cumming (instructed by Enyo Law LLP) for the Second Defendant
The First Defendant was not represented and did not appear
Hearing dates: 2 September 2014
Approved Judgment
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.
This is the trial of a preliminary issue ordered by Eder J on 4 April 2014. It concerns the construction of an indemnity provision in an agreement dated 13 April 2010 ("the SPA") for the sale and purchase of the shares in the First Defendant ("the Company"). The Company is an insurance broker which primarily offers bespoke policies to the classic car market. Prior to the sale, the shares were held by Mr Wood, Mr Kightley and Mr Collinge in proportions 94%, 1% and 5% respectively. Each was a director of the Company. The Second Defendant ("Capita") was the purchaser of the shares under the SPA.
By clause 7.11 of the SPA the sellers agreed to indemnify Capita in respect of losses pertaining to the mis-selling or suspected mis-selling of insurance products or services in the period prior to the share sale. The claim by Capita against Mr Wood under the indemnity is made by way of counterclaim in the proceedings. Mr Wood's claim is not relevant to the preliminary issue.
At the heart of the construction issue is whether clause 7.11 requires Mr Wood to indemnify Capita if there has been no complaint or claim by a customer, but the Company or Capita is nevertheless liable or potentially liable to make compensation pursuant to law or in accordance with regulatory requirements. Capita's indemnity claim alleges the following facts:
(1) In around August 2008 the Company began to sell motor insurance via online aggregator sites such as Confused. Com. Sales through those aggregator sites were not made automatically online; potential customers would obtain a quotation from the Company on the aggregator site, and the Company would then contact the potential customer directly with a view to confirming their risk details before selling them an appropriate insurance policy.
(2) Shortly after Capita's purchase of the entire shareholding of the Company, various employees raised concerns about the Company's sales processes, including in particular that certain customers had paid substantially more than they had initially been quoted in circumstances where neither their risk profile nor the underwriting premium had changed significantly upon the customer being contacted by the Company. Rather the Company had significantly increased its own fees without informing the customer of why exactly the quotation was increasing.
(3) In early 2011, in response to these concerns, the Company carried out a review of its sales. This found that for a period of approximately two years between January 2009 and January 2011 the Company had increased its own arrangement fee between quotation and sale in 28,575 instances out of a total of 81,002 sales made using online aggregator sites. In over 5,000 instances the arrangement fee had increased by more than £100 between quotation and sale, and in 158 instances the increase had been by more than £450. In most of the sales sampled, telephone operators had placed the customer on hold and given the customers the impression that they were in discussion with an underwriter, when it was likely that they were not. In the vast majority of cases sampled customers were misled as to the nature of the quotation given by the online aggregator site in order to justify the insurance policy offered being more expensive, and accordingly allowing the Company to charge a higher arrangement fee. In particular it was found that telephone operators consistently misrepresented the total price, comprising the underwriting premium and the Company's own arrangement fee, as being solely the underwriting premium. In more than 10% of the cases sampled undue pressure was placed on the customer, based on erroneous information, in order to ensure that the sale was made. In many cases sampled, changes were made to the customer's risk profile when information to make such a change had not been obtained from the customer.
(4) Capita and the Company were obliged to inform the Financial Services Authority ("FSA") of their findings and they did so on 16 December 2011. By a letter dated 21 September 2012 the FSA informed Capita and the Company that it considered that the latter's findings illustrated that customers suffered detriment at the hands of the Company's sales advisors; that the Company took unfair advantage of customers by misleading them, by manipulation of risk data, by taking advantage of vulnerable customers and through undertaking pressurised selling techniques; that customers were treated unfairly; and that detriment occurred and redress was due.
(5) In November 2012 the FSA conducted a Risk Assessment Visit in relation to the Company, at or following which Capita and the Company agreed with the FSA to conduct a customer remediation exercise for those customers identified as potentially affected by the Company's mis-selling ("the Remediation Scheme"). Deloitte LLP was appointed to provide independent validation of the Remediation Scheme.
(6) Capita claims that as a result, Capita, the Company, and Capita's other subsidiaries have suffered loss and damage, incurred charges, expenses and liabilities, and been required to pay compensation and make other payments relating to the period prior to the SPA which pertained to mis-selling and/or suspected mis-selling of insurance and/or insurance related products and/or services. The amount of loss identified includes an estimate of principal sums liable to be paid to customers by way of redress in an amount of approximately £1.35 million; interest of some £400,000; and costs involved in relation to the Remediation Scheme. The total claim is £2,432,883.10.
Capita claims that Mr Wood is liable to pay his respective proportion of 94% of...
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