John Youngs Insurance Services Ltd v Aviva Insurance Service UK Ltd

JurisdictionEngland & Wales
CourtQueen's Bench Division (Technology and Construction Court)
JudgeThe Hon Mr Justice Ramsey
Judgment Date14 Jun 2011
Neutral Citation[2011] EWHC 1515 (TCC)
Docket NumberCase No: HT-10-230

[2011] EWHC 1515 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Hon. Mr. Justice Ramsey

Case No: HT-10-230

Between:
John Youngs Insurance Services Limited
Claimant
and
Aviva Insurance Service UK Limited
Defendant

Steven Walker (instructed by Greenwoods Solicitors LLP) for the Claimant

Peter de Verneuil Smith (instructed by Berrymans Lace Mawer LLP) for the Defendant

Hearing dates: 14,15 March 2011

The Hon Mr Justice Ramsey

Introduction

1

In this judgment I deal with a number of preliminary issues in a dispute between the Claimant, John Youngs Insurance Services Limited ("Youngs") and Aviva Insurance UK Limited, formerly Norwich Union Insurance Limited, ("Aviva"). These proceedings arise out of an agreement entered into between Youngs and Aviva in relation to property damage insurance work. Youngs provided services to Aviva which consisted of handling claims made by Aviva's policy holders and undertaking building repair work where the damage was insured.

2

Although there was no written agreement between Youngs and Aviva, it is common ground that the draft agreement at Appendix 1 to the Amended Particulars of Claim is the agreement which governed the parties' relationship ("the Contract"). There is an issue as to whether clause 3.4 was included in the Contract and, for the purpose of deciding these preliminary issues, Aviva accept that I should proceed on the basis that clause 3.4 was not incorporated.

3

The commencement date for the Contract was 16 January 2002 and after that date Youngs performed services in relation to claims handing and building repair. In due course Aviva notified Youngs that it intended to terminate these arrangements and that Aviva would use a subsidiary to undertake the claims handling work with selected contractors being engaged to carry out the building repair works on a Schedule of Rates basis. Youngs decided that they did not wish to be involved on the basis of these arrangements and Aviva gave notice of termination to Youngs on or about 4 May 2007. The parties entered into a formal agreement in or about July 2007 terminating the Contract with effect from 9 July 2007 ("the Termination Agreement").

4

In these proceedings Youngs makes claims against Aviva for further payment and Aviva brings a counterclaim against Youngs. By an order dated 15 October 2010 the court ordered that there should be a trial of five preliminary issues, Issues (a) to (e). Issues (a) to (d) concern Aviva's contention that Youngs owed a fiduciary duty to account and that Aviva is entitled to an account and enquiry as claimed by them in the Counterclaim. Issue (e) relates to Young's claim to recover sums in respect of certain "redundant assets" which include termination costs for tracker systems for vans and mobile telephones, as well as sums by way of rent and fitting out costs of premises which they were unable to dispose of after the termination.

Background

5

In about 1997 John Youngs Limited, the Norwich office of the RG Carter Group, entered into discussions with Aviva with a view to taking on insurance related repairs work. This led to John Youngs Limited commencing claims handling services and building repair services for Aviva for a trial period commencing on 6 October 1997. The trial appeared to be a success and John Youngs Limited increased its resources and facilities to deal with this work.

6

In 2001 Aviva decided to invite tenders for these services and John Youngs Limited took part in the tender. This led to Aviva continuing to give them all their insurance claims relating to property damage in the East Anglia area. In December 2001 it was decided to set up Youngs for the sole purpose of undertaking these services and Youngs then entered into the Contract with Aviva for an initial term of 3 years from 16 January 2002.

7

A document was also produced, known as "the Process Document" which, as described in the Contract, was a document provided by Aviva as their "Household Property Repair Network Process Document". It set out various provisions concerning the process to be followed in providing services for Aviva.

8

Youngs provided the services under the Contract but between 2002 and 2005 they experienced an under-recovery in respect of their costs, overheads and profit. As a result there were negotiations between Youngs and Aviva which resulted in an agreement in or about December 2005 that Aviva would pay Youngs some £2.1 million in settlement for the under-recovery up to the end of April 2005.

9

At the outset of the Contract Youngs had operated from premises at Thorpe St Andrew Business Park in Norwich, with additional "hubs" at various other centres. A decision was taken in early 2007 to move to premises at Eastern Court in Long Water Business Park which was located on the outskirts of Norwich. This reduced the rent payable but Youngs incurred costs in fitting out the new premises.

10

In or around November 2006 Aviva announced that they were changing the way in which they would obtain claims handling and building repair services. They were setting up a company called Asprea Limited and wished contractors to undertake building repair services on the basis of a schedule of rates. After further discussions Youngs decided not to proceed on this basis. In or around June 2007 Youngs and Aviva negotiated the terms of the Termination Agreement which was signed and made effective from 9 July 2007. After the termination of the relationship between Youngs and Aviva, Youngs made claims for unpaid invoices and other costs. In turn Aviva alleged that there had been overcharging by Youngs and that there was an absence of documents to support Young's invoices.

11

There were communications between the parties in 2008 and the parties engaged solicitors from 2009. Following an unsuccessful mediation in May 2010, Youngs issued proceedings on 28 June 2010 and Aviva filed a Defence and Counterclaim on 28 July 2010.

The Preliminary Issues

12

On 15 October 2010 Edwards Stuart J ordered a trial of the following five preliminary issues:

Issue (a): Whether the Claimant owed the alleged fiduciary duty to account as alleged in paragraph 11c of the Defence and Counterclaim;

Issue (b): If the answer to a) above is affirmative, whether the alleged duty continued after the termination of the Contract and/or the Termination Agreement as alleged in paragraph 12 of the Defence and Counterclaim;

Issue (c): Whether the Defendant is entitled to an account and an inquiry pursuant to the terms of the Contract as alleged in paragraph 46 of the Defence and Counterclaim.

Issue (d): In light of the answers to a)-c) above, is the Defendant entitled to the account and inquiry claimed for in the Counterclaim?

Issue (e): Whether some or all of the costs claimed in Appendix E to the Particulars of Claim constitute costs of providing the Services and whether the Claimant is entitled to recover those costs from the Defendant, as alleged at paragraph 23 of the Particulars of Claim.

Witness Evidence

13

The parties then prepared witness statements which dealt with the relevant background to the Contract and the Termination Agreement.

14

Youngs served six witness statements. First there was a witness statement from Mr Nicholas Tappin who is Group Financial Controller with RG Carter Construction Limited and Company Secretary of Youngs. He has responsibility for the finances of Youngs and, although he was not involved in the negotiation of the Contract, had knowledge of the financial working of the Contract, the various financial issues which have arisen between the parties during the performance of the Contract up to and including the Termination Agreement.

15

The second witness statement was from Mr Paul Hannant who in January 2000 was appointed General Manager for the property related insurance repair work which John Youngs Limited was undertaking for Aviva. In December 2001 he became the general manager of Youngs when that company was formed. He was involved in the setting up of arrangements between Youngs and Aviva and in issues arising under the Contract. He left Youngs in December 2006 when it was considering the viability of the new arrangements proposed by Aviva.

16

The third witness statement was from Mr Saul Humphrey who was appointed as Director and General Manager of John Youngs Limited in 1997, became a Director of Youngs in 2001 and retained overall responsibility for Youngs until November 2002.

17

The fourth witness statement was from Ms. Rashael Girling who was employed by John Youngs Limited as a call centre administrator from about September 2000. In 2001 she moved to Youngs as an accounts assistant and undertook the administration of claims handling and building repair services for Aviva. She gave evidence concerning the Claimserve web based data base system used under the Contract and provided an example of the invoicing system.

18

The fifth witness statement was from Mr Christopher Boyd who joined Youngs in January 2002 in the role of accountant and left in 2008 when Youngs ceased undertaking work for Aviva. He explained financial issues, Claimserve and the invoicing process.

19

The sixth witness statement was from Mr Mark Hilton who joined Youngs in late November 2006 and became General Manager. He explained the situation when he joined, together with the events leading to the Termination Agreement.

20

In addition to those witness statements, Youngs also submitted a witness statement from Mr David Woods, a Solicitor who negotiated the Termination Agreement. In that witness statement he referred to a draft of that agreement. Aviva objected to that evidence and, in the end, it was not relied upon and it was not necessary to determine whether such evidence was admissible.

21

Aviva...

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