Lonmar Global Risks Ltd (formerly SBJ Global Risks Ltd) v West
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hickinbottom |
| Judgment Date | 11 November 2010 |
| Neutral Citation | [2010] EWHC 2878 (QB) |
| Docket Number | Case No: HQ09XO2891 |
| Court | Queen's Bench Division |
| Date | 11 November 2010 |
[2010] EWHC 2878 (QB)
IN THE HIGH COURT OF JUSTICE
Before: Mr Justice Hickinbottom
Case No: HQ09XO2891
Richard Leiper and Michael Lee (instructed by Hammonds LLP) for the Claimant Chris Quinn (instructed by Grant Saw Solicitors LLP) for the First Defendant Charles Ciumei (instructed by Edwin Coe LLP) for the Second Defendant Damian Brown (instructed by Russell Jones & Walker) for the Third Defendant Martin Palmer (instructed by Birketts LLP) for the Fourth Defendant
Hearing dates: 13, 14, 15, 18, 19, 20, 21, 22, 25, 26, 27, 28, and 29 October 2010
APPROVED JUDGMENT
Mr Justice Hickinbottom:
Introduction
The Claimant (“Global Risks”) is a Lloyd's insurance and reinsurance broker. The Fourth Defendant (“Tyser”) is in the same market, and is a direct competitor of Global Risks. The First, Second and Third Defendants (“Mr West”, “Mr Niel Mee” and “Mr Karpus”) worked for Global Risks until mid-2009 when, with others, they left: each was summarily dismissed on the basis that his conduct whilst employed by Global Risks – particularly in soliciting clients and other employees, and taking steps to move both work and employees away from Global Risks, largely towards Tyser – amounted to a repudiatory breach of his employment contract.
In these proceedings, Global Risks claims approximately £2.5m against each of those defendants for breach of contract and breach of fiduciary duty, and against each of those defendants and Tyser for inducing breaches of contract and conspiracy. That figure represents the net value of the work allegedly lost by Global Risks as a result of the unlawful acts alleged. Although most of the defendants accept some wrongdoing on their part, all deny that any wrongdoing admitted or found against them caused Global Risks any loss at all.
This judgment is made up of the following sections (with the relevant paragraph numbers):
Background
| Background | 4–29 |
| The Contractual Arrangements | 30–37 |
| The Restrictive Covenants | 38–55 |
| The Events Leading to the Claim | 56–147 |
| An Employee's Implied Duties and Fiduciary Duties | 148–159 |
| The Claims: Introduction | 160–164 |
| The Claims against Mr Niel Mee | 165–192 |
| The Claims against Mr Karpus | 193–197 |
| The Claims against Mr West | 198–216 |
| The Claims against Tyser | 217–221 |
| The Conspiracy Claim | 222–224 |
| The Counterclaims | 225–231 |
| Conclusion | 232 |
Both Global Risks and Tyser provide a variety of services to insurance companies and members of the public, but the majority of their work is wholesale, i.e. it is work that does not involve direct contact with individuals who have risks to be insured, but is rather obtained from international brokers or agents who wish to access the Lloyd's insurance market in London and who need to work through a registered intermediary to do so. As an intermediary, it shares both standard and profit commission. Standard commission derives from the client, who will agree to share it with an intermediary for the services that that intermediary renders. Profit commission is a reverse payment returning from the underwriters in respect of profits made by them, which is dependent upon (amongst other things) the level of claims made.
Much of the business in the international intermediary broking market is conducted through coverholders, i.e. agents to whom a Lloyd's syndicate, through a lead underwriter, has delegated its underwriting authority. The scope of that authority is set out in a formal contract of delegation, known as a binding authority. The scope differs from contract to contract, but coverholders usually issue the insurance documentation and often handle claims. Coverholding enables Lloyd's syndicates to underwrite internationally, but without the need for a local infrastructure: and it enables local insurers access to the Lloyd's market. About 30% of the Lloyd's premium income is now produced through coverholders.
Binding authorities are usually renewable on an annual basis. During the term of a binding authority, it is possible for a client to change its intermediary, usually by way of a broker of record letter authorising the transfer of all the paperwork to the new company. In those circumstances, an agreement is usually reached as to how the intermediary's commission during the balance of the binding authority period will be dealt with (it often continues to be received by the original intermediary, unless the transfer dictates otherwise) – and also how claims being dealt with by the original broker are to be run off (often by the new intermediary).
By their nature, such intermediaries require salesmen or “producers”, who are able to obtain and retain business from international brokers. That is a producer's prime, if not sole, job; many not servicing the actual business themselves, that being done by back-up brokers (who place the business on the market) and insurance technicians (who obtain the necessary information from both clients and underwriters, and otherwise service the business). Brokers and technicians are undoubtedly skilled in what they do. However, to a business such as Global Risks or Tyser, the most valuable employees are the producers, i.e. the ones who bring in the work for others to broke and service. Consequently, producers are more likely to be handsomely rewarded – and more likely to be sought by a competitor, particularly if that competitor wishes to move into a specific market in which the producer has a good name and following.
It was the common evidence of all the many witnesses who work in the industry from whom I heard, that there are often strong relationships between producers and clients, such that, if a producer moves from one broking house to another, there is a tendency for those clients to follow him, and most do. Although of course it will depend upon the particular producer and the particular client, there was considerable evidence before me of clients following producers through several moves during a professional lifetime, over many years.
Global Risks was incorporated as Steel Burrill Jones Limited, later changing its name to SBJ Limited and then to SBJ Global Risks Limited, a company that formed part of the SBJ Group. In March 2008, the SBJ Group was acquired by AXA Advisory Holdings Limited, a subsidiary of AXA UK plc and ultimately French-owned; and, with the exception of Global Risks, the group was fully integrated into the AXA Group. In August 2009, following lengthy negotiations, Global Risks itself was the subject of a management buy-out, through a company called Visionrange Limited, later renamed Centrix Insurance Holdings Limited. Global Risks became a subsidiary of that company, and was renamed Lonmar Global Risks Limited in March 2010. The management buy-out was effected with the assistance of loans from the AXA Group, in the form of a £5.58m short-term loan note (repaid in December 2009), and £10m long-term loan notes repayable in instalments in 2014–16, as well as personal individual investments by the management team.
Tyser are a long-established broking house, slightly smaller than Global Risks. In 2008, they wished to expand internationally, and in particular wished to expand into the French market.
Mr Niel Mee has been working in the insurance broking industry since 1976. He is a fluent French-speaker, and has for many years specialised in French insurance, particularly in obtaining business from retail insurance brokers in France and other Francophone countries and placing it in London. He is a producer, who spends much of his time travelling round and otherwise keeping in touch with actual and potential clients in France. He is not concerned with the technical side of broking and, once he has obtained the work, he requires a back-up team in London to service it.
From 1994–8, he was employed by the London brokers, Craven & Partners. In 1998, he was approached by Global Risks, and agreed to join them. An agreement was reached between his old and new employers, whereby he took all of his clients with him, together with two employees, Mr David Lee (a senior broker, with whom he had worked for over 15 years) and Ms Susan Clark (a technician). At Global Risks, they were placed in the International Division. In 2000, the back-up team was joined by Mr Karpus. There were other members of the team from time to time, more recently in the form of Miss Anne-Sophie Petit and Miss Maud Geadas, both translator/technicians. By 2008, these four (Mr Lee, Mr Karpus, Miss Petit and Miss Geadas) formed the core of Mr Niel Mee's back-up team, although others (including Ms Clark) assisted with the work. All of the team's work was generated by Mr Niel Mee, the brokerage fees generated being assigned within the company to a particular account, i.e. Special Account LI – those initials standing for “Laurence [Mr Niel Mee's first name] International”. Mr Niel Mee and those who serviced his work were known internally as “the French team”.
When Mr Niel Mee joined Global Risks in 1998, his annual earned brokerage fees were just short of £0.5m, but these were built up to exceed £1m by 2003 and hit nearly £1.7m by 2005 before falling back to £1.35m in 2007. From December 2005, he was appointed “Managing Director, Special Account LI”, a purely executive title; and those working on Special Account LI business were required to report to him. Mr Niel Mee was to report direct to the Chairman and Chief Executive of Global Risks, Mr Jim Clark.
His starting salary was £74,500, supplemented by a discretionary bonus determined taking into account the brokerage income...
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