Re Digital Satellite Warranty Cover Ltd
| Jurisdiction | England & Wales |
| Judge | Warren J. |
| Judgment Date | 31 January 2011 |
| Neutral Citation | [2011] EWHC 122 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: Nos 4762, 9328, and 9329 of 2010 |
| Date | 31 January 2011 |
[2011] EWHC 122 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Warren
Case No: Nos 4762, 9328, and 9329 of 2010
And in the Matter of the Financial Services and Markets Act 2000 and in the Matter of the Insolvency Act 1986
Glen Davis and Charlotte Cooke (instructed by The Financial Services Authority)
Lloyd Tamlyn (instructed by Messrs Brabners Chaffe Street LLP) for the Company and the Partnership
Hearing dates: 13th and 14th of January 2011
Mr Justice Warren :
Introduction
This is the trial of three related "public interest" petitions by which the Financial Services Authority ("the FSA") seeks the winding-up of the respondents, two companies and a partnership which the FSA alleges have in succession or with some overlap carried on substantially the same business of selling and carrying out extended warranty cover plans for Sky Satellite TV equipment without the authorisation which it says is required under the Financial Services and Markets Act 2000 (" FSMA").
Mr Glen Davis and Ms Charlotte Cooke appear for the FSA. Mr Lloyd Tamlyn appears for the first respondent (Digital Satellite Warranty Cover Ltd —"DSWC") and the third respondents (Bernard Freeman and Michael John Sullivan trading as "Satellite Services" – "the Partnership"). The second respondent (Nationwide Digital Satellite Warranty Services Ltd – "NDSWS") has not appeared and has taken no active part in the petition against it.
None of the relevant entities (DSWC, NDSWS and the Partnership) has ever been authorised under FSMA. The central issue on all three petitions is whether the relevant entity has been carrying out and effecting insurance business in breach of the general prohibition found in section 19 FSMA.
The relevant facts
The respondents have each carried on the business of providing extended warranty contracts in relation to satellite television dishes, digital boxes and associated equipment such as cabling. The warranty plans were in similar, but not identical, form for each of the respondents.
Contracts with customers arose largely as a result of mail-shots to customers and telephone conversations between customers and salespersons (sometimes after cold calls). From databases which they had acquired, the respondents were able to target persons who had purchased Sky satellite systems and whose warranties (provided on purchase by the manufacturer or supplier) were shortly to expire.
The evidence about the terms of the contracts entered into by customers comprises different elements. First, there are copies of mail-shots to potential customers. Secondly, there is a script which was available to the salesperson which could be used as a map for the "pitch" made to the customer. Thirdly, in a few cases, there is a transcript of the actual telephone call: a small number of examples were referred to at the hearing. Fourthly, there are more formal written conditions which purport to contain the terms on which customers contracted with the respondents.
DSWC: An example of a mail-shot (including an application form for the extended warranty) is headed "IMPORTANT NOTICE REQUIRING URGENT ATTENTION" reminding the recipient that "Your sky digital satellite system warranty is due to expire. Why wait 3 days for a service call, when our unique same day service is available from only £6.49 per month". The following contents of the mail-shot and the application form are to be noted:
a. The recipient is told that, without a warranty, a minimum call-out fee of £72 would be incurred. The customer is invited to "restore peace of mind and extend your sky digital warranty with us…".
b. A highlighted box contains the words "Extend your warranty cover with unlimited call-outs" with "no repair bills, call-out charges or labour to pay".
c. The application form is headed "Sky Digital Satellite Coverplan".
A second mail-shot is described as a "FINAL REMINDER" to take up "this exclusive offer". Introduced by the words "This is what your warranty will cover" is a box containing 6 bullet points the last of which read "Even covers accidental damage".
The script to which I have referred includes the following:
"Now I do appreciate what you're saying HOWEVER… Not only do you get unlimited call outs, you are covered for all repairs including outside dish, set top box, cables and remote control…."
Following such a telephone call, a customer taking out some form of cover would receive a document called a "Sky Digital Warranty Certificate" including the words "Fully Comprehensive Gold Option Benefits". This included dish alignment and re-cabling and remote control unit cover. There is nothing in this document which would exclude cover in the case of accidental damage.
None of the above material suggests that DSWC is under any obligation other than to repair, or if repair is impracticable, to replace the equipment covered. There is no obligation to pay money either in respect of repair or replacement costs in fact incurred by a customer or in place of fulfillment of the repair or replacement obligation.
An early edition of the DSWC terms and conditions contains a few provisions which I should mention:
a. Condition A under "What is provided" purports to provide that a contract upon those terms comes into being upon signing and return of the application form duly completed or by verbal acceptance (presumably in the telephone call with the salesperson). There is nothing to suggest that a customer would know of these terms and conditions during the course of the telephone call.
b. Condition C refers to "repair or replace". There is no obligation to meet any cost incurred by the customer.
c. Condition F provides that where a remote control unit needs replacing, it must be sent back to the service department when a replacement will be provided. There is no exclusion in this provision for accidental damage.
d. There is a section headed "What is not provided under your service contract with us". Condition E under this heading excludes a case
"Where any damage to the Equipment has been caused by theft, attempted theft or intentionally, or the damage is caused by fire, explosion, dampness or liquid spillings or foreign bodies inside the Sky Box."
e. And under Condition J, cover is not provided where the fault existed before the application form was sent.
A later version of the DSWC terms and conditions contains exclusions in similar terms.
Mr Davis submits that, in cases where the script which I have described was followed in the course of a telephone conversation between the customer and the salesperson, a binding contract came into being. The terms of the contract in any individual case can, of course, only be ascertained from the contents of the conversation. Nonetheless, the form of the mail-shot and the script suggest that contracts may well have been entered into during the course of the telephone conversation the terms of which contracts would provide for more than repair or replacement in case of breakdown and would include at least accidental damage.
At best from DSWC's point of view, contracts would be governed by one of the two sets of terms and conditions which I have referred to. As before, there is no obligation on DSWC to pay money to the customer in any circumstances; the contractual obligation is to repair or replace. However, the list of exclusions under the heading "What is not provided…" demonstrates that the repair and replacement obligation is perfectly general but subject to express exclusions. There is no exclusion for accidental damage, even where it has been caused as the result of negligent conduct on the part of the customer, although intentional damage is excluded. Apparently, therefore, there would be cover for a control unit damaged by being accidentally trodden on, or for a skybox accidentally knocked to the floor and thereby damaged. There is no exclusion for storm damage which would be relevant to satellite dishes installed outside a building. Nor is there exclusion for many other types of damage for instance, albeit unlikely, as the result of rodents chewing them or, a less unlikely occurrence, water damage from a leaking roof or overflowing bath neither of which could be described as "liquid spillage" within the exclusion.
NDSWS: The documentation concerning NDSWS includes a mail-shot, application form and certificate as with DSWC although the wordings are slightly different. The mail-shot describes the plan benefits as including "Comprehensive Coverplan"; it refers to a call-out charge of at least £72 in the absence of any cover. It invites the customer to "enjoy the benefits of our comprehensive sky digital satellite warranty service" and asks whether the customer can "afford to be without fully comprehensive unlimited call-out cover..".
The certificate refers near the top to "Your fully comprehensive warranty from NDSWS" and then contains a heading "Fully Comprehensive Gold Option Benefits". It includes "Dish alignment and re-cabling" and "Remote control unit cover".
The terms and conditions contain a paragraph (paragraph 5) dealing with "Claims". As with DSWC, there is nothing to suggest that NDSWS will provide anything other than repair or replacement. Exclusions include damage due to "Lightning, Fire, Water/Flood, Accidental, Vandalism, Theft, Spillage or use or Spray Polish and Faults occurring from Mains supply returning". These exclusions go wider than those in the (later) terms and conditions in relation to DSWC. But even these are not...
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