Richard Wales (t/a Selective Investment Services) v CBRE Managed Services Ltd

Hearing dates: 1–3rd July, 27th August 2019

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.

His Honour Judge Halliwell

(1) Introduction

The Claimant (“Mr Wales”) is an independent financial adviser, who has for many years practised in the name of “Selective Investment Services”. By these proceedings, he seeks to recover commission, in the revised sum of £204,392.44, for his services in connection with the group pension scheme (“the Group Pension Scheme”) of a corporate client. The First Defendant (“CBRE”) was Mr Wales's corporate client and the Second Defendant (“Aviva”) was pension provider.

CBRE was and is in the business of providing property management services. Having previously been incorporated in the names of Reliance Environmental Services Limited and Norland Managed Services Limited, it is now called CBRE Managed Services Limited.

Aviva has historically been incorporated as AXA Sun Life Services plc, Friends Life Services plc, Friends Life Services Limited and Aviva Administration Limited. Its name and status has changed following a series of mergers and acquisitions but, at least for the purpose of these proceedings, it can be treated as a single legal entity.

With Mr Wales's advice and assistance, CBRE's employees obtained the benefit of pensions issued by Aviva under the Group Pension Scheme. Aviva paid commission in respect of the pension contributions. However, it did not pay the commission to Mr Wales. Since Mr Wales acted as a representative of two separate intermediaries, DBS Financial Management plc (“DBS”) and, subsequently, Sesame Limited (“Sesame”), Aviva paid the commission directly to the intermediaries who then accounted to Mr Wales for a share of the amounts they received.

The dispute originates from CBRE's decision to move its employees to a new pensions platform and dispense with Mr Wales's services following legislation for eligible employees to be automatically enrolled on a workplace pension scheme. Once CBRE's employees were moved, premiums ceased to be payable under the original arrangements. Having made payments of commission to Mr Wales in anticipation of the receipt of such premiums, Aviva clawed back from Sesame commission in respect of the premiums which ceased following the transition. Sesame then clawed back from Mr Wales his share of the commission. Mr Wales disputes Aviva's right to claw back the commission and, by implication, Sesame's right to claw back his share.

By order dated 7th May 2019, Mr Wales was given permission to amend the claim to join Sesame as a defendant. On reflection, he elected not to do so but obtained permission to amend his existing case to rely on new contractual and restitutionary claims.

As pleaded and amended, Mr Wales's contractual claim against CBRE is based on a contract (“the CBRE Contract”) made “on or around 14th June 1999” for the provision of “Group Life and Personal Pension Scheme advice and services to and/or for the benefit of [CBRE] and its employees”.

Mr Wales and CBRE did, indeed, enter into a contract with one another in June 1999 or thereabouts. The contract incorporated DBS's standard terms on the basis that Mr Wales was one of DBS's appointed representatives. However, on 23rd October 2003, CBRE's finance director signed new conditions at Mr Wales's request. The new conditions were Sesame's standard conditions at the time (“Sesame's Standard Conditions”) and they were plainly signed with the intention that they would supersede DBS's conditions. At that point, Sesame's Standard Conditions took effect in substitution for the DBS conditions under a new contract or, alternatively, as a binding variation to the original contract in accordance with the principles referred to in Chitty on Contracts (33rd edition) (2018) at Paras 22–028 and 22–032. However, no pleading point was taken on this issue and I shall determine the case on the basis that, for material purposes and at all material times, the CBRE Contract was subject to Sesame's Standard Conditions.

Mr Wales contends that the CBRE Contract was subject to implied terms that CBRE would “deal honestly and/or in good faith with” Mr Wales.

As amended, Mr Wales's contractual claim against Aviva is based on a contract (“the Additional Contract”) between Mr Wales himself, CBRE and Aviva. This is alleged to take effect as a free-standing contract or, alternatively, as a collateral contract to a contractual agreement between Aviva and Sesame. Mr Wales contends that, under the Additional Contract, Aviva was under a contractual obligation to pay him commission or, at least, to pay his commission to Sesame. It is at least implicit in Mr Wales's case that this includes the disputed commission. Again, he maintains that it was an implied term of the Additional Contract that Aviva would act honestly and in good faith.

Mr Wales also seeks to recover the disputed commission on the basis that CBRE and/or Aviva have committed breaches of implied contractual duties of honesty and good faith and Aviva is in breach of its contractual obligations to pay the commission. He also advances claims based on promissory estoppel, quasi-contract and unjust enrichment.

Mr Wales's claims are disputed. CBRE does not take the point that Mr Wales entered into the CBRE contract in his capacity as an agent only and is thus not entitled to sue on it. However it denies that it is under any contractual liability to him in respect of the payment of commission. Aviva did not initially deny that it entered into a contract with Mr Wales but, upon re-consideration, obtained permission to amend its Defence and took issue with Mr Wales on this point. In any event, CBRE and Aviva both deny that they were under a contractual duty of good faith to Mr Wales. They also deny that they are in breach of any contractual obligations to him. The claims based on promissory estoppel and unjust enrichment are also denied. The quantum of his claim is disputed.

(2) Factual Sequence

By an agreement in writing dated 29th January 1996 (“the 1996 Agreement”) between DBS and Mr Wales, DBS appointed Mr Wales as one of its agents for the purpose of introducing business for submission to its institutional clients. DBS was a separate company which provided financial services through a network of independent financial advisers. This included pensions and life assurance.

It was envisaged that the institutional clients would pay commission to DBS out of premiums generated from the business introduced by its agents, including Mr Wales. The commission was then divided between DBS itself and the agent who had introduced the business, and DBS was obliged to account to the agent for “his undistributed share of the Commission received…” In the event that the institutions made payments of commission in advance of receipt of premium, they were entitled to reclaim the commission from DBS if the premiums were not received as anticipated. If, by then, DBS had accounted to its agent for his share of the commission, DBS was entitled, in turn, to reclaim that share from future commission to the agent.

In June 1999, Mr Wales entered into contractual arrangements with CBRE for the provision of advice and services in connection with the Group Pension Scheme for its employees. He did so in his capacity as DBS's agent. The contract was subject to DBS's standard conditions and, on 9th and 14th June 1999, Mr Wales and Mr Peat respectively signed documentation containing such conditions. Mr Wales signed “for and on behalf of DBS…of which Selective Investment SVS is a member”. The relevant pension scheme was provided by Aviva for the benefit of the CBRE's employees.

By letter dated 18th June 1999 to DBS, Aviva confirmed that DBS has been appointed as the new “intermediary” for the pension scheme and that, with effect, from 31st March 1999, DBS would thus be entitled to commission in respect of the scheme.

During 2003, Sesame acquired the assets and business of DBS. Following this transaction, Mr Wales continued to act for Sesame in the way he had for DBS. Unfortunately, the precise legal basis on which this happened remains obscure. No formal assignment or other contractual instrument has been adduced in evidence. It is unclear whether the re-arrangement took effect as a novation or on some other legal basis. However, on the balance of probability, Sesame stepped into the shoes of DBS and, by agreement reached expressly or by conduct, Sesame authorised Mr Wales to act as its agent and Mr Wales agreed to act as agent for it upon essentially the same terms mutatis mutandis as the 1996 Agreement. Although it is more than conceivable that their contractual arrangements have evolved over time and, whether by contractual variation or otherwise, adjustments have been made to the parties' share of commission, the same remained payable to Sesame so that it could be divided and distributed on the same basis as before.

Following the 2003 transaction, Mr Wales forwarded a copy of Sesame's Standard Conditions to CBRE. He did so as Sesame's “Appointed Representative”. There was a space on the document for Mr Wales to add his details. This was left blank. However,...