Templeton Insurance Ltd v Motorcare Warranties Ltd and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE SIMON,Mr Justice Simon,Re |
| Judgment Date | 03 December 2010 |
| Neutral Citation | [2010] EWHC 3113 (Comm) |
| Docket Number | Claim No:2009 Folio 915 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 December 2010 |
[2010] EWHC 3113 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: The Hon Mr Justice Simon
Claim No:2009 Folio 915
Mr Derek Sweeting and Mr Matthew Cook (instructed by Nelsons Solicitors Ltd) for the Claimant
Mr Peter Irvin and Mr Oliver Jones (instructed by Huttons Solicitors) for the Defendants
Hearing dates: 18–21, 26–28 October, 1–3, 8 and 10 November 2010
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.
Mr Justice Simon:
Introduction
This Claim concerns the sale of Mechanical Breakdown Insurance ('MBI'). This insurance is intended to cover consumers against the costs of the mechanical breakdown of motor vehicles after the expiry of the car manufacturer's warranty. The policies are sold either as a 'top-up' or extension to a new car warranty or, in the case of used cars, to provide insurance after expiry of the manufacturer's warranty.
The Claimant ('Templeton') is an Insurance Company incorporated in the Isle of Man and authorised to write insurance business in the United Kingdom. In four successive annual agreements (the 'Slips') Templeton agreed with the Defendant ('Motorcare') that it would act as Templeton's agent in selling MBI in the United Kingdom from July 2004 to July 2008. A necessary part of the Slips were Rate Schedules which set out the rates at which the insurance was to be sold by Motorcare and (more importantly in the present context) the premiums which were to be accounted by them to Templeton.
Contrary to the expectation of the parties, the contracts gave rise to heavy losses to Templeton; and among questions for determination in the action are issues which explain part of the losses. Eventually the contractual relationship between the parties came to an end, with allegations of fraud being made by Templeton against Motorcare and the grant of a Freezing Injunction.
The main focus of the trial was the state of the account between Motorcare and Templeton and the allegation of fraudulent misrepresentation in relation to Slip 4; but issues also arise in relation to Templeton's claims against the 2nd to 6th Defendants, who are members of the Thomas family and who, to a greater or lesser extent, were involved in the management of Motorcare and its contractual relationship with Templeton.
The Contracts
Motorcare's business was in the sale of MBI policies which were sold through car dealers to their customers. The policies would either be sold to the customer by the dealer or given away 'free' at the time the vehicle was sold. In either case a sum would be payable to Motorcare and premium would be accounted for by Motorcare to Templeton. The difference between these two sums represented Motorcare's profit.
At the inception of Slip 1 Motorcare's business was primarily managed by the Third Defendant, Harbinder (Harby) Panesar. Mr Panesar, who had previously worked in the Prison Service, joined Motorcare in 2003 and became a Director in 2004, He was relatively inexperienced in running the business, but he was industrious and was assisted by an experienced back-office staff and a team of salesmen. In addition, he was able to call on his father-in-law, the second Defendant, Anthony (Tony) Thomas. I shall refer to the 2nd Defendant as 'Mr Thomas', to distinguish him from his son, James Thomas, who is the 5th Defendant. In addition to Mr Thomas, Mr Panesar had assistance from John Dockerill, an associate of Mr Thomas.
Motorcare had developed over many years as Mr Thomas's business. In October 2003 he retired and handed over the running of the business to Mr Panesar. Other members of the family carried out nominal roles at Motorcare. The 4th Defendant, Caroline Thomas (who was Mr Thomas's daughter and Mr Panesar's wife) was the Company Secretary. James Thomas (the 5th Defendant) was Mr Thomas's son and acted as a Director. The 6th Defendant, Christine Thomas (Mr Thomas's wife and the mother of Caroline and James Thomas) was the sole shareholder, up to December 2007, when Mr Thomas became a 50% shareholder and her shareholding was reduced to 50%.
Although Mr Thomas gave evidence that he played a minor and subsidiary role in Motorcare after his retirement, covering for Mr Panesar when he was away, I have concluded (as the contemporary documents clearly show) that he continued to play a major role in the running of the company, particularly in relation to the agreements with Templeton.
An essential part of Motorcare's business was its computer system. This should have been able to record the relevant details of policies issued by Motorcare's agents, including the premium and the amount to be accounted to Templeton, and the claims made and paid. During the currency of the four Slips, Motorcare used at least two systems: the Winstar programme, which was used until October 2006, and the Blue-Orange system, which was intended to replace it. The database for the Winstar system was designed by Richard Lailey, who acted as a consultant to Motorcare. When the Winstar system encountered problems some of the claims data was recorded by Motorcare's back-office staff using manual records. These claims were later referred to as the KJ claims. The Blue-Orange system had the design advantage that it could be accessed by the dealers who could directly input the relevant data, as well as by Motorcare and its brokers. However, until the Blue-Orange system recorded all the relevant MBI policies issued by Motorcare, it was necessary to access two or more sources in order to provide the data which was necessary to monitor the profitability or otherwise of the insurance which Templeton was underwriting.
Mr Dockerill's relationship with Motorcare pre-dated its relationship with Templeton; and it was Mr Dockerill who, at short notice, arranged for Templeton to provide the underwriting which Motorcare needed to run its business. His company, John Dockerill Associates Limited (or JDA Limited) was described as 'Producer' on Slips 1 and 2. His formal status was as the Appointed Representative of Motorcare's brokers. In practice he took a prominent role as an intermediary during the operation of Slips 1 to 3, with half the broker's commission being paid to him. He was highly experienced in MBI business; and his advice to Motorcare extended far beyond the usual functions of a broker's representative.
There were two groups of companies in the contractual chain between Motorcare and Templeton. The first link in the chain was successive FSA registered brokers, who acted as a conduit for some of the information and funds passing between Motorcare and Templeton. From 1 July 2004 until 31 January 2006 the broker was Legal Risks Management Limited ('LRM'), from 1 February 2006 until 30 June 2007, it was SBM (International) Limited ('SBMI') and from 30 June 2007 to 7 July 2008 it was EWC Insurance Services Limited ('EWC').
EWC was a company established by Mr Eric Allen. During the operation of Slips 1–3, EWC acted as the second link in the chain, providing assistance to Templeton as underwriting agent. From the start of Slip 4, EWC also became Motorcare's broker. By the time that EWC had become involved as broker on Slip 4, Mr Allen was receiving assistance from Sean Kent and David Waters in the analysis of the financial outcome under the four Slips.
An intermediary with a dual function is not uncommon in the insurance business. However there is always the danger of difficulties arising from conflicting duties owed to two principals, the Insurer and the Assured. In this case the brokers' principal was Templeton's agent and not an assured.
Templeton's business was run from the Isle of Man. Up until mid 2006 Mr Ralph Brunswick was the Managing Director; and Slips 1 and 2 specified that he was the only person entitled to bind Templeton. Up to 27 July 2006 he was assisted by another director, Mr Antony Corlett. There are a number of letters which appear to have been written by Mr Corlett which Motorcare has relied on, as showing an agreement by Templeton to vary the express terms of the Slip. Mr Corlett did not give evidence, although an affidavit by him is relied on by Motorcare. He has stated, as is now accepted by Motorcare, that one of the letters which appears to be his is in fact a forgery.
Mr Kenneth Wells was employed by Templeton from October 2005; and became involved with the Motorcare Slips in May 2006, taking over as Managing Director of Templeton on 1 January 2007.
Outline Chronology
Slip 1
It is convenient to describe the terms of Slip 1 in detail since it provided the model for Slips 2 and 3.
The first 5 pages of the document were set out on the headed notepaper of Motorcare's broker, LRM. Each page is signed by Templeton with an undated signature. The nature of the insurance was described as a 12-month period of cover from 1 July 2004 for Mechanical Breakdown repairs to new or used vehicles. There were further terms:
Maximum Period of Insurance any one vehicle:
New: 36 months after the expiry of the manufacturer's warranty period
Used: 36 months from the date of purchase, 12 months from the date of purchase in respect of commercial vehicles.
Conditions:
1. 90 day cancellation clause …
2. 30 day rate review clause …
…
Exclusions:
4. Any vehicles used for competitions, racing, pacemaking, rallies, or for hire or reward or by a driving...
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