The Motoring Organisation Ltd v Spectrum Insurance Services Ltd

Hearing dates: 14–16, 20–23, 28 November 2023

This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:00 on Friday 09 February 2024.

Simon BirtKC:

The Claimant, The Motoring Organisation Limited (“ TMO”), brings claims for breach of contract, breach of confidence, breach of fiduciary duty and unjust enrichment against the Defendant, Spectrum Insurance Services Limited (“ Spectrum”) in relation to what is alleged to be Spectrum's wrongful exploitation of certain business opportunities, being:

(1) An opportunity to provide a particular warranty to the UK dealership that sold vehicles made by the Korean manufacturer, SsangYong (the “ SsangYong Opportunity”); and

(2) An opportunity to provide regulated insurance products to certain car dealers (“ the 2020 customers”).

This judgment follows a trial of issues of liability in this action. The parties agreed to a split trial in the course of agreeing a consent order dated 29 July 2023. The order, even though it did not expressly order a split trial, assumed in its drafting that this trial would be of liability issues only. There was no controversy about this at the trial – the parties were agreed that this trial would not determine any question of remedy, but only of whether liability was established under one or more of the pleaded causes of action.

In this judgment I deal with matters in the following order:

(1) Factual background.

(2) The witnesses.

(3) The claims in respect of the SsangYong Opportunity.

(4) The claims in respect of the 2020 customers.

(5) Conclusion.

Factual background

The businesses involved in this case were all involved in the selling of insurance and/or warranty products for cars. Some of the relationships between individuals go back a long way.

TMO is a warranty and after-sales product provider which, among other services, provides vehicle warranties to dealers to sell on to their end customers. The two principal figures behind TMO were Mr Donald Pinkney and his son, Mr Christopher Pinkney. I will refer to them as Mr Don Pinkney and Mr Chris Pinkney and sometimes together as “the Pinkneys” (which is how they were sometimes referred to in contemporaneous documents and by some of the witnesses at trial).

Spectrum, formerly known as Tobell Automotive Limited, is an insurance provider for the motor industry. At the material time, Mr Russel Kitchin and Mr Brian Clarke were directors of Spectrum.

Mr Don Pinkney has been involved in the business since the early 1980s, when he joined a business called Warranty Holdings Limited (“ Warranty Holdings”), based in Sheffield, which had been set up by his father (Mr Frederick Pinkney). This was a successful business, which Mr Don Pinkney said at its high point had been one of the biggest warranty providers for used cars in Europe. Mr Don Pinkney's two brothers, Paul and David, also worked at Warranty Holdings.

Some time after his father's retirement from the business in June 1993, Mr Don Pinkney left Warranty Holdings and, in July 1996, set up a new company with his two brothers, called Motorway Direct plc (“ Motorway Direct”). Motorway Direct was based in Rotherham, and had a similar business to that of Warranty Holdings.

In 1993, Mr Kitchin had started to work at Warranty Holdings, first as a claims engineer in Sheffield. It was in that role that he first met Mr Don Pinkney, who was the regional director at the time. Mr Kitchin was promoted swiftly, and in 1995 became a claims manager in charge of a new NW claims office.

In 1996, he moved to Motorway Direct when it was set up, and developed its claims and administration systems from the ground up. He came to be, for Mr Don Pinkney, a trusted and key employee.

Mr Kitchin was appointed a director of Motorway Direct in October 2005, by which time he held a senior role described as Underwriting Director. Due to ill health, he resigned in September 2006. By that time the annual premium income of Motorway Direct had reached around £35 million. Mr Don Pinkney recalled that he had given Mr Kitchin what he described as a “golden handshake” of £200,000 when he left to help Mr Kitchin given his health issues and to reflect how much he had valued Mr Kitchin's assistance in building up Motorway Direct. Mr Kitchin recalled that it was Simon Tennyson, another of Motorway Direct's directors, who had offered him a sum of money (which Mr Kitchin did not identify). Nothing turns on who offered this. It was clear that Mr Kitchin had contributed greatly to the success of Motorway Direct, and his services and abilities were valued by Mr Don Pinkney. As Mr Don Pinkney said in his oral evidence:

“Russell [Kitchin] was the prime person that helped me set up Motorway Direct.”

Motorway Direct's main target clients were dealerships who would sell insurance products to customers when they bought a car. Motorway Direct provided the insurance product, which would be underwritten by an insurer from whom Motorway Direct generally had a form of authority, and would deal with the after sales claims if a claim was made under the terms of the policy.

Motorway Direct was regulated by the FCA as a principal, such that it could carry out regulated activity, including the selling of insurance backed warranty products for cars. It had a licence to sell certain warranties under the “AA warranty” brand.

In around April 2019, Mr Don Pinkney and his brothers all decided that they would leave Motorway Direct and put the business into run-off. At the trial there were suggestions from Spectrum that there had been a number of issues at Motorway Direct and some level of disagreement or difficulty had arisen between the three brothers.

Having decided to leave Motorway Direct, Mr Don Pinkney wanted to set up a new company with his son, Mr Chris Pinkney, something he had been considering doing for a number of years. At first, they were minded to use a subsidiary of Motorway Direct called AA Mechanical Insurance Services Limited (“ AAMIS”) to do this, and some preparatory steps (such as transfer of some staff) were undertaken with this in mind. Subsequently, by or around August 2019, they decided instead to use TMO. (In a subsequent Motorway Direct board minute, this was described as linked to the decision, in August 2019, to determine the AA warranty brand licence). Although described in the witness statements of Mr Don and Mr Chris Pinkney as a subsidiary of Motorway Direct, TMO was, in fact, wholly owned by Mr Don Pinkney. Nothing, however, turns on that. Mr Chris Pinkney became a TMO director in November 2017, and Mr Don Pinkney was appointed a director on 17 October 2019. Mr Chris Pinkney is the managing director of TMO.

The agreement that Mr Don Pinkney appears to have made with Motorway Direct was that he would take the sales business of Motorway Direct and set it up to run within TMO. He took on about 20 staff from Motorway Direct (which no longer required them as it was no longer writing new business).

After Mr Kitchin had left Motorway Direct, he and Mr Don Pinkney had fallen out of touch, but had met by chance at an insurance conference at The Armouries in Leeds in 2015. This had led to a resumption of their relationship, and they subsequently met up (also with Mr Chris Pinkney) and talked about working together again at some point in the future. At this point, Mr Kitchin was working at Tobell Automotive Limited (“ Tobell”), which was another company that sold car warranty products.

This led to various discussions from time to time over the subsequent years (between 2015 and 2019) about whether Mr Don Pinkney might buy out or takeover Tobell or find some other way where his business might work with that of Tobell.

The other principal at Tobell at that time was Mr Neil Smith. He had also been involved in some of the discussions between Mr Don Pinkney and Mr Kitchin. At some point in the summer of 2019, Mr Smith left Tobell, following which Mr Kitchin renamed the company Spectrum Insurance Services Limited (i.e. the Defendant).

This appears to have brought about an opportunity for the discussions about Mr Don Pinkney's business (which was now to be TMO) to takeover or merge with Spectrum to become more serious and focussed.

It was evident that both Mr Don Pinkney and Mr Kitchin saw great potential for such a co-joined business. They both explained that they had complementing strengths – Mr Don Pinkney on the sales side (Mr Kitchin said of Mr Don Pinkney “ …there's no doubt that as a salesman in the warranty business I think he's exceptional”), and Mr Kitchin on the claims and administration side. In his oral evidence, Mr Don Pinkney described it as “ a perfect fit”; Mr Kitchin in his oral evidence said: “ it was a match made in heaven quite frankly.”

It appears that the discussions about a possible merger or takeover had been increasing during the course of late 2018 and during 2019. These were between Mr Don Pinkney and Mr Kitchin, and sometimes included Mr Chris Pinkney. These were not documented in any way. At the trial there were no notes of these meetings in any sense, and no focus on any documentary record of them e.g. emails between the participants...