Walker v Co-Operative Insurance
| Jurisdiction | England & Wales |
| Judge | Lord Justice Toulson |
| Judgment Date | 19 November 2009 |
| Neutral Citation | [2009] EWCA Civ 1390 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2009/0559 |
| Date | 19 November 2009 |
[2009] EWCA Civ 1390
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON CIVIL JUSTICE CENTRE
(HIS HONOUR JUDGE KNIGHT QC)
Lord Justice Toulson
Case No: B2/2009/0559
Mr Charles Davey appeared on behalf of the Appellant
The Respondent did not appear and was not represented
Lord Justice Toulson:
Mr Walker took out a number of with-profits endowment policies with CIS. He also subsequently took out four personal pension policies with CIS, which he then transferred. He brought the present claim against CIS, alleging that it had acted in breach of contract in two ways. These have been referred to as the unlawful subsidy claim and the differential bonus claim.
The case was heard in the fast track by District Judge Lightman on 31 January 2008 and was dismissed. It was heard in the fast track because the claim was stated to be limited to £5,000. Mr Walker appealed, and his appeal was heard by HHJ Knight QC on 24 February 2009. The appeal was dismissed. Mr Walker now seeks permission to appeal to this court. Because it would be a second appeal, he has not only to pass the usual threshold but also to show that the appeal would raise an important point of principle or practice or that there is some other compelling reason to hear it. His application was considered on paper by Sir Richard Buxton and refused on the grounds that the appeal would stand no reasonable chance of success, in addition to there being no important point of principle.
Since then Mr Walker has produced revised Grounds of Appeal. Today he has been represented by Mr Davey of counsel, and Mr Davey has put the case as comprehensively as he could possibly could. Unusually, for an application of this kind, the argument has gone for an hour and a half. That is not a criticism of Mr Davey, but I shall not in this judgment deal with every point that has been canvassed during those 90 minutes. I remind myself that this is not the full hearing of an appeal but an application for permission. I will deal with the two heads of claim in turn.
The unlawful subsidy claim
On a date which is unimportant for present purposes, CIS introduced a stakeholder pension scheme. Under the Stakeholder Pension Schemes Regulations 2000, the maximum charge that CIS could make to cover all its administrative costs was 1% per annum of the underlying value of the funds. This figure was later increased to 1.5%. The actual expenses incurred by CIS in brokers' commission and other costs for each new pension were the equivalent of 13.6% of the first year's premium, so there was a considerable excess over the amount which CIS could charge against the fund. Its commercial aspiration was that in later years, as the value of the fund grew, that loss would turn into profit. In the meantime it had to meet the expense.
Mr Walker says that it did so by taking funds which adversely affected the bonuses he could have otherwise expected to receive under his with-profits endowment policies; in other words CIS robbed Peter to pay Paul. CIS's case was set out in considerable detail and with clarity in a witness statement by Dr Timothy Bunch, who was CIS's senior actuary at the relevant time. He also gave evidence before the District Judge and was cross-examined. He was emphatic that the costs in question came from CIS's free working capital in a way that had no effect on the calculation of bonuses for with-profits endowment policies. It appears that the FSA was content with what the CIS had done and did not consider that there had been any breach of the regulations. The District Judge accepted Dr Bunch's evidence and so dismissed this part of the claim. HHJ Knight could detect no error of law in the decision, nor could Sir Richard Buxton.
In his revised Notice of Appeal Mr Walker makes essentially two comments. First, he says that the District Judge fundamentally misunderstood his complaint. The District Judge treated it as if Mr Walker was saying that the expense in question had been levied against the stakeholder pension fund contrary to the regulations and to the detriment of pension holders including himself, whereas it is common ground that in fact Mr Walker has never had a stakeholder pension with CIS, although he has had other forms of personal pension with CIS. Rather, his complaint was that the relevant costs were taken from funds which ought to have been preserved for with-profits endowment policy holders including himself.
There is force in the complaint that the District Judge misunderstood what Mr Walker was saying. In his pleaded case Mr Walker set out. at paragraph 5, a number of implied terms, the existence of which was not disputed by the CIS. These included:
“… 2) CIS would not operate a differential policy to the prejudice of with-profits policy holders which was to the benefit of a different class of policy holder(s);
…
4) With-profits designated funds would not be used to subsidise other unprofitable funds; …”
The pleading went on to set out alleged breaches in relation to the unlawful subsidy claim. He said this:
“8. In order to increase its return from selling unprofitable stakeholder pensions, CIS operated a policy of subsidising commissions in excess of the statutory limit to its sales staff to the detriment of with-profits funds/bonuses. CIS stakeholder pensions were subject to an annual charge of 1% and commission amounted to 13.6% of the first year's premium. In about July 2006 CIS stopped selling stakeholder pensions by its face to face sales force.
9. The payment of high commission in respect of stakeholder pensions was unlawful and/or in breach of the above implied terms.”
I accept that Mr Walker was there making the complaint that the shareholder pension fund was subsidised from funds which should have been properly applied for the benefit of with-profits endowment policyholders. I also accept that in his judgment the District Judge appears to have thought that his complaint was that the expenses were taken from the shareholder pension fund. I have some sympathy with the District Judge, who received a very large volume of papers at short notice in a fast track trial. Included in the papers was a witness statement of Mr Walker in which he set out why he said that the payment of the relevant expenses were unlawful. The first reason given by him was that in the event of insolvency the 13% charge would be debited against stakeholder pensioners. It is not altogether surprising that the District Judge understood the complaint to be that the stakeholder fund was wrongly depleted. Nevertheless, I accept that this was a misunderstanding of the case which Mr Walker was seeking to present and had set out in his pleading, when properly understood.
Mr Davey, in his submissions this morning, accepted at first that the relevant implied term of which CIS was allegedly in breach by what has been termed the “unlawful subsidy” was essentially the term pleaded in paragraph 5.4: that is, that with-profits designated funds would not be used to subsidise other unprofitable funds, and he initially accepted that the other implied term to which I referred, that in paragraph 5.2, added nothing to this particular ground of complaint. Later in his submissions he was to change that position. I have to say that had I been reading his pleading I would have understood this claim to be a claim that CIS had utilised what in shorthand may be called with-profits funds to subsidise the stakeholder pension fund. And that is how Dr Bunch unsurprisingly appears to have understood it in his lengthy witness...
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