Reeds Solicitors (A Firm) & Anor v Norwich Union Insurance Ltd & Ors

J U D G M E N T

Monday, 7 March 2005

1. LORD JUSTICE WARD: I will ask Lord Justice Longmore to give the first judgment, please.

2. LORD JUSTICE LONGMORE: As must be clear from my Lord's pronouncement, we are agreed about disposal of this appeal and I would allow the appeal for reasons that I am about to give. However, before I do give those reasons I should emphasise because this is an application for summary judgment by the defendant, which we will say should not succeed, anything I say is not to be treated as binding on the trial judge. Indeed I will say as little about the case as I possibly can, save to show why I disagree with the disposal of the judge.

3. This is a case about what may be called "lead solicitor status" for a major insurer. At one time in the recent past Norwich Union and other insurers offered their customers insurance against legal expenses, as well as vehicle insurance. Most car accidents result in some legal expenses, and performing the services which an insurer or its customers will require in respect of legal work arising from accidents is, or can be, depending on the terms pursuant to which it is done, attractive work for any firm of solicitors. One of the vehicle insurers in this case is, as I say, Norwich Union Insurance Ltd. It is the first defendant to a claim by a firm of solicitors who used to be called LawLine Solicitors and are now called Reeds Solicitors. The moving spirit of this firm is Miss Chantal Reed. She claims that she and her consultant, Mr Nick Godliman, reached an agreement with Mr Dominic Clayden of Norwich Union and Mr John Palmer of a firm of insurance brokers, a wholly owned subsidiary of Norwich Union called Hill House Hammond Ltd, whereby they agreed that 80 per cent of their legal expenses insurance cases were to be referred to the firm for a period of five years. Norwich Union and Hill House Hammond dispute that claim and in the context of that dispute it may be relevant to be aware that it is said that the legal expenses insurance was provided not by Norwich Union but by a separate company - in this case Equity Red Star.

4. It is, however, uncontroversial that in due course, on 6 May 2003 three written agreements were made with other wholly owned subsidiaries of Norwich Union. First, a "panel agreement" between the claimant firm referred to in that agreement as the "panel firm" and a company called BTE LawLine Ltd, again a wholly owned subsidiary of Hill House Hammond, whereby BTE LawLine agreed to introduce the claimant firm to insured persons who required client claims services in relation to motor accidents. Clause 2.4 of that agreement provided:

"The parties acknowledge that BTE LawLine makes no commitment as to the number, type or size of cases it may introduce to Panel Firm under this Agreement."

Clause 3 is headed "Duration", and provides:

"This agreement shall commence on the Commencement Date and subject to clause 11 and 16 shall continue in force for a period of 5 years."

There were express provisions as to determination in certain events in Clause 11 of that agreement.

5. Secondly, there was a "Services Agreement" between the claimant firm, again referred to as the panel firm, and a company called Evident Legal Services, whereby the claimant firm agreed to appoint Evident as its subcontractors to provide the non-legal services which would be required for the panel firm's legal work to be performed. Typically this would include ascertaining details of accidents and injuries, liaising with witnesses, obtaining medical records and expert advice from both doctors and accident investigators.

6. Thirdly, there was a consultancy agreement between the claimant firm, now called "the consultant", and the above two companies whereby the client firm agreed to provide advice and assistance to them on all aspects of personal injury claims and legal expenses insurance for a period of 12 months, and report from time to time as appropriate to the company's boards of directors.

7. The case of Miss Reed and her firm is that although there is no provision in any of these written agreements for 80 per cent of the business to be referred, and although each of the agreements had what is known to lawyers as an "entire agreement clause", nevertheless the earlier express agreement for 80 per cent of cases to be referred made, as she asserts, with Norwich Union and Hill House Hammond, is carried through into the written agreement with BTE LawLine and also constituted an agreement which, as I say, was made orally with Norwich Union and Hill House Hammond.

8. Miss Reed says further that the reason why the agreements were made was that originally what had been contemplated was a joint venture arrangement between the client firm and Hill House Hammond; that she and her associates had put an enormous amount of work into preparing for and executing the scheme of the joint venture which was to be a joint venture company in which they would now respectively have 75 per cent and 25 per cent of the interest, but that at a late moment, after heads of agreement had been drafted with much trouble and much difficulty, Norwich Union refused to go any further down the route of a joint venture because they did not wish to be publicly associated with one particular form of solicitors as recipients of the majority of their work.

9. In return for that disappointment, however, there was, according to Miss Reed, an oral agreement that came about as set out in her statement, of which I should read a few passages beginning at paragraph 27. She refers to the termination of the joint venture discussions, and says this:

"I was clearly upset by this and John [John Palmer of Hill House Hammond] offered to meet with me and Nick [Mr Godliman, her consultant] the following day. This we did at the Hilton Metropole in London. Nothing new was discussed, but it was made clear that despite the Heads of Agreement, and the fact that the whole concept was our idea, if we wanted to remain part of it we had no choice but to accept this development. 28. There really was no decision to make, after all the hard work we had put in and the fact that in reality we would be no worse off, perhaps even better, taking into account John's confirmation that

(a) the firm would still receive in excess of 80% of the claims for 5 years, which based on the projections to hand meant circa 4000 claims per annum,

(b) the fees to the Firm would be less per claim; and

(c) the possibility of [Norwich Union] coming on board, if the scheme was successful with 35,000 claims per annum.

We therefore decided to accept the position however started to take a harder line with regard to the time we were giving to the project. Whilst we were going to benefit by part ownership of the JV, I was happy not to charge for my time, but now that we were to be excluded from JV yet still expected to contribute substantial amount of time in setting up this new company and putting the processes in place, I felt that it was only fair that I be paid."

There was then a meeting scheduled for 5 November and rescheduled for 7 November, which Miss Reed described in paragraph 31 of her statement in the following way:

"At the meeting the new model, which made specific reference to a 'lead panel solicitor' and parameters were agreed and it was left that work would continue on the agreements, and alterations of the processes, and that we would submit to Dominic [Dominic Clayden of Norwich Union] a list of potential other panel solicitors and any other issues that arose surrounding the model and agreements that needed to be drawn up."

10. Miss Reed then goes on to give a reason why it was that the figure of 80 per cent was not set out in any written agreement and why contemporaneous documents such as, for example, a letter of comfort expressed to be non-binding by Hill House Hammond on 5 March 2003 promised only to refer "a substantial number of claimant road traffic personal injury cases", rather than any specific percentage. This reason was, according to Miss Reed, that Norwich Union and their associates did not want the outside world to know that Reeds Solicitors was going to be a Norwich Union "lead firm". In these circumstances, it is alleged that the agreement for the referring of 80 per cent of cases for five years carried through to the stage of the written agreements and that either on 7 November, or at a later stage when written agreements came to be made, Norwich Union and Hill House Hammond were bound by the oral agreement allegedly made on their behalf and that the agreements with the third and fourth defendants were in those circumstances partly oral and partly in writing or were induced by the collateral promise of 80 per cent of cases being referred.

11. As always when an oral agreement is relied on, particularly when there is a subsequent non-binding comfort letter and there are subsequent written agreements with entire agreement clauses, any court would look at a claimant's case with a great deal of scepticism. The question, however, for us, is whether there is no realistic prospect of success for the claimants.

12. Mr Boyle, for the defendants, has submitted that we should look at each defendant individually. He submits that there can be no claim against Norwich Union because it was always intended that any contract to which the claimant firm would be a party should be a contract in writing and because there is not even a plea that Norwich Union had any obligation arising out of any agreement reached, let alone any obligation to ensure that Hill House Hammond would refer 80 per cent of their cases. However, paragraph 5 of the particulars of claim does allege - rightly or wrongly remains to be seen - that Norwich Union did make an agreement for the referring of 80 per cent of the claims. It is not necessary for it to be alleged that Norwich Union procured that Hill House Hammond would do so. It is alleged that Norwich Union promised that it would be done and that that promise was made by Mr Clayden or, at the very least, assented to by him on 7 November 2002.

13. Mr Boyle then submitted that there could be no agreement with Hill House Hammond because again it was expected that any agreement to which the claimant firm would be a party would be in writing, and Hill House Hammond only signed the letter of comfort of 5 March 2003, to which I have already referred, which was expressed in terms not to be binding. That letter was written on Hill House Hammond's notepaper to the claimants, and said this:

"We refer to our negotiations to conclude a Panel Agreement under which you will be appointed to the panel of solicitors operated by BTE LawLine Limited to handle personal injury claims under its 'before the event' legal expenses products.

Subject to the rights of all BTE LawLine's clients to be represented by a solicitor of their own choice, whether from BTE LawLine's panel of solicitors or not, Hill House Hammond, through its wholly owned subsidiary BTE LawLine, has agreed to refer to Reeds Solicitors, previously known as LawLine Solicitors, a substantial number of claimant road traffic personal injury cases that will be generated through our new Before the Event Insurance scheme. We anticipate that, after the first twelve months during which the Scheme will bed down, the Scheme as a whole will generate in the region of 5,000 cases per year.

This letter is a statement of intention binding in honour only and is not intended to create a legally binding relationship between any parties."

14. There is no doubt a strong argument that the defendants, Hill House Hammond, can mount in relation to that letter of comfort which I have read out. But it is to be noted that it does actually refer to Hill House Hammond having made a previous agreement and does not state in terms that that prior agreement is not to be legally binding. What it does obviously state is that the letter itself is not to be legally binding.

15. It seems to me, therefore, that if one looks at the separate positions of Norwich Union and Hill House Hammond against the evidence set out, only a small part of which I have read in Miss Reed's statement, despite the fact that Miss Reed is relying on an oral agreement it cannot be said that at this stage of the proceedings there is no realistic prospect of success of her showing that that oral agreement came into existence. Mr Boyle may well be right to say that overall there could not have been a binding commitment as at 7 November; but that is too easy a disposition of the difficult question as to whether or not, when an agreement was finally made, Norwich Union and Hill House Hammond were nevertheless bound by what was said by Mr Palmer and/or Mr Clayden in October and November 2002.

16. Mr Boyle then turned his attention to BTE and submitted that there was a written agreement with BTE, the third defendant, and that that contained an entire agreement clause. However, as I have said, Miss Reed has alleged that there was a good reason understood and known to the parties for the agreement which she alleges was made not to be committed to paper, viz that Norwich Union did not want the publicity. I have in mind paragraphs 33, 37 and 47 of her statement.

17. Fourthly, Mr Boyle said that there was no evidence of how the 80 per cent became a contractual commitment when, as he put it, it was perfectly clear that at the time the figure (or a figure like that) was first being bandied about it was not in the context of any contractual commitment. But as I have said Miss Reed's case is not confined to a case of a contractual commitment on or about 7 November, but extends to a contractual commitment coming into existence at the time that the written agreements were signed.

18. The judge set out the facts with much care and then gave five reasons for concluding that there was no prospect of the claimants establishing an oral agreement. Those five reasons are set out in paragraph 26 of his judgment. He says, first of all, that Miss Reed does not assert that on 7 November the first claimant entered into an oral agreement with the first and second defendants for 80 per cent of the claims to be referred for a minimum period of five years. He added.

"Paragraph 31 of her witness statement is completely silent on this point. That in my judgment is a remarkable omission."

That seems to me to be unfair to the statement of Miss Reed when read as a whole. Paragraphs 28 and 29, which I have read, did indeed assert that there was, to use the word in those paragraphs, a "confirmation" that 80 per cent of the claims would be referred for a minimum period of five years, and it was because that confirmation had been received that no doubt Miss Reed did not consider it necessary to refer to it again in paragraph 31 of her witness statement. If one reads the witness statement as a whole as far as paragraph 69, one sees that she is indeed asserting such an oral agreement. It is perhaps fair to say that the judge should also have taken into account the fact that there were particulars of claim the truth of which was attested to by Miss Reed.

19. The second reason given by the judge is that, according to the evidence, work was to continue on many details with a view in the fullness of time of finalising written agreements. That may well of course be so, but, as I have already said, it is not an essential part of Miss Reed's case that a contract was finally established once and for all on 7 November rather than when contractual commitments were in general established. No doubt Mr Boyle can say with much force that at the time in October and November and the remainder of 2002 no final agreement had been reached. The question is, of course, whether, when final agreement was reached, the terms of that agreement were as alleged by the claimants.

20. Thirdly, the judge said that the five-year term was not referred to at all, and he called that a remarkable omission. It is true that in the contemporaneous documentation in October and November there was no reference to a five-year term, but the heads of agreement made it quite clear that it was proposed that the relationship should last for five years. The panel agreement which was eventually signed made it plain that it was to last for five years. It would not be difficult to conclude that, if there was any agreement at all (that is, of course, a major question) it would have been contemplated that that would be for a five-year period, subject always, no doubt, to any arguments as to any obligations of the parties to continue with the kind of business which the agreement was contemplating.

21. The judge's fourth point was that there was no post-meeting letter from the claimants setting out the facts and terms of the oral agreement and evidencing the same. Nevertheless, Mr Underwood did show us at least one document after November 2002 in the form of a chart where the figure of 80 per cent was actually inserted. And while the agreement did last, there is apparently no doubt that 80 per cent of cases were in fact referred.

22. The judge then says, fifthly, that the only reference to percentage referrals (and he means, I think, before 7 November) is "of 85 to 90 per cent" which, as the judge observes, is not the same as a minimum of 80 per cent. Nevertheless, if any court concluded that there was an oral agreement of some kind, the difference between "85 to 90" and "a minimum of 80 per cent" is not in fact very great. We were then reminded that the judge in paragraph 53 referred to various legal reasons for coming to his conclusion as well, particularly in the context of the written agreements, namely, the existence of the entire agreement clauses, the fact that the third and fourth defendants did not exist at the time that the oral agreement was alleged to have been made, and the provisions for termination are inconsistent with a term of five years.

23. However, as to those, one can only think that if after a trial a court was persuaded that there was some oral agreement whether it is to be said that it is part of a contract which, as a whole, is both oral or in writing, or as a collateral contract to the making of the written contracts, these legal points relied on by the judge would have a very different flavour.

24. For those reasons I would reluctantly conclude that the judge does not appear to have fully taken on board the force of the evidence which Miss Reed was seeking to put before the court. It is all too easy, of course, to say that at first sight the claimant's case appears to be a weak case and Mr Boyle's submissions would have been very forceful in any final speech. However that is quite different from saying that it is a case which has no prospect of success. In my view there ought to be a trial, and I would allow the appeal.

25. LORD JUSTICE CLARKE: I agree. Mr Boyle has persuaded me that there are many aspects of the appellants' case which are fraught with difficulty. However, for the reasons given by Longmore LJ, I do not think that the judge was justified in going so far as to hold that the appellant's claim has no real prospects of success. The right course, to my mind, is to allow the matter to proceed to trial. At that trial the judge will be able to resolve the matter in the light of the oral evidence of Miss Reed set against the other evidence in the case.

26. In all the circumstances, I would allow the appeal for the reasons given by Longmore LJ.

27. LORD JUSTICE WARD: I agree.

(Appeal allowed; costs deferred; to be listed before a High Court judge if possible; further orders to be agreed by counsel).