Quantum Advisory Limited v Quantum Actuarial LLP

This is the latest round of litigation between the parties (Quad and LLP respectively) as to the meaning and effect of a services agreement (the agreement) entered into on 1 November 2007 by LLP and Quad’s predecessor, which agreement was then novated to Quad. The first claim concerned whether the agreement prevented LLP from soliciting Quad's clients. His Honour Judge Keyser QC, sitting as a judge of the High Court, found largely in favour of Quad ( [2020] EWHC 1072 (Comm)). LLP's appeal was dismissed by the Court of Appeal ( [2021] EWCA Civ 227 ). Quad then brought a claim for declarations that LLP was obliged to carry out tendering, and to render various other services, on behalf of Quad under the agreement. The issue as to whether LLP was obliged to carry out tendering came before me, and I found that it was not ([2022] EWHC 1423 (Ch)). Quad appealed and the Court of Appeal dismissed that appeal too ([2023] EWCA Civ 12). The parties were then in dispute about the mark “Quantum Advisory,” which dispute came before Judge Keyser. He found that under the agreement LLP is a fiduciary to Quad in respect of the conduct of the Quad’s business and is entitled by licence to the use of the mark during the subsistence of the agreement ([2023] EWHC 47 Ch), but refused other relief. That decision too is headed for the Court of Appeal. Quad also applied for two other orders, which applications were dismissed by Judge Keyser and there is no appeal from those decisions.

The dispute which I must now resolve has a rather convoluted procedural history, which I will need to summarise, albeit briefly. Before I do so, I will set out what Mr Onions KC with Mr Adams for Quad, in oral submissions, indicated was at the centre of the current dispute, namely what LLP must do to comply with its obligations under clause 8.5 of the agreement. Quad seeks declarations, and no other relief, as to what those obligations are. The clause provides:

“Information” is defined to mean “such data, records, files or information in the possession of the LLP in relation to the Clients and the Services.” Schedule 7 defines the Services as “Provision of pensions consulting, actuarial, administrative and investment services” and sets out a list of examples of what falls within the definition. Clause 1 defines “Clients” to mean:

The Pipeline Business is defined to mean “any engagements by Quad entered into with any of the Clients or Prospects or which are referred to Quad by any of the Introducers in connection with the provision of Services during the Extended Period”. The definition of Introducers includes all Clients, all those identified in Schedule 4 to the agreement, and everyone else with whom Quad’s predecessor had had face to face contact for the purposes of engendering a commercial relationship in the twelve months immediately prior to 1 April 2007.

Little more need to be said about the factual background than set out in the earlier decisions set out above. In brief summary, before 2007 the business of Quad’s predecessor was as a provider of administrative, actuarial and related services primarily for defined benefit pension schemes. The largest shareholder and managing director wanted to diversify the business, but his colleagues did not, so they agreed to form LLP and reorganise that business. This was done by ring fencing existing clients and certain prospective clients, which would remain with Quad and be serviced by LLP, but allowing LLP to develop and expand its own business. The agreement was to put this all into effect, and provides that LLP is paid a monthly amount equal to 57% of the aggregate of Quad's receipts of fee income from the Clients serviced by the LLP and any commissions. This represents the cost to LLP of providing the Services, with no profit element. LLP took over all of Quad's staff and also has full use of its premises, equipment and brand.

In the second Court of Appeal decision cited above ([2023] EWCA Civ 12), Falk LJ, giving the lead judgment, referred to the Services to be provided under the agreement in these terms at paragraph 38.:

In paragraph 42 Falk LJ referred to particular parts of schedule 7 which Quad relied on in saying that it included tendering, namely "...such other administrative support as Quad may reasonably require from time to time" at the end of the paragraph headed "Quad Administration". Falk LJ continued:

The claim form which included the current part of the dispute states as follows:

As indicated above, the issue in relation to tendering has already been dealt with. Judge Keyser gave directions seeking to clarify what remained to be determined under this claim, and directed that the hearing to determine the question as to the extent to which LLP is obliged to do such other things as are necessary for the participation by the Quad in any tendering procedure be restored and re-listed. It is that hearing which has now taken place before me. Judge Keyser also directed that the parties should file statements setting out their respective cases as what remains to be decided under this claim.

That of Quad provides as follows:

The principles of contractual construction have been set out in the previous decisions cited above and are not in dispute. It suffices for present purposes for me to remind myself of the recent helpful summary by Carr LJ in Network Rail Infrastructure Ltd v ABC Electrification Ltd [2020] EWCA Civ 1645 ("Network Rail") at paragraph 18 and the conclusion at paragraph 19 as follows:

In my judgment, it is immediately obvious that what Quad’s statement quoted in paragraph 10 above seeks to do is to rewrite clause 8.5 of the agreement. LLP’s over-arching point is that it is not appropriate to grant declaration of the type sought, where there is no real and present dispute between the parties, merely concern at what disputes might arise in the future. Section 19 of the Senior Courts Act 1981 gives the court power to grant such relief, and by CPR 40.20 the court may do so whether or not any other remedy is claimed.

In Well Barn Shoot Ltd v Shackleton [2003] EWCA Civ 02, the Court of Appeal dealt with this discretionary power, and amongst other matters, the appropriateness of using it where issues are hypothetical. Carnwath LJ, as he then was, said this at paragraph 57:

Sedley LJ, agreeing, put it this way at paragraph 67:

The most recent edition of the textbook cited by Carnwath LJ (2011) has a similar reference to the need for concrete facts.

A useful summary of the principles to be observed in determining whether it is appropriate to exercise the discretionary power has been given more recently In Bank of New York Mellon, London Branch -v- Essar Steel India Ltd [2018] EWHC 3177 (Ch) Marcus Smith J, after reviewing the authorities on the grant of declarations, at paragraph 21 set out the principles, the most relevant of which for present purposes are as follows:

The key practical issues between the parties, as focussed upon in oral submissions and as I understand them, are whether LLP is obliged to;

It is clear in my judgment from the history of the disputes between the parties concerning the agreement, and the polarised position they have taken in the present proceedings, that they have a real difficulty about agreeing what the agreement says and does. In terms of clause 8.5, in my judgment there is a real and present dispute about the extent of LLP’s obligations thereunder. However, I am doubtful that declarations are the most effective way of resolving the issues. I accept Mr Butler KC’s submissions that the level of detail sought in Quad’s statement and the various circumstances set out, some of which may be more hypothetical than others, are such that the granting of declarations may cause more problems than they resolve.

Mr Onions KC adopted a somewhat more general approach in his oral submissions than shown in Quad’s statement. He realistically recognised that not every situation which might arise under clause 8.5 could be dealt with by declarations. As an alternative he invited the court to give what he termed narrative guidance on the key practical issues between the parties. In my judgment that is likely to be the most effective way of resolving these issues.

In the course of their respective submissions, both counsel referred to the possibility of coming back to court if further disagreement arose between the parties. In my judgment, given the unfortunate history of litigation between the parties over the agreement, this is to be strongly discouraged. Most agreements need some compromise to work effectively, and however strained relationships may be at present, both parties are strongly encouraged to take a more positive approach to making the agreement work, rather than undertaking the further time, stress and expense that even more litigation is likely to involve.

Clause 8.5, in my judgment, is a fairly straightforward provision. It allows Quad to access information in the possession of LLP which relates to the Clients and Services as defined. It is not subject to an express duty of good faith, although some six other clauses in the agreement are expressly subject to such a duty. Mr Onions KC submits that this shows there is an implied term of good faith underpinning the whole of the agreement, which needs to be implied into clause 8.5 to make it work. Mr Butler KC, for LLP, submits that it shows that the parties have chosen which obligations under the agreement are subject to such a duty and clause 8.5 is clearly not.

A term will be only be implied if it is necessary to make the agreement work and/or is so obvious as to go without saying. In Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, Lord Neuberger, giving the lead judgment of the Supreme Court, said at paragraph 21, that the implication of a term will satisfy the test of business efficacy “if, without the term, the contract would lack commercial or practical coherence”.

I am inclined to the view that an implied term of good faith in respect of clause 8.5 fulfils neither of those tests. However, on the assumption for present purposes that it does, in my judgment that does not assist in resolving the key issues between the parties, because such an implication cannot serve to widen the scope of the obligations under clause 8.5. Falk LJ, in the second Court of Appeal decision referred to above ([2023] EWCA Civ 12), said this at paragraph 48:

The agreement contains an entire agreement clause. Five points are immediately obvious from clause 8.5. The first is that what LLP must give is not the information itself, but access to it. The second is that the obligation refers to any information, providing that it comes within the definition. Third, the definition of information is wide, and refers to “data, records, files or information” relating to the Clients and Services as defined. Fourth, it is information “in the possession” of LLP. Fifth, the definitions of Clients and Services are narrow, the former relating only to existing clients of Quad and certain clients in the pipeline as at 2007.

Clause 8.5 should be read in the context of the agreement as a whole, which includes the preceding sub-paragraphs of the clause. These provide as follows:

In my judgment there is no room for the type of gloss which Quad seeks to put on the information to which access must be given. For example, its request for any information “whatsoever available” to LLP, as set out in paragraph 2 of its statement, goes beyond the scope of the obligation in clause 8.5, which is expressly limited to information in the possession of LLP. Information may be available to LLP but not in its possession, and in my judgment the obligation under clause 8.5 is limited as stiptulated. The formulation of answers to questions also goes beyond giving access to information. There is no obligation to create new documents or to process information in a particular format.

Some of the references in Quad’s statement to tendering, for example paragraph 2.3-5 and 3.1-2, also go beyond the scope of clause 8.5, given the fact that information is limited to Clients and pipeline business as at 2007 and to the Services as defined. As Falk LJ observed and as cited above, the client-related activities referred to in schedule 7 of the agreement relate to Services supplied to Clients on behalf of Quad, rather than work done to obtain or retain Clients so that Services can be provided. I accept LLP’s submissions that a demand for access to information which in truth effectively amounts to a request that the LLP prepares a tender, does not amount to a demand under clause 8.5.

Having said that, as Mr Onions KC submits, if Quad is already providing the Services to Clients then it is entitled to access information that preserves that competitive edge. I accept that submission as far as it goes. The mere fact that information is required as part of a tendering process does not mean that it necessarily falls outside the scope of clause 8.5. The particular information in question must be looked at to see if it does relate to the Clients and Services as defined, and if it does, access to it must be given.

When Quad was shortlisted by Cardiff City Transport Services Limited in a tender exercise, that company expressed a wish to meet the key team members and to visit the location from which all or most of the services will be provided. Accordingly Quad requested LLP for the next stage of the process to make its premises available for a site visit requested by that potential client and to make its personnel available to prepare and deliver a presentation. In my judgment both of those requests are outside the scope of clause 8.5.

In some respects LLP seeks to put too restrictive an interpretation on its obligations. Mr Butler KC submits that the information to be provided must be “tangible” and does so by saying that “information” in the definition must be read in the context of the words which precede it namely “data, records, files.” He submits that it does not extend, for example, to information which is stored personally by employees in their own memories. I accept that the words data, records and files, suggest tangible information and that the phrases “access to” and “in the possession of” may suggest the same. In my judgment however, a reasonable reader would conclude that by adding the word “information,” the parties intended to add something more than already provided for. That word is capable of ordinary meaning and includes information held by employees in their memories, as long as it complies with the definitions.

LLP also submits that clause 8.5 is complied with by allowing Quad’s directors to inspect documents such as the Client file at LLP’s premises, and Quad’s request for remote access goes beyond the scope of LLP’s obligations under clause 8.5. That clause does not stipulate how access is to be given, and in my judgement, as long as LLP gives access which is effective for Quad to obtain the information, then its obligation is complied with. Again, the narrow ambit of the definitions of Clients and Services in the agreement militate against Quad’s suggestion that it is entitled to any wider access.

This is whether access to information which may be demanded under clause 8.5 includes information as to LLP’s philosophy, which is something that some Clients demand. As long as this relates to Clients and Services as defined in the agreement, and not otherwise, then LLP must give access to this information if demanded. It may well be that such a proviso means that in practice this issue is unlikely to arise very often, but as a matter of principle it may do.

In my judgment it is not appropriate or desirable to go beyond the key issues set out above which have arisen as a matter of practice. The parties have chosen the words set out in the agreement including clause 8.5, which as I have indicated is fairly straightforward, and should strive to ensure that their agreement is put into effect. I have worded the guidance set out above in a way which I hope will assist the parties to do just that, rather than to give them something more to disagree about.

Counsel helpfully indicated that any consequential matters which cannot be agreed should, as far as possible, be dealt with on the basis of written submissions. Any such submissions, together with a draft order agreed as far as possible, should be filed within 14 days after handing down of this judgment.