John Youngs Insurance Services Ltd v Aviva Insurance Service UK Ltd

In this judgment I deal with a number of preliminary issues in a dispute between the Claimant, John Youngs Insurance Services Limited (“Youngs”) and Aviva Insurance UK Limited, formerly Norwich Union Insurance Limited, (“Aviva”). These proceedings arise out of an agreement entered into between Youngs and Aviva in relation to property damage insurance work. Youngs provided services to Aviva which consisted of handling claims made by Aviva’s policy holders and undertaking building repair work where the damage was insured.

Although there was no written agreement between Youngs and Aviva, it is common ground that the draft agreement at Appendix 1 to the Amended Particulars of Claim is the agreement which governed the parties’ relationship (“the Contract”). There is an issue as to whether clause 3.4 was included in the Contract and, for the purpose of deciding these preliminary issues, Aviva accept that I should proceed on the basis that clause 3.4 was not incorporated.

The commencement date for the Contract was 16 January 2002 and after that date Youngs performed services in relation to claims handing and building repair. In due course Aviva notified Youngs that it intended to terminate these arrangements and that Aviva would use a subsidiary to undertake the claims handling work with selected contractors being engaged to carry out the building repair works on a Schedule of Rates basis. Youngs decided that they did not wish to be involved on the basis of these arrangements and Aviva gave notice of termination to Youngs on or about 4 May 2007. The parties entered into a formal agreement in or about July 2007 terminating the Contract with effect from 9 July 2007 (“the Termination Agreement”).

In these proceedings Youngs makes claims against Aviva for further payment and Aviva brings a counterclaim against Youngs. By an order dated 15 October 2010 the court ordered that there should be a trial of five preliminary issues, Issues (a) to (e). Issues (a) to (d) concern Aviva’s contention that Youngs owed a fiduciary duty to account and that Aviva is entitled to an account and enquiry as claimed by them in the Counterclaim. Issue (e) relates to Young’s claim to recover sums in respect of certain “redundant assets” which include termination costs for tracker systems for vans and mobile telephones, as well as sums by way of rent and fitting out costs of premises which they were unable to dispose of after the termination.

In about 1997 John Youngs Limited, the Norwich office of the RG Carter Group, entered into discussions with Aviva with a view to taking on insurance related repairs work. This led to John Youngs Limited commencing claims handling services and building repair services for Aviva for a trial period commencing on 6 October 1997. The trial appeared to be a success and John Youngs Limited increased its resources and facilities to deal with this work.

In 2001 Aviva decided to invite tenders for these services and John Youngs Limited took part in the tender. This led to Aviva continuing to give them all their insurance claims relating to property damage in the East Anglia area. In December 2001 it was decided to set up Youngs for the sole purpose of undertaking these services and Youngs then entered into the Contract with Aviva for an initial term of 3 years from 16 January 2002.

A document was also produced, known as “the Process Document” which, as described in the Contract, was a document provided by Aviva as their “Household Property Repair Network Process Document”. It set out various provisions concerning the process to be followed in providing services for Aviva.

Youngs provided the services under the Contract but between 2002 and 2005 they experienced an under-recovery in respect of their costs, overheads and profit. As a result there were negotiations between Youngs and Aviva which resulted in an agreement in or about December 2005 that Aviva would pay Youngs some £2.1 million in settlement for the under-recovery up to the end of April 2005.

At the outset of the Contract Youngs had operated from premises at Thorpe St Andrew Business Park in Norwich, with additional “hubs” at various other centres. A decision was taken in early 2007 to move to premises at Eastern Court in Long Water Business Park which was located on the outskirts of Norwich. This reduced the rent payable but Youngs incurred costs in fitting out the new premises.

In or around November 2006 Aviva announced that they were changing the way in which they would obtain claims handling and building repair services. They were setting up a company called Asprea Limited and wished contractors to undertake building repair services on the basis of a schedule of rates. After further discussions Youngs decided not to proceed on this basis. In or around June 2007 Youngs and Aviva negotiated the terms of the Termination Agreement which was signed and made effective from 9 July 2007. After the termination of the relationship between Youngs and Aviva, Youngs made claims for unpaid invoices and other costs. In turn Aviva alleged that there had been overcharging by Youngs and that there was an absence of documents to support Young’s invoices.

There were communications between the parties in 2008 and the parties engaged solicitors from 2009. Following an unsuccessful mediation in May 2010, Youngs issued proceedings on 28 June 2010 and Aviva filed a Defence and Counterclaim on 28 July 2010.

On 15 October 2010 Edwards Stuart J ordered a trial of the following five preliminary issues:

The parties then prepared witness statements which dealt with the relevant background to the Contract and the Termination Agreement.

Youngs served six witness statements. First there was a witness statement from Mr Nicholas Tappin who is Group Financial Controller with RG Carter Construction Limited and Company Secretary of Youngs. He has responsibility for the finances of Youngs and, although he was not involved in the negotiation of the Contract, had knowledge of the financial working of the Contract, the various financial issues which have arisen between the parties during the performance of the Contract up to and including the Termination Agreement.

The second witness statement was from Mr Paul Hannant who in January 2000 was appointed General Manager for the property related insurance repair work which John Youngs Limited was undertaking for Aviva. In December 2001 he became the general manager of Youngs when that company was formed. He was involved in the setting up of arrangements between Youngs and Aviva and in issues arising under the Contract. He left Youngs in December 2006 when it was considering the viability of the new arrangements proposed by Aviva.

The third witness statement was from Mr Saul Humphrey who was appointed as Director and General Manager of John Youngs Limited in 1997, became a Director of Youngs in 2001 and retained overall responsibility for Youngs until November 2002.

The fourth witness statement was from Ms. Rashael Girling who was employed by John Youngs Limited as a call centre administrator from about September 2000. In 2001 she moved to Youngs as an accounts assistant and undertook the administration of claims handling and building repair services for Aviva. She gave evidence concerning the Claimserve web based data base system used under the Contract and provided an example of the invoicing system.

The fifth witness statement was from Mr Christopher Boyd who joined Youngs in January 2002 in the role of accountant and left in 2008 when Youngs ceased undertaking work for Aviva. He explained financial issues, Claimserve and the invoicing process.

The sixth witness statement was from Mr Mark Hilton who joined Youngs in late November 2006 and became General Manager. He explained the situation when he joined, together with the events leading to the Termination Agreement.

In addition to those witness statements, Youngs also submitted a witness statement from Mr David Woods, a Solicitor who negotiated the Termination Agreement. In that witness statement he referred to a draft of that agreement. Aviva objected to that evidence and, in the end, it was not relied upon and it was not necessary to determine whether such evidence was admissible.

Aviva relied on two witness statements. The first witness statement was from Mr Iain Sinclair, a Senior Supply Chain Manager with Aviva since 2000. He was involved in the negotiation of both the Contract and the Termination Agreement. The second witness statement was from Mr Neil Shepherd who has held the position of senior purchasing consultant with Aviva since May 2006. He was involved in the negotiation of the Termination Agreement. Youngs objected to various paragraphs of the witness statements of Mr Sinclair and Mr Shepherd on the basis that they were not admissible for the purpose of this issue. Again, in the event, Aviva did not rely on those passages.

Neither party wished to call oral evidence or cross-examine the witnesses who had put in witness statements. I have taken account of what is said by the witnesses by way of general background to the preliminary issues.

I now turn to consider the provisions of the Contract and the Termination Agreement and also the relevant parts of the Process Document.

The recitals conveniently summarise the position in relation to the Services to be provided by Youngs as follows. First in recital B it states: “The parties are agreed that [Youngs] will provide to [Aviva] Claims Handling Services in respect of property insurance claims”. In recital C it is stated: “The parties are further agreed that [Youngs] shall offer to provide Building Repair Services to [Aviva] Policyholders in connection with claims made under [Aviva] insurance policies”. These recitals therefore differentiated between the Claims Handling Services which were being provided to Aviva and the Building Repair Services which were being provided to Aviva policyholders.

The “Commencement Date” was 16 January 2002 and the “Initial Term” was 36 months after the Commencement Date. By Clause 2 the Contract was to apply from the Commencement Date and to remain in force unless and until terminated in accordance with Clause 10.

Clause 3 dealt with Delegated Authority in relation to the Claims Handling Services. Clause 3.1 provided as follows:

“[Aviva] authorise [Youngs] when providing Claims Handling Services to act as [Aviva’s] agent, to reject, adjust and settle Claims (subject to the provisions of clause 3.2) pursuant to the Delegated Authority in accordance with this Agreement.”

“Delegated Authority” was defined in the following terms:

“the Delegated Authority granted by [Aviva] to [Youngs] to provide the Claims Handling Services to [Aviva] in respect of Policyholders and to bind [Aviva] to pay any balance properly payable by it in respect thereof without reference to [Aviva] in accordance with the terms hereof, as more particularly set out in clause 3 and Schedule 4.”

The reference to Schedule 4 was an error and should, in fact, have been a reference to Schedule 3 of the draft agreement which formed the Contract. Schedule 3 provided as follows:

Clause 3.2 stated that Youngs did not have authority to reject, adjust settle or pay any third party liability claim; to handle any claim where indemnification is sought in excess of £10,000 excluding VAT; to handle any claim where Aviva notified them that the risk was not covered or that Aviva would handle the Claim or to make any ex gratia payment in relation to a claim.

Clause 3.3 provided that:

“[Youngs] shall, in providing the Claims Handling Services, have regard to the Delegated Authority and paragraph 2.4, Section A.9.2 and Appendix 6 of the Process Document”.

In terms of payment for the Claims Handling Services, Clause 4.1 said that Youngs “shall be entitled to charge [Aviva] and [Aviva] shall pay [Youngs] at the rates and on the basis set out in Schedule 1”. It was stated that Youngs should invoice Aviva for Building Repair Services on the following basis:

“Where [Youngs] carries out Building Repair Services for the [Aviva] Policyholder which has made the claim, [Youngs] will following successful completion of the work submit an invoice to [Aviva] that covers the Building Repair Services (as further detailed in clause 5 below) and the Claims Handling Services. The Claims handling charge to [Aviva] will consist of two elements:-

(a)

a charge based upon the initial claim assessment costs referred to in clause 4.1.1 (details of the charge set out at Schedule 1); and

(b)

a charge reflecting an appropriate proportion of [Youngs’] overhead costs of providing Claims Handling Services together with the profit margin specified in Schedule 1.”

In relation to payment for Building Repair Services, Clauses 5.1 and 5.2 provided as follows:

“5.1

Where [Youngs] carries out Building Repair Services for [Aviva] Policyholders, [Youngs] shall be entitled to recover through charges the actual cost (at the cost rates and on the basis set out in Schedule 1) of providing the Building Repair Services together with the profit margin specified at Schedule 1 and [Youngs] shall make such recovery through the submission of a Repair Summary Invoice following each completion of work for [an Aviva] Policyholder. The Repair Summary Invoice (which also includes details of the Claims handling charge pursuant to clause 4) shall clearly state that whilst the payment for the Building Repair Services is required from [Aviva], the Building Repair Services were supplied by [Youngs] to the [Aviva] Policyholder, not to [Aviva]. The Repair Summary Invoice shall include details of the [Aviva] Policyholder, including his or her policy number.

5.2

The charges for Building Repair Services shall consist of two distinct elements, each shown separately on the Repair Summary Invoice:

5.2.1

[Youngs] shall charge for the direct costs of the building repair work (at the cost rates and on the basis set out in Schedule 1) in respect of which the Repair Summary Invoice is submitted. The direct costs shall include labour, materials, plant and equipment hire, and travel. The direct travel costs shall be calculated in accordance with the travel costs rates set out in Schedule 1 (such rates shall be amended from time to time only upon written agreement of the parties).

5.2.2

[Youngs] shall make a charge under the heading of “Associated Costs” which shall reflect an appropriate portion of [Youngs’] overhead costs of providing the Building Repair Services. The amount which [Youngs] shall charge as “Associated Costs” on each Summary Repair Invoice shall be agreed by the parties for each forthcoming quarter at the Quarterly Review, and for the first three months after the Commencement Date shall be as set out in Schedule 1.”

Clause 6 provided at clause 6.1 that Youngs and Aviva should work together on a continual basis to explore opportunities to reduce the costs to Youngs. Clause 6.2 provided as follows:

“[Youngs] shall allow [Aviva] full access to information on a visible open book basis which will enable [Aviva] to understand how [Youngs] incurs costs in the provision of both the Claims Handling Services and the Building Repair Services. [Youngs] shall keep full and accurate accounting books and records (such records being of sufficient detail to demonstrate the services performed and the calculation of charges), and these will at all reasonable times be made available to [Aviva].”

In addition there was provision for a quarterly review in Clauses 6.3 and 6.4 as follows:

“6.3

The parties shall at each Quarterly Review agree charging rates for the three months to the next Quarterly Review, and in doing so shall have particular regard to the following:-

6.3.1

exploiting opportunities to reduce the costs to [Youngs] and therefore the charges to [Aviva] (for the avoidance of doubt the agreed profit margin shall not be subject to review at a Quarterly review unless both parties agree that it should be);

6.3.2

the extent to which [Youngs] has, in the three months leading up to the Quarterly Review, recovered its actual cost of providing services together with the agreed profit margin. The parties shall agree the amount by which [Youngs] over or under recovered during the previous three months, and in setting the charge rates for the forthcoming three months the parties shall seek to ensure that the effect of the under or over recovery is corrected in full over the forthcoming three months.

6.4

If at a Quarterly Review the parties are unable to agree charge rates for the 3 months to the next Quarterly Review, then the parties shall seek to resolve the dispute by applying the escalation and mediation provisions at Clause 20. If the parties are still unable to reach final agreement following mediation then either party shall be entitled to terminate this agreement by giving 3 months notice to the other.”

Clause 7 provided at Clause 7.1 that Youngs warranted that its obligations under the Contract should be performed at all times “with all reasonable skill and care”.

Clause 8 stated:

Clause 10 dealt with termination, providing that either party could terminate the Contract at any time on giving not less than 3 months notice in writing to the other to expire no earlier that the expiry of the Initial Term.

Clause 11 dealt with the consequences of termination and provided at Clause 11.1:

“The termination of this Agreement however caused will be without prejudice to any obligations or rights of either party which exist prior to termination and will not affect any provision which is expressly or by implication intended to continue in effect after termination.”

Clause 11.3.3 dealt with the following obligation in respect of information:

“Within thirty (30) days of the date of termination of this Agreement:

…

each party shall deliver up to the other party all information obtained, acquired or produced by or on behalf of that other party in connection with this Agreement upon reasonable request by that other party.”

Clause 11.4 dealt with the review of charges following termination:

“Following termination of this agreement either party shall be entitled within 14 days of termination (following which the right shall be lost) to request a review of charges to assess the extent to which [Youngs] has since the last Quarterly Review over or under recovered its costs and the agreed profit margin.”

Clause 20 set out the relevance of the Process Document in relation to the Contract in the following terms:

“Except where specifically provided in this Agreement, the contents of the Process Document are not intended to be legally binding, and are intended to assist the parties in understanding and discharging their responsibilities under this Agreement. In the event of inconsistency or conflict between the Process Document and this Agreement, the terms of this Agreement shall take precedence.”

Under Clause 25 there were provisions for the inspection of records and access to the facilities. Clause 25.1 provided as follows:

“During the term of this Agreement and for a period of 3 calendar months thereafter [Aviva] shall be entitled to inspect the records of [Youngs] in respect of the provision of the Services.”

Clause 25 also provided as follows:

“25.2

[Youngs] shall make available reasonable access to its facilities for the specific purpose of:

25.2.1

enabling [Aviva] and the Agents to inspect and copy any or all information in any form relevant to the inspection; ...

25.3

[Aviva] shall give [Youngs] at least 2 working days notice requesting an inspection pursuant to this clause 25. ... [Aviva] shall not be entitled to carry out an inspection more frequently than once in any period of 6 months.”

There was a provision at Clause 27 as to management information in the following terms:

“27.1

[Youngs] shall provide [Aviva] with or allow [Aviva] access to on a monthly basis the Management Information described in Schedule 2, and following the submission of each Repair Summary Invoice, [Youngs] shall provide [Aviva] on its request with a Repair Full Cost Breakdown in the format set out in Schedule 3.

27.2

[Youngs] shall enter into a software licence with Claimserve so as to allow access to the claims management software which Claimserve have adapted for [Aviva]. [Youngs] shall pay licence fees to Claimserve (such fees to be calculated on a fee per claim basis), and shall be entitled to claim reimbursement from [Aviva] by including licence fees within the Claims Handling Charges. [Aviva] shall procure that Claimserve grants a licence to [Youngs] on this basis.

27.3

[Youngs] shall ensure that information required by the Claimserve system is input promptly and accurately.”

Clause 30.5.1 provided as follows in relation to waiver:

“The delay or failure of either party at any time to require performance by the other of any provision of this Agreement will in no way affect the right of that party to require performance of that provision.”

Schedule 1 to the Agreement contained various provision as to charges as follows:

“Profit

The agreed profit margin is 7.5% (on sales value)

Overheads

Initial claim assessment cost (charged on all jobs received) £50.00

Claims handling overhead £67.66

(charged as percentage)

Building Repair Services-Associated Costs £98.27

(charged as percentage)

Direct Costs

Labour Rates: [Youngs] shall be entitled to recover actual labour charges as follows:…”

The recitals summarised the position in relation to the Termination Agreement as follows:

“This Agreement is supplemental to, and sets out the terms for the termination and exit from, the arrangements currently in place under which [Youngs] provides claims handling services to [Aviva] and building repair services to [Aviva] policyholders (“the Existing Arrangements”).

[Aviva] have given notice to bring the Existing Arrangements to an end with effect from 6 August 2007 but the parties have agreed instead to bring the Existing Arrangements to an end with effect from 9 July 2007, on the terms set out in this Agreement.”

Clause 2 dealt with claims. Clause 2.1 stated that no further Claims Handling or Building Repair work would be placed with Youngs by Aviva from close of business on 9 July 2007 (“the Effective Date”). Clause 2.2 stated that all claims that had been notified by Aviva to Youngs and on which surveying work had been carried out by Youngs as at the Effective Date, referred to as “the Run-Off Claims”, would be completed by Youngs in accordance with the existing arrangements.

Clause 2.3 provided as follows:

“[Aviva] shall pay [Youngs] for the Run-Off Claims in accordance with the Existing Arrangements but with the sum of £225 added by way of management fee in addition to each invoice in respect of each claim (making an aggregate management fee of £587.09 for each such invoice) to recognise the under recovery by [Youngs] in respect of previous work. For the avoidance of doubt, the additional sum of £225 is a full and final settlement for all under-recoveries incurred by [Youngs] under the Existing Arrangements.

Any work that has been carried out by [Youngs] prior to the effective date and has not been invoiced and any unpaid invoices submitted to [Aviva] prior to the Effective Date will be dealt with as paid in accordance with the Existing Arrangements.”

Clause 3 dealt with assets belonging to Youngs. Clause 3.1 stated that Youngs would use reasonable endeavours to obtain reasonable market value for its assets by selling those assets to the New Contractors. Clause 3.2 stated that Youngs would use reasonable endeavours to sell to other companies in its group any assets not purchased by the New Contractors. It then provided by Clause 3.3 as follows:

“If [Youngs] has not been able to sell those assets pursuant to clauses 3.1 and 3.2 by close of business on 6 August 2007, [Aviva] and [Youngs] will meet to discuss any possible third party purchasers for those remaining assets and, subject to that, those assets shall be dealt with in accordance with the terms of the Existing Arrangements, to the extent (if at all) dealt with therein.”

Clause 5 dealt with “agreed exit costs” in the following terms:

“[Aviva] will pay the sum of £310,000 (plus VAT, if applicable) to [Youngs] in respect of the agreed exit costs, relating to the Existing Arrangements, (this sum to include a contribution of £10,000 by [Aviva] towards the legal costs incurred by [Youngs] in relation to TUPE).”

Finally Clause 6 dealt with the effect of the Termination Agreement in the following terms at Clauses 6.1, 6.2 and 6.3:

“6.1

This Agreement is intended to be the entire (and full and final) agreement between the parties in respect of the termination of the Existing Arrangements.

6.2

Subject to clause 6.3, neither party shall be entitled to raise any further claims against the other party in respect of any matters relating to the Existing Arrangements or the termination of the Existing Arrangements.

6.3

[Aviva] shall be entitled to carry out operational audits in accordance with the Existing Arrangements: [Aviva] acknowledge that the sum of £99,667 has been taken into account in reaching the management fee stated at clause 2.3 in respect of compensation and re-work costs.”

The Process Document

The relevance of the Process Document to the obligations under the Contract was set out in Clauses 3.3 and 20 of the Contract. In Section 1 of the Process Document the purpose of that document was set out as follows:

“This manual provides an overview of how the [Aviva] Household Property Claims Supply Process will work, what is expected from suppliers and how they will interface with the various [Aviva] representatives.”

Section 2 dealt with the Process and contained a “walk through” of the Claims Management Process dealing with the following stages:

Section 5 of the Process Document dealt with “how the commercials work” and set out the cost structure in terms of direct cost, overhead costs and profit. In relation to overhead costs, it provided at paragraph 5.1.2 as follows:

“[Aviva] has agreed to pay the suppliers reasonable overhead costs for managing the forecasted volume of claims in each year (within the designated tolerance). The agreed overhead will be recovered as a management fee and survey fee. The management fee is the costs attributable to [Aviva] for general overhead and claims handling operations. The survey fee is the cost of carrying out the surveys, scopes and reports (including travel costs). The management fee will be recovered against jobs, whilst the survey fee will be recovered against all claims.”

The general overhead was defined in the following terms:

“The general overhead category includes the costs necessary to manage the workload for [Aviva]. It will include all directly employed staff (excluding staff included in the claims handling and surveying costs), a proportion for office accommodation and running costs of head and/or branch offices.”

Section 5.2 dealt with cost management on claims including the way in which work scope was defined and works estimated, how estimates were checked against benchmark costs, the reconciliation of costs and reporting of costs against the estimate.

Appendix 2 to the Process Document dealt with service level agreements; Appendix 3 dealt with the Codes of Conduct; Appendix 6 dealt with validation guidelines; Appendix 7 dealt with scoping and estimating methodology; Appendix 11 dealt with monthly management information and Appendix 12 contained an invoice template. Appendix 13 dealt with IT functional requirements which included claim logging, claims tracking and management, customer management, diary management, validation, scoping and estimating, execution of repair, customer service, cost management (invoicing), costs management (payment), PDMs-audit, system access/utility overview and reporting structure.

Having set out the relevant provisions of the Contract, Termination Agreement and the Process Document I now turn to consider the preliminary issues, dealing first with the question of the duty to account.

Aviva contends that Youngs owed an alleged fiduciary duty to account which Youngs denies.

Mr Peter de Verneuil Smith, who appeared on behalf of Aviva, approached the issue of whether or not there was a duty to account in three stages: first, whether there was a duty to account in principle; secondly, if so, what was the scope of that duty to account and, thirdly, whether the scope of that duty to account was reduced by the Contract.

In relation to whether the duty to account arises in principle, Mr de Verneuil Smith said that it was common ground that Youngs acted as agent pursuant to the Claims Handling Services and he submitted that the existence of that agency relationship made it unarguable that there was not a duty to account in principle because all agents owed a duty to account. He referred me to passages in Bowstead & Reynolds on Agency (19th Edition). At para 6-095, the authors deal with cases where an agent may be required to account in equity to his principal if there was a fiduciary situation between the principal and his agent. At para 6-090 they set out the duties of an agent “to preserve and be constantly ready with correct accounts of all his dealings and transactions in the course of his agency” and “to produce to the principal, or to a proper person appointed by the principal, all books and documents in his hands relating to the principal’s affairs.”

Mr de Verneuil Smith also referred me to the decision of the Court of Appeal in Leicestershire County Council v Michael Faraday and Partners Limited [1941] 2 KB 205 at 216 where Mackinnon LJ, with whom the other members of the Court of Appeal agreed, said:

“If an agent brings into existence certain documents while in the employment of his principal, they are the principal’s documents and the principal can claim that the agent should hand them over, but the present case is emphatically not one of principal and agent. It is a case of the relations between a client and a professional man to whom the client resorts to advice.”

He also referred me to the decision in Yasuda Fire & Marine Insurance Company of Europe Limited v Orion Marine Insurance Underwriting Agency Limited [1995] 3 All ER 211 where Colman J dealt with the obligations of underwriting agents to provide documentary records following the termination of the agency agreement. At 219 Colman J said this:

“The nature of the defendants’ mandate was such that, subject to express qualification by the terms of any agency agreement, they were in the course of the agency clearly under a general duty to keep and provide records of all the transactions into which they had entered on behalf of the plaintiffs, including those which were in the process of being run off: see 1(2) Halsbury’s Laws (4^th edn reissue) para. 104; Bowstead on Agency (15^th edn, 1985) pp 191-193, art 51; Pearse v Green (1819) 1 Jac & W 135, [1814-23] All ER Rep 405 and Gray v Haig (1855) 20 Beav 219, 52 ER 587. The nature of the duty to keep and provide records in such a case would, by necessary implication, involve full disclosure of records of all transactions and the current state of premium, outstanding claims and reinsurance protection in relation to each.

That obligation to provide an accurate account in the fullest sense arises by reason of the fact that the agent has been entrusted with the authority to bind the principal to transactions with third parties and the principal is entitled to know what his personal contractual rights and duties are in relation to those third parties as well as what he is entitled to receive by way of payment from the agent. He is entitled to be provided with those records because they have been created for preserving information as to the very transactions which the agent was authorised by him to enter into. Being the participant in the transactions, the principal is entitled to the records of them.”

Mr de Verneuil Smith submitted that there was a fiduciary relationship in this case because Youngs had the authority to bind its principal and there was thus a fiduciary duty to exercise that authority responsibly. He submitted that there was therefore an equitable duty to account.

He submitted that the scope of the account related to all of the Claims Handling Services for which Aviva trusted Youngs to act in accordance with the Contract and in the interests of Aviva. In relation to this Mr de Verneuil Smith referred to the various provisions of the Contract which I have set out above and which required Youngs to prepare and give access to documents.

In relation to the contractual provisions, Mr de Verneuil Smith relied on the decision of the House of Lords in HIH Casualty and General Insurance Limited v Chase Manhattan Bank [2003] 1 All ER (Comm) 349 where at [11] Lord Bingham of Cornhill had said this:

“There can be no doubting the general authority of these principles, which have been applied in many cases, and the approach indicated is sound. The courts should not ordinarily infer that a contracting party has given up rights which the law confers upon him to an extent greater than the contract terms indicate he has chosen to do; and if the contract terms can take legal and practical effect without denying him the rights he would ordinarily enjoy if the other party is negligent, they will be read as not denying him those rights unless they are so expressed as to make clear that they do.”

He submitted that the duty to account was independent of the Contract and this was a case where no clear words had been used in the Contract to limit the duty to account. He submitted that the contractual provisions could operate without being inconsistent with the equitable duty to account. He referred me to the Yasuda case at 221e where Colman J said:

“First there was, as I have explained above, a continuing entitlement to access to the agents’ records which was a legal consequence of the agency relationship and which co-existed with the express terms of cl 4.2. Since it existed independently of the agency agreement that right of inspection could not be impaired even if further performance of the contracts were terminated for repudiation or for any other reason.”

He also referred to 220c where Colman J stated:

“Because the agents’ duty to provide records of transactions to the principal is founded on the entitlement of the principal to the records of what has been done in his name, termination of the agent’s authority to enter into further transactions should have no bearing on the continuance of the duty to provide pre-existing records pertaining to the period when transactions were authorised. Accordingly, in the absence of express agreement to the contrary, the agent’s duty to provide to his principal the records of transactions effected pursuant to the agency must subsist notwithstanding termination of the agent’s authority. That, as I have held, is a duty that is imposed by law in consequence of the existence of the agency relationship and is not founded on the existence of a contract of agency.”

He submitted that there was nothing within the contractual terms to take away the equitable duty to account which he submitted existed as a result of the fiduciary duty. He said that the provisions of the Contract gave rise to ancillary and parallel duties to account.

Mr Steven Walker, who appeared on behalf of Youngs, submitted that Mr de Verneuil Smith’s approach to the question of whether there was a fiduciary duty was not correct. He submitted that the matter should not be approached by considering what the duty was in principle and then seeing whether that duty was reduced or altered by reference to the Contract because it was necessary to see whether or not a fiduciary duty arose in the first place by looking at the terms of the Contract. In this respect he referred me to the decision of the House of Lords in Henderson v Merrett Syndicates Limited [1995] 1 AC 145 where Lord Browne-Wilkinson said this at 206 A-D:

“the extent and nature of the fiduciary duties owed in any particular case fall to be determined by reference to any underlying contractual relationship between the parties. Thus in the case of an agent employed under a contract, the scope of his fiduciary duties is determined by the terms in the underlying contract.”

He also referred me to the decision of the Privy Council in Kelly v Cooper [1993] AC 205 at 213 to 215 where Lord Browne-Wilkinson giving the judgment of the Privy Council said:

“In the view of the Board the resolution of this case depends upon two fundamental propositions: first agency is a contract made between principal and agent; second, like every other contract, the rights and duties of the principal and agent are dependent upon the terms of the contract between them, whether express or implied. It is not possible to say all agents owe the same duties to their principals: it is always necessary to have regard to the express or implied terms of the contract.

…

Thus, in the present case, the scope of the fiduciary duties owed by the defendants to the plaintiff (and in particular the alleged duty not to put themselves in a position where their duty and their interest conflicted) are to be defined by the terms of the contract of agency.”

Mr Walker accepted that Youngs owed a fiduciary duty in respect of part of the Claims Handling Services but not all of those Services. He submitted that Youngs’ obligations in relation to Claims Handling Services and their fiduciary duties in relation to those Services were not co-extensive and that it was only those duties where Youngs were acting in a manner which altered Aviva’s legal position vis-a-vis the policyholders where there was potentially a fiduciary duty. Therefore he submitted that not all documents created as a result of the Claims Handling Service came within the scope of Youngs’ fiduciary duty as agent.

In this context he referred me to the decision of the House of Lords in Boardman v Phipps [1967] 2 AC 46 where Lord Upjohn said this at 126F to 127C:

“But as I have already pointed out it seems to me that this question whether this assumption of office leads to the conclusion that the appellants were accountable requires a closer analysis that it has received in the lower courts.

This analysis requires detailed consideration:

He also referred to the decision of the Court of Appeal in Bristol and West Building Society v Mothew [1998] Ch 1 in which Millett LJ dealt with breach of fiduciary duty in a judgment with which the other members of the Court agreed. He said this at 16C to F:

“Despite the warning given by Fletcher Moulton L.J. in In re Coomber; Coomber v Coomber [1911] 1 Ch. 723, 728, this branch of the law has been bedevilled by unthinking resort to verbal formulae. It is therefore necessary to begin by defining one’s terms. The expression “fiduciary duty” is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties. Unless the expression is so limited it is lacking in practical utility. In this sense it is obvious that not every breach of duty by a fiduciary is a breach of fiduciary duty. I would endorse the observations of Southin J. in Girardet v Crease & Co. (1987) 11 B.C.L.R. (2d) 261, 362:

“The word ‘fiduciary’ is flung around now as if it applied to all breaches of duty by solicitors, directors of companies and so forth…That a lawyer can commit a breach of the special duty [of a fiduciary]…by entering into a contract with the client without full disclosure… and so forth is clear. But to say that simple carelessness in giving advice is such a breach is a perversion of words.”

These remarks were approved by La Forest J. in LAC Minerals Ltd. V International Corona Resources Ltd. (1989) 61 D.L.R. (4^th) 14, 28 where he said : “not every legal claim arising out of a relationship with fiduciary incidents will give rise to a claim for a breach of fiduciary duty.”

At 18 A to C Millett LJ continued:

“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.”

Mr Walker also made reference to the decision of the High Court of Australia in Hospital Products Limited v United States Surgical Corp (1984) 156 CLR 41, cited with approval by Patten J in Halton International Inc (Holdings) SARL v Guernroy Limited [2005] EWHC 1968 (Ch) at [138], where Mason J said at 97:

“That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

I was also referred to the decision of the Privy Council in New Zealand Netherlands Society “Oranje” Incorporated v Kuys [1973] 2 All ER 1222 where the judgment was delivered by Lord Wilberforce who said this at 1130:

“A person in his position may be in a fiduciary position quoad a part of his activities and not quoad other parts: each transaction, or group of transactions, must be looked at.”

Finally I was also referred to In Re Goldcorp Exchange Limited (in Receivership) [1995] 1 AC 74 at 96 where Lord Mustill, in giving the judgment of the Privy Council said this:

“No doubt the fact that one person is placed in a particular person vis-à-vis another through the medium of a contract does not necessarily mean that he does not also owe fiduciary duties to that other by virtue of being in that position. But the essence of a fiduciary relationship is that it creates obligations of a different character from those deriving from the contract itself. Their Lordships have not heard in argument any submission which went beyond suggesting that by virtue of being a fiduciary the company was obliged honestly and consistently to do what it had by contract promised to do. Many commercial relationships involve just such a reliance by one party on the other, and to introduce the whole new dimension into such relationships which would flow from giving them a fiduciary character would (as it seems to their Lordships) have adverse consequences far exceeding those foreseen by Atkin LJ in In re Wait[1927] 1 Ch 606. It is possible without misuse of language to say that the customers put faith in the company and that their trust has not been repaid. But the vocabulary is misleading; high expectations do not necessarily lead to equitable remedies.”

On this basis Mr Walker submitted that, whilst Youngs acted as agent in carrying out the Claims Handling Services, the court had to look at the terms of the contractual relationship to see what the scope of the fiduciary duty was. In particular the fact that Aviva relied on Youngs to perform its contractual obligations did not necessarily lead to those contractual obligations giving rise to a fiduciary duty. He said that the only aspect of the agency which could give rise to a fiduciary duty related to Youngs’ decision made under the delegated authority either to accept or repudiate low value claims by the policy holders in respect of property damage.

In relation to the Contract Mr Walker submitted that the invoice sent by Youngs to obtain payment from Aviva for the Building Repair Services did not come within any fiduciary duty. It did not alter the position of Aviva vis-a-vis the policyholders but was document produced by Youngs to obtain payment from Aviva under the Contract and in that context was not part of the agency function at all. He submitted that it was only in deciding whether the claims should be validated or repudiated, that Youngs owed a fiduciary duty. Once this decision had been made and the claim had been held to be valid, the necessary repair work was carried out either by Youngs or by the Insured Own Builder (“IOB”).

Where Youngs carried out the work then, as provided for in Clause 8.1 of the Contract, they carried out the work for the policy holders and kept records because of the need for reimbursement by Aviva, not because they were affecting the legal relations between Aviva and the policy holder. In such circumstances there was, Mr Walker submitted, no question of a fiduciary duty arising. He submitted that it would be strange if when carrying out the repair works Youngs were acting as stated in the Contract as a principal and yet, in some way they were acting as agent when they were invoicing Aviva for those works. He submitted that in doing the repair works and invoicing for them the arrangement was no different from that of a contractor carrying out and being reimbursed for building works with Aviva having rights of audit in respect of sums which Youngs sought to have reimbursed.

In relation to the submissions made by Mr de Verneuil Smith, Mr Walker submitted that the reference to Bowstead and Reynolds on Agency at paragraph 6-090 in relation to the duties of an agent did not arise from a fiduciary duty but were part of the implied obligations of an agent. The obligation to keep accurate accounts of all transactions entered into on the principal’s behalf and to deliver up to the principal at the termination of the agency all documents concerning the principal’s affairs which had been prepared by the agent did not apply to the documents which were being sought in this case. He submitted that the Leicestershire County Council, Yasuda and Equitas cases, relied on by Mr de Verneuil Smith, did not establish any fiduciary obligations but were rather concerned with the obligations of an agent. He said that in the Leicestershire County Council case the documents were the principal’s documents.

In this case Mr Walker submitted that the invoices were not the principal’s document and were not bought into existence by an agent on behalf of the principal. He submitted that on analysis the Yasuda case did not proceed on the basis of a fiduciary duty but rather was based upon duties analogous to the duties implied by law on an agent. In any event he submitted that Yasuda dealt with the position of an underwriter’s agent which was entirely different from the present case where Youngs had carried out repair work as principal under agreements with the policyholders and had submitted invoices to obtain payment from Aviva and where, now several years later, Aviva wished to investigate those invoices in order to see whether there had been overcharging. He submitted that in the Equitas case the defendants acted as brokers and agents of Lloyds Syndicates and accepted that they owed the duties set out in paragraph 6-090 of Bowstead and Reynolds on Agency. He submitted that this case did not take the matter any further.

In relation to Article 51 of Bowstead and Reynolds on Agency at paragraph 6-094 Mr Walker submitted that a duty to account in equity to a principal was concerned with cases where the agent held money or property for the principal and could be required to show what money or property he was holding. In the present case the documents which were being sought were not documents which related to money or property held by Youngs on behalf of Aviva or documents where Youngs were acting as agent for Aviva vis a vis the policy holder, but generally related to invoices and details of the building work which had been carried out by Youngs as principals under agreements with the policy holders.

A distinction has to be drawn between the two sets of obligations imposed upon Youngs under the Contract. As identified in Recitals B and C to the Contract and as defined in the Contract, Youngs were to perform “Claims Handling Services” and “Building Repair Services”. In relation to the Claims Handling Services Aviva authorised Youngs to act as Aviva’s agent to reject, adjust and settle claims by Aviva’s policyholders under their insurance policies, pursuant to the Delegated Authority set out in the Contract. That authority was limited to low value claims which, as stated in the Contract, covered claims not in excess of £10,000 excluding VAT. As set out in Schedule 3, under the “Delegated Authority Scheme (Claims Handling)” Youngs were to investigate, negotiate and settle or repudiate the claims. Youngs were to handle the claims and report on those to Aviva by supplying management information in the format defined in Schedule 2 to the Contract. It also stated that they were to retain on file or computer record information regarding “all estimates and accounts, notes/information supporting core/item specification, correspondence with the [Aviva] policy holder and any other interested parties and notes of telephone conversations with [Aviva] policyholders.”

In addition under Clause 3.3 of the Contract Youngs had to have regard to certain provisions of the Process Document: Clause 2.4 which deals with stage 4 of the process relating to repair works undertaken by Youngs, Section A9.2 which refers to a questionnaire to ascertain the current performance of Youngs as perceived by the policyholder and Appendix 6 which refers to the validation guidelines to be applied in deciding whether to validate or repudiate a claim. In respect of the Claim Handling Services, payment is dealt with under Clause 4 of the Contract and there is a Quarterly Review of costs and charges under Clause 6. There is a provision for audits under Clause 25 of the Contract and a provision in Clause 27 for management information, which includes an obligation to place that information on the Claimserve system.

The second aspect of the Services relates to Building Repair Services. Clause 8.1 of the Contract states that Youngs shall act as principal and not as agent for Aviva when providing the Building Repair Services to Aviva policyholders.

From those provisions of the Contract it is evident that Youngs were to carry out services in terms of validation or repudiation of claims and also adjusting and settling claims. The reference in Clause 3.3 of the Contract to Clause 2.4 of the Process Document indicates that part of the Claims Handling Services included scoping, estimating and cost management. The initial stage of the survey leads to an assessment of damage and the gathering of information concerning the damage, affected areas and non-affected areas. The second stage is a consideration of whether the claim should be validated pursuant to the validation guidelines. Where the claim is validated, the surveyor has to complete a full scope of works for the required repair and, if the works are to be carried out by Youngs rather than the insured own builders “IOB”, then the surveyor has to obtain the policyholder’s signature on the full scope of the works.

When those works are to be undertaken by Youngs they have to enter the peril and scope information onto the IT system, develop the cost estimates and confirm whether or not the scope costs fit within the delegated authority. If it does, then Youngs proceed with the works and they enter operatives’ time sheets and plant and materials data onto the Claimserve management system. The actual claimed costs are benchmarked against the estimate, with a variance analysis and any issues are entered onto an issues log. There is then a payment process, by which an invoice is prepared and sent to the relevant organisation designated by Aviva for payment.

On that analysis, I consider that the Claims Handling Services include all the necessary steps in the above process except for the process of carrying out the repair works which are indicated in the scope document, signed by the policyholder. I consider that this follows from Youngs’ Delegated Authority to act as Aviva’s agent in rejecting, adjusting, and settling claims made by policy holders in accordance with Clause 3 and Schedule 3 of the Contract. This includes the reference in Clause 3.3 of the Contract to Clause 2.4 of the Process Document. In principle, as part of these activities relating to the Claims Handling Services, Youngs would produce documents as the agent of Aviva vis-a-vis the policyholder and would also produce documents which are required to be produced under the provisions of the Contract by way of managing the process of adjustment and settlement of the claim.

In relation to the carrying out of the repairs, those repairs are not carried out as an agent of Aviva, as is made clear by Clause 8.1 of the contract. The organisation of that work together with recording the work carried out and the costs of labour, plant and materials would be a matter for Youngs as principal, as would the invoicing of those costs. There is no aspect which relates to Youngs acting as agent for Aviva in relation to those matters. It is clear, though, that under the terms of the Contract Youngs had to make available or provide information relating to those matters to Aviva but that was a matter of contractual obligation and did not arise from Youngs acting in the role of agent for Aviva vis-à-vis the policyholders.

Having identified the relevant aspects of the Claims Handling Services and the Building Repair Services under the Contract, it is now necessary to analyse whether any of the duties imposed upon Youngs can properly be characterised as fiduciary duties. In this case, Aviva contend at paragraph 11 of the Defence that Youngs owed three fiduciary duties to Aviva. First a duty to act in the best interests of Aviva; secondly, a duty to avoid conflicts of personal interest with professional duty, and thirdly, a duty to account for all services carried out and costs charged (“the fiduciary duty to account”). I am concerned here with the third of those fiduciary duties.

From the various authorities cited by the parties I derive the following principles in relation to the equitable duty to account:

Applying those principles to the present case, there are aspects of the Claims Handling Services where Youngs acted as agent for Aviva in relation to claims made by policyholders under their relevant policies. Part of that agency relationship involved Youngs deciding whether a claim was a valid claim under the insurance policy. In those circumstances Aviva were relying on Youngs to decide what was the cause of any damage and whether that came within the insurance provisions of the policy. In doing so then Youngs were trusted by Aviva to act loyally in Aviva’s best interests in dealing with the validation and repudiation of the claim vis-a-vis the policyholder. In so doing I consider that, as Mr Walker accepted, a fiduciary relationship would arise.

However, in carrying out the survey, assessing the work scope and producing estimates, I do not consider that Youngs were acting as an agent giving rise to a fiduciary duty in respect of these aspects of the Claims Handling Services. As pointed out in New Zealand Netherlands Society v Kuys a person may be in a fiduciary position in respect of some part of their activities and not in respect of other parts. Aviva were using the expertise of Youngs to carry out these other parts of the Claim Handling Services and expected them to carry out those services properly but as Lord Mustill pointed out in In re Goldcorp Exchange at 98 F, that did not impose obligations of a fiduciary character in what was essentially a commercial relationship.

There is also a concern in this case that Youngs’ own interest in carrying out the Building Repair Services meant that there could be a conflict of interest. As Millett LJ pointed out in Bristol and West Building Society v Mothew, the principal is entitled to the single-minded loyalty of his fiduciary and must not place himself in a position where his duty and his interest may conflict. This was not a case where Youngs had no interest other than the interest of Aviva in relation to work carried out as a result of validated claims by policyholders. While it is clear that Aviva trusted Youngs to carry out the Claims Handling Services properly and Youngs had a contractual duty to do so I do not consider that this gave rise to fiduciary duties in relation to all the Claims Handling Services.

Even if I am wrong about that and certain fiduciary duties arose in relation to other aspects of the Claims Handling Services where Youngs were acting as agent for Aviva, it is evident that Youngs were not acting as fiduciaries owing a fiduciary duty in relation to the provision of the Building Repair Services. Those services were being carried out by them as principal and not agent for Aviva. In particular, in relation to the costs of the repair works, these were contained in the invoice which, as made clear by Clause 5.1 of the Contract, were to be paid by Aviva for services supplied by Youngs to the policyholder and not to Aviva. In my judgment, there can be no question of a fiduciary relationship arising in such circumstances in relation to the issue of invoices. It cannot be suggested that Youngs owed a single-minded duty to Aviva or were not entitled to make any profit from the transaction or were not to put themselves in a position of conflict of interests. That simply does not reflect the commercial position in respect of the Building Repair Services.

In this case the purpose for which Aviva seeks to impose a fiduciary duty is so as to obtain the equitable remedy of an account and enquiry. Such a remedy, as stated in Snells Equity (32nd Edition) at paragraph 20-012 is available where “equity polices a variety of relationships which have the common characteristic that one party has custody of a fund in circumstances where he is obliged to administer that fund for the benefit of another or others.”

This is not a case where Youngs as an agent controlled property or money belonging to Aviva which they were obliged to administer for Aviva’s policyholders’ benefit. Whilst, as set out in Article 51 of Bowstead and Reynolds on Agency at paragraph 6-094, an agent may be required to account in equity to his principal, this does not apply generally to the relationship between Aviva and Youngs but only in relation to the limited aspect of the relationship where Youngs is validated or repudiating a clam made by one of Aviva’s policyholders.

So far as Mr de Verneuil Smith placed reliance on Bowstead and Reynolds on Agency at paragraph 6-090 and the Leicestershire County Council, Yasuda and Equitas cases, I agree with Mr Walker that these were dealing with the general obligations of an agent and were not concerned with an equitable duty to account. I therefore do not consider they assist on this aspect.

Having concluded that there were only limited fiduciary duties in the relationship between Aviva and Youngs, it is evident that they would not give rise to an obligation upon Youngs to provide Aviva with all the information and documents which they seek in these proceedings. It is therefore convenient to consider Issue (c), the duty to account under the Contract, before considering Issue (b), the effect of termination of the Contract and the Termination Agreement.

In relation to this issue Aviva contends that they can obtain the same remedy, in substance, as a result of Youngs’ obligations to provide information to Aviva under the Contract as under an equitable duty to account and further, that as a matter of construction that remedy remains available to Aviva after termination.

Mr de Verneuil Smith submitted that the Contract required Youngs to keep all records that would have formed part of an account and that Aviva had the right to require Youngs to disclose information and records regarding the services, as set out in Clauses 6.2, 25.1, 27.1 and 27.3 of the Contract.

Mr Walker submitted that these provisions either did not provide a duty to account in relation to the information and documents sought by Aviva or, if it did, then it terminated with the termination of the Contract or with the Termination Agreement.

In my judgment Mr de Verneuil Smith is correct and the provisions of the Contract do contain wide obligations on Youngs to keep records and provide information to Aviva. In particular Clause 6.2 provided for Aviva to have full access to information on a visible open book basis to enable Aviva to understand how Youngs incurs costs and for Youngs to keep full and accurate accounting books and records and to make them available to Aviva. Clause 25.1 gave Aviva the right to inspect and copy information and Clause 27.1 required Youngs to provide management information and Clause 27.2 referred to the Claimserve software.

As a result the issue of whether the duty to account applies depends on the extent to which these contractual provisions continued after termination of the Contract and the entering into of Termination Agreement. I therefore now turn to consider this aspect under Issue (b).

Mr de Verneuil Smith submitted there was nothing in the Contract which limited or barred the operation of the duty to account. He referred to the provisions of the Contract in Clauses 11.3.3 and 25.1 which deal with the effect of the termination of the Contract and give rise to a mutual right to request delivery up of information and a right to inspect on termination. Those rights, he submitted, were distinct from and additional to the equitable duty to account. He said that the parties had not placed any limit on the duration of the equitable duty to account and he submitted that Clause 11.1 of the Contract stated that termination of the Contract was “without prejudice to any obligations or rights of either party which exist prior to termination” and this was not limited to “obligations or rights” under the Contract but would include an equitable duty to account.

In any event, he submitted that the obligations of Youngs to provide or give access to information under Clauses 6.2 and 27.1 of the Contract did not have any limit and therefore continued after termination.

In relation to Clause 6 of the Termination Agreement, Mr de Verneuil Smith submitted that Clauses 6.2 and 6.3, when read together, permitted Aviva to make further claims arising out of the information and documents obtained as a result of the operational audits carried out under Clause 6.3. He submitted that those operational audits would include rights under Clause 6.2 and 25 of the Contract.

He submitted that, whilst Clause 25 of the Contract provided that the right to audit ceased three months after termination of the Contract, there was no such provision in Clause 6.2 of the Contract and, in any event, neither Clauses 6.2 nor 6.3 of the Termination Agreement limited the time when a further claim arising out of the audit could be made. As a result he submitted that Aviva is entitled to bring any claims which would arise as a result of the operational audits.

In the alternative, he submitted that Clauses 6.2 and 6.3 of the Termination Agreement at least entitled Aviva to make such claims arising out of operational audits of any invoicing after 9 July 2007. He submitted that at the time of the Termination Agreement both parties knew that there were claims for payment by Youngs for Building Repair Services provided to policyholders prior to 9 July 2007 which had not been invoiced by Youngs or where invoices were unpaid and these had been addressed in Clause 2.3 of the Termination Agreement. These claims could not fall within Clause 6.2 of the Termination Agreement. He also said that the Run-Off Claims as defined in Clause 2.2 of the Termination Agreement could not fall within the provision in Clause 6.2. Thus, he submitted that the Run-Off Claims and invoices produced after or unpaid at 9 July 2007 could not have been intended to be excluded as coming within “further claims” under Clause 6.2 of the Termination Agreement. This meant that claims in respect of the Run-Off Claims and invoices unpaid at or produced after 9 July 2007 could be brought by either party, either as a claim to payment by Youngs or a claim by Aviva arising from information or documents produced by way of a duty to account.

Mr Walker referred to the terms of Clauses 25, 11.3.3, 6.2, 11.1, 11.6 and 27.2 and submitted that the terms of the Contract showed that Youngs’s obligations to provide information or documentation terminated with the termination of the Contract and there were no grounds for a fiduciary duty to be imposed giving wider obligations as to production of information and documents.

In relation to the Termination Agreement, Mr Walker referred to the agreed Spreadsheet which formed part of the agreed background to the Termination Agreement. He said that the Existing Arrangements did not come to an end on 9 July 2007 but continued after that date as shown by Clauses 2, 3.3 and 6.3. However, Mr Walker submitted that after 9 July 2007 Youngs’ involvement in claim validation had ended so that any question of a fiduciary duty relating to documents did not apply to any duty after that date.

In relation to Clause 6.2 of the Termination Agreement, Mr Walker submitted that this was a compromise or release provision and the usual principle of construction applied and he referred me to Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 at [8-9], [26] and [78-79]. He submitted that, on the true construction of Clause 6.2, neither party could demand that something was due as a result of a right relating to the Existing Arrangements or the termination of the Existing Arrangements and that, as Aviva’s claim for the production of documents related to the Existing Arrangements, Aviva was not entitled to bring such a claim.

He submitted that the claims which were retained by the Termination Agreement were claims to payment under Clause 2, claims for assets under Clause 3.3 and any claims that might be brought under Clause 6.3. Otherwise he submitted that there would be little sense in Clause 6.2 saying that both parties gave up claims if they retained a right to bring claims at any time.

In relation to clause 6.3 of the Termination Agreement Mr Walker submitted that the reference to “operational audits” related to what were referred to in Clause 2.2 as the Run-Off Claims. These were the only operations which continued in terms of the Building Repair Services. Further it made sense for Aviva to be entitled to have audits in relation to those Run-Off Claims. On this basis he agreed with the alternative submission by Mr de Verneuil Smith that the audits envisaged by Clause 6.3 related to the Run-Off Claims otherwise there was little point in agreeing the financial position but leaving Aviva with the right to have an audit.

Mr Walker referred to Clause 6.1 of the Termination Agreement and submitted that the terms of the Termination Agreement superseded the provisions as to termination in Clause 11 of the Contract. He submitted that on this basis there was no preservation of the right to an account based on matters prior to the 9 July 2007 and the only right was that of an audit under Clause 25 of the Contract in relation to the Run-Off Claims which would run for a period of 3 months after 9 July 2007.

The question posed by this issue is the extent to which either any equitable duty to account or the contractual obligations survived termination of the Contract and/or the terms of the Termination Agreement.

I have held that Youngs did owe Aviva an equitable duty to account in relation to an aspect of the claims validation process part of the Claims Handling Services. Whilst the scope of any equitable duty is derived from the contractual relationship between Youngs and Aviva, I consider that the equitable duty to account in relation to claims validations which were carried out by Youngs up to the date of the termination of the Contract does not come to an end with that termination. In that sense the equitable duty to account is independent of the provisions of the Contract and, after the termination of the Contract, the scope and extent of that duty will depend on equitable principles. However, as provided for in Clause 2.1 of the Termination Agreement, Youngs carried out no further Claims Handling Services after 9 July 2007 and therefore it is evident that no duty to account would arise in relation to claim validation after that date. I therefore do not consider that either the termination of the Contract or the entering into of the Termination Agreement brought to an end the equitable duty to account in respect of the aspect of the claims validation process.

As set out above, the Contract contained detailed obligations for the provision of information and documents by Youngs to Aviva. During the currency of the Contract it is evident that Aviva had a number of rights giving them access to information (Clause 6.2); an entitlement to inspect records (Clause 25.1); access to management information (Clause 27.1) and access to information which Youngs were obliged to put onto the Claimserve system (Clause 27.3). In addition there was an obligation in Schedule 3, the Delegated Authority Scheme (Claims Handling), which required Youngs to retain certain information on file or on computer records. To what extent did these provisions continue after termination of the Contract or the terms of the Termination Agreement?

I consider that Mr Walker is correct in his submission that Clause 6.1 of the Termination Agreement means that the terms of the Termination Agreement supersede the terms of the Contract, following the termination. As a result, the provisions of the Contract only apply to the extent that the Existing Arrangements are stated in the Termination Agreement to apply. In particular the Existing Arrangements are stated to apply, among other things, to the claims under Clauses 2.2 and 2.3 of the Termination Agreement, to redundant assets under Clause 3.3 and to Aviva’s entitlement to carry out operational audits under Clause 6.3.

As a result, the question is essentially the extent of Aviva’s entitlement “to carry out operational audits in accordance with the Existing Arrangements” under Clause 6.3 of the Termination Agreement. Does it permit Aviva to seek information and documents under the contractual duty to account or is it limited to claims that can be made under Clause 2 of the Termination Agreement?

The reference in Clause 6.3 to “operational audits in accordance with the Existing Arrangements” is a reference to Youngs’ obligations under the Contract. I consider that the first matter to be considered is the extent to which Young’s obligations under the Contract to provide information and records survived the termination.

In relation to termination of the Contract Clause 11.3 of the Contract states that “within thirty (30) days of the date of termination of this agreement” each party shall deliver up to the other party all information obtained, acquired or produced by or on behalf of that other party in connection with the contract upon reasonable request by that other party. Clause 25.1 says that “during the term of this agreement and for a period of 3 calendar months thereafter” Aviva shall be entitled to inspect the records of Youngs in respect of the provision of the Services. In respect of those provisions it is evident that the right under those clauses expired with the expiry of the relevant period after 9 July 2007.

Mr De Verneuil Smith sought to rely on Clause 30.5 dealing with waiver to overcome those time limits but I do not consider he is correct to do so. That provision refers to a delay or failure of any party to require performance and says that that will not affect the right to require performance. In other words, generally a delay or failure in requiring performance would not be a defence to having to perform. However in this case where there are express time limits it is those express time limits which preclude performance, not delay or failure by Aviva. What Clause 30.5 does not do, in my judgment, is to take away the express time period during which the parties have agreed the other party would perform certain obligations. Otherwise, it would render all time limits ineffective which cannot, objectively, have been the intention of the parties.

However, as Mr de Verneuil Smith points out, Clause 6.2 of the Contract is a general provision that Youngs should allow Aviva full access to information on a visible open book basis and that Youngs shall keep full and accurate accounting books and records which will, at all reasonable times, be made available to Aviva. I accept that, in principle, Clause 30.5 would mean that delay or failure to access or make use of the availability of the books and records would not, in itself, preclude Aviva from having access, making use of the availability of the books and records. In this case, though, the impact of Clause 11.1, dealing with the consequences of termination, has to be taken into account. Clause 11.1 is in two parts, the first part says that termination of the Contract “will be without prejudice to any obligations or rights of either party which exist prior to termination”. I do not consider that this means that all rights and obligations which existed prior to termination continue after termination of the Contract. That meaning would deprive the termination provision of any practical effect. Rather, I consider that existing rights and obligations which have accrued prior to termination are not affected by the termination. I do not consider that, in the context of Clause 6.2, it would mean that the rights continued after termination of the Contract.

The second part of Clause 11.1 states that the termination of the Contract “will not affect any provision which is expressly or by implication intended to continue in effect after termination.” There is nothing expressly stated in Clause 6.2 to the effect that it continues in effect after termination. Is it to be implied that that provision was intended to continue after termination?

In my judgment, it is not. The parties have by Clause 11.3.3 and Clause 25.1 made specific provision for the supply of information for a limited period after termination. If there was continuing full access to information and there were to be continuing availability of the accounting books and records then the provisions of clause 11.3.3 and 25.1 would be unnecessary. Further the obligation in Clause 11.6 that for a period of three months following termination of the Contract Youngs should, subject to being reimbursed for its reasonable costs in doing so, co-operate in good faith with Aviva, strongly suggests that there are time limited obligations which are subject to reimbursement, after the date of termination. If the provisions of Clause 6.2 continued to apply after termination then an obligation to give “full access” and make available “at all reasonable times” would impose an unlimited obligation which is only consistent with the parties’ obligations of performance during the currency of the Contract and not after termination.

Mr de Verneuil Smith also relies on Clause 27.1 which required Youngs to provide Aviva, “on its request” with a “Repair Full Cost Breakdown”. An initial difficulty is that there is no such form in Schedule 3. But, in any event, that provision applies “following the submission of each Repair Summary Invoice.” I do not consider that this gives rise to an indefinite obligation upon Youngs to supply that cost breakdown in the period after the submission after the invoice. In any event, such an obligation would not, in my judgment, continue by implication after the termination of the Contract. Evidently, under the first part of Clause 11.1 if, prior to the termination of the Contract, Aviva had requested a Repair Full Cost Breakdown; that would have been a right or obligation which existed and would not have been prejudiced by the termination of the Contract. But unless that happened I do not consider that Aviva would be able to request a Repair Full Cost Breakdown after termination.

The view that I have taken above as to the continuation of obligations is also consistent with the provisions of Clause 27.3 which required Youngs to enter information on the Claimserve claims management software. It was open to Aviva to decide what management information they wished to retain and to specify it within the Claimserve system. This then gave them the ability to have information which continued after the termination of the Contract.

It follows that, in my judgment, under the terms of the Contract the obligations of Youngs to provide information and documents following the termination of the Contract were limited and once those rights expired there was no continuing duty to make information or documents available. In the light of that, I do not consider that Clause 6.3 of the Termination Agreement was intended to introduce a new and wide set of obligations to provide information and documentation so that Aviva could carry out an audit of Youngs’ invoices for all its Services prior to termination. Rather, I consider that the rights to operational audits related to claims dealt with under Clause 2 of the Termination Agreement being unpaid invoices, work not invoiced for or the Run-Off Claims.

This view is supported by the fact that there is a reference to “operational audits”. As Mr Walker submits this strongly suggests that the audits were in respect of operations which were continuing under the Existing Arrangements rather than covering Services which had been performed, invoiced and paid prior to termination of the Contract.

In addition, I consider that such a meaning is consistent with the way in which Clause 6.2 and 6.3 of the Termination Agreement are to be read together. Clause 6.2 provided that “Subject to Clause 6.3” neither party was entitled to raise further claims in respect of matters relating to the Existing Arrangements or the termination of the Existing Arrangements. What does the phrase “Subject to Clause 6.3” mean?

Clause 6.3 itself does not expressly give any entitlement to raise a claim. Rather, that clause deals with two matters. First it states that Aviva shall be entitled to carry out “operational audits in accordance with the Existing Arrangements”. Secondly it states that Aviva acknowledges that a particular sum has been taken into account in reaching the management fee stated at Clause 2.3 of the Termination Agreement in respect of compensation and rework costs. Whilst not expressly stated in such terms I consider that Clause 6.2 necessarily envisaged that further claims might arise out of Aviva’s entitlement to carry out the operational audits covered by Clause 6.3. Indeed that was effectively common ground between the parties. The difference was the scope of the audit which might give rise to the claims. I do not decide but reserve for further argument the question of whether Aviva is entitled to make claims in the absence of carrying out an operational audit.

In my judgment, if it had been intended to permit Aviva to have a complete right to audit every invoice issued by Youngs under the Existing Arrangements and to bring a claim for overpayment in respect of those invoices it would have been necessary to have clear wording to that effect. The tenor of the agreement is generally to draw a line under matters related to the Existing Arrangements, with certain limited exceptions and I do not consider that a wide exception is either consistent with the other provisions of the Termination Agreement or the wording of Clause 6.2 and 6.3. The Termination Agreement envisaged that Youngs would be seeking payment for unpaid invoices, work not invoiced and Run-Off Claims and it made commercial sense to provide expressly for there to be a right for Aviva to have operational audits for those claims, given the effect of termination of the Contract on the ability of Aviva to obtain information and documents from Youngs.

What, then, given the provisions of the Contract as to the supply of information and documents are the “operational audits in accordance with the Existing Arrangements”? In my judgment what is intended is a reference to the rights under Clause 25.1 of the Contract. Whilst the heading of Clause 25 refers to “Auditing”, Clause 1.2.1 of the Contract precludes the headings from being taken into consideration in the interpretation or construction of the Contract. Despite that I consider that the essence of an audit is that Aviva should be entitled to inspect the records of Youngs in respect of the provision of the Services. The express time limit in Clause 25.1 could not apply and I do not consider that the limit of a 3 month period could, as Mr Walker submits, be interpreted as applying to 3 months after 9 July 2007. Subject to any further submissions on this aspect I consider that the entitlement to carry out operational audits would continue for a reasonable time.

Accordingly, after termination of the Contract and given the terms of the Termination Agreement, I consider that:

Mr de Verneuil Smith submitted that Aviva was entitled to the account and enquiry which they claimed in the counterclaim and he produced a draft order which set out the scope of the relief being claimed. It amounted, in substance, to a request for the provision of information and documents.

In particular it sought this information in respect of each invoice: Date of Invoice, Insured name and address, the extent to which a claim was validated and the grounds in support of the validation decision including the identification of the relevant peril, the estimate of the claim value, the scope of the works (including material requirements, tradesmen and plant and the cost estimate), description of the work carried out, start date, completion date, material volume and value, change orders, whether photographs exist, complaints by policyholder, breakdown of invoice to show job cost, management cost, VAT, excess, grand total, reconciliation of final cost with costs estimate, reasons for difference, re-visits and re-works.

It also sought provision of the following documents: Estimates of repair, scope of works documents, photographs, time sheets, materials purchase documents, plant use documents, communications between Youngs and agents of Aviva (for instance loss adjustors), communications between Youngs and the policyholders and documents signed by policyholders (including scope of works and customer satisfaction forms).

On the basis of my findings as to the scope of the equitable duty to account and subject to any further submissions as to particular information or documents, I consider that Aviva would be entitled to information concerned with the validation of the claim which would include the Insured’s name and address, the extent to which a claim was validated and the grounds in support of the validation decision including the identification of the relevant peril and communications between Youngs and the policyholders relating to the validation of the claim.

In relation to the claims made by Youngs for unpaid invoices at 9 July 2007, work not invoiced at 9 July 2007 and Run-Off Claims then Aviva should be should be entitled to inspect the records of Youngs in respect of the provision of those claims for Services. The precise extent of the information will depend on the records which Youngs have produced.

Youngs seek to recover “redundant assets”. At paragraph 23 of the Particulars of Claim Youngs contends that it is entitled to recover the cost of these redundant assets because they form part of the actual cost of providing the Services. It is common ground that these costs are not included within Clause 5.1 of the Termination Agreement which deals with “agreed exit costs”. These costs relate to leases on the new premises at Longwater together with the fitting out works to those premises and to cancellation charges for mobile telephones and for tracking devices for vans. Aviva contends that these costs are not recoverable.

Mr de Verneuil Smith submitted that these redundant assets were not part of the actual costs of providing the Services and so are not recoverable from Aviva. He submitted that to the extent that the redundant assets had a value, they were not a cost or a cost incurred in order to provide services up to 9 July 2007 or in the run-off period to October 2007. He referred to the final costs spreadsheet which had been agreed between the parties and he pointed out that it did not contain any sum for redundant assets.

He also referred to the definition of general overhead in paragraph 5.1.2 of the Process Document. He submitted that any claim for such overheads could only be brought, either for payment of Claims Handling Services under Clause 4.1.2(b) or for payment of Building Repair Services under Clause 5.2.2. Under Clause 4.1.2(b) Youngs was entitled to be paid a charge reflecting an appropriate proportion of Youngs’ overhead costs of providing the Claim Handling Services and under Clause 5.2.2 Youngs was entitled to make a charge under the heading of “associated costs” to reflect an appropriate portion of Youngs’ overhead costs in providing the Building Repair Services. Both of these items were to be subject to agreed amounts which for the first three months after the commencement date were to be those in Schedule 1 and were thereafter to be agreed by the parties for each forthcoming quarter at the Quarterly Reviews.

He referred to the process of Quarterly Reviews under Clause 6.3 of the Contract which provided that the parties should, at the Quarterly Reviews, agree charging rates for the three months to the next Quarterly Review, having particular regard to the extent to which Youngs had, in the three months leading up to the Quarterly Review, recovered its actual cost of providing Services together with the agreed profit margin. He said that Clause 6.3 provided that the parties should agree or, if they are unable to agree, the parties should seek to resolve the matter by applying the escalation and mediation provisions at Clause 20 of the Contract. If the parties were still unable to reach agreement then either party was entitled to terminate the Contract.

On this basis Mr de Verneuil Smith submitted that there was no express entitlement to payment. In any event he submitted that the overhead charges had been reviewed at termination under Clause 11.4 of the Contract on the basis set out in the agreed spreadsheet and this had led to Clause 2.3 of the Termination Agreement which provided that an additional sum of £225.00 per claim was in full and final settlement of all under recoveries incurred by Youngs under the Existing Arrangements.

As a result, whilst these redundant assets had been referred to in Clause 3 of the Termination Agreement, they were to be dealt with “in accordance with the terms of the Existing Arrangements, to the extent (if at all) dealt with therein.” In the circumstances and given the terms of the Contract and the Termination Agreement Mr de Verneuil Smith submitted that these redundant asset costs could not be recovered.

Mr Walker submitted that the claim for redundant assets is a claim for a cost incurred in providing the Services which had not been reimbursed. He submitted that under the terms of Clauses 4, 5 and 6 of the Contract the redundant asset costs were properly recoverable as general overheads and, absent the Termination Agreement, they would have been reviewed at the Quarterly Reviews under Clause 6.3.2 or at the review on termination under Clause 11.4 and recovered as part of the overhead costs. Mr Walker referred to Clause 3 of the Termination Agreement and submitted that under Clause 3.3 there were terms of the Existing Arrangements under which these overhead costs could be dealt with.

In relation to Aviva’s submission that under Clause 2.3 of the Termination Agreement the parties had agreed £225 as the additional sum in full and final settlement for all under recoveries incurred by Youngs under the Existing Arrangements, Mr Walker submitted that, given the terms of Clause 3 of the Termination Agreement, it was evident that the parties could not at the Effective Date, determine that those costs had been incurred because of the continuing process of seeking to dispose of those assets which had been agreed under Clause 3. For instance, the assets might have been sold for market value.

He submitted that Clause 3.3 of the Termination Agreement clearly contemplated potential liability of Aviva in respect of the redundant assets and it was common ground that such assets did not form part of the “agreed exit costs” dealt with under clause 5 of the Termination Agreement. On that basis he submitted that this claim came outside the terms of Clause 2.3 and Youngs was entitled to have these costs reimbursed as general overheads under the Contract.

The issue is whether Youngs can in principle recover such heads of cost under the terms of the Contract and whether, given the terms of Clause 2.3 of the Termination Agreement, it is open for Youngs to bring such claims.

By Clause 3 of the Termination Agreement the parties agreed a process by which Youngs would attempt to sell these “redundant assets” under Clauses 3.1, 3.2 and 3.3. Clause 3.3 then states that subject to those provisions “those assets shall be dealt with in accordance with the terms of the Existing Arrangements, to the extent (if at all) dealt with therein.”

I consider that the cost of the premises (including fitting out costs) and the costs of mobile phones and tracking devices for vans would all, in principle, come within the heading of general overheads, as referred to in Section 5.1.2 of the Process Document. They are costs necessary to manage the work load for Aviva and include accommodation costs. It seems that this is common ground.

The way in which overheads were recovered under the Contract was by way of payment of a charge under Clause 4.1.2 (b) for Claims Handling Services or Clause 5.2.2 for Building Repair Services. In Schedule 1 to the Contract there were fixed sums to be charged for Claim Handing Services “overheads” and Building Repair Services “associated costs”. Those sums applied to the first three months of the Contract and were thereafter subject to review at the Quarterly Reviews under Clause 6.3 and 6.4. Whether any particular item of overhead was recoverable depended on whether Youngs had over or under recovered during the relevant period of three months. The approach under Clause 6.3.2 of the Contract was that, in setting the charge rates for the forthcoming three months, the parties “shall seek to ensure that the effect of the under or over recovery is corrected in full over the forthcoming three months”.

That was a matter of agreement between the parties and if the parties were unable to agree then Clause 6.4 of the Contract provided that the parties should seek to resolve the dispute by applying the “escalation and mediation provisions at Clause 20.” In fact, it seems that the dispute resolution provisions were at Clause 19 rather than Clause 20. That did not provide any specified remedy if the parties were unable to resolve their dispute by negotiation and mediation unless the dispute was a technical issue in relation to the building works, in which case there was arbitration before a single arbitrator.

Clause 6.4 did, though, give either party the right to terminate the contract if they were unable to reach final agreement following mediation. In my judgment the principle to be applied under Clause 6.3.2 is clear: the charging rate for the forthcoming three months had to be set to ensure that the effect of the under or over recovery was corrected in full over those forthcoming three months. That principle of the review of the over or under recovery at Quarterly Reviews was carried forward in Clause 11.4 of the Contract in the case of termination which provided for a review of charges to assess the extent to which Youngs had over or under recovered its costs and the agreed profit margin since the last Quarterly Review.

If there were to be a dispute as to those charges then, whilst there was an escalation and mediation provision in Clause 19 and the parities had the right to terminate, that in my judgment did not deprive the court of being able to resolve the dispute based upon the principles set out in Clause 6.3.2 and 11.4.

Mr De Verneuil Smith submitted that the redundant assets cannot be considered as the actual costs of providing Services because, as is apparent from the documents, the tracker and mobile phone termination costs were incurred after 9 July 2007 and these cannot be considered therefore as the actual cost of providing services prior to 9 July 2007.

Whilst it is correct that the asset costs crystallised after 9 July 2007 because the assets had not been disposed of as provided for in Clauses 3.1, 3.2 and 3.3, I consider that the termination costs of tracker devices and mobile phone and the cost of accommodation (including fitting out costs) used for providing the Services which were not recovered after termination would be recoverable as overheads. In assessing the costs of providing tracking devices or phones where there is a charge on termination of the agreement I consider that the charge forms part of the overall overhead costs. In other words the real cost of providing the Services must take account of that termination cost. Similarly, sums payable for accommodation under a lease, together with fitting out costs which cannot be avoided under Clauses 3.1, 3.2 and 3.3 are overhead costs which, in my judgment, can be recovered on the principle that there should be no under or over recovery of the costs of providing services.

To be recoverable on termination I consider that they would have to be dealt with under Clause 11.4 of the Contract. From the evidence of the background to the Termination Agreement, it is evident that Youngs produced a schedule of “redundant assets” as well as the matters in the agreed Spreadsheet. The redundant assets could not be dealt with as part of the overheads in that agreed Spreadsheet which were resolved by the additional overhead payment of £225 under Clause 2.3 of the Termination Agreement because the process to attempt to dispose of them had not been carried out. Subject to the effect of Clause 2.3 of the Settlement Agreement I consider that the provisions of Clause 3.3 of the Termination Agreement were concerned with whether there was a provision within the Contract to deal with that aspect rather than questions of whether a request had been brought within time under Clause 11.4.

On that basis I consider that Clause 11.4 of the Contract would give Youngs the entitlement to be paid an amount so as to balance any under recovery of overheads in accordance with the principles set out in that Clause. For the reasons set out above I consider that, in principle, the termination costs or costs which had not been recovered in respect of leases or fitting out costs would be recoverable under Clause 11.4 of the Contract.

Finally I consider whether or not the agreement of £225 under Clause 2.3 of the Termination Agreement precludes such a claim. That clause provides that “for the avoidance of doubt, the additional sum of £225 is a full and final settlement for all under recoveries incurred by Youngs under the Existing Arrangements.”

As I have observed, the Termination Agreement stated that Youngs’ claim for redundant assets “shall be dealt with in accordance with the terms of the Existing Arrangements” if they are dealt with in the Existing Arrangements. The question is whether despite that statement in Clause 3.3 the parties intended that any claim which might be made under Clause 3.3 could not be made because of the terms of Clause 2.3 of the same agreement because it was in full and final settlement of “all under recoveries”. I consider that Clause 3.3 was a freestanding right to make that claim in accordance with the terms of the Existing Arrangements. It made it clear that it “shall be dealt with” in accordance with those arrangements. I do not consider that it would be dealt with in accordance with the terms of the Existing Arrangements if Youngs were precluded from doing so by the full and final settlement provisions of Clause 2.3. Rather, I consider that the effect of Clause 3.3 was to retain the right of Youngs to have the claim dealt with in accordance with the Existing Arrangements so that that claim would be outside the entitlement to be paid the extra £225 under Clause 2.3.

It follows that, in principle and subject to arguments of quantum, termination charges for tracking devices and mobile phones and costs of leases and fitting out works which would otherwise have been recovered but which were not recovered because of the termination would be recoverable under Clause 11.4 of the Contract. I do not decide but reserve for further argument, the scope of the arguments of quantum which are open to Aviva.

Subject to any submissions on the terms of the answers to the Issues, I would propose to answer the Issues as follows: