Willis Management (Isle of Man) Ltd & Anor v Cable and Wireless Plc & Anor

An agreement is unenforceable for uncertainty where the parties leave an essential term, such as the principles or mechanism for calculating a party’s share of loss, to future discussion and agreement. The court cannot supply that missing agreement.

This differs from an unqualified agreement to pay a fair or reasonable share. Such a term provides an objective standard which a court can apply. A signed formal document must be construed with the parties’ related emails and oral communications. It cannot create a binding contract where those communications show that the essential basis for determining liability remained to be agreed.

Cable & Wireless plc and its captive insurer, Pender Insurance Ltd, alleged that an employee of the Willis companies had assisted a fraudulent scheme. To avoid immediate joinder to the proceedings, Willis signed a letter accepting legal responsibility for the employee’s acts. An accompanying email stated that Willis would pay only a share of the claimants’ loss, to be discussed in good faith.

Cooke J held that the letter, email and oral discussion formed an enforceable agreement. He made declarations that Willis was legally responsible, subject to assessment or agreement of its share. Willis appealed from [2005] EWHC 409 (Comm). The central issue was whether the parties had reached a binding agreement or had merely agreed to agree the essential basis for quantifying Willis’s liability.

1. Appeal allowed unanimously. The court set aside Cooke J’s order and declared that the parties had not reached a binding contract.

2. Lord Justice Tuckey held that the signed letter could not be read in isolation. The caveat email, the telephone conversations and the confirmatory email showed a consistent consensus that the parties would discuss and agree both the principles and the mechanism for determining Willis’s share of the loss.

3. The expression “fair share” was not an unqualified contractual criterion. It was merely a label for an outcome which the parties hoped to achieve after further agreement. The agreed basis for determining that share was an essential term. Until it was agreed, the arrangement was incomplete and unenforceable.

4. The court accepted the distinction illustrated by The Didymi, [1988] 2 Lloyd’s Rep. 108. An unqualified obligation to pay a fair or reasonable share may be sufficiently certain because the court can apply that objective standard. That was not this case: the parties had reserved to themselves the agreement of the applicable principles or process. The court could not make that agreement for them.

5. Lord Justice Rix agreed. The formality of the signed letter established consensus on some matters, but did not resolve whether the parties had made a contract. The provisions concerning deferred joinder and a future standstill agreement themselves contemplated that a binding agreement might yet fail to be achieved. Mr Justice Wilson agreed with both judgments.

• Court of Appeal (Civil Division) — in [2005] EWCA Civ 806, allowed Willis’s appeal, set aside the Commercial Court order, and declared that no binding contract had been made.
• Commercial Court — Cooke J, in [2005] EWHC 409 (Comm), held that the parties’ communications formed an enforceable agreement and made declarations concerning Willis’s legal responsibility, subject to assessment or agreement of its share.