Equitas Ltd & Anor. v Horace Holman & Company Ltd.

An agent must maintain and provide records sufficient to enable the principal to ascertain the true state of the account and monies received on the principal’s behalf. An account is not settled merely because the agent states that nothing is due. Where the information supplied is inadequate or unreliable, the principal may reject it and require a fresh account, notwithstanding procedural provisions governing accounts in litigation. The agent must provide relevant records, even where its own accounting systems do not readily separate the principal’s transactions. Costs remain discretionary and may reflect both the parties’ conduct and the extent to which litigation ultimately achieved useful results.

Equitas, as assignee of rights relating to Lloyd’s syndicates, claimed against Horace Holman, a Lloyd’s broker and agent, for documents, an account of monies received from reinsurers, payment of sums allegedly retained, and damages. Horace Holman supplied a composite account based principally on claims files and later paid certain sums.

The proceedings continued because Equitas disputed the reliability and completeness of that account. The principal claims for an account and documents were eventually abandoned, but a money claim and costs dispute remained. The issues were whether the money had been received and paid over, whether the composite account answered the claim, and how the costs should be allocated.

1. Agency duties. Horace Holman owed duties to maintain proper and adequate records enabling the syndicates and Equitas to ascertain the true state of the account and sums received from reinsurers. It also had to provide relevant records relating to transactions carried out as agent. The fact that relevant records were mixed with records concerning other principals did not excuse production. Yasuda Ltd v Orion Underwriting Ltd, [1995] QB at p 191F, supported that conclusion. Chandrey Martin v Martin, [1953] 2 QB 286 concerned professionals and clients and did not govern the principal-agent relationship.
2. Effect of the composite account. An agent cannot establish a defence to an action for an account simply by stating that no sum is due. The account must have been adjusted, the balance struck and the principal given a proper opportunity to challenge it. Here the composite account did not identify what had been received and paid, depended on claims files vulnerable to error, and omitted other relevant records. Equitas was therefore entitled in equity to reject it and call for a fresh account. The Practice Direction supplementing CPR Part 40 did not remove that substantive right; Equitas could apply for directions for a fresh account.
3. Money claim. Applying the ordinary burden of proof, Equitas had to establish receipt and Horace Holman had to establish payment over. The theoretical River Thames exercise sufficiently established receipt of the dollar and sterling sums claimed. Entries stating that particular sums had been previously paid, together with the evidential deficiencies in the records, were sufficient to establish that those sums had in fact been paid over. The resulting award was US$34,614.01 and £3,018.57. Further submissions were invited on Can $508.
4. Costs. Equitas was justified in bringing proceedings because proper information had not been supplied. Horace Holman was ordered to pay Equitas’ costs, except for one half of Equitas’ costs incurred between 1 March 2004 and 28 February 2006, reflecting the limited practical success achieved during that period. The costs remained subject to assessment for reasonableness and proportionality.

First-instance judgment in the Commercial Court. The judgment records earlier procedural orders by Langley J and Christopher Clarke J but no appeal from them.