Temple Legal Protection Ltd v QBE Insurance (Europe) Ltd

An agent’s authority is generally revocable by the principal, even where revocation breaches the agency contract. The narrow exception for an authority coupled with an interest requires an interest of a security or proprietary nature. Commercial goodwill, commission and business development are insufficient by themselves. Post-termination obligations to manage a run-off, together with authority to amend existing policies, do not ordinarily create a right to continue acting against the principal’s wishes. Clear language is required for that result. An agent’s indemnity for liabilities already incurred may survive revocation, but it does not preserve authority to act in the future.

Temple, an underwriting agent for legal expenses insurance, appealed from Beatson J’s dismissal of its appeal against an arbitration award. The High Court decision is reported at [2008] EWHC 843 (Comm). Under a binder, QBE authorised Temple to write insurance and delegate authority to solicitor coverholders. After the relationship deteriorated, the binder was terminated and QBE sought to take over the management of the existing policies’ run-off.

The arbitrator and Beatson J concluded that Temple’s authority to manage the run-off had ended. The central issue before the Court of Appeal was whether the binder nevertheless gave Temple a continuing right to manage the run-off against QBE’s wishes, including by reason of an authority coupled with an interest or liabilities owed to third parties.

The appeal was dismissed. Moore-Bick LJ gave the leading judgment. Bennett J agreed with his reasons. Rix LJ agreed that the appeal should be dismissed, but expressed some differences concerning the construction of the termination provisions.

1. The contractual structure did not make QBE a party to the coverholder agreements. Those agreements were between Temple and the coverholders. The insurance certificates evidenced contracts between QBE and the individual insureds, and Temple was not a party to those contracts.
2. Section 10.2.1 preserved authority to cancel, extend, amend or alter existing policies after termination, but that authority was ancillary to the post-termination obligations. Section 10.2.2 imposed an obligation to perform the run-off; it did not, without clear language, confer an enforceable right to insist on doing so against QBE’s wishes. The binder was drafted on the assumption that Temple would ordinarily conduct the run-off, but that assumption did not create an entitlement.
3. The agency relationship remained fiduciary. The common law therefore allowed QBE, as principal, to revoke Temple’s authority. The exception for an authority coupled with an interest was confined to cases involving a security or proprietary interest. Temple’s commission, goodwill and commercial interest did not qualify.
4. [1882] 10 Q.B.D. 100 and [1884] 13 Q.B.D. 779 were distinguished. They supported an agent’s right to reimbursement or indemnity for liabilities incurred in exercising authority, but did not establish a continuing power to act after revocation.
5. Comments in the interim-injunction decision in Europ Assistance Insurance Ltd v Temple Legal Protection Ltd, reported at [2007] EWHC 1785 (Comm) and [2008] 1 Lloyd’s Rep. 216, were provisional and did not determine the substantive rights in issue.

Rix LJ considered that sections 10.2.1 and 10.2.2 assumed continuing authority while the run-off obligations remained, and that release from those obligations ordinarily required agreement. However, he held that sections 9 and 10 did not exclude the common-law power of a principal to revoke authority. The result was therefore the same: Temple had no right to insist on conducting the run-off.

1. Court of Appeal (Civil Division): dismissed Temple’s appeal.
2. High Court of Justice, Queen’s Bench Division, Commercial Court: Beatson J dismissed Temple’s appeal against the arbitrator’s award and reached the same substantive conclusion, for different reasons, in [2008] EWHC 843 (Comm).
3. Arbitration: Mr J.H.L. Leckie held that QBE’s letter of 4 January 2007 had effectively terminated Temple’s authority to manage the run-off.