John Youngs Insurance Services Ltd v Aviva Insurance Service UK Ltd

Fiduciary duties in a commercial agency relationship depend on the underlying contract and may apply to only particular activities. An agent’s contractual duties do not automatically become fiduciary duties merely because the principal relies on the agent. Here, a fiduciary duty to account arose in relation to validating insurance claims under delegated authority, but not in relation to surveying, repair work or invoicing carried out as principal. The fiduciary duty survived termination for pre-termination claim validation. Contractual information and inspection rights were narrower and, after termination, applied principally to unpaid invoices, uninvoiced work and run-off claims. Termination-related overhead costs could in principle be recovered under the contractual review mechanism.

The claimant provided insurance claims-handling services to the defendant and carried out building repairs for the defendant’s policyholders. The parties’ relationship was governed by a contract and later by a termination agreement. The court determined five preliminary issues concerning fiduciary duties, contractual information rights, post-termination audits and recovery of redundant asset costs. The central questions were whether the claimant owed a fiduciary duty to account, whether relevant obligations survived termination, and whether specified termination costs were recoverable under the contract.

1. Fiduciary duty. The contract distinguished between claims-handling services, performed under delegated authority as the defendant’s agent, and building repair services, performed as principal. Fiduciary obligations had to be determined by the contract and the particular activities undertaken. Not every contractual duty owed by an agent was fiduciary.
2. A fiduciary relationship arose in the limited activity of validating or repudiating insurance claims, where the claimant exercised judgment affecting the defendant’s legal position towards policyholders. No fiduciary duty arose in relation to surveying, assessing work scopes, producing estimates, carrying out repairs or invoicing repair costs. Those activities were either contractual services or were performed as principal.
3. The equitable duty to account continued after termination in relation to claim validations carried out before 9 July 2007. It did not extend to all documents and information relating to the commercial relationship.
4. The contract imposed broad information and inspection obligations during its term. After termination, the termination agreement superseded the contract except where the existing arrangements were preserved. The continuing audit entitlement was limited to unpaid invoices, work not invoiced at termination and run-off claims. It did not confer a general right to audit every pre-termination invoice.
5. The claimant was not entitled to the wide account and inquiry sought. The defendant was entitled to information relating to claim validation and to inspect records concerning the identified unpaid, uninvoiced and run-off claims.
6. Termination charges for tracking devices and mobile telephones, and unavoidable premises and fitting-out costs, were in principle recoverable as overheads under the contractual review mechanism in clause 11.4, subject to quantum. The termination agreement’s £225 payment did not preclude that separate claim.