Personal Touch Financial Services Ltd v Simplysure Ltd & Anor

Arranging an interview to collect material information from a prospective insurance customer may constitute arranging deals in investments under article 25 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Article 25 has a deliberately wide scope.

Whether a contractual term is a condition depends on the agreement as a whole. Expressly calling it a condition is a strong, though not conclusive, indication. Breach of a true condition is repudiatory irrespective of resulting loss.

Following termination for repudiatory breach, the innocent party’s executory obligations cease unless a clear surviving term provides otherwise. A right to renewal commission accrues when the policy is renewed, not when it was originally taken out.

Personal Touch Financial Services Ltd appointed SimplySure Ltd as its representative for private medical insurance business. SimplySure used personnel whom Personal Touch had not authorised to collect information from prospective customers through part of a standard fact-find questionnaire.

The Mercantile Court held that this was regulated activity contrary to the general prohibition, but that the resulting contractual breach was not repudiatory. It therefore held that Personal Touch had wrongfully terminated the agreement and remained liable for renewal commissions transferred by SimplySure to Usay Business Ltd.

Personal Touch appealed. SimplySure and Usay cross-appealed against the finding that the fact-find activity contravened the general prohibition. The principal issues concerned article 25 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, the classification and consequences of clause 7, and liability for post-termination renewal commissions.

1. Appeal allowed and cross-appeal dismissed. Arranging for an unauthorised representative to interview a prospective customer and complete the initial part of the fact-find was regulated activity within both article 25(1) and article 25(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. The purpose was the customer’s purchase of private medical insurance. The questions extended beyond basic personal details and included a matter requiring specialist knowledge. The court approved the regulator’s guidance as correctly explaining article 25’s deliberately wide scope. Article 26 required no consideration because it applies only to article 25(1), whereas article 25(2) applied independently.

2. SimplySure’s conduct consequently breached clause 7 of the appointed representative agreement. On construing the agreement as a whole, clause 7 was a true condition. Its unique and emphatic description as a condition carried substantial weight. That construction was commercially sensible because non-compliance exposed Personal Touch to potential criminal, civil and regulatory consequences, including responsibility under section 39(3) of the Financial Services and Markets Act 2000. The breach was repudiatory regardless of whether it caused actual loss.

3. The rubric reserving later parts of the questionnaire for authorised private medical insurance advisers neither excused the breach nor prevented reliance upon it. The unpleaded point should not have been permitted. In any event, the rubric did not imply that wholly unauthorised persons could complete the earlier parts; those parts could have been completed by advisers authorised for other insurance products.

4. The judge also applied the wrong inquiry under clause 32. Where termination depended upon Personal Touch’s opinion that an act precluded SimplySure from a position of trust, SimplySure had to establish that the opinion was perverse or irrational. The point was academic because termination was already justified under clause 7.

5. Termination for repudiatory breach ended Personal Touch’s executory obligations absent a clear surviving contractual term. A right to renewal commission could not accrue until renewal occurred. Neither clause 18 nor any implied term preserved entitlement to commissions arising from post-termination renewals. Personal Touch therefore owed neither damages for wrongful termination nor renewal commissions to SimplySure or Usay.

1. Court of Appeal (Civil Division): The court unanimously allowed Personal Touch’s appeal, dismissed SimplySure and Usay’s cross-appeal, and set aside the order below: [2016] EWCA Civ 461.
2. High Court, Queen’s Bench Division, Manchester District Registry, Mercantile Court: His Honour Judge Bird held that the fact-find activity contravened the general prohibition but that the contractual breach was not repudiatory. He awarded relief for wrongful termination and held that renewal commissions remained payable. No citation is stated in the judgment.