Wales (t/a Selective Investment Services) v CBRE Managed Services Ltd & Anor

A contractual duty of honesty may ordinarily be implied, but a broader duty of good faith requires a sufficient relational and commercial foundation or satisfaction of the stringent necessity test. A professional retainer terminable on short notice, involving duties owed principally to third parties, will not ordinarily justify such an implication.

Contractual and restitutionary claims cannot be used to circumvent an agreed commission structure allocating rights and clawback risks between an intermediary, its appointed representative and a product provider. Promissory estoppel requires an assurance, reliance and inequity, and operates defensively rather than as an independent cause of action.

The claimant, an independent financial adviser, sought £204,392.44 from his former corporate client and a pension provider. The sum represented commission clawed back after the client transferred employees from an existing pension scheme to a new auto-enrolment platform.

He alleged implied duties of honesty and good faith, contractual obligations by the pension provider, promissory estoppel, unjust enrichment and entitlement to payment for services. The central issues were whether those obligations or remedies could arise consistently with the contractual arrangements governing commission, payment and clawback.

1. Claim dismissed. The claimant failed to establish any claim against either defendant.
2. A duty of honesty was properly implied into the contract with the corporate client. The parties could reasonably be expected to deal honestly with one another, particularly because the adviser’s services depended substantially on information supplied by the client. The implication was supported by the principles in Yam Seng PTE Limited v International Trade Corp Ltd [2013] 1 Lloyds Rep 526 and Marks and Spencer plc v BNP Paribas [2016] AC 742.
3. No duty of good faith was implied. The contract was a retainer, terminable by either party on two days’ notice, rather than a joint venture or long-term collaborative relationship. The client’s primary duties were owed to pension-scheme participants. The factors relevant to relational contracts, identified in Bates v Post Office (No 3) [2019] EWHC 606 (QB), did not justify implication. Nor was good faith necessary to give the contract business efficacy or make it obvious that it went without saying.
4. The client had not acted dishonestly. Applying Ivey v Genting Casinos (UK) Limited [2017] UKSC 67, the claimant failed to establish conduct which was dishonest according to the standards of ordinary decent people. The client was entitled to transfer the scheme and dispense with the adviser without making alternative provision for him.
5. No additional contract existed between the claimant, the client and the pension provider. The necessity test in Aramis [1989] 1 Lloyds Rep 213, illustrated by James v Greenwich LBC [2008] EWCA 35, was not satisfied. The parties’ conduct was fully explicable by the existing contracts between the intermediary and the adviser, and between the intermediary and the pension provider.
6. The pension provider was contractually entitled to claw back advance commission from the intermediary, which was entitled to claw it back from the claimant. Any hypothetical direct payment obligation would have been waived or varied by the parties’ long-established practice. A duty of honesty would have arisen on the hypothetical contract, but no actionable breach was proved.
7. The estoppel claim failed. No promise or assurance was identified, reliance and inequity were not established, and the doctrine was being used as a cause of action contrary to Combe v Combe [1951] 2KB 215.
8. The restitutionary claims failed because they would undermine the contractual allocation of remuneration and clawback rights. The principle in Costello v MacDonald [2011] EWCA Civ 930; [2012] QB 244 required the contractual arrangements to be upheld. Any hypothetical contractual damages would have been nominal only. Restitutionary damages or an account of profits would in any event have been exceptional remedies under AG v Blake [2001] 1 AC 268.

First-instance decision. The claims against both defendants were dismissed.