The Motoring Organisation Limited v Spectrum Insurance Services Limited

The court held at first instance that an oral agreement was reached in or about September 2019 by which Spectrum agreed to place the SsangYong warranty opportunity for the benefit of The Motoring Organisation Limited (TMO) and that Spectrum would not personally benefit from that opportunity except in the event of a completed merger. The judge found that, on those facts, Spectrum owed fiduciary duties to TMO in relation to the SsangYong opportunity and also breached duties of confidence when it used information passed to it to take commercial benefit for itself. By contrast, the judge rejected TMO’s case that a parallel oral agreement existed in respect of the so-called 2020 dealers (the dealers for whom TMO had been supplying GAP insurance), and dismissed TMO’s contractual, fiduciary and confidentiality claims in respect of those customers.

In short: TMO succeeded on liability for breach of contract, breach of fiduciary duty and breach of confidence in relation to the SsangYong Opportunity; TMO’s claims relating to the 2020 customers failed. Issues of remedy and quantum were reserved for a subsequent stage.

Background and parties: This was a first-instance Commercial Court trial of liability issues only following a split trial arrangement. The claimant, The Motoring Organisation Limited (TMO), a provider of vehicle warranties and after-sales products run by Mr Don and Mr Chris Pinkney, alleged that the defendant, Spectrum Insurance Services Limited (Spectrum), had wrongfully exploited two business opportunities introduced to Spectrum by TMO: (1) a warranty opportunity relating to SsangYong vehicles (the "SsangYong Opportunity") and (2) a group of dealerships in early 2020 for whom TMO had been providing regulated GAP insurance (the "2020 customers").

Nature of claim / relief sought: TMO pursued causes of action in the alternative for breach of contract (based on alleged oral agreements), breach of fiduciary duty, breach of confidence and unjust enrichment, seeking damages or other appropriate relief. The parties agreed that this trial would determine only liability, with remedies and quantum to be addressed later.

Issues framed by the court: The principal factual and legal issues were whether (i) one or more binding oral agreements had been made between TMO and Spectrum in respect of each opportunity; (ii) fiduciary duties arose from the parties’ relationship in relation to those opportunities; (iii) Spectrum had been entrusted with confidential information and had used it in breach of confidence; and (iv) Spectrum had been unjustly enriched.

Evidence and context: The tribunal heard oral evidence from principals and senior figures on both sides (the Pinkneys for TMO, and Mr Clarke, Mr Kitchin, Mr Mills and Mr Reynolds for Spectrum). The parties had been negotiating a merger/takeover of their businesses in late 2019 and early 2020; TMO would in due course have become an Appointed Representative of Spectrum. The SsangYong Opportunity was introduced into this context by an intermediary working for SsangYong’s UK importer and contained commercially sensitive material, including pricing and projected volumes. Matters became fraught when Spectrum’s principal underwriter (Acasta) raised issues relating to historic debts owed by Motorway Direct, producing a breakdown in the proposed merger relationship and changes to the parties’ regulatory and underwriting positions.

Court’s reasoning and findings: On the SsangYong Opportunity the judge accepted TMO’s account that an oral agreement was made (around September 2019) that Spectrum would seek underwriting for the opportunity on TMO’s behalf; that the opportunity remained TMO’s unless and until a merger was completed; and that Spectrum would not take profit from it except through the merger. The court relied on objective assessment of contemporaneous documents, subsequent conduct and inherent likelihood, finding the parties’ contemporaneous emails and exchanges (including Spectrum drafts and internal emails) consistent with TMO’s account. Because Spectrum had undertaken to act for TMO in those circumstances, the court found Spectrum owed fiduciary duties in relation to that opportunity and had an obligation of confidence in respect of the confidential material TMO passed to it. Spectrum breached those duties by pursuing the opportunity for its own account. The judge declined to decide ancillary points about whether the insurer required Spectrum to be the named administrator beyond noting it made no difference to the principal findings.

By contrast, in respect of the 2020 customers (passed in late January 2020) the court found there was no comparable oral agreement or fiduciary relationship: the merger prospects had already materially deteriorated, Acasta’s position meant Spectrum could not act as a mere conduit for TMO’s benefit, and the evidence supported Spectrum’s explanation that it was asked to provide regulated GAP cover so that TMO might retain the non-regulated elements of dealer relationships. The court therefore dismissed TMO’s claims in respect of the 2020 customers. The court also held that, given the contract and fiduciary findings in respect of SsangYong, unjust enrichment did not provide a procedural alternative on those facts and that TMO had not established an unjust enrichment case in relation to the 2020 customers.

The court found that TMO succeeded on liability in relation to the SsangYong Opportunity: an oral contract was made in September 2019 that Spectrum would place the SsangYong business for TMO and not benefit from it except through a completed merger; Spectrum therefore owed fiduciary duties to TMO in respect of that opportunity and also owed and breached an obligation of confidence in using TMO’s information for its own benefit. In contrast, TMO’s claims (contractual, fiduciary, confidence and unjust enrichment) in relation to the 2020 customers were dismissed. The judge reserved all issues of remedy and quantum for a later stage.