AVIVA INSURANCE LIMITED AGAINST THOMAS MANN, TRADING AS WEST LOTHIAN INSURANCE SERVICES
OUTER HOUSE, COURT OF SESSION
[2015] CSOH 1
CA125/12
OPINION OF LORD TYRE
In the cause
AVIVA INSURANCE LIMITED
Pursuers;
against
THOMAS MANN, TRADING AS WEST LOTHIAN INSURANCE SERVICES
Defender:
Pursuers: Upton; HBM Sayers
Defender: Party
8 January 2015
Introduction
[1] The pursuers are an insurance company who were at one time named CGU Insurance plc. They are a member of the Aviva group of companies. At the time of the events with which this action is concerned, the defender carried on business as an insurance broker under the name of West Lothian Insurance Services. On or about 7 January 2005, the defender entered into a contract with the pursuers and three other companies in the group in terms of the pursuers’ 2004 terms of business agreement. On or about 15 November 2010, the defender entered into a new contract with the same four companies in terms of the pursuers’ 2010 terms of business agreement. Under each of these agreements, the defender acted as the agent of the four companies for the purposes of collecting and holding premiums on their behalf. The rights of the other three companies under these contracts were transferred to the pursuers by virtue of a scheme approved by the High Court of Justice in London in October 2011.
[2] In this action the pursuers seek an accounting by the defender of insurance premiums said to be due to them under both agreements, and payment of the amount found to be due. Following a series of minor downward revisions, the total sum now said by the pursuers to be due to them is £397,299.07. The defender denies that he has any outstanding liability. This opinion is concerned with a motion by the pursuers for summary decree for payment by the defender of the sum of £158,559.28, with interest at 8% per annum from 24 May 2012 (the date of citation) until payment.
Background to the raising of the action
[3] There has as yet been no diet of proof, and what follows represents a brief summary of the court’s understanding of the factual background, gleaned from documents lodged and the submissions of the parties. During the period between about 2007 and 2010, the parties’ business relationship ran into difficulties. These appear to have derived at least in part from problems encountered by the pursuers, possibly in connection with the overseas outsourcing of some of their business activities, in setting up direct debits and collecting premiums from customers in respect of whom the defender acted as broker. By January 2010 the defender was writing to the pursuers to complain of “maladministration of Aviva staff” that was causing anxiety to his customers and resulting in loss of business. On 28 February 2011, an employee of the defender emailed the pursuers seeking, apparently for the whole period since January 2007, “Copy of all payments sent to you – month year amount” and “Copies of all items cleared against the payments received – every item for every payment”.
[4] Attempts at reconciliation of receipts and payments were made by both parties. Meetings were held. An apologetic letter sent by the pursuers in March 2011 to inter alia the defender suggests that the pursuers’ “collections issues” had not yet been resolved. The defender instructed lawyers who reiterated his demand for a detailed reconciliation of accounts with monies paid to the pursuers. For their part, the pursuers sought evidence vouching the amount of monies held by the defender in trust for their benefit, with payment of sums which were not in dispute. The defender continued to contend that sums paid by him to the pursuers had been applied by them to the wrong accounts. On 15 May 2012, the pursuers wrote to the defender demanding payment of the sum of £423,132.27, being the sum said to be due by way of net premiums (after deduction of commission) as detailed in a lengthy schedule attached. In response, the defender reiterated that the pursuers had made numerous errors in reconciliation of payments to customer accounts. On 13 June 2012, the pursuers terminated the defender’s agency. They subsequently raised the present action.
Progress of the action
[5] The defender has appeared throughout this action as a litigant in person. Among the documents lodged by him was a spreadsheet (7/46 of process) and a list, vouched by bank records, of payments made by him to the pursuers (7/47). The spreadsheet consists of what appear to be the same items as those listed in the schedule annexed to the pursuers’ letter of 15 May 2012, though not in the same order, together with comments by the defender. By interlocutor dated 27 February 2013, Lord Malcolm held productions 7/46 and 7/47 to be treated as an accounting provided by the defender in terms of the first conclusion of the summons. He appointed the pursuers to lodge their response thereto, to include a full statement of all monies received by them from the defender over the relevant period and their allocation.
[6] Since then, the spreadsheet has gone through a number of iterations. The pursuers duly added their item-by-item response; further item-by-item comments were obtained from the defender; and additional comments by the pursuers were added in March 2014. This process has resulted in the modest reductions in the sum sued for that I have mentioned. The pursuers have also, in compliance with Lord Malcolm’s interlocutor, produced a vouched statement of monies received by them from the defender over the relevant period (6/28 and 6/29 of process). As the pursuers’ total of £625,820.08 was slightly higher than the total amount that the defender claimed in 7/47 of process to have paid, the total sum paid by the defender to the pursuers is not presently a live issue. Allocation of that sum to customer accounts has proved to be more difficult; however, the pursuers now assert that they have reconciled all but £28,941.03 of the total sums received to specific accounts. I should add for the sake of completeness that the pursuers’ position is that in terms of each of the agreements, contractual responsibility for specifying the accounts to which premium payments fell to be allocated rested and continues to rest upon the defender and not upon themselves. For his part, the defender continues to dispute the correctness of the pursuers’ reconciliation, and maintains that substantial sums paid by him to the pursuers during the period of difficulty were and remain incorrectly allocated.
The background to the pursuers’ summary decree motion
[7] The defender’s spreadsheet 7/46 included around 384 items in respect of which his stated response was “Payment Agreed”, or similar wording. The total of the sums concerned was £172,504.30. In advance of a continued procedural hearing on 28 June 2013, the pursuers called upon the defender, in correspondence and by formal notice to admit, to state whether he accepted that those entries represented amounts which he was obliged to pay to the pursuers. At the hearing on 28 June 2013, the defender confirmed that these were amounts that he had collected from policy holders. An amendment procedure followed but the defender did not provide any further explanation of what was meant by “Payment Agreed”. At a continued procedural hearing on 29 August 2013, the pursuers proposed that a one-day hearing be fixed to hear a motion for summary decree for payment of these sums. They also moved the court to order the defender to specify what he meant by “Payment Agreed”. No order was made but a further period of adjustment was allowed.
[8] When the case called again on 1 October 2013, the pursuers renewed their application for the matter to be dealt with by hearing a motion for summary decree. On 22 November 2013, Lord Malcolm issued a note to parties setting out his views on further procedure in the action. That note included the following paragraph (20):
“I will appoint Mr Mann to lodge and exhibit to the pursuers a document explaining the intended meaning of the phrase ‘payment agreed’ or similar wording where used in the documentation, and this within three weeks … I will not fix a summary decree hearing meantime, but will continue the pursuers’ application on that matter until the next hearing.”
An interlocutor to that effect was pronounced on 26 November 2013.
[9] On 10 December 2013, the defender intimated and lodged a document entitled “Note of Payment Agreed – Reply to Interlocutor dated 27th November 2013” which stated as follows:
“The term payment agreed are premiums received from clients to be OFF SET against monies held by Aviva that Aviva have ADMITTED receiving and have yet to advise how the money was ALLOCATED. Aviva are also holding back unpaid commissions and return premiums that should have been credited to our accounts. Aviva are also holding back money paid out of our Broker account that they have ADMITTED receiving that has been UNALLOCATED!
The whole account when properly audited will show a credit balance to West Lothian Insurance Services.”
The pursuers replied to the defender raising various queries which they regarded as arising from the terms of the defender’s response to the interlocutor of 26 November 2013.
[10] At this time I assumed responsibility for case management of the proceedings. Hearings took place on 16 and 21 January 2014. The minute of proceedings for the latter hearing records as follows:
“The defender confirmed to the court that where in 7/46 of process he has annotated individual entries (for premiums averred by the pursuers to be owed by him to them, in accordance with 6/31 of process as revised to produce 6/67 of process) with the words ‘Payment agreed’, it is admitted by him that those sums are due and payable by him to the pursuers, subject to (1) any right of set-off that he can establish (including any right to payment of commission) and (2) to the correction of 7/46 to substitute other comments instead of ‘Payment agreed’ for certain entries where ‘Payment agreed’ has been used in error, as illustrated by the defender at the bar on 21 January 2014.”
The pursuers were appointed to produce a revised version of the spreadsheet, including a further blank column in which the defender was appointed to respond to the pursuers’ comments other than the entries to which he had previously responded “Payment Agreed”(unless that comment had been used in error). The pursuers’ application to fix a hearing of their motion for summary decree was again continued.
[11] The case called on 5 March 2014. Shortly prior to that hearing, the defender intimated his responses to the pursuers’ comments. With regard to 429 entries, which correspond broadly but not exactly with those items previously noted “Payment Agreed”, he added the following comment:
“Ofsett against monies held by Aviva that are oweing to WLIS for unpaid commissions and monies already paid to Aviva that have not been allocated to various accounts.”
The total of the amounts in these 429 entries was £158,559.28, as detailed in the pursuers’ spreadsheet 6/73, pages 52 to 114.
[12] At the time of the hearing on 5 March 2014, the pursuers had a list of 13 receipts from the defender amounting in total to £161,103.10, listed in document 6/72 of process, which they had been unable to reconcile to customer accounts. The defender contended that these should be deducted from the sum sued for, although he could not at that hearing demonstrate whether any or all of them should be allocated to “Payment Agreed” or what I shall hereafter refer to as “offset/unpaid commission” items, ie the 429 entries referred to above. At the end of the hearing, I pronounced an interlocutor ordaining the defender, within 28 days, to produce (a) a statement listing, in respect of each of the entries in 6/72 of process, the accounts to which he considered that the amounts in each entry should have been allocated by the pursuers, and (b) a list of the commission payments which he considered were due to him by the pursuers, with sufficient identifying details.
[13] On 31 March 2014, the defender intimated and lodged a document entitled “Statement of Entries 6/72”. It was accepted on behalf of the pursuers at the hearing on 30 April 2014 that in respect of three of the 13 items, amounting to £20,273.55, the defender had identified accounts to which sums fell to be allocated. Otherwise, the defender’s document did not comply with my interlocutor, in respect that it did not identify any account to which the defender contended that any of the remaining 10 payments should have been allocated on receipt by the pursuers. The document makes reference to a payment of £47,132.11 which the pursuers are said to have admitted receiving; I return to this below. The defender also intimated and lodged a document entitled “List of commission payments due to Mr Mann by the pursuers”, referring to two sums of £3,792.59 and £3,296.44 respectively, and a list of 69 miscellaneous commission payments amounting to £13,393.58. The total of these three figures is £20,472.61.
[14] The case called again on 30 April 2014. Counsel for the pursuers stated that the pursuers had by then been able to allocate all but around £23,000 of the payments listed in 6/72. None of the allocations had affected the amount of the sum sued for. In the light of the information before the court at that hearing, I decided that the pursuers should be given an opportunity to argue that there was no relevant defence stated in respect of some or all of the sum of £158,559.28 consisting of the “offset/unpaid commission” items in the spreadsheet 6/73 of process. On 23 October 2014, I heard parties’ submissions on a motion by the pursuers for summary decree in the terms already noted.
Argument for the pursuers
[15] On behalf of the pursuers, it was submitted that no relevant defence had been pled in relation to the “offset/unpaid commission” items amounting in total to £158,559.28. It appeared, however, that the defender wished to state three defences, so far as these items, among others, were concerned.
[16] Firstly, the defender maintained that he had not been given credit for the “unallocated payments”, ie the payments admittedly received by the pursuers which they were unable to reconcile to customer accounts. It was submitted, however, that the onus was on the pursuer to aver and prove that payments which he had made had been wrongly allocated. That onus arose from general principles of candid pleading, from the defender’s record-keeping obligations in terms of the agreements, and by virtue of orders previously pronounced by this court. So far as the summary decree motion was concerned, the onus was on the defender to specify when and how he had advised the pursuers to ascribe any of the 13 “unallocated payments” to the items comprising the sum for which summary decree was sought, and to demonstrate that they had been thus ascribed. He had failed to do so.
[17] Secondly, he claimed to be due commission amounting in total to £20,472.61. That defence was unsound as a matter of law because the premium payments collected by the defender were held by him in a fiduciary capacity and could not be set off, either by retention or under the Compensation Act 1592, against sums allegedly due to the defender personally. In any event the commission claimed was demonstrably not due to the defender. Of the £3,792.59 sum, £925.35 was claimed for periods after the defender’s agency had been terminated, and the defender had already taken credit for the remainder. As regards the £3,296.44 sum, the defender had taken credit for that sum in his remittance advice for January 2012 when making a payment of £51,854.39 for which he was not being sued. The 69 sums totalling £13,393.58 related to a payment of £47,132.11 that the defender claimed to have made to the pursuers in January 2009. The pursuers denied having received that payment, but in any event the relevant calculation showed that the £47,132.11 was a net amount after deduction of commission. Either (as the pursuers contended) the payment had not been made, in which case no commission was due to the defender, or it had been made, in which case the defender had already taken credit for the commission. Whichever of these alternatives was correct, no sum was due to the defender.
[18] The third defence related to the alleged payment of £47,132.11 itself. The defender had produced an email from the pursuers’ broker collections department dated 2 February 2009 (7/1 of process) which acknowledged receipt of this payment in relation to the defender’s December 2008 account. The pursuers denied receipt of this sum. The email appeared to have been sent in error at a time when the defender’s remittance advice for December 2008 had been received and payment was expected shortly. The amount of £47,132.11 had not been included in either the defender’s account of payments made (in 7/47 of process) or the pursuer’s account of payments received (in 6/28 and 6/29 of process). There was no trace in the banking records of either party of the payment having been made. On this state of the evidence it was contended that the pursuer should be held to his own accounting, and that the court should proceed on the basis that no such payment was made.
Argument for the defender
[19] I did not understand the defender to disavow any of the three arguments that counsel for the pursuers had anticipated in his submissions, although he did not found expressly upon them. Instead, he repeated assertions that he had made at previous hearings before Lord Malcolm and before me that the pursuers were concealing the destination of large sums of money paid by him. He founded upon an email from the pursuers’ trading manager dated 5 April 2011 (7/94 of process) which referred to the pursuers having themselves allocated over £239,000 of payments received from the defender because, according to the pursuers, they had not or might not have received remittance advices from the defender specifying the correct allocation. The defender was aware of various cases of incorrect allocation. Hundreds of thousands of pounds had gone missing; a full reconciliation would produce a balance due by the pursuers to the defender. The motion should be refused and the case remitted to a forensic accountant to carry out a reconciliation of payments made to customer accounts.
Decision
[20] Rule of Court 21.2(4) states that the court may grant a motion for summary decree if satisfied that there is no defence disclosed to the action, or to any part of it to which the motion relates. In Henderson v 3052775 Nova Scotia Ltd 2006 SC (HL) 85, Lord Rodger of Earlsferry, delivering the judgment of the House of Lords, stated (paragraph 19):
“… A judge who is considering a motion for summary decree is entitled to proceed not merely on what is said in the defences, but on the basis of any facts which can be clarified, from documents, articles and affidavits, without trespassing on the role of the proof judge in resolving factual disputes after hearing the evidence. The judge can grant summary decree if he is satisfied, first, that there is no issue raised by the defender which can be properly resolved only at proof and, secondly, that, on the facts which have been clarified in this way, the defender has no defence to all, or any part, of the action. In other words, before he grants summary decree, the judge has to be satisfied that, even if the defender succeeds in proving the substance of his defence as it has been clarified, his case must fail.”
[21] The pursuers’ motion for summary decree is concerned not with the whole sum sued for but with the sum of £158,559.28, being the total value of net premiums claimed to which the defender has given the “offset/unpaid commission” explanation. I am satisfied that no defence is disclosed to this part of the pursuers’ claim. In response to orders by the court, the defender has admitted receipt of these sums. Despite ample opportunity to do so, during a period that has endured from at least June 2013 until the hearing of the pursuers’ motion in October 2014, the defender has failed to produce any material to demonstrate, or which might even be said to suggest, that any of these premiums have been paid to the pursuers. On the face of it, therefore, there is no defence to the pursuers’ claim to this extent.
[22] As regards the three specific potential defences addressed by counsel for the pursuers, I accept the submission that the defender has not pled a relevant case for retention of premiums held by him on behalf of customers and due to be remitted to the pursuers, pending resolution of any claim that he may have for unpaid commission. In so far as the other potential defences raise issues of disputed fact, it is not appropriate for me to reach a concluded view at this stage as to whether any or all of them, if insisted upon by the defender, will prove to be well-founded in the context of the pursuers’ claim as a whole. That would be to trespass upon the role of the judge at proof. But I can find no reason to regard any of them as constituting a defence in so far as the “offset/unpaid commission” items are concerned. There is nothing in the material before me to suggest any connection between, on the one hand, either (a) the alleged unpaid commission or (b) the sum of £47,132.11 asserted by the defender as having been paid in January 2009 and, on the other hand, any of the 429 items making up the total for which summary decree is sought. The defender has also failed, despite having been given ample opportunity at previous hearings, to demonstrate a link between any payments by him that remain unallocated by the pursuers and any of the “offset/unpaid commission” items. Instead, he has preferred to rest his argument upon correspondence received from the pursuers at various dates in the past. I regard this correspondence as superseded by the significant amount of work that has been undertaken by the pursuers since the commencement of this action to achieve a reconciliation of payments received to customer accounts, in order to rectify the administrative shortcomings of which both parties appear to have been guilty during the period when their business relationship was breaking down. In addressing the issue of summary decree, I attach no weight to sweeping and unspecific assertions by the defender of maladministration and dishonesty on the part of the pursuers, when he has been given so much time to provide adequate specification of his defence but has failed, despite orders by the court, to do so.
[23] For these reasons I shall grant summary decree for payment to the pursuers by the defender of the sum of £158,559.28, with interest at 8% per annum from the date of citation until payment. I shall put the case out by order for parties to address me on further procedure in relation to the remainder of the pursuers’ claim. I wish in particular to be addressed on the matter of a remit to an accountant. In view of the fact that so many of the spreadsheet entries will be removed from the picture by the granting of the pursuers’ motion for summary decree, previous discussions of this aspect of the case require to be revisited.