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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Temple Legal Protection Ltd v QBE Insurance (Europe) Ltd [2009] EWCA Civ 453 (06 April 2009) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2009/453.html Cite as: [2009] 1 CLC 553, [2009] EWCA Civ 453, [2009] Lloyd's Rep IR 544

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
Mr. Justice Beatson
[2008] EWHC 843 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		6 April 2009

Lord Justice Moore-Bick :

Background

1. This is an appeal by Temple Legal Protection Ltd ("Temple") against the order of Beatson J. made on 25^th April 2008 dismissing Temple's appeal against an award made by the arbitrator, Mr. J.H.L. Leckie, in proceedings against the respondent, QBE Insurance (Europe) Ltd ("QBE").
2. Temple is an insurance broker specialising in legal expenses insurance, both "Before the Event" ("BTE") and "After the Event" ("ATE") insurance. The respondent is the European wing of a major international insurance group. The dispute between these two parties arises out of an Underwriting Agency Agreement, a type of agreement generally known as a "binder", under which QBE authorised Temple to write certain classes of insurance on its behalf. I shall refer to the agreement in this case simply as "the binder" or "the agreement", as convenient.
3. Temple came into existence in 1999 as a specialist legal expenses insurer with a view to taking advantage of the increase in the market for insurance of this kind resulting from the statutory provisions which allowed lawyers to enter into conditional fee arrangements for the conduct of litigation. Temple's business model was to provide insurance through intermediaries, mainly solicitors whose clients required cover against the risk of incurring liability for defendants' costs in proceedings conducted under conditional fee arrangements. ATE insurance in conditional fee cases represented the vast majority of its business. Acting under the authority of a binder, Temple's business model was to delegate the writing of insurance to solicitors who were authorised to issue certificates of insurance to individual clients. Although it did not carry the insurance risk itself, Temple had developed the business and was responsible for its administration. It was therefore able to market the cover as its own product and had a developed a large following among solicitors who regularly acted for clients under conditional fee arrangements. From 1999 to 2002 Temple had operated under binders provided by various Lloyd's syndicates and from 2003 to the end of 2005 it had operated under a binder provided by Europ Assistance Holdings Ltd ("Europ Assistance"). Towards the end of 2004 Europ Assistance indicated its intention to withdraw from the market when its binder expired and accordingly on 1^st December 2005 Temple entered into a binder with QBE which came into effect on 1^st January 2006. QBE had no previous experience in the writing of legal expenses insurance.

The contractual arrangements

4. The binder is a lengthy document and it is not necessary to set out many of its terms in full, although it will be convenient to refer to the wording of some clauses from time to time. By Section 1 QBE appointed Temple its agent to write various classes of legal expenses insurance on its behalf and to issue certificates of insurance to policyholders evidencing cover in respect of insurances bound under the agreement. Temple was also authorised to receive and hold premiums and premium refunds, to receive and hold claims money and to manage and settle claims in accordance with the terms of the binder. By Section 1.2 Temple was to inform its clients that in each case it would hold any such money as agent of QBE.
5. By Section 4 QBE authorised Temple to delegate underwriting authority to any other person, firm or company accepted by Temple who was authorised by the Financial Services Authority ("FSA") or exempt from such authorisation. Authority to delegate in that way was essential to the operation of Temple's business, which depended on enabling individual firms of solicitors to grant cover to their clients. Section 4.1 of the binder obliged Temple to enter into "Coverholder Agreements" for that purpose substantially in the form set out in Schedule 1 and to send QBE each month a list of all persons to whom authority had been delegated.
6. The binder was expressed to continue in force for three years until midnight on 31^st December 2008, unless terminated in accordance with its terms. Section 9, to which it will be necessary to refer in more detail at a later stage, made provision for termination in various circumstances, one of which was Temple's entering into any lineslip or binder with another insurer.
7. The coverholder agreements set out in Schedule 1 for ATE and BTE insurance respectively followed closely the form of Temple's existing agreements with coverholders. The form relating to ATE insurance contains the heading 'Temple Litigation Advantage Disbursements and Opponent's Costs Insurance Scheme for Personal Injury Cases' and provides for signature on behalf of Temple and the coverholder alone. It contains no reference to QBE as such. The agreement authorises the coverholder to issue policies of insurance to its clients by issuing certificates of insurance in specified terms. The BTE form is headed simply "Coverholder Agreement" and is in similar terms. It, too, provides for signature by Temple and the coverholder alone.
8. By Section 21 of the binder all insurances bound under it were to be subject to, or in substantially the same terms as, those contained in the documents attached as Schedule 2. The certificate for BTE insurance was not included in the appeal bundle, but there is no reason to think that it differed in any material respect. The ATE certificate contains several references to "the Insurer", who is described as follows:

"Temple Legal Protection Limited are specialist underwriters with authority to underwrite and manage this insurance on behalf of QBE Insurance (Europe) Ltd."

In the section dealing with complaints, the insured is directed first to Temple, and only then, if he is still dissatisfied, to QBE. The certificate gives as the insurer's head office and registered address the name and address of QBE at its offices in London. Finally, it is necessary to mention briefly a "Key Facts" document which also formed part of Schedule 2. It contains a summary of the main policy terms and was intended to be given to a potential insured. It states in terms that the insurance is underwritten by QBE.

9. From this brief description of the contractual arrangements it can be seen that individual policies of insurance were written by solicitor coverholders in favour of their clients acting under the authority granted by QBE to Temple and delegated to them by Temple and that the policy in each case took effect as a contract between the client and QBE. That was effectively common ground.

The dispute

10. Relations between QBE and Temple appear to have deteriorated early in 2006. QBE complained that Temple had failed to provide all the information required under the binder; Temple disputed that and said that QBE did not understand the workings of the legal expenses insurance market. Relations deteriorated further in or about June of that year when one of Temple's underwriting directors, Mr. Rocco Pirozzolo, resigned in order to take up the position of legal expenses underwriter with QBE. Temple thought that QBE was trying to steal its business. In August 2006 Temple served notice to terminate the binder and shortly afterwards entered into a binder with a new insurer, IGI, which took effect from 1^st October 2006. At that point it stopped writing new business for QBE. On 4^th January 2007 QBE wrote to Temple stating that it would assume all claims handling functions relating to policies underwritten by QBE, including the run-off. It also wrote to a number of coverholders asking them to deal directly with it in future.
11. In due course all matters in issue between the parties were referred to arbitration. The most urgent aspect of the dispute was whether QBE was entitled to take over the management of the run-off or whether Temple was entitled to insist on managing the run-off itself. The arbitrator directed that that question should be determined first, in part because Temple was pressing for interim relief. It was and remains common ground between the parties that the binder had been terminated no later than 2^nd December 2006. There was a dispute about precisely when and in what circumstances termination occurred, but that was not relevant to the issues before the arbitrator at the first hearing and he made no decision on the point. The arbitrator held that Temple's authority to manage the run-off of the business was effectively terminated by QBE's letter of 4^th January 2007. On appeal Beatson J. reached the same conclusion, albeit for different reasons.

The nature of the issue

12. There are two aspects of the dispute which it is worth mentioning at the outset. The first concerns the nature of the relationship between QBE and Temple; the second the terms of the binder. The relationship between QBE and Temple exists on two levels: although it is defined by the terms of the contract contained in the binder, it is fundamentally one of principal and agent. It is therefore a relationship of a fiduciary nature, being based on the principal's trust and confidence in the agent and as such it imports a duty of loyalty on the part of the agent. In Bristol & West Building Society v Mothew [1998] 1 Ch. 1 Millett L.J. described the position of a fiduciary as follows at page 18:

"A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary."

13. It was not disputed that as an underwriting agent Temple owed fiduciary duties, including a duty of loyalty, to QBE. That being so, the suggestion that that it should have the right to continue handling QBE's affairs when QBE no longer wishes it to do so might appear a little surprising at first sight. Temple's case, however, is that on the true construction of the binder and its associated contracts it has a right to manage the run-off, whether QBE is willing for it to do so or not. QBE's case is that, although the binder imposes an obligation on Temple to manage the run-off, it does not give Temple a corresponding right to do so. Accordingly, it says that it can revoke the authority given under the binder and release Temple from its obligations. This brings me to the terms of the binder. It is important to note that it does not contain any express provision giving Temple a right to manage the run-off in defiance of QBE's wishes. If such a right exists, it must be implicit in the terms of the binder and its associated contracts read as a whole.

The nature of the run-off

14. Before turning to consider the parties' submissions in detail, it may be helpful to say a little more about the nature of the run-off in this case. In common with most liability insurance the policy covers the insured in respect of claims made during the period of cover, which in the case of ATE insurance is the period between the inception date and the conclusion of the proceedings to which it relates. In the ordinary case of liability insurance, once the policy has been written and the premium has been paid, the insurer has no further part to play until he is notified by the insured of a claim, at which point it becomes necessary to make such investigations as are appropriate and to pay or decline the claim. The policy contained in the ATE certificate in this case differs in certain respects. The premium is not payable until the conclusion of the proceedings, whether by settlement or at trial, and varies according to the stage at which that occurs. Moreover, the solicitor handling the litigation is obliged to report to the insurer on the progress of the proceedings and the insurer has the right to cancel the policy immediately if there is any deterioration in the prospects of a successful outcome for the insured at trial. To that extent what has been described as the "run-off" of such business may call for some involvement in matters more closely related to the underwriting itself.

The parties to the policies and the coverholder agreements

15. In support of their respective arguments both Mr. Butcher Q.C. and Mr. Popplewell Q.C. made submissions about the identity of the parties to the coverholder agreements and certificates of insurance. Mr. Butcher submitted that Temple was a party to the certificates of insurance as well as the coverholder agreements; Mr. Popplewell submitted that QBE was a party to the coverholder agreements as well as the certificates of insurance. Each disputed the other's case. These issues lie at the heart of the relationships between the various parties involved in any individual policy of insurance. The overall contractual structure is established by the binder and the forms of agreement set out in the schedules, so the identity of the parties to the various contracts may be expected to have an important bearing on the question of Temple's right to manage the run-off. It is therefore convenient to consider these issues at the outset.

(a) The coverholder agreements

16. The form of ATE coverholder agreement required by the binder provided in its opening paragraph as follows:

"By this Agreement Temple Legal Protection Limited (Temple) allows the Coverholder . . . to issue a certificate of insurance in respect of those clients of the Coverholder who are eligible for Temple Litigation Advantage Insurance. It should be read in conjunction with the definitions, terms conditions and exclusions of the Certificate Wording . . . attached to this Agreement. Words and phrases defined in the Certificate Wording have the same meaning in this Agreement."

The BTE coverholder agreement contained a materially similar paragraph. As I have already mentioned, each of them provided for signature by Temple and the coverholder, but not for signature by QBE. At first sight, therefore, they appear to be agreements between Temple and the coverholder alone. However, Mr. Popplewell submitted that QBE was also a party for some purposes. His argument was based in part on certain provisions in the ATE agreement which refer to the "Insurer" as if it were a party to the agreement, coupled with the definition of "Insurer" in the certificate, and partly on what he said was the practical necessity of having in place provisions that would enable the agreement to be enforced against the coverholder if Temple's authority were revoked, for example, as the result of a repudiatory breach of the binder on its part.

17. The second paragraph of the ATE coverholder agreement provides that

"This Agreement is entered into based upon the information . . . supplied by the Coverholder to Temple . . . It is intended, understood and accepted by the Coverholder that this Information was to be and has been relied upon by Insurers in deciding to enter into this agreement on the terms contained herein.",

"Coverholder" being defined in the certificate as

"The solicitor . . . named in the Schedule or legal entity who has authority under a Coverholder Agreement with Insurers to arrange this insurance on behalf of the Insured . . . ".

Moreover, the arbitration clause refers to disputes between the "Insured and the Insurers". The BTE coverholder agreement refers to "Underwriters" rather than "Insurers".

18. Mr. Popplewell submitted that the expression "the Insurers" in the ATE agreement must be intended to refer to QBE, not only because that is what the certificate says it means, but because whenever the agreement intends to refer to Temple it does so by name. There is, he submitted, no reason in principle why the coverholder agreement should not confer rights and impose obligations on both QBE and Temple, depending on the context and content of each provision: see, for example, British Energy Power and Trading Ltd v Credit Suisse [2008] EWCA Civ 53. In the present case QBE was intended to be a party for some purposes, those purposes being ascertained by examining the agreement as a whole: see Tudor Marine Ltd v Tradax Export SA ('The Virgo') [1976] 2 Lloyd's Rep. 135.
19. Mr. Butcher submitted that when read as a whole the coverholder agreement was not intended to have that effect. He relied principally on the fact that the preamble identifies Temple and the coverholder alone as parties and does not provide for signature on behalf of QBE as powerful indicators that QBE was not intended to be a party.
20. The arguments put forward on each side sought to derive support from an exhaustive analysis of the language of the coverholder agreement and, to a lesser extent, the certificate. However, with the exception of the primary matters to which I have referred, I do not find such an approach particularly helpful. Since the forms of the coverholder agreement and certificate of insurance were scheduled to the binder, it is necessary to read all these documents together in order to ascertain who were intended to be parties to which agreements and in my view more assistance is to be gained from the overall structure of the arrangements for which they provide than from a detailed linguistic analysis of individual clauses. For example, no one suggested that the insured in each case was intended to be a party to the coverholder agreement; that was plainly not the case. Accordingly, the reference in the arbitration clause to disputes between "the Insured and the Insurers" is clearly inapposite, and if it is not to be taken as an indication that the insured is a party to the agreement, it does not provide a strong basis for saying that QBE was intended to be one.
21. In my view the documents read as a whole disclose a clear and businesslike structure: under the binder QBE authorised Temple to write insurance on its behalf; it also authorised Temple to delegate that authority to coverholders who thereby became authorised to enter into contracts of insurance on behalf of QBE with their clients. That scheme does not require QBE to become a party to the coverholder agreement and the form and language of the coverholder agreements themselves do not suggest that it was intended to do so. It would have been possible for QBE to become a party to the coverholder agreements through the agency of Temple, but there is nothing in the binder either to suggest that that was contemplated. Indeed, it is essentially incompatible with the delegation of authority by Temple for which Section 4.1 provides.
22. Against that background I do not think that the second paragraph of the coverholder agreement can carry the weight that Mr. Popplewell sought to put on it. The information to which it refers is that provided by the solicitor in its application to Temple for acceptance as a coverholder. In my view the expression "Insurers" in this context must be understood as meaning Temple, notwithstanding the definition of "Insurer" in the certificate. That is less surprising than it might be when one considers that the coverholders must have been aware that Temple was acting as agent for the insurer. Similarly, the definition in the certificate must itself be read in context. Both documents were drafted by Temple in such a way as to present itself, so far as it properly could, as the entity providing cover. In a broad sense it was, because it had made arrangements with QBE which enabled it to make insurance available to solicitors and their clients, in most cases without further reference to QBE. It was also the entity responsible for the administration of the cover. One sees that most clearly in the definition of "Insurer" to which I referred earlier. Although that definition correctly states the position, it emphasises Temple's role and provides a flimsy basis for construing the word "Insurer" in the coverholder agreement to mean QBE. For all these reasons I am unable to accept that the language of the documents supports the conclusion that QBE was intended to be a party to the coverholder agreement.
23. Nor am I able to accept that it is necessary for QBE to be a party in order to enable the business to be properly administered in the event that Temple for some reason became unable or unwilling to continue managing it. In the first place, if the parties had intended to provide for such an eventuality (itself inherently unlikely) they would surely have provided for it in express terms. The fact that they did not do so suggests that they did not advert to it at all, or, if they did, that they preferred to leave matters to the general law and market practice. There would undoubtedly be a need to administer the business in an orderly way, but the contracts of insurance were made between QBE and individual litigants and there is no reason why QBE should not have managed them itself. It is worth noting that under Section 24 of the binder QBE retained a large measure of control over the handling of claims.
24. The clause dealing with the Contracts (Rights of Thirds Parties) Act 1999 reinforces this conclusion, since it expressly provides that Temple's principal, that is QBE, shall be entitled to enforce the coverholder's obligation to indemnify it against loss caused by its negligence. The judge initially appears to have recognised the force of that point, but seems to have discounted it because a similarly worded clause is also to be found in the certificate of insurance where that part of it is clearly inapposite. The likelihood is that the clause was copied from the coverholder agreement into the certificate without sufficient thought being given to its wording. However, the fact that inapposite language has been included in the certificate does not, in my view, provide grounds for failing to give it its natural meaning in the coverholder agreement in which it has a clear role to play.
25. Mr. Popplewell sought to find some support for his argument in the judgment of this court in British Energy Power and Trading Ltd v Credit Suisse, but in my view that decision does not assist QBE's case. The court in that case was concerned with a complex set of agreements which specifically provided that the bank designated as the security agent had entered into the relevant agreement "as agent and security trustee" for the lenders. It was not difficult, therefore, to reach the conclusion that it had entered into the agreement in more than one capacity and that in relation to some obligations it was acting as a principal and in relation to others as agent for the lenders, who thus incurred personal liability on the contract. Nothing of that sort is to be found in the coverholder agreements in this case. With the exception of the arbitration clause, which for reasons I have already given I think must be disregarded for these purposes, none of the terms of the agreement either by its nature or wording supports the inference that the agreement was intended to give rise to rights or obligations in QBE. It is quite true that, if Temple were to become unable or unwilling to carry out its obligations under the coverholder agreements, it would be convenient for QBE to be able to enforce them in accordance with their terms, but that of itself does not provide a sufficient indication that that was intended, nor does it provide a sound basis for holding that QBE is a party to them.
26. In paragraphs 106 to 111 of his judgment the judge reached the conclusion that QBE was a party to the coverholder agreements, mainly because he considered that the definition of "Insurer" in the certificate and the references in the coverholder agreement to "the Insurer", to which I have referred, indicate that Temple was not acting solely on its own behalf. I am afraid I am unable to agree. For the reasons I have given, I have come to the conclusion that QBE was not a party to the coverholder agreements. However, I agree with the judge's comment in paragraph 112 that even if QBE were a party, that would not of itself provide a definitive answer to the question that arises in this case.
27. That is sufficient to dispose of this particular issue, but since Mr. Butcher's argument relied heavily at various points on the nature and effect of the coverholder agreements, I think it is right to explain a little more fully how I think they are to be understood. One of the main planks of his submissions was that the coverholder agreements give rise to important rights and obligations that are personal to Temple. I accept, for the reasons I have already given, that QBE was not a party to any of the coverholder agreements and (which is to say the same thing) that they did not create privity of contract between QBE and any of the coverholders. However, the coverholders were aware that Temple was not the insurer and it must therefore have been obvious to them, if they thought about it, that in collecting premiums, exercising rights relating to individual policies, paying claims, and in other aspects of administering the insurances Temple was exercising functions that ultimately were those of the insurer.
28. Each coverholder had authority to bind contracts of insurance on behalf of QBE acting under the authority delegated to it by the coverholder agreement and in accordance with its terms. These included reporting and other obligations in relation to the individual policies which it issued. In those circumstances, when the agreement provides for notice to be given to Temple, it must be understood not as requiring notice to be given to Temple in a purely personal capacity, but to Temple in its capacity as agent for QBE. The obligation was no doubt owed by the coverholder to Temple and could, if necessary, have been enforced by it, but in order to reflect the nature of the contracts which the coverholders were authorised to create, such obligations must be understood as being owed to Temple as agent for QBE and therefore as conditional upon Temple's retaining its authority to act on behalf of QBE. If those obligations were essential to the administration of the insurances and were truly personal to Temple, in the sense that no one other than Temple could benefit from them, Mr. Butcher's argument would have some force, but that is not the case. QBE itself, or any other agent it chose to nominate for the purpose, could fulfil Temple's role, whether as efficiently or not is irrelevant. On termination of Temple's authority the coverholder's obligation to report to Temple would necessarily lapse and in the absence of agreement QBE could require each coverholder, as its agent, to provide sufficient information relating to the contracts written on its behalf to enable them to be properly administered.
29. Moreover, it is a striking fact that under the coverholder agreements Temple incurs very few, if any, obligations to the coverholders. Insofar as it does, they are not of a kind that are personal to it in the sense that the functions to which they relate could not be performed by QBE or another agent. There is no reason, therefore, why they should not also be construed as conditional on Temple's retaining its authority to act as QBE's agent. Moreover, to construe them in that way gives proper recognition to the nature of the transactions as a whole. On revocation of Temple's authority, QBE as the insurer, or another agent appointed for the purpose, would have to administer the policies in accordance with their terms. There is nothing that renders the continued involvement of Temple essential.

(b) The certificates

30. It was common ground that the certificates of insurance evidenced contracts between QBE and the individual litigants created through the agency of the coverholders, but Mr. Butcher submitted that those contracts also created rights and obligations in Temple, in particular a right as well as an obligation to manage the insurance on a continuing basis. In order to sustain that argument Mr. Butcher was driven to submit that Temple became a party to the contract contained in the certificate, if only for some purposes. He therefore drew our attention to the definition in that document of the expression "Coverholder" as the solicitor who has authority "under a Coverholder Agreement with Insurers to arrange the insurance on behalf of the Insured" and to the definition of "Insurer", to which I have already referred.
31. In my view, however, Temple was not a party to the contract of insurance for any purposes. It was not envisaged by the binder that it should be and, more importantly, the terms of the certificate make it quite clear that the insurer was QBE and no one else. Despite the fact that the definition of "Insurer" was couched in less than straightforward terms, its meaning is clear enough and is reinforced by the reference to QBE in the clause dealing with complaints. The inappropriate use of the word "Insurer" in some other parts of the document (for example, in the reference to a coverholder agreement "with Insurers") is incapable in itself of supporting the conclusion that Temple was a party to the contract and none of the terms of the certificate require Temple to be a party to the contract in order to enable it to achieve its commercial object.

The construction of the binder

32. Having thus established the overall structure of the arrangements, it is necessary to examine the terms of the binder itself. The dispute between the parties relates to the consequences of termination and it is therefore necessary to summarise the terms of Section 9, which deals with termination and cancellation in various circumstances and on various terms. The Section begins with an unusual paragraph, Section 9.1, which expressly provides that many sections of the contract are to survive its termination. These include Sections 4.2, 10 and 11, to which it will be necessary to refer in greater detail. Section 9.2 provides for cancellation by either party on 240 days' notice, without the need to give any reason. Section 9.3 provides that unless QBE specifically agrees to the contrary in writing, the agreement will terminate automatically and with immediate effect if Temple goes into liquidation or if other circumstances occur which demonstrate its insolvency or if it has its approval withdrawn by the regulator. Section 9.4 gives QBE a right to cancel the agreement at any time with immediate effect if certain events occur which could be expected seriously to undermine QBE's confidence in Temple's ability effectively to perform the agreement. They include failure to remedy a material breach within 60 days of being given notice to do so; a director, partner or employee being charged with or convicted of fraud; and an inability to continue to comply with the terms of the legislation regulating financial markets. QBE also has the right to cancel the agreement under this Section if there is a change in control of Temple. Section 9.5 gives QBE a right to cancel the agreement on 60 days' notice if certain developments occur, in particular if Temple enters into a similar agreement with another insurer or if there is a significant change in its management.
33. Section 10, which deals with the effect of termination, lies at the heart of the dispute. It provides, so far as material, as follows:

"SECTION 10 – EFFECT OF TERMINATION

Upon and following the giving of any notice of termination pursuant to Section 9.2 or 9.4 or 9.5 Temple shall have authority to extend insurances already bound (or which may be bound during the period of such notice).

10.1 Upon Termination:-

10.2.1 Temple shall immediately cease and shall have no further authority either to bind or offer to bind insurances or to renew any insurances but shall have authority to cancel, extend, amend or alter any insurances already bound;

10.2.2 unless otherwise agreed in writing by QBE, Temple shall remain liable to perform its obligations in accordance with the terms and conditions of this Agreement in respect of all insurances bound prior to Termination until every such insurance has expired or has otherwise been terminated PROVIDED that if Termination occurs pursuant to Section 9.3.6 Temple shall have no liability to perform such obligations to the extent that to do so would be in breach of the FSMA, any secondary legislation made thereunder or referred to therein or any rule made by or condition imposed by the FSA upon Temple's permission (if any) to carry on regulated activities and in such circumstances Temple shall co-operate in good faith with and comply with all reasonable instructions from QBE with a view to the appointment of such other person as QBE may choose to provide the services which Temple is unable to provide.

10.2.3 unless otherwise agreed in writing by QBE, Temple shall deliver promptly to QBE or its authorised representative all unused Certificates of insurance, other documents and other unused materials which it possesses in connection with the Agreement which might be used as evidence of insurance and which bear the name of, mark of or refer in any way to QBE."

34. Section 11 provides as follows:

" . . .

11.2 It is Temple's responsibility to ensure that QBE is not committed to insurances which incept after Termination. Should any insurance bound provide for or local legislation entitle an insured to tacit or automatic renewal, Temple shall immediately upon (and notwithstanding) termination:-

11.2.1 take appropriate action to cancel any renewals which would incept after the Termination Date;"

35. Mr. Butcher emphasised that the business of providing and managing legal expenses insurance which was ultimately supported by the binder had been developed by Temple over some years. He submitted that the coverholders could properly be regarded as Temple's clients and that its business relations with them generated valuable goodwill. Although individual litigants were unlikely to require ATE insurance on a regular basis, the solicitors who were recruited as coverholders could be expected to act for many clients who would require this kind of protection. Temple therefore had an interest, as QBE must have realised, in retaining and enhancing its relationship with the coverholders. That, he submitted, was an important part of the background to the binder.
36. The arbitrator found that when QBE discovered that Temple had signed a new binder with IGI and had stopped writing insurance under its own agreement it accused Temple of repudiating the binder and purported to treat it as discharged immediately. In the alternative QBE gave 60 days' notice of cancellation pursuant to Section 9.5. That notice would have taken effect on 2^nd December 2006 and it was on that basis that the parties agreed that the binder had been terminated at the latest on that date. In the Interpretation section of the binder "Termination" is defined as meaning termination pursuant to Section 9 "or otherwise". It was common ground between the parties that it included termination by acceptance of a repudiation and the argument proceeded on that basis. I continue to entertain some doubts about that, because I find it difficult to see why any aspects of Temple's authority should survive a complete renunciation of its obligations under the binder. However, whatever may be the correct view, I do not think it affects the outcome of the appeal and I shall therefore assume that the parties' understanding of the position is correct.
37. Much argument was directed to the effect of Section 10. The arbitrator recorded in paragraph 15 of the award that the two insurance market experts called to give evidence before him agreed that the procedure followed in the majority of cases is for the agent to conduct the run-off and it must be likely, therefore, that that was at least present to the minds of the parties in this case when they entered into the binder. In the ordinary way, therefore, one would expect that the termination of an agreement of this kind would have two consequences: first, the immediate revocation of the agent's underwriting authority in order to prevent it from binding the insurer to new contracts; but second, the continuation of such authority as is necessary to enable the agent to manage the run-off to completion.
38. As might be expected, the opening words of Section 10.2.1 provide for the immediate revocation of Temple's authority to bind insurances, including by way of renewal. Mr. Popplewell submitted that the word "insurances" in this context should be read as referring to the coverholder agreements and the judge agreed, but in my view that is not consistent with the way in which the word is used elsewhere in the binder, in particular in Section 1, which contains the basic grant of authority to underwrite on behalf of QBE. The binder does not simply authorise Temple to delegate underwriting authority to coverholders; it authorises Temple itself to underwrite on behalf of QBE and, almost as an ancillary matter, confers authority on Temple by Section 4.1 to delegate that function to coverholders. There is nothing surprising, therefore, about the use of the word "insurances" in Section 10.2.1 to mean policies of insurance since that is consistent with the terms of Section 1. It is also consistent with Section 11.2, which makes it clear that Temple has an obligation to ensure that QBE is not committed to policies which incept after termination, and with Section 10.2.3 which obliges Temple (unless otherwise agreed in writing by QBE) immediately to return all unused certificates and other materials which might be used as evidence of a contract of insurance binding QBE. Following termination, therefore, Temple could neither write new policies itself nor could it delegate authority to new coverholders to write new policies on behalf of QBE.
39. The main difficulties in the present case arise out of the opening paragraph of Section 10 and the final words of Section 10.2.1. The opening paragraph is directed only to termination under Sections 9.2, 9.4 and 9.5 and the choice of language suggests that it was intended to operate as a fresh grant of authority arising upon the giving of notice of termination and limited to extending insurances already bound, or which may be bound during the period of notice. No such authority is granted, however, if the agreement is terminated under Section 9.3, probably because the events to which that Section relate are liable to render any further performance of Temple's obligations legally or practically impossible. I find it difficult to identify the purpose of including this particular provision, but its effect is limited and I do not think that it points strongly in favour of either party's case.
40. The final words of Section 10.2.1, however, pose greater difficulty. They give Temple authority to cancel, extend, amend or alter any insurances already bound. It is not altogether clear how that provision is intended to operate in conjunction with the opening paragraph, since the more limited power to extend insurances already bound which that paragraph conveys must extend beyond the date of termination, if only because it relates to policies bound during the period of notice (if there is one). However, since the authority granted by Section 10.2.1. is wider and includes a right to extend insurances already bound, the two are not in conflict. Nonetheless, in the light of the market practice to which I have referred, I do not find it surprising that Section 10.2.1 confers on Temple authority to act in relation to insurances already bound. One can see from the terms of the certificate that the management of the policy may involve taking steps which affect the existence or scope of cover rather than the purely administrative functions normally associated with managing a run-off. For example, the insurer may be asked to consent to the settlement or discontinuance of the proceedings to which the policy relates or to a variation in the terms of a conditional fee agreement. It may also be asked to consent to a change of solicitor by the insured. Most importantly, the insurer has the right to cancel the policy if there is a deterioration in the insured's prospects of success at trial. In my view the final part of Section 10.2.1 was included in order to give Temple the degree of authority it would need to enable it to continue managing the business after its authority to underwrite had been withdrawn. It also provides the authority needed to enable Temple to comply with its obligation to ensure that QBE is not committed to insurances which incept after termination. (Section 16.2 of the binder permits Temple to write insurances which incepted up to 30 days later.) Mr. Butcher's argument, however, proceeded on the footing that if Temple is granted authority to act in relation to existing policies after termination of the binder, it must have a right to continue exercising that authority, even if QBE wishes to revoke it and has purported to do so. That, however, begs the question. In my view it is impossible to spell a right of that kind out of the language of Section 10.2.1.
41. In my opinion that more limited view of section 10.2.1 is reinforced by the terms of Section 10.2.2, which imposes on Temple, following the termination of its authority to write new business, an express obligation to perform the various obligations arising under the binder in relation to policies already written. For reasons I have already given, that is what one would expect. However, it is important to note that Section 10.2.2 is couched in terms of obligation not entitlement, a matter which is of some significance when one comes to consider the parties' competing submissions. Contrary to Mr. Butcher's submission, I do not think that any assistance can be derived from the fact that the section makes specific provision for the loss of FSA authorisation in terms that require co-operation with QBE. It is not uncommon for parties to make specific provision for events of that kind and the fact that it would be unnecessary if QBE's case is correct does not seem to me to shed much light on that question.
42. Mr. Butcher submitted that it would be inconsistent for the binder to preserve Temple's authority to cancel, extend, amend or alter insurances already bound and at the same time for QBE to be free to take over the management of those policies. Indeed, that was the primary basis for his submission that Temple has a right to continue managing the run-off and in order to reinforce that argument he submitted that the opening words of Section 10.2.2 ("unless otherwise agreed in writing by QBE") import the need for there to be agreement between Temple and QBE before Temple's right to manage the run-off can be withdrawn. He also submitted that other Sections of the binder assume that Temple will be entitled to manage the run-off.
43. In my view this argument fails to take adequate account of the nature of the relationship between Temple and QBE under the binder generally or of the way in which Section 10.2.2 is expressed. Although Temple's case is that it has a right to manage the run-off, Section 10.2.2 is worded in terms of a liability to perform obligations. They are not the same thing and it is essentially for that reason that I am unable to accept Mr. Butcher's submission that the opening words of Section 10.2.2 contemplate an agreement in the sense of a bilateral consensus between Temple and QBE. Similar words are used in a similar context in Section 10.2.3 (v. sup.), Section 23 ("Unless otherwise agreed by QBE in writing and endorsed hereon the total net written premium income . . . shall not exceed £10,000,000 per calendar year"), Section 26.1 ("Unless agreed to the contrary by QBE in writing Temple shall prepare the monthly bordereaux . . . etc.") and Section 27.4 ("Temple shall, unless otherwise agreed in writing by QBE, bear and pay all charges and expenses incurred by Temple in the operation of the Agreement."). Elsewhere in the binder the same expression is used, but in a different context: see Section 16.3 ("No insurance shall be bound which provides for automatic or tacit renewal unless otherwise agreed in writing by the QBE."). In each case the context provides an essential aid to construction. Section 16.3 probably contemplates bilateral agreement, being concerned with a restriction on the authority granted to Temple and contemplating the possibility of its being extended. I am left in no doubt, however, that in Sections 10.2.2 and 10.2.3 (and for that matter 27.4) what is contemplated is not a bilateral agreement but simply the formal communication by QBE of its consent to the release of Temple from an obligation which the binder imposes on it. In principle, an obligee can always release his obligor, although in order to be legally binding the release will require something to support it (for example, a deed, an agreement supported by consideration, or a change of position on the part of the obligor). In the present case the revocation of authority itself prevents Temple from performing its obligations, thereby rendering the release binding. I do not find the word "agreement" surprising in that context; it is one that is frequently encountered in ordinary usage. The fact that other sections assume that Temple will continue to manage the run-off does not in my view advance the argument. The binder has been drafted on the assumption that the ordinary consequences of termination will follow and that the agent will in fact manage the run-off, but that is not sufficient to give rise to an entitlement to do so contrary to the principal's wishes.
44. In my view, therefore, Section 10.2.2 simply provides that Temple's obligations in relation to the run-off remain in force save to the extent that QBE chooses not to require it to perform them. However, that is quite different from saying that Temple has a right to manage the run-off contrary to QBE's wishes. As I have pointed out, Section 10.2.2 is worded in terms of Temple's obligations and obligations are the converse of rights. If Temple has a legally enforceable right to manage the run off, it must be found somewhere other than in Section 10.2.2. As I have said, Mr. Butcher relied heavily on the implication to be drawn from the continuation of authority in Section 10.2.1, but in my view that is no more than an adjunct to the performance of the obligations to which Section 10.2.2 refers. If QBE were to release Temple from the obligation to manage the run-off, in whole or in part, the authority granted by Section 10.2.1 for that purpose would to that extent cease to have any content and would lapse. Similar considerations apply in relation to Section 16.4, which I agree assumes (but does not require) that Temple will continue to manage the business.
45. The judge expressed his conclusion in a slightly different way. In paragraph 96 of his judgment he said that the provisions in the binder relating to Temple's functions after termination must be construed as being contingent on its remaining authorised to act and liable to perform its obligations in relation to the run-off. However, I think he was saying the same thing. Mr. Butcher submitted that his conclusion involved implying a radical qualification into all the terms of the binder to which he had referred, but in my view it involves no more than construing the agreement as a whole in its commercial context. In my view the judge's conclusion was correct.
46. Before leaving this aspect of the appeal, I should say something about Section 4.2 on which Mr. Popplewell placed a certain amount of reliance. It provides, so far as material, as follows:

"Any agreement by Temple for delegated authority to a coverholder (business producer) shall continue in force until its natural expiry or 12 months from the termination or non renewal of this Agreement, whichever is less provided always that such agreements:

1 for ATE insurance are as per the standard agreement or in substantially the same form attached amended to include provision for

1.1 certificates, policies or copies thereof to be issued within 21 days

1.2 inspection of records to include QBE and any Financial Services Regulator

1.3 Temple has discretion to negotiate eligible risks and premiums as appropriate . . .

2 do not apply to risks relating to the coverholder's own costs or fees

3 for BTE insurance as per the standard Temple policy wording or in substantially the same form

4 provide for standard bordereau to be maintained per QBE agreed format . . .

All cases falling outside these eligibility criteria are to be referred to QBE."

47. Mr. Popplewell strove valiantly to make sense of Section 4.2 in a way that supported his construction of Section 10.2.1, but without conspicuous success. Since the standard form of ATE coverholder agreement provided for it to remain in force for a period of 24 months, it must have been apparent from the moment the binder was signed that if they ran to their normal expiry dates, many such agreements might extend beyond the termination or expiry of the binder itself and that many policies might be bound after that date. QBE had no direct contact with the coverholders and if it no longer wanted Temple to write business on its behalf, it would be surprising if it would be content for the coverholders to continue doing so. The inclusion of Section 11.2 is therefore perfectly understandable and, in conjunction with a right to cancel the coverholder agreements on 30 days' notice, provides a large measure of protection to QBE. However, Section 4.2 is not consistent with that approach.
48. Section 4.2 is not an easy provision to construe, either in terms of its language or its relationship to the other provisions of the binder. I do not find it surprising that a clause of this kind should have been included in the binder in order to provide for the position of coverholders following the termination of the binder itself. The difficulty lies in understanding what its effect is intended to be. However, since, whatever its effect, it deals only with the duration of authority delegated under coverholder agreements, I do not think that it advances Temple's case on the appeal. Certainly Mr. Butcher did not seek to place any reliance on it and in those circumstances I do not think it is necessary or desirable to extend this judgment by continuing to explore its meaning further. That can be left for another occasion.

Authority coupled with an interest

49. A contract under which one person is given authority to act on behalf of another creates a relationship of principal and agent which is distinct from the rights and obligations created by the contract. The relationship is fiduciary in nature, giving rise to a duty of loyalty, which requires the agent to act at all times in the interests of the principal. It is essential, therefore, that the principal should be able to terminate the relationship if the necessary degree of trust and confidence no longer exists. In general, therefore, the principal can revoke the agent's authority at will, even though it is expressed to be irrevocable and even though he commits a breach of contract by doing so: see Bowstead & Reynolds on Agency, 18^th ed., Article 120. That much was not in dispute. However, in cases where the agent's authority has been conferred for valuable consideration in order to protect rights granted to him by the principal it is not capable of being revoked. One hallmark of such cases is that the authority conferred on the agent is intended to be used not for the benefit of the principal but for the benefit of the agent. The learned editor of Bowstead & Reynolds says in paragraph 10-007 that

"The orthodox contemporary exposition is that authority is irrevocable where it accompanies a security or proprietary interest and is part of it or a means of achieving it . . . the authority must be conferred as part of, or as protection of, the agent's interest. . . . this is different from normal agency, in which the agent must act in the interests of the principal: here the agent acts in his own interests."

50. In cases of the kind envisaged in that paragraph the grant of authority can be viewed as incidental to the rights which it is intended to protect and it is that which entitles the agent when exercising it to act in his own interests rather than in the interests of his principal. In the present case the binder gives Temple certain valuable rights, including a right in Section 27.1 to "retain" commission out of premiums, but they do not include any rights of a security or proprietary nature to which the authority can be regarded as incidental. It is well established that the right to be paid commission does not fall under that head and I do not think that Temple can derive any support from the use of the word "retain" in this case, which simply recognises that the premium is expected to pass through its hands. Temple's authority to receive payment of commission on behalf of QBE was not, on the true construction of the binder, conferred in order to provide security for the payment of its commission. Under an agreement of this kind the agent is a fiduciary who must act in the interests of his principal, both in relation to the writing of insurance contracts and in administering the business arising out of them.
51. Mr. Butcher sought to place some reliance on Society of Lloyd's v Leighs [1997] CLC 759, a case arising out of underwriting business at Lloyd's. Lloyd's sought to recover from various Names amounts due in respect of reinsurance premiums owed to Equitas under the reconstruction and renewal plan. The Names contended that since they had not accepted the plan they were not bound to make payments under it. Colman J. held that Names could not revoke the authority of their managing agents to enter into reinsurance contracts in respect of liabilities incurred in the relevant years and expressed the view that there is no inflexible principle that nothing less than a security interest can justify the irrevocability of an agent's authority. He considered that the rationale for rendering the agent's authority irrevocable is that its continuation is a necessary means of enabling the agent to ensure that some obligation of the principal towards him is performed. He concluded in that case that the managing agent's authority was irrevocable because any revocation would disrupt the agent's business as the manager of a market trading unit with responsibilities to all the members of the syndicate.
52. A managing agent at Lloyd's incurs obligations to each member of the syndicate for which it acts which it would be difficult, if not impossible, to discharge properly if any one of them were to revoke its authority to act on his behalf in relation to business conducted during the syndicate year. It may be, therefore, that the decision can be supported on the grounds that revocation of authority would prejudice the managing agent by preventing it from performing obligations owed to third parties. That is an aspect of the present case to which I shall come in due course. However, I confess to having some doubt whether an interest of a purely commercial kind can ever be sufficient of itself to render the agent's authority irrevocable. Almost all agents operating in a commercial context have an interest of some kind in the exercise of their authority, if only in earning their commission, developing their businesses and seeking to enhance their reputations. Hitherto the law has not regarded an interest of that kind as sufficient to render the agent's authority irrevocable, presumably because, notwithstanding the agent's interest, the relationship remains one of a fiduciary nature. In my view Temple's commercial interest in maintaining and developing its business is not sufficient to render its authority to act on QBE's behalf irrevocable.

Liabilities to third parties

53. The agent's authority is also said to be irrevocable in certain cases where he has incurred personal liability to a third party in respect of which he would be entitled to reimbursement or an indemnity from the principal. In such cases the principal cannot revoke the agent's authority if by doing so he would defeat that right. The leading case is Read v Anderson (1882) 10 Q.B.D. 100, (1884) 13 Q.B.D. 779 in which the defendant instructed the plaintiff, a turf commission agent and a member of Tattersall's, to place several bets on his behalf, but in his own name, on horses running in various races. The defendant was aware that the plaintiff would thereby become personally responsible to the bookmaker for payment of any bets lost. At the end of the day the defendant repudiated liability for the amount due to the plaintiff and in due course was sued by him. The defendant argued, among other things, that the bets were wagers, that he had not authorised the plaintiff to pay them and that, even if he had, that authority had been revoked before payment was actually made.
54. Hawkins J. rejected that argument. He held that the defendant could lawfully pay wagering debts, if he chose to do so, even though they were not legally enforceable, and that if he authorised another to pay them on his behalf that person, having done so, could recover the money from him. The judge also held that authority to place the bets carried with it implied authority to pay them. As to the revocation of that authority he said at page 107:

"As a general rule a principal is no doubt at liberty to revoke the authority of his agent at his mere pleasure. But there are exceptions to this rule, one of which is that when the authority conferred by the principal is coupled with an interest based on good consideration, it is in contemplation of law irrevocable, that is, though it may be revoked in fact, that is to say by express words, such revocation is of no avail. . . .

In the present case the authority to pay the bets if lost was coupled with an interest; it was the plaintiff's security against any loss by reason of the obligation he had personally incurred on the faith of that authority to pay the bets if lost, the consideration for that authority was the taking upon himself that responsibility at the defendant's request. Previous to the making of the bets the authority to bet might beyond all doubt have been revoked; but the instant the bets were made and the obligation to pay them if lost incurred, the authority to pay became, in my judgment, irrevocable in law. In other words, the case may be stated thus. If a principal employs an agent to do a legal act, the doing of which may in the ordinary course of things put the agent under an absolute or contingent obligation to pay money to another, and at the same time gives him an authority if the obligation is incurred to discharge it at the principal's expense, the moment the agent on the faith of that authority does the act, and so incurs the liability, the authority ceases to be revocable."

55. Later, however, he said this:

"The plaintiff's case may also, as it seems to me, be supported on this ground, that if one man employs another to do a legal act, which in the ordinary course of things will involve the agent in obligations pecuniary or otherwise, a contract on the part of the employer to indemnify his agent is implied by law . . . "

56. The judgment of Hawkins J. was affirmed on appeal. Brett M.R., although dissenting in the result, stated the principle thus at page 781:

"The question is whether the law will imply an undertaking by the defendant, that he will not revoke the plaintiff's authority to pay bets which have been lost. If a principal employs an agent to perform an act, and if upon revocation of the authority the agent will be by law exposed to loss or suffering, the authority cannot be revoked."

57. Bowen L.J., with whom Fry L.J. agreed, said at page 783:

"It will not be denied that if a principal employs an agent to do something which by law involves the agent in a legal liability, the principal cannot draw back and leave the agent to bear the liability at his own expense. . . . Was the defendant entitled to turn round and tell the plaintiff not to pay the bets, and to thus put him into the position of being expelled from the room where he carries on his business? What is the inference of fact to be drawn as to the true bargain between them? Can it be said that the plaintiff took upon himself the risk of embarking upon this perilous adventure without such an indemnity? As an inference of fact, it seems to me that it was well understood to be part of the bargain that the principal should recoup his agent, and should not revoke the authority to pay, but should indemnify the agent against all payments made in the regular course of business. I feel the force of the point that the obligation to pay a lost bet relied upon by the plaintiff is not recognised by law; but the plaintiff has placed himself in a position of pecuniary difficulty at the defendant's request, who impliedly contracted, I think, to indemnify him from the consequences which would ensue in the ordinary course of his business from the step which he had taken."

58. Two rather different principles emerge from these passages, one relating to the revocability of authority, the other relating to an agent's right to be indemnified by his principal in respect of any liability incurred to third parties in the exercise of his authority. The principal's obligation to indemnify his agent does not appear to have been disputed, but it was argued that it was limited to liabilities that are legally enforceable. In that case the plaintiff had for all practical purposes incurred a personal liability as a result of placing bets for the defendant and had done so acting within the scope of his authority. The majority held that the fact that the payment was made in the regular course of business was sufficient to entitle him to recover from his principal.
59. Mr. Butcher relied heavily on Read v Anderson as authority for the proposition that an agent's authority cannot be revoked if he would suffer loss or other prejudice as a result, but, as the learned editor of Bowstead points out in paragraph 10-010, that case, and others like it, are not concerned with revocation of the agent's authority in the sense of his power to affect the legal position of the principal but to authority in the context of the rule that the right to reimbursement and indemnity does not extend to unauthorised acts. The distinction would be of importance in a case where the principal was willing and able to indemnify the agent against any loss flowing from the revocation of his authority, but was not willing to allow the agent to take action on his behalf which would avoid the loss. In such a case I do not think that the agent's authority would be irrevocable. In the present case if, before QBE purported to revoke its authority, Temple had incurred liabilities to third parties as a result of acts done in the exercise of that authority, its right to an indemnity would be unaffected by any subsequent revocation of authority. It does not follow that Temple would continue to have authority to act on behalf of QBE in the future, or that there would be any need for it to do so.
60. In the present case Temple is said to have incurred liabilities under the coverholder agreements of a kind that render its authority to manage the run-off on behalf of QBE irrevocable. It is necessary, therefore, to examine those agreements a little more closely. The primary function of both the ATE and the BTE coverholder agreement was to delegate authority to individual firms of solicitors to underwrite on behalf of QBE by issuing certificates of insurance to their clients. The ATE coverholder agreement also gave them authority to consent on behalf of QBE to the issue, discontinuance, withdrawal or settlement of proceedings, where such consent was required under the policy, and to decline offers of settlement or payments into court and to incur disbursements. For its part each coverholder undertook to fulfil its obligations under the agreement until all the insurances issued under it had run their full course. They included various reporting obligations and an obligation to indemnify Temple or its principal against any payment made in respect of certificates issued otherwise than in accordance with the terms of the agreement. However, the most important provision for these purposes is the clause in the ATE coverholder agreement relating to claims administration, which provides as follows:

"Temple will administer all claims matters arising from policies issued under this agreement. Any payments due to the insured shall be made by Temple and the Coverholder must not set off such claims payments against premiums due to underwriters . . . "

61. For reasons given earlier, I am satisfied that QBE was not a party to any of the coverholder agreements, but it is clear, both from the coverholder agreements themselves and the certificates of insurance, that Temple was acting as agent for the insurer. That is an important part of the context in which the agreements have to be read. Most of their terms are concerned with three matters: (i) defining the scope of the coverholder's authority and the terms of cover, (ii) imposing an obligation on the coverholder to issue certificates in certain prescribed cases and (iii) imposing on the coverholder various reporting and accounting obligations. In my view the purpose of the Claims Administration clause is not to impose a personal obligation on Temple to administer the business, but to make it clear that all aspects of claims, including payments to the insureds, are to be handled exclusively by Temple and that the coverholder has no right to set off claims against premiums. Although worded in such a way as to emphasise the central role played by Temple, the language of the agreement as a whole is not inconsistent with the true position, well understood by both parties, namely, that in administering contracts entered into through the issue of certificates Temple was acting as the agent of QBE. The only obligations of a personal nature imposed on Temple are those contained in the arbitration and confidentiality clauses, each of which was capable of continuing in effect after the expiry or termination of the agreement and was no doubt intended to do so. In my view Temple did not undertake any obligations to the coverholders which the revocation of its authority would prevent it from performing. Once notified by QBE of the revocation of Temple's authority, coverholders who were willing to continue to handle the business on behalf of their insureds would be obliged to deal with QBE itself or any other agent appointed to act on its behalf. Mr. Butcher accepted that if the binder were terminated by Temple's repudiation, it would lose any right to continue to manage the run-off and any authority to act on behalf of QBE. In such circumstances the run-off would have to be managed by QBE itself, or another agent appointed for the purpose, and there is no reason to think that the difficulties would be any greater than would be encountered if Temple's authority were revoked for other reasons.
62. Mr. Butcher submitted, however, that the definition of "Insurer" in the certificate of insurance contained an implied undertaking that QBE would not revoke Temple's authority to manage the insurance on its behalf and he relied on certain dicta of Langley J. in Europ Assistance Insurance Ltd v Temple Legal Protection Ltd [2007] EWHC 1785 (Comm), [2008] 1 Lloyd's Rep. 216 as providing support for that submission. Europ Assistance had provided underwriting capacity for Temple's legal insurance scheme between 1^st January 2003 and 31^st December 2005 under a binder and related contracts which were very similar in their terms to the binder, coverholder agreements and certificates of insurance in this case. In April 2007 Europ Assistance purported to revoke Temple's authority to manage the run-off and a dispute arose between them which bears many similarities to that which has arisen between QBE and Temple. Temple insisted that it had a right to continue managing the run-off and Europ Assistance therefore made an application for an interim injunction to restrain it from doing so. Langley J. dismissed the application on the grounds that the balance of convenience lay in favour of maintaining the existing state of affairs.
63. Mr. Butcher relied principally on certain comments made by the judge in paragraph 17 of his judgment, in which he acknowledged that the business and the commercial goodwill attaching to it were Temple's, and in paragraph 19, in which he expressed the view that it was very arguable that revocation of Temple's authority would expose it to claims by coverholders and perhaps policyholders as well. It must be borne in mind, however, that it was not necessary for the court to decide any of those issues in order to dispose of the application and the judge did not purport to do so. He merely had to decide whether, in the light of all the circumstances, it was appropriate to restrain Temple there and then from taking any further part in managing the run-off. The particular matters he identified, including the possibility that Temple might incur liabilities to third parties, were no doubt all important factors to take into account in reaching his decision, but such views as he expressed were no more than provisional. His decision supports the conclusion that Temple's arguments had some substance, but it goes no farther than that.
64. On its face the description of the insurer in the certificate merely describes the position at the date of the certificate. It is not worded in terms of a continuing state of affairs and it is not easy to see why it should have been intended to contain an undertaking of the kind suggested by Mr. Butcher. It is true that the certificate requires initial notification of a claim to be made to Temple, but in my view that is not sufficient. Read in context it is no more than a requirement that notice be given to the insurer's named representative. I am unable to accept that the certificate contains an undertaking on the part of QBE not to revoke Temple's authority, or that, if it did, it would be effective to prevent it from doing so.

Conclusion

65. For all these reasons, which are substantially the same as those of the judge, I have reached the conclusion that the binder does not give Temple the right to insist on conducting the run-off against QBE's wishes. For reasons which I have sought to explain, it would be unusual, and I would suggest uncommercial, for any principal who had employed an agent to manage some aspect of his business to be obliged to allow that agent to continue to act on his behalf once the necessary degree of trust and confidence had, for whatever reason, been lost. At the very least clear language would be required to bring about such a result and no such language is to be found in this binder. Although I am unable to agree with every aspect of the judge's reasoning, I think he reached the right conclusion. I would therefore dismiss the appeal.

Mr. Justice Bennett:

66. I have had the advantage of reading in draft the judgments of Rix and Moore-Bick LJJ. I agree that the appeal should be dismissed. As they differ, albeit to a limited extent, in their reasons, it may be helpful if I indicate that I agree that the appeal should be dismissed for the reasons given by Moore-Bick LJ.

Lord Justice Rix:

67. I have had the advantage of reading Lord Justice Moore-Bick's judgment in draft. I agree, and add a few observations of my own, in a complex case, to emphasise what I see as the crucial considerations.
68. When the various agreements have been analysed and explained, as my Lord has done, it is necessary to come back to the critical provisions of Section 10 of the binder dealing with the effect of termination. Their essence is contained in the following wording:

"10.1 Upon Termination: -

10.2.1 Temple shall immediately cease and shall have no further authority either to bind or offer to bind insurances or to renew any insurances but shall have authority to cancel, extend, amend or alter any insurances already bound;

10.2.2 unless otherwise agreed in writing by OBE, Temple shall remain liable to perform its obligations in accordance with the terms and conditions of this Agreement in respect of all insurances bound prior to Termination until every such insurance has expired or has otherwise been terminated…

10.2.3 unless otherwise agreed in writing by QBE, Temple shall deliver promptly to QBE or its authorised representative all unused Certificates of insurance…"

69. In my judgment, these provisions assume, without expressly stating, that, following termination (which the agreement in its interpretation section 1 also refers to as "Termination"), Temple will continue, despite termination, to conduct, and thus to be authorised to conduct, what has been described during the argument as the run-off ("until every such insurance has expired or has otherwise been terminated"). Although section 10.2.2 is expressed in terms of Temple's obligations and not its rights, those obligations could not be performed unless Temple had the right to perform them. A continuing authority is a necessary part of that right. It seems to me that this is supported and confirmed by the provisions of sections 10.2.1 and 10.2.3 which expressly address other aspects of Temple's authority in the period after termination. Thus in sum: (a) Temple shall lose authority to bind new insurances (section 10.2.1); (b) and shall accordingly promptly deliver up unused certificates of insurance etc, because they will not be needed anymore (section 10.2.3); but (c) shall be authorised to amend existing insurances (the exception to section 10.2.1); and shall be authorised, and thus entitled and indeed bound, to perform the run-off (section 10.2.2). However, the obligations expressed in sections 10.2.2 and 10.2.3 may be abrogated by agreement: "unless otherwise agreed in writing by QBE". I am not persuaded that this phrase contemplates a merely unilateral waiver on the part of QBE. Although no doubt the meaning of that phrase must take its colour from its context, and part of that context is that, in the ordinary way, a principal may withdraw his authority even if he has promised not to do so, the natural meaning of the phrase where it appears in sections 10.2.2 and 10.2.3 is that where Temple seeks to be relieved of an obligation, QBE may demonstrate its agreement by putting it in writing.
70. However, for all the agreement's apparent precision, both in section 9, dealing with the circumstances of termination, and in section 10, dealing with its consequences, those sections are built upon, but do not seek to replicate, restate, or regulate all aspects of, the common law relating to the termination of contracts or of an agent's authority. Thus, importantly, neither section makes express provision for the consequences of a termination which comes about by reason of the common law acceptance of a repudiation. In this connection it may also be observed that section 10 does not operate where, pursuant to section 9.3, the binder terminates "automatically" (eg in the stated events of insolvency or loss of regulatory authority from the FSA). It has not been suggested that section 9 is intended to be an exclusive provision concerning circumstances in which the binder would come to an end by reason of defaults on either side.
71. How can it be therefore that the binder is silent about such matters? In my judgment because, as Moore-Bick LJ has shown, a principal can always revoke his agent's authority, even if he has agreed not to do so, save in an extremely limited and rare class of case, which can be described loosely as an agency coupled with an interest. I agree that the binder with which we are here concerned is not within that rare class of case.
72. I find therefore that I am in essential agreement with the way in which the matter was put by the arbitrator, Mr James Leckie, when he said in his Award No 1, dated 4 July 2007, at para 18:

"I must remember that these words [section 10.2.2]…were brought into existence in the context of the general law of agency, and that law is set out in the wording of paragraph 10-023 of Bowstead on Agency…Looking at [Bowstead's] wording, it appears to me to be addressing two quite separate sequences of events. The first is where the principal wishes to terminate the authority, in which case unilateral notice is normally sufficient, and the second is where the agent wishes to renounce his authority, in which case there is a requirement for mutual agreement in that the principal must accept the renunciation. Applying those two separate principles to the wording of section 10.2.2 I am struck by the fact that the wording really only deals with the situation arising if Temple wished to renounce its liability to carry out the run-off, and expresses the requirement of the common law that it could only do so if the principal, QBE, agreed. I accept that, in those circumstances there is a requirement of mutuality…However, it seems to me that the wording of section 10.2.2 does not address at all the possibility of a termination notice in relation to the run-off being given by QBE, the principal, and, if that is right (and I can see no alternative) then the Binder simply incorporates the common law position, and, under the terms of the Binder QBE is free to terminate Temple's authority to conduct the run-off by unilateral notice."

73. The upshot of this is that the binder holds matters fairly in balance. The consequences of a repudiation, save as they might come within the wording of sections 9 and 10, are left to the common law. The right under the common law of QBE as principal, whatever its agreement, to terminate its agent's authority is not affected. However, by agreeing, where section 10 applies, that Temple shall continue to conduct the run-off, implicit in Temple's continuing obligation to do so (unless that is the parties agree otherwise), QBE may thereby have to respect and compensate any losses caused to Temple by the withdrawal of its authority in the absence of Temple's agreement. If, however, there has been a repudiation at common law, accepted outside the provisions of section 9, then section 10 does not seem to apply at all.
74. In sum, I agree that this appeal should be dismissed, very much, if not quite entirely, for the reasons given by Moore-Bick LJ.