In ordinary (ie non-insurance) contract law, a breach of a condition allows the innocent party to terminate the contract. The main issue in this case was whether an insurer was entitled to terminate an Appointed Representative agreement with the defendant, such that commission was no longer payable. However, some more general points were also discussed.
- Clause 7 of the agreement provided that it was a condition that the Appointed Representative abide by the rules of the regulator (here, the FSA at the relevant time). At first instance, the judge found that non-authorised advisors working for the defendant had carried out regulated activities and so the defendant had breached FSMA 2000 (although he also found that clause 7 was not a condition). The Court of Appeal agreed that there had been a breach of FSMA. It also held that clause 7 was a true condition which entitled the insurer to terminate the agreement.
- Clause 32 of the agreement provided, in relevant part, as follows: "This agreement terminates automatically on…the commission of any…act which in the [insurer's] opinion precludes the Appointed Representative from a position of trust.."
Although not required to decide the point in light of the conclusion on clause 7, the Court of Appeal held that the judge had erred in reaching his own decision about a loss of trust, as if the clause made no reference to the insurer's opinion. Instead, the correct question was whether the Appointed Representative could show that the insurer's decision was perverse or irrational.
- Entitlement to renewal commissions: The Court of Appeal also held that the judge had erred in finding that the Appointed Representative had a right to receive renewal commissions after the agreement was terminated because the right to receive that commission had accrued before the termination. The Court of Appeal held that: "the right to a renewal commission cannot accrue unless and until the policy is renewed. The right does not accrue when the policy is originally taken out. For post-termination renewals to result in a right to commission, it is necessary to find an implied term to that effect, and, moreover, a term that survives termination for repudiation".