In Personal Touch Financial Services Ltd v Simplysure Ltd and Usay Business Ltd, Personal Touch Financial Services Ltd (Personal) and Simplysure Ltd (Simplysure) entered into an Appointed Representative Agreement (the Agreement) whereby Simplysure would solicit on its behalf applications for private medical insurance.

Simplysure paid a monthly fee to Personal which in turn paid Simplysure commission on policies it sold. Personal, which is authorised by the Financial Conduct Authority (and its predecessor) under the Financial Services and Markets Act 2000 (the Act), provided Simplysure with standard forms for a fact-find to be completed with potential clients' information to enable advice to be given. Simplysure used employees who had not been authorised by Personal to complete the initial parts of the form before they were then referred on to an authorised adviser.

On discovering this, Personal terminated the Agreement on the basis that there was a failure to comply with the terms of the Agreement and the Act. Although Simplysure was an exempt person under s39 of the Act, and so came within the exception to the general prohibition under s19 of the Act, Personal said Simplysure's unauthorised personnel were not. This created a criminal offence under s23 of the Act and gave Personal the right to terminate the Agreement for repudiatory breach.

Simplysure commenced proceedings for wrongful termination and damages, being the lost commission on renewed policies introduced by it. It was successful at first instance, but Personal appealed.

The Court of Appeal allowed the appeal. It held the completion of the first parts of the fact-find by unauthorised persons was in breach of the general prohibition under the Act. As such a breach could render Personal criminally liable and lead to regulatory sanction, the clause in the Agreement providing that Simplysure would abide by the rules of the regulator (FCA) and Personal's compliance and procedure manuals was a true condition, breach of which entitled Personal to terminate, regardless of whether it had suffered any loss. The Agreement was lawfully terminated.

Personal was not in breach of the Agreement and Simplysure was not entitled to damages for premature termination or for renewal commissions on policies introduced during the currency of the Agreement. There was nothing in the Agreement that explicitly or implicitly provided that payment of such commission would remain payable after termination for breach.

Things to consider

Generally, future obligations of the innocent party to a contract come to an end if the contract is terminated by the innocent party on the ground of the other party's repudiation or breach of a condition of the contract. This is, of course, subject to any clear term in the contract providing to the contrary so, as ever, the wording of the contract will be highly relevant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.