Out-Law / Your Daily Need-To-Know

The insurer failed to show that a clause in an appointed representative agreement that allowed it to set off sums due to it against sums payable but prevented the appointed representative from doing the same was fair and reasonable in all the circumstances.

AXA Sun Life Services Plc v Campbell Martin Limited & others 

  • [2011] EWCA Civ 133

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The dispute related to provisions in standard appointed representative agreements entered into between AXA Sun Life and various companies. In each case, the agreement had been terminated and AXA was claiming outstanding sums due. 

The appointed representatives disputed the amounts claimed. They also argued AXA had misrepresented that the arrangement would be multi-tie rather than single tie and/or that AXA was in breach of implied terms to process all business submitted to it without unreasonable delay.

The court was asked to decide preliminary issues. The first was whether an "entire agreement" clause precluded the appointed representatives from relying on alleged misrepresentations about the nature of the arrangement, and/or breaches of warranty and/or implied terms.

The second issue was whether a clause excluding the appointed representatives' right to set off prevented them from relying on the sums they counterclaimed in their defence, or from withholding payment. The third was whether a clause that said AXA's calculation of the amount due would be final prevented the court from determining the true amount.

If the answer to these issues was yes, the appointed representatives argued that the clauses were unenforceable because they breached the Unfair Contract Terms Act 1977 (UCTA).
The High Court judge answered all three questions in the negative. AXA appealed.

Terms and conditions

Each agreement was for a term of five years, although either party could terminate it by giving two months' written notice at any time. AXA also had the right to summarily terminate the contracts on the happening of certain events, such as such as insolvency or breach of FSA rules.

The entire agreement clause said that the agreement and schedules constituted the entire agreement between the parties and would supersede any previous agreements or representations relating to the subject matter of the agreement.

Clause 5 concerned the payment of commission and clawback if a customer cancelled a purchase. Any decision made by AXA on the amounts due or repayable would "save for manifest error, be final and conclusive and binding on [the appointed representative.]".

Under clause 7, AXA agreed to provide the appointed representative with an initial development allowance and ongoing financial support, known as a business benefits allowance. These became repayable according to a formula set out in schedule 4 to the agreement.

Schedule 4 said that any repayments could be deducted by AXA from commission otherwise due and that AXA's statement or certificate "save for manifest error, shall be final and conclusive and binding on [the appointed representative]".

Under clause 15, AXA was entitled without notice to set off any liability the appointed representative had to AXA against any liability AXA had to the appointed representative. All monies payable by the appointed representative to AXA, however, "shall be paid in full without any deduction or withholding" and the appointed representative was not allowed to use any set off or counterclaim to justify withholding payment.


Where one party to an agreement deals on the other's written standard terms of business, section 3 of UCTA prevents the other party from being able to rely on any exemption or exclusion, or from rendering a performance substantially different from that which was reasonably expected of him, except insofar as the term passes the test of reasonableness.

This test requires that the term is a "fair and reasonable one to be included, having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made".

Circumstances taken into account include the relative strength of each party's bargaining position, whether the customer had an opportunity to enter into a similar contract elsewhere without having to accept a similar term, and whether the customer knew or ought reasonably to have known of the existence and the extent of the term.

The judgment

The Court of Appeal found as a matter of construction that the entire agreement clause would prevent the appointed representatives from relying on warranties that were collateral to the agreement, but had no effect on misrepresentations. However, the alleged statements the appointed representatives relied on were more likely to be, at best, collateral warranties.

As for the alleged implied terms, if proved, they were an intrinsic part of the agreement anyway, so would be unaffected by the entire agreement clause.

In any event, the entire agreement clause passed the UCTA reasonableness test. The purpose of the clause was to provide legal certainty. The appointed representatives, although much smaller than AXA, were commercial organisations. As such, they would expect their agreement to be contained in the document they signed. If they were dissatisfied, the contract allowed them to terminate at any time on two months' notice.

The clauses concerning AXA's calculation of commission and the repayment of the development allowances were also found to satisfy the reasonableness test.

"Manifest error" meant obvious error. One would expect an appointed representative to be able to keep track of commissions earned and commission clawback and to be able to make its own calculations about the amounts repayable under the schedule. It should, therefore, have been able to demonstrate any obvious error in AXA's calculations.

Different considerations, however, applied to the provision which allowed AXA to set off monies but did not allow the appointed representatives to do the same.

AXA had not explained why this clause was needed. In the absence of such explanation, the Court of Appeal found AXA had not shown that the clause satisfied the UCTA reasonableness test.


The decision illustrates that a one-sided clause, if challenged under UCTA, is more likely to be found unreasonable. It is not clear whether any explanation would have satisfied the court that the clause as drafted was fair. 

As for the other terms, the Court of Appeal's main reasoning seemed to be that the appointed representatives could and should have verified the figures themselves. But it also took into account that these were fairly standard terms in the insurance industry. In the circumstances, it was satisfied that the appointed representatives knew or ought reasonably to have known of their existence and extent.

Had the appointed representatives found the terms unacceptable, they could have terminated the agreement on notice – or not entered it in the first place but carried on business as independent financial advisers. This would, of course, have required them to be authorised by the FSA.

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