Appeal court rejects firm’s £4.5m claim over “missing referrals”


Court of Appeal: Agreement did not promise certain amount of referrals

A personal injury law firm has lost its appeal against a High Court ruling that dismissed its £4.5m claim against a legal expenses insurance underwriting agency that the expected number of referrals did not materialise.

The Court of Appeal found no reason to disturb the decision last year of Sir Richard Field, sitting as a deputy High Court judge.

Sheffield-based PM Law argued that the agreement it had from 2007 with Motorplus, in the context of oral conversations as well, amounted to a promise to refer around 100 ‘acceptable’ road traffic cases, as well as 40 employer’s and public liability cases, a month.

PM Law said this was later supplemented by a promise to refer a further 100 claims made by customers of Kwik-Fit Insurance Services every month. In all, it said it lost profits of around £4.5m as a result.

The relationship collapsed in 2011 after a dispute over payments that Motorplus said it was owed.

Motorplus said it had expressed nothing more concrete than an intention to deliver those numbers of cases.

Clause 1 of the written agreement stated: “In consideration for the referral fees by PM Law Ltd Solicitors as set out in clause 4 of this agreement Motorplus Ltd shall refer a quantity of road traffic accident, accident at work, public or private liability and product liability PI & Non PI claims.”

Sir Richard Field said he was “at first attracted to the proposition” that this was a promise by Motorplus to deliver a reasonable quantity of referrals.

But “on further reflection”, and taking all the facts into account, he concluded that the agreement only expressed an intention, rather than a guarantee.

Giving the unanimous ruling of the appeal court, Lady Justice Asplin agreed. She said: “It seems to me that if one focuses on the words used in clause 1 of the 2007 agreement in the light of the terms of the agreement as a whole and the relevant factual matrix including the nature of the relationship between the parties immediately prior to its execution and the change in the Solicitors’ Code of Conduct which occurred at or around the same time, the meaning is clear.

“Viewed in that light, I agree with the judge that the phrase ‘Motorplus Ltd shall refer a quantity of… claims’ does not amount to a promise or an obligation to refer a quantity of claims or any claims.

“It is merely an expression of a present intention and the clause as a whole is a description of the intended referral relationship if and when claims are referred. The details of the way in which claims which are referred must be dealt with is set out in the remainder of the 2007 agreement.”

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Our latest special report, produced in association with Temple Legal Protection, looks at the role of after-the-event (ATE) insurance in commercial litigation post-LASPO. We are at a time when insurers, solicitors, clients and litigation funders work ever more closely to create funding packages that work for all of them, with conditional fee and even damages-based agreements now part of many law firms’ armoury.

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