Henshaw: Claim over each firm limited to £3m
Legal expenses insurer AmTrust has paid £48.5m to settle a claim brought by the disbursement funder owed money following the collapse of Pure Legal and High Street Solicitors, it has emerged.
AmTrust is now seeking to recoup the money it has paid Novitas Loans, as well as £15m it paid out on failed cases, from Sompo, the law firms’ professional indemnity insurer.
In a 171-page ruling yesterday, Mr Justice Henshaw dealt with 19 preliminary issues in the part 20 claim.
The action follows a failed litigation funding scheme involving about 20,000 consumer claims over cavity wall insulation, mortgage mis-selling, mortgage miscalculation and undisclosed commissions.
“For whatever reason, the scheme did not turn out to be a success,” the judge noted. As of 24 January 2023, some 14,000 claims had either failed or been abandoned, and fewer than 200 had settled.
Each client entered into a conditional fee agreement with the participating scheme solicitor – mainly Pure Legal – a loan agreement with Novitas to fund litigation expenses and an after-the-event (ATE) policy issued by Composite Legal Expenses as coverholder on behalf of AmTrust.
Novitas advanced non-resource sums at the outset to pay disbursements, including expert report fees and ATE premiums.
Pure entered administration in November 2021 and High Street Solicitors in June 2023.
Though Pure’s directors estimated that the realisable value of its work in progress at the time of administration was £30m, by November 2024 the administrators had recovered less than £500,000.
Pure’s 5,800 cavity wall claims were transferred to SSB Law, which considered that none of them were feasible to pursue.
The dispute began when AmTrust denied liability under a deed of indemnity with Novitas to repay outstanding loan balances even if the ATE policies were void or unenforceable.
AmTrust filed a defence and issued the part 20 proceedings against Sompo, alleging breaches of terms of business agreements between Composite and the law firms.
Henshaw J recorded that, last July 2025, Novitas and AmTrust settled the main proceedings, with AmTrust paying £48.5m in respect of all the law firms in the scheme.
AmTrust has since amended its part 20 claims to around £44m, plus the £15m it said it paid in respect of disbursements and adverse costs orders made in Pure Legal and High Street Solicitor cases.
In November 2023, AmTrust issued further proceedings to claim the £15m by the alternative means of subrogation in the names of 2,420 clients of the two law firms.
The judge dealt with preliminary issues in relation to both claims. Among his findings were that, for the purpose of the indemnity insurance, AmTrust was pursuing a single claim in respect of each law firm, making them each subject to a single £3m limit of indemnity.
If he was wrong on this, then the claims against each fell to be aggregated “on the basis that they arise from the same matter or transaction”, specifically the relevant terms of business agreement.
He also held that the scheme solicitor was not obliged to carry out a detailed risk assessment for each claim for the purpose of AmTrust deciding whether or not to issue ATE cover.
Henshaw J added that, following the settlement with Novitas, AmTrust has issued a third action, also subrogated proceedings, based on around £44m in payments it made under a further 14,519 ATE policies.
Those proceedings have not yet been served and were outside the scope of the preliminary issues trial.
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