A personal injury law firm has lost a £4.5m claim against a legal expenses insurance underwriting agency that the expected number of referrals did not materialise.
Sheffield-based PM Law failed to convince the High Court that there was a contractually binding oral promise in place with Motorplus from 2006 to 2011, when referral fees were lawful.
The firm has promised to appeal the decision.
Sir Richard Field, sitting as a deputy High Court judge, said there was insufficient evidence to back up the claim that Motorplus had promised 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.
Motorplus said it had expressed nothing more concrete than an intention to deliver those numbers of cases.
The relationship collapsed in 2011 after a dispute over payments that Motorplus said it was owed.
Sir Richard said  he had no hesitation in finding that both Donald Mackay, senior partner of PM Law in 2006, and Nigel Sayer, then Motorplus’s chief executive, gave their evidence honestly and “in an endeavour to the best of their abilities to assist the court”.
However, faced with their conflicting evidence, the judge said he found Mr Mackay’s evidence of an oral agreement “insufficiently reliable for it to be accepted”.
Among other reasons, he said it was “extraordinary” that Mr Mackay did not include the supposed promise in an agreement between the two in 2007, while there was no other contemporaneous documentation.
Also, PM Law made no complaints about the number of referrals until the dispute in 2011.
Further, there was an initial agreement in 2006 in relation to another source of referrals and the judge noted email evidence that Mr Sayer had been careful not to give a binding commitment as to the number of referrals that would be made.
“It would be surprising if he were to change tack when it came to the 2007 agreement,” the judge said.
“Neither the 2006 agreement nor the 2007 agreement depending for its efficacy on a guaranteed number of acceptable referrals.
“Motorplus needed a panel of solicitors to handle the many claims reported to it and a decision to agree to Motorplus’s terms on the basis of Motorplus’s estimate of the number of referrals was capable of making commercial sense, even in the absence of a guaranteed number of referrals. Businesses take such calculated risks all the time.”
However, the judge did uphold Motorplus’s claim that PM Law gave a contractually binding promise that it would pay a minimum referral fee for Kwik-Fit referrals based on a 70% conversion rate, whether or not 70% of the referrals were actually accepted by the firm.
In a statement, PM Law said: “PM Law will seek to appeal the judgement of Sir Richard Field because we consider that he has, in error, misconstrued the contract between the parties and misinterpreted the factual evidence before him, which, in turn, fundamentally undermines his Lordship’s findings.”
PM Law had also sought to recover around £3m from Motorplus for disbursements and other costs it said were due under the company’s legal expenses insurance policies covering the referred cases, but this part of the claim was struck out last year .