Colin Poole, the solicitor boss of Claims Direct, deceived the company into paying him £9.75m when he failed to deliver on a promise to divest his interest in his law firm, the High Court has ruled.
His Honour Judge Brian Rawlings, sitting as a High Court judge in Birmingham, overturned a decision by Mr Poole’s trustee in bankruptcy of to reject a proof of debt for the £9.75m, upholding a claim in deceit made by the liquidators of Claims Direct.
He found that, while Mr Poole said he intended to dispose of his interest in his law firm, Poole & Co, after Claims Direct was admitted to the Stock Exchange, in fact he did not do so.
The damages were equivalent to the whole of the purchase price paid to Poole & Co by Claims Direct – and therefore to Mr Poole as its sole proprietor – of £9.75m.
In 1996, Claims Direct – set up by Tony Sullman – struck a deal with Mr Poole that Poole & Co would arrange the vetting of incoming personal injury claims. In 1997, Mr Poole became a director of the claims business.
In 2000, as it prepared for the stock market listing, a proposal that Claims Direct buy the vetting business from Poole & Co for £9.75m turned into one that Poole & Co would retain the vetting business but sub-contract the work to Claims Direct and pay the vetting fees it received from panel solicitors to the company.
This was to get around the then Law Society ban on solicitors paying referral fees to non-solicitors.
Given the risk of conflict for Mr Poole as a director of Claims Direct and proprietor of Poole & Co, prospective investors were told that Mr Poole intended to dispose of his interest in Poole & Co after the listing.
Mr Poole agreed to sell Poole & Co to Jake Bennett from 1 September 2000 and on that date Claims Direct transferred £9.75m to Poole & Co on the understanding that it could start providing vetting services.
Under the share purchase agreement (SPA), Mr Bennett could serve a notice opting out of purchasing Mr Poole’s interest in Poole & Co, or opting to continue with the purchase, in either case before the first anniversary of the date of the agreement. If he did neither, he would be taken to have opted out and would transfer the business back to Mr Poole.
Claims Direct soon ran aground amid media stories of claimants being misled about the recoverability of large after-the-event insurance premiums.
Mr Poole resigned as director in August 2001 and in May 2002 Mr Bennett opted out of buying Poole & Co and returned it to Mr Poole.
Claims Direct went into administration in July 2002 and later passed into creditors voluntary liquidation.
In 2004, Mr Poole undertook not to be a director of a company for 10 years ahead of director disqualification proceedings.
In 2011, he was struck off as a solicitor, with the Solicitors Disciplinary Tribunal finding he had acted dishonestly, including by stating in the prospectus that he was divesting himself of his interest in Poole & Co when, under the terms of the SPA, he did not.
He was made bankrupt in 2016 on a petition presented by HM Revenue & Customs.
In January 2020, the joint liquidators of Claims Direct submitted the proof of debt to Mr Poole’s trustee in bankruptcy, asserting the claim in deceit and also that he acted in fraudulent breach of trust and in breach of the fiduciary duties that he owed to Claims Direct.
The trustee rejected the proof of debt for multiple reasons.
HHJ Rawlings, who decided the case without any oral evidence or argument in opposition to the appeal, concluded that Mr Poole remained the sole proprietor of Poole & Co, despite having told Claims Direct that he was not from 1 September 2000.
Whilst the SPA purported to provide that the benefit of the profits and burden of the losses of the practice passed to Mr Bennett, “in fact Mr Poole continued to fund the practice and take the benefit of the practice’s profits and burden of its losses”.
Further, whilst the SPA provided for Mr Poole to loan money to Mr Bennett to continue the practice from 1 September 2000, Mr Bennett only had to repay the loan if he served a valid opt-in notice.
“Mr Bennett’s ability to make any significant decisions for the practice was severely restricted because he had to obtain Mr Poole’s consent…
“I conclude that, in accordance with the terms of the Poole & Co SPA, Mr Poole remained the true proprietor of the Poole & Co practice unless and until Mr Bennett served a valid opt-in notice.
“It is common ground that no valid opt-in notice was ever served by Mr Bennett and in due course the goodwill and assets of the practice transferred back to Mr Poole. So, Mr Poole remained proprietor of Poole & Co on 1 September 2000 and thereafter.”
HHJ Rawlings went on to hold that Mr Poole intended that Claims Direct would act on his representation that he would cease to be proprietor of or partner in Poole & Co and that Claims Direct suffered loss as a result.
For completeness, the judge said he was not satisfied that Mr Poole acted in fraudulent breach of duty/in breach of his fiduciary duties.
Mr Poole is now a law firm consultant, while Mr Sullman is behind claims company Call Brian, offering a different approach to handling claims caught by the government’s whiplash reforms.