CASE LAW: Impact Funding Solutions Ltd v Barrington Support Services Ltd

Supreme Court

Impact Funding Solutions Ltd v Barrington Support Services Ltd (formerly Lawyers at Work Ltd) (AIG Europe Ltd, Third Party)
[2016] UKSC 57; [2016] WLR (D) 558

The solicitors, who conducted personal injury claims on behalf of clients pursuant to conditional fee agreements, entered into a written agreement with the claimant, a loan company, whereby the claimant operated a data management system which identified potential claims, the solicitors could access the system and decide whether to accept or reject those claims, the system would produce a loan agreement between the claimant and any person whose claim the solicitors had accepted and, once signed, the solicitors could draw down funds to meet the disbursement costs of the court action. The solicitors paid a fee to the claimant, undertook personal liability to pay back the loans in specified circumstances such as breach of contract, and warranted that they would provide a professional service to their client. Many of the claims were abandoned and the loans went unpaid by the clients. The claimant brought an action against the solicitors for breaches of the agreement. The judge awarded the claimant damages, holding that by failing adequately to assess the merits of the claims and using the loans for improper purposes the solicitors had breached the agreement. The solicitors went into liquidation and the claimant brought proceedings against their professional indemnity insurers, pursuant to the Third Parties (Rights against Insurers) Act 1930. The judge held that the insurers were entitled to rely on a clause of the professional indemnity insurance policy which excluded “debts and trading liabilities” consisting of “(b) any breach by any insured of the terms of any contract or arrangement for the supply to, or use by, any insured of goods or services in the course of the insured firm’s practice”, that clause being in similar terms to clause 6.6(b) of The Law Society’s Minimum Terms and Conditions of Professional Indemnity Insurance for Solicitors and Registered Lawyers in England and Wales 2009. On the claimant’s appeal the Court of Appeal held that the obtaining of loans for clients to cover disbursements in intended litigation was essentially part and parcel of the obligations assumed by a solicitor in respect of his professional duties to them rather than the incurring of a trading liability in the course of providing legal services and so the exclusion clause did not apply and the claimant was entitled to have judgment entered against the insurers for the sum for which the solicitors had been found liable. The insurers appealed.