ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
HIS HONOUR JUDGE WAKSMAN QC (Sitting as a High Court Judge)
Strand, London, WC2A 2LL
B e f o r e :
THE RIGHT HONOURABLE LORD JUSTICE PATTEN
THE RIGHT HONOURABLE LADY JUSTICE GLOSTER
| IMPACT FUNDING SOLUTIONS LIMITED
|- and -
|BARRINGTON SUPPORT SERVICES LIMITED (FORMERLY LAWYERS AT WORK LIMITED)
AIG EUROPE INSURANCE UK LTD
(Formerly known as Chrtis Insurance UK Limted)
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Mark Cannon QC (instructed by Mayer Brown LLP) for the Respondent
Hearing dates: 9th December 2014
Crown Copyright ©
Lord Justice Longmore:
The insurers must indemnify each insured against civil liability to the extent that it arises from private legal practice in connection with the insured firm's practice …"
Private legal practice is defined as:-
"… the provision of services in private practice as a solicitor or Registered European Lawyer including, without limitation:
a) providing such services in England, Wales or anywhere in the world, whether alone or with other lawyers in a Partnership permitted to practise in England and Wales by rule 12 of the Solicitors' Code of Conduct 2007; and
b) the provision of such services as a secondee of the Insured Firm; and
c) any Insured acting as a personal representative, trustee, attorney, notary, insolvency practitioner or in any other role in conjunction with a Practice; and
d) the provision of such services by any Employee; and
e) the provision of such services pro bono publico."
"6. The insurance must not exclude or limit the liability of the insurer except to the extent that any claim or related Defence Costs arise from the matters set out in this clause 6 ….
6.6 Debts and Trading Liabilities
(a) trading or personal debt of any insured, or
(b) 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 …."
Facts and relevant documentation
"2. CREDIT FACILITIES
2.1 [Impact] shall offer Credit Facilities to Clients selected by the Firm in its discretion up to the aggregate sum set out in Schedule 3 (but without any obligation of [Impact] to make advances totalling such sum or at all).
2.2 The Firm agrees to pay (i) the Administration Fee to [Impact] on execution of each Credit Agreement by [Impact] and (ii) the first instalment of the Quarterly Monitoring Fee to [Impact] on execution of this Agreement. [Impact] may adjust the amount of the Quarterly Monitoring Fee, by writing to the Firm giving three months notice, to reflect any increase in the Total Approved Facility.
2.3 The Firm may not charge Administration Fee, the Quarterly Monitoring Fee or any other fee or charge to the Customer in relation to the Credit Agreement. The Firm acknowledges that if it were to do so it would, inter alia, render the Credit Agreement unenforceable.
2.4 The Firm shall use all reasonable endeavours to advise relevant Clients of the availability of Credit Facilities (except in the circumstances set out in Clause 8), but the Firm shall not be involved with the introduction of Credit Agreements to Clients.
3. PAYMENT BY [Impact]
As soon as reasonably practicable following execution of a Credit Agreement by [Impact], [Impact] will pay the cash price of the Disbursements as follows:
3.1 to the relevant third party suppliers (as directed by the Firm);
3.2 as to the remaining cash price of the Disbursements, to the Firm's client account as notified by the Firm to [Impact] in writing.
All payments made by [Impact] will be accompanied or followed by a memorandum itemising the same.
6. Undertakings by the Parties
Each party undertakes and represents to the other that:
6.1 It shall comply with all applicable laws, regulations and codes of practice from time to time in force (including, without limitation the Act …) and each party indemnifies the other against all loss, damages, claims, costs and expenses … which the other party may suffer or incur as a result of any breach by it of this undertaking …
7. Repayment Undertaking By the Firm
7.1 The Firm undertakes to pay [Impact] all sums payable by a Customer under a Credit Agreement on or before the repayment date specified in that Credit Agreement out of either:
a) the damages paid to a Customer under the relevant PI claim, or
b) the proceeds of any relevant Insurance Product acquired by the Customer and funded by that Customer under the Credit Agreement.
7.2 In the event of any breach of a Credit Agreement by the Customer, if any circumstances arises which entitles [Impact] to terminate a Credit Agreement or in the event of the unenforceability of a Credit Agreement against the Customer by [Impact] where such unenforceability arises as a result of any act or omission of the Firm, the Firm undertakes and agrees to pay to [Impact] immediately upon first demand an amount equal to all sums payable by the Customer under that Credit Agreement. A certificate signed by [Impact] or other duly authorised officer for the time being of [Impact] shall, save for manifest error, be conclusive evidence of that amount payable by the Firm to [Impact] pursuant to this clause and such certificate shall be final and binding on the Firm.
13.The Firm's Services for the Customer
The Firm represents and warrants to [Impact] that:
13.1 the services provided or to be provided by the Firm to the Customer shall be provided to the Customer in accordance with their agreement with the Customer as set out in the relevant Conditional Fee Agreement;
13.2 it has provided or will provide (as the case may be) each Customer with full details of the cost of the service provided or to be provided by the Firm;
13.3 it will, in discussing Insurance Products with Clients, make it clear to those Clients that it undertakes those discussions on its own behalf, and not on behalf of [Impact] or of any other third party;
13.4 it shall indemnify and keep indemnified [Impact] against all claims, damages, costs and expenses (including legal costs on a full indemnity basis), losses or liabilities incurred by [Impact] arising out of any action, omission, negligence or breach of contract by the Firm."
"Administration Fee means a fee in respect of each Credit Agreement in the sum as notified by [Impact] to the Firm from time to time and payable by the Firm, together with Value Added Tax (if applicable), by way of remuneration for the services of [Impact].
Quarterly Monitoring Fee means an annual fee equal to 1% of the total Approved Facility which is payable by the Firm in quarterly instalments, together with Valued Added Tax (if applicable), by way of remuneration for the Audit performed by [Impact]."
i) it was (now) common ground that Barrington's liability to Impact fell within clause 1 of the insurance cover as being "civil liability" arising "from private legal practice in connection with the insured firm's practice";
ii) that the judge was wrong to characterise the DFMA as a "contract or arrangement for the supply to … any insured of … services in the course of" Barrington's practice because it was no more than a facility provided to, and for the benefit of, Barrington's clients; and
iii) if it was necessary to categorise the DFMA it was a contract designed to regulate the conduct of Impact's provision of loans to Barrington's clients and Barrington's provision of legal services to those clients.
i) the DFMA was a contract for services made with Barrington in the course of its practice because the offer of the facility in clause 2 (in return for the Administration Fee and the Quarterly Monitoring Fee), together with the expectation that the offer would not be revoked before Barrington caused the relevant documentation to be executed by a relevant client, was the offer of a service accepted on the terms of the DFMA. It was similar to an insurance agent acting as a coverholder being able to commit underwriters to insurance agreements made with potential insureds;
ii) it was Barrington which provided the consideration for this service by agreeing to pay the Administration Fee and, when relevant, the Quarterly Monitoring Fee;
iii) the service Impact provided was to take from Barrington the burden of funding disbursements which otherwise Barrington would have to assume (or arrange for somebody else to assume); and
iv) this was the way in which Barrington obtained the ability to conclude CFAs with their clients and enabled it, if things went well, to generate profit for itself; if it could not be done this way it would have to be done in some other way or Barrington would be unable to earn profit at all.
Lord Justice Patten:
Lady Justice Gloster: