Whether insurers liable to solicitors where portal claims were settled directly with claimants

http://www.bailii.org/ew/cases/EWCA/Civ/2015/1230.html

Several claimants were pursuing road traffic accident claims under the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents ("the Protocol"). The claimants entered into CFAs with their solicitors and their claims were entered on the Portal. The defendants' insurer knew that the claims had been notified under the Portal but it then settled the claims directly with the claimants (offering to pay the claimants more if they did not use solicitors), thereby depriving the claimants' solicitors of their costs. At first instance, the judge dismissed a claim brought by the claimants' solicitors against the insurer for their costs. The Court of Appeal has now allowed the appeal from that decision.

Reference was made to the earlier Court of Appeal decision in Khans Solicitors v Chifuntwe (see Weekly Update 17/13), in which the Court of Appeal held that there is no necessity to find collusion between the client and the payer, instead, there will be no proper discharge of a claim if the payer is "on notice" of the solicitors' legitimate interest in the payment.

In this case, the Court of Appeal confirmed that such notice can be implied. Here, however, it was held that the insurer had express notice because its "knowledge of and participation in the scheme established by the Protocol and the Portal meant that it was well aware of the interest of [the claimants' solicitor] in receiving its fixed costs and other sums due under the Protocol scheme. Furthermore, it has not been disputed that [the insurer]'s objective in entering into the compromise agreements was to defeat that interest".

Although the effect of a client care letter (which prevailed over the terms of the CFA, and which provided that, upon success, the solicitors would recover their fixed costs and other sums from the other side) was that the solicitors had no right to recover fees from their clients, an entitlement to recover costs arose under the Protocol (and, although it could have, the insurer had not exited the Protocol process at the time of the settlements). The principle of equitable intervention therefore required the insurer to pay the solicitors their fixed costs and other sums payable under the Protocol.