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Insurer Acted Unconscionably by Contacting Law Firm’s Clients Directly

Solicitors provide access to justice for ordinary people and it is only fair that they are paid for the work they do. The Supreme Court made that point in finding that an insurance company that reached settlements directly with a law firm’s clients in an attempt to cut out the middleman had acted unconscionably.

Country road 2The case concerned six road accident claims in which injured parties had instructed the firm to represent them under conditional fee arrangements (CFAs). Using ordinary pre-action protocols, the firm had used the Road Traffic Accident Portal to lodge claims against the insurer. However, the insurer proceeded to contact the clients directly, informing them that they would receive more compensation, and more quickly, by cutting out the firm.

The clients cancelled their CFAs after reaching settlements directly with the insurer, with the end result that the firm did not receive its fees. The insurer had followed the same course in many other cases. The firm launched proceedings against the insurer, with a view to recovering the fixed fees it would ordinarily have been paid under the protocol. The firm’s claim was initially dismissed by a judge, but was subsequently upheld by the Court of Appeal.

In dismissing the insurer’s challenge to that outcome, the Supreme Court noted that payment of the firm’s fees was secured by an equitable lien, by which the clients agreed that the firm would be paid out of the fruits of the litigation, if successful. The concept of an equitable lien had been developed to broaden access to justice by enabling law firms to offer litigation services on credit to clients, who would otherwise lack the resources to pursue meritorious cases.

The fact that the clients did not have to put their hands in their own pockets – in that the firm’s fees would be recoverable from the other side in the event of a successful claim – did not relieve them of a contractual liability to pay the firm’s fees. By logging the claims onto the portal, the firm had contributed to the eventual settlements by supplying details of the claims to the insurer and revealing that the clients were represented under CFAs and intent on litigation.

The insurer was thus on notice of the firm’s equitable lien and, by reaching settlements directly with the clients, had unconscionably interfered with the firm’s interest in the fruits of the litigation. In the circumstances, the firm could enforce its equitable lien against the insurer and recover its reasonable fees.



 
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