Ashiq Hamid, trainee solicitor at CMS, considers the case of Gavin Edmondson Solicitors Ltd v Haven Insurance Company Ltd:

On 5 February 2018, the Supreme Court began hearing the appeal by Haven Insurance (“Haven”) contending that it did not cheat Gavin Edmondson Solicitors (“Edmondson”) out of costs owed by six clients represented by Edmondson through conditional fee arrangements (a “CFA”) in road traffic accidents when Haven reached direct settlements with all six of the firm’s clients.

The facts

Six individuals were involved in road traffic accidents involving vehicles insured by Haven. These individuals all entered in to CFAs with Edmondson. Edmondson lodged six separate personal injury claims for these individuals on the Road Traffic Accidents Portal (“RTA”) notifying Haven that there were six claims against defendants they insured. Haven proceeded to contact the six clients and offer money to settle the claims since it was more cost effective for Haven to settle the claims directly. All six clients accepted the settlement and cancelled CFAs with Edmondson leaving the firm unable to recover its costs for representation.

The firm brought a claim against Haven for the fixed costs, success fees and disbursements that it could have recovered were the claims settled through the RTA.

Earlier decisions

The High Court dismissed the claim on the basis that Haven had not broken any laws making direct contact with clients, and rejected the claim for equitable intervention. Judge Jarman QC concluded that, on the basis of previous case law, equity would only intervene to protect a solicitors claim on funds due to be recovered by a client if (i) the paying party is colluding with the client to cheat the solicitor of his fees or (ii) the paying party is on notice that the other party’s solicitor had a claim on the funds for outstanding fees. The High Court decided there was no evidence that Haven knew of the contractual terms as to payment between the individuals and Edmondson, and therefore there was insufficient notice for a claim of equitable intervention.

In contrast, the Court of Appeal found for Edmondson accepting the firm’s equitable intervention claim. In the leading judgment, Lloyd Jones LJ rejected Haven’s argument that previous cases demonstrated that the principle of equitable interference would only apply in cases where there is express notice of the lien (the CFA with Edmondson). There was nothing stopping the court from applying existing authorities and extending equitable intervention to cover the situation where there was an implied notice of a lien. In any case, the Court considered that Haven had express notice anyway from the RTA that a lien existed. The Court found for Edmondson on the basis that Haven had acted with the intention of defeating Edmondson’s entitlement to its fees from representing all six clients.

Issues for the Supreme Court to decide

The decision of the Supreme Court is whether the Court of Appeal erred in allowing the respondent solicitors firm’s claim for equitable intervention against Haven to recover its costs under the CFAs. The decision will have some important ramifications for lawyers that work in personal injury cases on CFAs and at the same time set a landmark precedent on whether insurers can bypass solicitors and settle claims directly with injured people upon receiving notification through the RTA.