Novitas Loans Limited v Amtrust Specialty Limited

Mr Justice Henshaw: (A) INTRODUCTION 4 (B) PROCEDURAL HISTORY 7 (1) The Main Proceedings: Novitas v AmTrust 7 (2) The Part 20 Proceedings: AmTrust v Sompo 7 (3) The Subrogation Proceedings 8 (4) Generally 9 (C) WITNESSES 10 (D) FACTUAL BACKGROUND 11 (E) CONTRACTUAL ARRANGEMENTS 22 (1) Retainer/CFA between solicitor and client 22 (2) CCA Loan Agreement between Novitas and the client 23 (3) ATE policy between AmTrust and the policyholder (client) 23 (4) AmTrust/CLE: Binding Authority Agreement and 14th Endorsement 25 (5) CLE/PCSS: Services Level Agreement (SLA) 25 (6) Terms of Business Agreements (TOBAs) between CLE / Scheme Solicitors 30 (a) CLE/PLL TOBA 30 (b) CLE/HSS TOBA 35 (7) Novitas/PCSS Services Provision Agreement 36 (8) Novitas/PLL Global Terms Agreement 36 (9) Novitas/AmTrust Deed of Indemnity 37 (F) TERMS OF THE PI COVER 38 (1) PLL’s PI policies 38 (2) HSS’s PI policies 40 (3) The SRA Minimum Terms and Conditions 40 (4) The Presentations for Insurance by PLL and HSS 41 (G) OPERATION OF THE SCHEME 42 (H) PRINCIPLES 63 (1) Contractual interpretation: general 63 (2) Recitals to contracts 65 (3) Previous cases on the scope of ‘solicitors’ business’ in the PI context 69 (a) Haseldine 69 (b) Sutherland 70 (c) Impact Funding 75 (d) Doorway 83 (e) Cases outside the litigation funding context 86 (4) Subrogated claims 87 (5) “Claims” and aggregation in insurance policies 92 (I) PART 20 PROCEEDINGS: COVERAGE ISSUES 99 ISSUE 1 – ATTACHMENT 99 ISSUE 2 – SCOPE OF COVER 102 ISSUE 3 – EXCLUSION 2.6(B) 110 ISSUE 4 – EXCLUSION 2.6(C) 115 ISSUE 5 – NUMBER OF CLAIMS 116 ISSUE 6 – AGGREGATION 121 (J) PART 20 PROCEEDINGS: GENERIC LIABILITY ISSUES 124 ISSUE 9(A) – RISK ASSESSMENT UNDER THE TOBAS 124 ISSUE 9(B) – VETTING AND ATE COVER 130 ISSUE 9(C) – DUTY TO MITIGATE LOSS 130 ISSUE 9(D) – ABSOLUTE OR QUALIFIED DUTIES? 132 ISSUE 9(E) – TOBA CLAUSE 1.10 136 ISSUE 10 –TOBA APPENDIX 1 ELIGIBILITY CRITERIA 138 ISSUE 11 – PCSS AS AGENT FOR SCHEME SOLICITOR 142 ISSUE 12 – DUTIES OF CARE 144 (K) SUBROGATED PROCEEDINGS: SUBROGATION AND COVERAGE ISSUES 147 ISSUES 13 (ENTITLEMENT) AND 14 (PAYMENT) 147 ISSUE 15 – RELIEF FROM POLICYHOLDERS 156 ISSUE 16 – NO RELIEF FROM POLICYHOLDERS 161 ISSUE 17 – ADVERSE COSTS 162 ISSUES 18 (ATTACHMENT) AND 19 (NUMBER OF CLAIMS) 162 (L) CONCLUSIONS 165 ANNEX –PRELIMINARY ISSUES AND CONCLUSIONS REACHED 165 (A) INTRODUCTION

1. This judgment follows a 12-day trial of 19 preliminary issues (“ the Preliminary Issues ”) arising from two sets of proceedings.

2. The proceedings arise out of a failed litigation funding scheme (“ the Scheme ”) which involved about 20,000 consumer claims. AmTrust Specialty Limited (“ AmTrust ”) was a provider of the after-the-event (ATE) insurance in relation to the Scheme. Endurance Worldwide Insurance Limited (“ Sompo ”) is the professional indemnity insurer of two of the firms of solicitors who had conduct of claims in the Scheme, namely Pure Legal Limited (“ PLL ”) and High Street Solicitors Limited (“ HSS ”).

3. The Scheme applied in practice to claims for negligently installed cavity wall insulation (“ CWI ”); mortgage mis-selling (“ MMS ”); mortgage miscalculation (“ MMC ”); and undisclosed commissions (“ UDC ”).

4. The Scheme involved each client entering into (a) a conditional fee agreement (“ CFA ”) with a participating Scheme Solicitor; (b) a loan agreement with Novitas Loans Limited (“ Novitas ”) regulated by the Consumer Credit Act 1974 (“ CCA ”) to fund litigation expenses (a “ Novitas Loan ”); and (c) an ATE policy issued by Composite Legal Expenses Ltd. (“ CLE ”), as coverholder on behalf of AmTrust, covering the client’s own disbursements and adverse costs. Novitas advanced loan sums at the outset to pay disbursements, including expert report fees and ATE premiums.

5. The Novitas Loan was non-recourse to the client. If a claim succeeded, repayment was intended to come from any recoveries; if it failed, the ATE policy was expected to repay the Novitas Loan and cover adverse costs. A Deed of Indemnity dated 8 November 2017 (“ the Deed of Indemnity ”) between AmTrust and Novitas provided that AmTrust would indemnify Novitas in respect of any Novitas Loan sum that the client could have claimed under the ATE policy had AmTrust not rejected the claim or avoided / cancelled the policy.

6. PLL and HSS represented most of the Scheme clients. PLL, established in 2015, specialised in consumer and personal injury claims under CFAs and was part of the Pure Business Group (“ PBG ”), which also included Pure Claims Support Services Limited (“ PCSS ”), a provider of case vetting and other ancillary services. PLL and most PBG companies entered administration on 2 November 2021. PCSS is now in compulsory liquidation. HSS, incorporated in 2009, operated as a firm of solicitors until it entered administration on 5 June 2023, later going into creditors’ voluntary liquidation on 20 May 2025.

7. Both PLL and HSS were insured by Sompo under standard form professional indemnity (PI) policies compliant with the Solicitors Regulation Authority (“ SRA ”) Minimum Terms and Conditions of Professional Indemnity Insurance, annexed to its Indemnity Insurance Rules (“ the Minimum Terms ”). The relevant policies are: (a) for PLL, those covering 1 October 2020 to 30 September 2021 (“ the PLL 20/21 Policy ”) and 1 October 2021 to 30 September 2022 (“ the PLL 21/22 Policy ”); and (b) for HSS, those covering 1 October 2020 to 30 September 2021 (“ the HSS 20/21 Policy ”) and 1 May 2022 to 30 April 2023 (“ the HSS 22/23 Policy ”).

8. The dispute began when Novitas claimed against AmTrust under the Deed of Indemnity, requiring it to repay outstanding loan balances. When AmTrust denied liability, Novitas commenced proceedings in November 2022 (case number CL-2022-000603, “ the Main Proceedings ”), claiming under the Deed of Indemnity or alternatively in restitution. The value of Novitas’s claim was about £55 million, which increased as more cases were acknowledged to have failed.

9. In the Main Proceedings, AmTrust filed a Defence, and issued Part 20 proceedings (“ the Part 20 Proceedings ”) against (a) Sompo, as PLL’s PI insurer, under the Third Parties (Rights against Insurers) Act 2010 (“ the 2010 Act ”); and (b) HSS.

10. In the Part 20 Proceedings, AmTrust alleges breaches of Terms of Business Agreements (“ TOBAs ”) between CLE (as AmTrust’s agent) and PLL/HSS, claiming (a) contribution or indemnity in respect Novitas’s claim and (b) about £15.1 million which AmTrust says it paid under the Scheme. The claim against HSS was stayed on the firm entering administration, and AmTrust amended its case to pursue Sompo directly as PI insurer of HSS, under the 2010 Act.

11. Sompo defends the Part 20 Proceedings on the grounds: (a) that there is no cover under the PI policies, by reference to both the insuring clause and policy exclusions; (b) that the claim against each of PLL and HSS is a single “Claim” under the policies, or is subject to aggregation, limiting any liability to a single £3 million limit of indemnity per firm; (c) that PLL and HSS did not owe all the contractual and tortious duties which AmTrust claims were owed; and (d) that AmTrust is required to prove breach, causation and loss in each underlying case.

12. In November 2023, AmTrust issued further proceedings (case number CL-2023-000795, “ the Subrogation Proceedings ”) claiming from Sompo the sums it had by then paid out under the Scheme (about £15.1 million) by the alternative means of subrogation in the names of clients of PLL and HSS. AmTrust named the 2,420 clients as defendants, seeking orders that they lend their names to the claim. In its Defence, Sompo raises issues as to (a) AmTrust’s entitlement to exercise subrogated rights; (b) the number of “Claims” for policy purposes, and aggregation; and (c) the duties alleged. Sompo also maintains that breach, causation and loss must be proved in each case.

13. In July 2025, Novitas and AmTrust settled the Main Proceedings (“ the Settlement ”), with AmTrust paying £48.5 million (in respect of all firms in the Scheme, including PLL and HSS). AmTrust has since amended its claim in the Part 20 Proceedings and now claims around £44 million, plus the £15.1 million it says it had already paid under the Scheme in respect of PLL and HSS cases.

14. Following the Settlement with Novitas, AmTrust has issued a third set of proceedings (“ the New Proceedings ”). These are also subrogated proceedings, based on the payments AmTrust made under a further 14,519 ATE policies, which payments totalled around £44 million. Those proceedings have not yet been served and were outside the scope of the Preliminary Issues trial.

15. The parties agreed, and the court approved, a Statement of Agreed and Assumed Facts and List of Generic Issues for the trial. Among other things, it is to be assumed for the purposes of the present trial (a) that all the ATE policies provided by AmTrust were on the same terms as a specimen policy it has disclosed, and (b) that the authority of CLE to bind cover on AmTrust’s behalf was governed by a Binding Authority Agreement and its 14th Endorsement.

16. The Preliminary Issues can broadly be categorised as follows:- i) P20 Proceedings: Attachment of Cover (Issues 1 and 1A); Scope of Cover (Issue 2); Exclusions (Issues 3 and 4); Number of Claims / Aggregation (Issues 5 and 6); and Generic Liability Issues (Issues 7 to 12). ii) Subrogation Proceedings: Generic Subrogation Issues (Issues 13 to 17); Attachment of Cover (Issue 18); and Number of Claims (Issue 19).

17. The text of the Preliminary Issues is set out in the Annex to this judgment. My conclusions on them are indicated at the end of the consideration of each Issue in sections (I), (J) and (K) below, and collected together in the Annex to this judgment. (B) PROCEDURAL HISTORY

18. In this section I summarise in slightly more detail the history of the proceedings leading up to the Preliminary Issues trial. (1) The Main Proceedings: Novitas v AmTrust

19. Prior to the Settlement, Novitas claimed around £55 million from AmTrust (including about £48 million relating to PLL and about £5 million relating to HSS), plus interest, in respect of outstanding loan sums. It brought its claim under the Deed of Indemnity, maintaining that AmTrust was liable even if the ATE policies were void or unenforceable (as AmTrust had contended some were). Alternatively, it sought restitution of around £22 million in ATE premiums paid.

20. AmTrust denied liability, contending that (a) the Novitas Loans were unenforceable due to non-compliance with regulatory requirements; (b) the ATE policies were void for lack of authority of CLE and/or the Scheme Solicitor; (c) no sum was due under the Deed of Indemnity; (d) the claim should fail for circuity of action, as AmTrust would be subrogated to an equivalent claim against Novitas; and (e) there had been no valid notice or rejection of claims under the Deed of Indemnity. AmTrust also counterclaimed for restitution of around £14.5 million paid to Novitas, alleging mistake or total failure of consideration. Novitas denied the counterclaim. (2) The Part 20 Proceedings: AmTrust v Sompo

21. During the life of the Scheme, AmTrust indemnified approximately 2,400 consumers who were represented by either Pure or HSS (“ the Group 1A Claims ”). AmTrust’s payments related to both the disbursements incurred by the consumers and adverse costs orders made against them.

22. Subsequently Novitas commenced proceedings against AmTrust seeking payments in respect of about 10,000 consumers whose loans Novitas alleged were repayable but had not been repaid. The consumers were listed in Schedule 2 to Novitas’s Particulars of Claim. Not all of those consumers were represented by Pure or HSS, although most of them were (“ the Group 1B Claims ”). Novitas’s proceedings did not relate to all the consumers to whom it had made loans because (a) some of those loans had been repaid (i.e. the Group 1A Claims) and (b) some of those loans had not become payable when Novitas commenced its proceedings.

23. AmTrust then commenced its Part 20 Proceedings. As originally constituted the Part 20 Proceedings related only to the Group 1A Claims and the Group 1B Claims. The Group 1A Claims were listed in Schedule 1 to AmTrust’s Particulars of Additional Claim. Thus in their original form, AmTrust’s Part 20 Proceedings related only to (a) the consumers listed in Schedule 1 to AmTrust’s Part 20 Proceedings and (b) the consumers listed in Schedule 2 to Novitas’s Particulars of Claim (together “ the Group 1 Claims ”).

24. AmTrust’s settlement with Novitas related not only to those consumers listed in Schedule 2 to Novitas’s Particulars of Claim, but also to additional consumers to whom Novitas had made loans as part of the Scheme. The cases not identified in either (a) Schedule 1 to AmTrust’s Particulars of Claim or (b) Schedule 2 to Novitas’s Particulars of Claim are referred to as “ the Group 2 Claims ”.

25. AmTrust then amended its Part 20 Particulars of Claim to bring the Group 2 Claims. Those claims had not previously been advanced, because when AmTrust’s Part 20 Proceedings were initially commenced (a) the claims had not been paid by AmTrust and (b) the claims were not the subject of Novitas’s claim against AmTrust.

26. In the Part 20 Proceedings, AmTrust claims against Sompo under the 2010 Act in respect of alleged breaches by PLL and HSS of contractual and tortious duties owed under their respective TOBAs. AmTrust alleges breaches in relation to (a) vetting of cases; (b) ensuring clients’ compliance with ATE policies; and (c) litigation handling. AmTrust now claims in respect of around £44 million paid to Novitas in respect of PLL and HSS, along with damages of about £15.1 million for sums paid in respect of those firms under the Scheme.

27. In its Re-Amended P20 Defence, Sompo makes the following contentions: i) Duty: Various terms under the TOBAs are not to be construed as AmTrust argues, such that PLL and HSS did not owe duties as alleged and/or those duties were qualified. Moreover, PLL and HSS did not owe the tortious duties alleged in respect of (a) vetting claims (which was conducted for AmTrust by PCSS) or (b) handling of claims (in effect, an unwritten collateral warranty). ii) Breach/Causation/Loss: These matters require the examination of thousands of cases. AmTrust relies on a self-selected “sample” of 20 cases (10 per firm) and generic allegations of breach. Sompo challenges the representativeness of the sample and raises causation defences. iii) Coverage: Sompo disputes coverage, on the basis that: (a) the claim falls outside the insuring clause; (b) otherwise, it is excluded under a “trading debts/liabilities” exclusion; and (c) AmTrust’s claim in respect of each firm is either a single “Claim” under the policies or, if there are multiple “Claims” in respect of each firm, then they fall to be aggregated, limiting indemnity to £3 million per firm. (3) The Subrogation Proceedings

28. On 17 November 2023, AmTrust issued the Subrogation Proceedings, claiming around £15.1 million (plus interest) from Sompo under the 2010 Act. It has named 2,420 former clients of PLL and HSS as defendants, seeking orders that they lend their names to its proceedings and alleging that it has indemnified them under ATE policies. The sum claimed is said to be what AmTrust paid under the Scheme in respect of PLL and HSS. It corresponds with the earlier counterclaim against Novitas, and with the damages claimed in the P20 Proceedings (beyond the indemnity for Novitas’s claim).

29. AmTrust alleges that PLL and HSS breached duties in handling the 2,420 claims, relying on 20 (different) “ example ” cases (10 per firm) and generic “ categories ” of alleged negligence, namely (a) failure to advise properly on merits; (b) failure to advise properly about litigation funding; and (c) poor litigation handling and conduct. AmTrust claims that the clients would not have incurred disbursements or adverse costs but for those breaches. It does not claim for uninsured losses, e.g. for any asserted loss of chance of the client succeeding in the underlying case.

30. Whereas the P20 Proceedings are based on alleged duties under the TOBAs and/or duties in tort said to be owed directly to AmTrust by the Scheme Solicitors, the Subrogation Proceedings involve AmTrust pursuing allegations of professional negligence based on duties owed by the Scheme Solicitors to their clients under the retainers.

31. In its Amended Defence to the Subrogation Proceedings, Sompo raises the following defences:- i) Subrogation: AmTrust is not entitled to pursue its claim against each firm by subrogated rights because (a) it appears to have made payments under the Deed of Indemnity (or as volunteer) while disputing its liability under ATE policies, in which case no right of subrogation arises; and (b) it needs the relief it seeks against the policyholders, and there are good reasons for refusing such relief (at least without conditions). ii) Coverage: AmTrust has brought a single “ Claim ” against PLL and a single “ Claim ” against HSS, each being subject to a limit of indemnity of £3m. It made each “ Claim ” in a notice dated 9 February 2021, and it has since then pursued each “ Claim ” through the P20 and Subrogation Proceedings. Alternatively, if there are multiple claims in the Subrogation Proceedings, they should be aggregated. iii) Duty / Breach / Causation / Loss: AmTrust’s reliance on generic categories of breach and “ example ” cases fails to satisfy the requirements for pleading 2,420 individual claims. It must plead and prove each element in every case. (4) Generally

32. There have been three CMCs. At the first, Foxton J directed the present trial to resolve generic legal issues, while making clear that it “ should not be concerned with findings that concern the individual factors of specific claims ”. The second and third CMCs addressed general case management and disclosure. One decision at the third CMC concerning disclosure by Sompo of communications preceding inception of PI policies was successfully appealed by AmTrust, leading to two additional disclosure issues being added to the DRD in the P20 Proceedings.

33. Disclosure was given in accordance with the approved DRDs in the P20 Proceedings and Subrogation Proceedings. Witness statements were exchanged on 30 July 2025.

34. The Main Proceedings were dismissed by consent on 26 August 2025 following the Settlement.

35. The PTR took place on 19 September 2025 before Butcher J.

36. Following the PTR, AmTrust formally amended its pleadings in the P20 Proceedings and Subrogation Proceedings by consent. On 10 October 2025, Sompo filed and served its amended Defences. Various other outstanding issues were resolved consensually.

37. On 16 September 2025, following the Settlement, AmTrust issued the New Proceedings. AmTrust has provided its Particulars of Claim in draft, but has not yet served them. By those proceedings, AmTrust will seek to claim by subrogation the sum paid to Novitas under the Settlement in respect of PLL and HSS, together with sums in respect of adverse costs. In effect, AmTrust will be seeking the amount claimed in the P20 Proceedings which is not claimed in the Subrogation Proceedings. The New Proceedings are not before the Court, but the resolution of issues in this judgment may be significant for them. Sompo intends to raise limitation defences in the New Proceedings. (C) WITNESSES

38. Each of AmTrust and Sompo called one witness of fact. AmTrust called Mr Simon Warr, AmTrust’s Lead Underwriter for Legal Expenses. Sompo called Ms Jennifer Jayne Shaw, a former director of PLL.

39. Mr Warr indicated that Mr Gilchrist, an underwriter at CLE, had been primarily responsible for the relationship with PBG and played a larger role than Mr Warr did in the setting up and overseeing the Scheme. Mr Warr said he was not responsible for the Scheme contracts, and could not recall whether he had read them before, though he knew about the existing templates on which the TOBAs appear to have been based.

40. In his witness statement, Mr Warr said his company was relying on the Scheme Solicitors to carry out an appropriate risk assessment of a case, including its prospects of success, and that “[w]e were aware that additional vetting was being undertaken by others given the inclusion of vetting fees in the pricing. However, I anticipated this vetting to be “non-legal” (in the sense that it would be looking at issues like whether the right sort of mortgage had been taken out in a potential mortgage mis-selling claim, or cavity wall insulation had been wrongly installed in a potential CWI claim)” .

41. In cross-examination, Mr Warr accepted that (a) he knew that the law firm presenting a case for funding under the scheme was not paid by AmTrust or CLE for its initial assessment, and that that assessment was not provided directly to AmTrust or CLE; (b) CLE had appointed PCSS to vet cases and PCSS was being paid for that work pursuant to the CLE/PCSS contract; (c) the Claim Vetting Forms attached to the contract required PCSS to make specific inquiries designed to select cases with good prospects; (d) he would expect the PCSS staff doing the work to have been trained; and (e) inquiries which the Claim Vetting Forms required PCSS to consider included key questions going to the cases’ prospects of success, and meant that they should have been doing a full assessments of the claims’ merits. It seems to me, therefore, that in this passage of Mr Warr’s witness statement quoted above, he was rather downplaying the role of PCSS (which he did not even name). Nonetheless, I am satisfied that in his oral evidence he was candid and straightforward, and I consider his evidence as a whole to have been honestly given.

42. Ms Shaw explained near the start of her cross-examination that she had not been shown any documents when preparing her witness statement, so she was reliant on unrefreshed recollection. However, her evidence was in fact consistent with the key documents. More generally, I am satisfied that she was giving her evidence (written and oral) honestly and to the best of her ability.

43. It is arguable that neither side adduced evidence from the individuals who might have been able to be most informative (Mr Gilchrist, Mr Hodgkinson and Ms Ashton). I do not, however, see any particular issues on which it would be appropriate to draw an adverse inference. (D) FACTUAL BACKGROUND

44. PBG was established in early 2015, with Pure Business Group Ltd (“ PBGL ”) as the parent company. Following the sale of an earlier costs consultancy, Philip Hodgkinson and Amanda Ashton (previously Grimes) founded Pure Legal Costs Consultants Ltd (“ PLCC ”). Due to market changes (including the costs reforms and increasing court fees) and declining Road Traffic Accident (“ RTA ”) costs work, their focus had shifted to multi-track claims given the greater scope for costs recovery. The founders of PLCC decided to establish PBG and a new law firm, PLL.

45. Mr Hodgkinson held a 96.9% shareholding in PBGL. In turn, PBGL owned six subsidiaries, including PLL and PCSS. Ms Ashton held minority shareholdings in four subsidiaries, and was the Chief Operating Officer of PBG. Ms Jeni Furlong was Head of Operations at PCSS.

46. PLL was incorporated in March 2015 and acquired Pryers Solicitors LLP, a clinical negligence firm. By late 2017, PLL had several employees. Ms Shaw could not recall how many, but put the total figure at “ maybe 25, 30 ”. They included qualified lawyers, like Ms Shaw, Mr Robert Mares (himself a director and compliance head of PLL) and Mr Craig Leigh.

47. As it expanded, PBG moved into areas such as MMS and negligently installed CWI. Cases of this kind involved significant up-front costs, for example because experts’ reports were needed at an earlier stage in order to assess prospective claims.

48. PCSS was described by CLE, in its first Scheme Overview, as an “ administrative and vetting hub ”. Operating as “ Pure Litigation Funding ”, PCSS arranged non-recourse CCA loans for clients in order to finance disbursements. ATE insurance was arranged to cover risks of claims failing. PCSS vetted claims before loan funding or insurance was obtained, though the nature and scope of such vetting is a matter in contention. For this work, PCSS charged a case vetting fee and a case management fee. Following vetting and once funding and insurance were in place, PLL would conduct the litigation on the client’s behalf under a CFA. PLCC would handle costs assessment on conclusion of the case. Another PBG entity, Pure Claims Limited, sourced claims for the business. Other companies were set up to support PBG’s business. Another of PCSS’s roles was to decide which firms might be permitted to become Scheme Solicitors, which involved considering whether they would be competent to do the underlying work.

49. A PBG document prepared later on (in early 2019) for pitches to prospective lenders illustrated the business model in diagram form thus:-

50. Employees of PLL and PCSS occupied the fourth floor of a building in Liverpool, with PCSS on one side and PLL on the other.

51. By 2017, PCSS had developed a relationship with Novitas, which had agreed to provide the Novitas Loans integral to the model. Initially, the chosen ATE insurer was Box Legal Ltd acting as agent for Leeward Insurance Company Ltd (“ Leeward ”). About 30 law firms participated in the funding project while Leeward was involved. However, due to Novitas’s concerns about Leeward’s financial security, the credit line was capped at £30 million. As Novitas allocated the maximum credit limit on the loan, even if undrawn, against this cap, the facility was exhausted in about a month.

52. To secure continuation of the funding project, PBG and Novitas sought a new ATE insurer. In February 2017, Jason Reeve of Novitas arranged a meeting with AmTrust alongside Mr Hodgkinson of PBG to discuss the proposed Scheme. Subject to approval by AmTrust, the idea was to introduce new law firms other than PLL (as under the Leeward scheme). Mr Hodgkinson’s initial proposal was summarised in a slide pack entitled “ Underwriting Proposal ”. This pack was later circulated within CLE/AmTrust accompanied by a structure chart. (Later, on 10 May 2017, Mr Gilchrist of CLE circulated this document, describing it as a “scan of the original presentation” that Mr Hodgkinson had taken him and Matthew Williams, AmTrust’s Head of Law, through.) The slide pack suggests that Mr Hodgkinson’s original intention was for AmTrust to cover cases by providing underwriting capacity for a captive insurer owned by PBG, but otherwise it describes features of the Scheme as later implemented. The slide pack included the following points about the proposed scheme. i) Claims would be introduced by a claims management company, which would charge marketing fees. Claim types were expected to include RTA, holiday sickness, clinical negligence, MMS and housing disrepair. ii) According to a structure chart bearing the date April 2017 (hence presumably added later), PBG’s role would include “ Arrang[ing] Funding… [and] Vet[ting] Case” , and CLE would pay “ Vetting & Admin Fees ” to PBG. Novitas would provide “ Facility Admin ”. iii) Each case would be “ individually screened/vetted and approved at every drawdown request by [PCSS] ” before funds were sent to solicitors. A page of Premium Tables included a column for “ PCSS Fees ”, against which (in AmTrust’s copy) Mr Gilchrist had written the word “ Vetting ”. iv) PBG would refer each case to a law firm, which would enter into a CFA and represent the client. v) The client would obtain a Novitas Loan and use it to pay an ATE premium to CLE, which would then issue an ATE policy underwritten by AmTrust. vi) The client would be “afforded FULL cover for everything if the case is unsuccessful” . If successful, the client would be liable for the premium, unrecoverable interest, and any unrecovered disbursements. The presentation also appears to have included a slide headed “Existing Market and Our Experience to date” , which among other things said:- “We have now successfully processed 600 cases and to date have a 100% success rate, we have yet to lose a case which is mainly due to the fact that our front end process has been perfected and is incredibly robust, to the point that from us receiving a potential case, it takes a further 90 days of investigations and vetting before we are happy to proceed with any matter.”

53. On 1 March 2017, Mr Gilchrist asked Mr Hodgkinson for “ Any performance data” because “ This…will give us a great insight into how the Pure vetting and selection process pre-selects good matters and impacts ultimate performance ” .

54. On 31 March 2017, Mr Hodgkinson replied to Mr Gilchrist (copying Mr Warr and others) explaining that performance data was “ difficult ” because the Scheme was new. However, he stated that they had a “ very different way of doing things to the norm ”, explaining that:- “What is different about this model, and hence our projected lower failure rates is:

1. A second level of vetting on every case, to strict criteria by our in house staff

2. 3 levels of vetting on Medical negligence cases, including external barristers opinion on higher value matters, before proceeding to cover.

3. Solicitors provided with our acceptable criteria on all case types to avoid non-runners.

4. On-going monitoring of all cases every 30 days, to weed out and suspend cover on cases which are not progressing correctly.

5. We have set a target to vet out 50% of everything we are sent for the scheme, this may be too high, but gives us a level of comfort that we are only taking good quality cases.” Mr Hodgkinson sent the email from his PLL email address, though it is clear from the quoted text that it is not confined to PLL’s role in the process. Asked about numbered point 1 above in re-examination, Mr Warr said he thought the first level of vetting was that done by the solicitor. As to the third level of vetting, by a barrister in clinical negligence cases, Mr Warr said in cross-examination that whether the barrister would have a relationship with the ATE insurer would depend on whether the insurer instructed them, which Mr Warr believed AmTrust did not.

55. A meeting was arranged for 10 May 2017 between PBG, AmTrust/CLE and Novitas. The previous day, Mr Gilchrist sent an email indicating some areas of particular interest for the discussion: “Some key points for us:

1. Understanding the two stage vet, how the firms are selected and approved (for the various claim types) and how the individual cases are assessed

2. The processes and procedures to make sure from a regulatory piece we are happy i.e. what role does everyone play and do we need to confer any insurance status on Pure?” Mr Gilchrist also emailed Mr Warr and Mr Matthew Williams of AmTrust a suggested agenda which included:- “2. Pure Firm Vetting process

3. Pure Case vetting process ” Asked about this in cross-examination, Ms Shaw said she assumed that item 2 referred to the selection of Scheme Solicitors and item 3 to the vetting of cases.

56. Later on 10 May 2017, after the meeting, Ms Amanda Robertson of PCSS emailed to Mr Gilchrist of CLE various template documents “ as requested ”. These were standard forms:- i) a “ Pure Funding Application Form ”, one for each category of business (clinical negligence, holiday sickness, RTA, employers’ liability, housing disrepair, industrial disease, noise induced hearing loss and public liability); ii) a “ Claim Vetting ” form for each business type; iii) a “ Claim Re-vetting ” form for each business type; iv) a “ Settlement Form ”; and v) a “ Failed Case/Claim on Policy ” form. Mr Gilchrist replied noting that “ with the volumes predicted we want this to be as automated as possible… ”.

57. The Pure Funding Application Form was designed to be completed by the Scheme Solicitor and sent to PCSS. It required the provision of basic details about the claim and the parties, and an indication of prospects of success. For example, the “ Client Details ” required by the Pure Funding Application Form for Housing Disrepair included the location of the accident, whether the disrepair was reported to the landlord (and how quickly), whether it had been rectified (and when) and “ further comments ”. The details required under “ Claim information ” were:- “Date of signed CFA Have BTE checks been concluded? Injuries sustained and duration/progress Has the claimant had medical treatment? Details of injury or medical condition Are there any pre-existing injuries? If Fatal injury, are there any dependants? Prospects of success % with any supporting case law Estimate of Quantum: General and Special damages Risks” The solicitor was also required to provide certain basic details, and, where available, photographic evidence of accident location, measurements if applicable, witness evidence and a copy of the accident book. Ms Shaw said the form would be filled in after the CFA had been agreed with the client.

58. Each variant of the Pure Funding Application Form asked for a statement of the percentage prospects of success, sometimes also seeking supporting evidence or case law (and, in the case of the Industrial Diseases form, an estimate of General and Special Damages). Ms Shaw said in cross-examination that a case needed greater than 50% prospects in order to be admitted to the Scheme. She said the completed form would be saved onto the ProClaim IT system and visible to anyone with access to that system.

59. The Claim Vetting form was envisaged to be completed by PCSS: as Ms Shaw confirmed, and as was consistent with the fact that substantially the same forms were later annexed as Schedule 8 to the SLA between CLE and PCSS as setting out the ‘vetting criteria’ PCSS were required to apply (see Schedule 2 § 2 bis and the heading to Schedule 8). Again taking the housing disrepair variant as an example, after boxes for basic details – including whether the proposal was accepted or rejected – the form called for the following information:- ◦ “Is the claim within acceptable period for statutory limitation — within 12 months from accident date? ◦ Have we received relevant documentation: ◦ Signed retainer ◦ ID documents — Electronic verification, Passport, Driving licence, recent utility bill ◦ Claimant's AskCuePI result ◦ Defendant's full details ◦ Address of property which was in disrepair ◦ Witness Evidence ◦ Photographs of disrepair ◦ Review key fraud indicators: ◦ Accident in fraud hotspot location ◦ Multiple claim history of the Claimants ◦ Does the Claimant have a minimum of 51 % prospects of success for liability? ◦ Was the Claimant physically injured for a minimum of 4 weeks? What was the type of injury the Claimant received? ◦ Was the Claimant suffering from a medical condition such as, asthma, COPD, other lung conditions, allergies and/or skin conditions, which have been caused or made worse by the housing disrepair? ◦ Has the Claimant provided any supporting evidence of their injuries? ◦ GP / Hospital / Walk in Centre attendance ◦ Time off work ◦ Restriction in activities ◦ Travel to and from medical appointments ◦ Medication ◦ Credibility considerations: ◦ Has the claim be[en] brought swiftly? ◦ Is there a credible reason for any delay? ◦ Is the Claimant willing to attend a medical appointment? ◦ Consider period of suffering and if lack of medical attention from own GP — why?”

60. Each variant of the Claim Vetting form attached to the email asked whether the claimant had a minimum of a 51% prospect of success on liability, or (in the case of the Clinical Negligence form) whether the prospects of success were accurate, apart from the Holiday Sickness form. That form did, however, ask several specific questions evidently directed at prospects of success, such as whether the claimant had been ill for at least 5 days, whether the illness started after eating a specific dish or at least 3 days into the holiday, whether the client dined exclusively in the hotel, evidence that the illness was reported at the hotel, details of any medical attention sought, details of any other parties who were ill, and “ Credibility considerations ” including the consistency of all party statements and of the reported illness and travel dates, and whether the claimant went on any excursions that could have been responsible for the illness.

61. Neither the email nor, in due course, Schedule 8 to the Service Level Agreement between CLE and PCSS attached a template Claim Vetting form relating specifically to CWI cases (as opposed to “ Housing Disrepair ”). It is not entirely clear why that was. The documents include a “ Claim Vetting – Cavity Wall Insulation ” form completed on 30 November 2017 which does not include a specific prospects of success question. On the other hand, (a) it does contain questions directed to whether the claim was time barred, the witness and photographic evidence (among other documents), the type of damage caused and “ Credibility considerations ” (specifically, whether the claim had been brought swiftly and whether there was a credible reason for any delay); (b) as noted in §§ 156-157 below, the Acceptance Criteria which PCSS applied – and which Ms Shaw understood to have been agreed between the parties – required PCSS to “ confirm good liability prospects ”; and (c) as set out in section (E)(5) below, the Service Level Agreement between CLE and PCSS required PCSS to “… carry out in respect to each Case a full review of the Claimant’s Case, its prospects and suitability for cover under the ATE Policy in accordance with terms of the ATE Policy and the vetting criteria at Schedule 8 or as agreed with Composite in writing” .

62. Ms Shaw said PCSS did not speak to clients and its staff were not lawyers; and that it would be for the Scheme Solicitor to make any enquiry relevant to the merits that depended on speaking to the client.

63. Ms Shaw was asked about a Notice of Administrators’ Proposals in relation to PCSS which the Administrators, Kroll, later produced very shortly after their appointment, and in particular a paragraph referring to PCSS acting “as agent for PLL in assessing the merits of potential claimants and vetting them prior to them being taken on by PLL” and thereafter undertaking “an administrative check of the case” . Ms Shaw said that the first part of that account reflected work done by a team of PCSS employees who for a time took responsibility for onboarding cases for PLL, under an arrangement described in her second statement. She disagreed with Kroll’s description of the work PCSS did on its own account, saying, “No, because they – it wasn’t just an administrative check. They were – they [PCSS] were vetting the case.”

64. The Claim Re-vetting form was also envisaged to be completed by PCSS. The Housing Disrepair re-vetting form, for example, required basic details (including whether the claim was accepted or rejected) and asked:- ◦ “What additional document have been received? ◦ Please re-assess Liability / Quantum as necessary based upon the documents received ◦ Do you require any additional documentation or are you happy to proceed? ◦ What additional documentation do you require in order to proceed?”

65. By June 2017, draft TOBAs between CLE and Scheme Solicitors (initially covering RTA, clinical negligence and “ slip/trip ” cases) were drafted and circulated internally within AmTrust/CLE. Separately, AmTrust and Novitas negotiated the Deed of Indemnity, which was drafted to be “ deliberately broad ” and to cover all civil litigation products.

66. By June 2017, Mr Hodgkinson had also proposed including MMS cases in the Scheme, based on support from Mortgage Audit Report Software Limited (“ MARS ”), which had access to a significant volume of cases and had developed software aimed at calculating losses accurately. According to a PLL presentation, MARS could provide a “ fully packaged case ”, which was expected to result in a low failure rate.

67. On 21 July 2017, Mr Gilchrist of CLE circulated an updated structure chart internally. He said that the Scheme was “ focused on personal lines ATE, a mix of injury and financial ”, and that “[a]fter considerable negotiation we are the selected ATE partner.” Mr Gilchrist also explained why he that thought CLE/AmTrust would need PCSS to obtain appointed representative (AR) status under the FCA’s regulatory regime:- “…The main contracting party will be PCSS their role is to market the funding scheme to suitable panel solicitors, provide vetting services and case management. They will not be our agent, they will not have any delegated authority on issue or claims… Nevertheless, there is no doubt that they [i.e. PCSS] are assisting in arranging and bringing about the insurance contracts…so…we all agree that we need to grant them AR status. I am in the process of getting the paperwork in play.” It appears that PCSS was never in fact designated as an appointed representative. However, Mr Warr recalled a concern to ensure that by having a contract with PCSS, and if PCSS was not made an appointed representative, that CLE would not be breaching the regulations regarding the carrying on of insurance business. As I note later, this regulatory point appears again in subsequent documents, and has potential relevance to the drafting of the SLA between CLE and PCSS. It is also notable that Mr Gilchrist made clear in his email that PCSS would not have any delegated authority in relation to policy issue or claims (as Mr Warr accepted in cross-examination, specifically confirming that no-one other than CLE would have delegated authority to issue policies).

68. On 3 August 2017, Mr Gilchrist sent Ms Shaw of PBG a draft TOBA for PLL “ for the RTA cases ”. Ms Shaw arranged for Mr Hodgkinson to sign the agreement on PLL’s behalf. She requested a counter-signed version from CLE, but one was never returned.

69. Also in August 2017, Mr Gilchrist prepared two versions of an overview document for AmTrust internal approval, a longer version of three pages plus appendices and a shorter two-page version. The longer version, dated August 2017 and headed “ Pure Scheme – Procedures, Processes and Compliance Overview ”, included the following points:- i) The “ Pure Group ” consisted of “ interlinked legal business. Including several law firms, a specialist legal costs solicitors and an administrative and vetting hub — Pure Claims Support Solutions (PCSS).” ii) ATE insurance was an inherent part of the product, and Novitas Loans would not provide CCA funding without a suitable ATE policy in place. The previous ATE provider was Box Legal, an agent of Leeward, but due to concerns over its security Novitas limited its credit line to £30 million, which was exhausted in little over a month. iii) As to incentives:- “Although PCSS receive fees for undertaking some of their roles from CLE this is not their primary income driver. Typically PCSS will be receive less than 10% of the premium as expenses. Within the Pure Group is a legal costs consultant — Pure Legal Costs (PLC). It is a requirement of any firm that utilises PFP that they instruct PLC for costs claims. These instructions generate substantial legal fees (not insured by AEL) with high gross profit margins. The key point to note is the coincidence of interest between AEL and the Pure Group, only successful cases require the services of PLC and that protects our loss ratio.” iv) PCSS’s roles were listed as marketing, initial vetting of firms, case vetting, presenting cases and claims to the insurer (as agent of the law firm), disbursement approval and processing, case monitoring and distribution of settlement funds. Novitas’s roles were listed as firm vetting on behalf of the bank, loan processing, funding and collections. CLE’s roles was listed as firm vetting on behalf of AmTrust, policy acceptance, policy issue, case management and claims handling. v) The Compliance Overview section said:- “PCSS — The Pure Group is not regulated by the FCA. Within their group they hold various other authorisations from national regulators including the SRA and the MoJ. The contract between CLE and PCSS as well as the agreement between PCSS and the law firms expressly states that they execute their role as agent of the solicitor. PCSS have not authority to accept insurance, bind cover, handle claims or represent the insurer in any other way, nor is it envisaged these rights will ever be conferred. That being said it is felt they are instrumental in the arranging and bringing about of the insurance. Whilst no delegations will be given CLE is appointing PCSS as their Authorised Representative within the FCA framework. PCSS will fall within the standard monitoring provisions that CLE has for ARs including training, reporting and oversight. …” vi) After a Process Overview diagram, the document stated:- “The above shows the key contract and documents that underpin the scheme. After the solicitor has sourced a 'claimant' if they are within the scheme they will present the case to PCSS for vetting (we have approved these vetting processes). If approved the case is linked to CLE and NL using secure web services built in to PCSS Pro Claim system. … At no time do PCSS interact with the policyholder this is undertaken by either CLE or the law firm acting for their client.”

70. The shorter version, dated 14 August 2017, was headed “Pure Legal Scheme Overview” and included the following:- “This deal provides ATE insurance (personal injury and consumer) to law firms in conjunction with (1) Pure Legal and (2) Close Brothers (previously Novitas Loans in which AmTrust had a 25% stake prior to its disposal). The Pure Group consists of several interlinked legal businesses including law firms, specialist legal costs consultancies and an administrative & vetting hub. Close Brothers is a bank. Pure and Close have developed a CCA loan product for claimants pursuing personal claims for compensation. The loan is used to fund litigation costs, namely disbursements including ATE insurance. Typically, law firms use their own balance sheet to fund these items and as most firms will work on a contingent basis (no win no fee) these costs put limitations on the number of cases that can be handled. The Pure product therefore is very attractive to them. The basic operation of the scheme is as follows: • Law firm contacted by potential claimant • Law firm does initial case review • Case goes to Pure Legal for detailed vetting • Close enter into a CCA (Consumer Credit Act) agreement with the claimant • The claimant (via the solicitor) uses the loan to fund the disbursements • Close monies remitted to solicitor • Solicitor applies on line for ATE policy for claimant • Composite accepts application • Solicitor pays premium + IPT to Composite • Composite issues policy • Composite deducts commissions and pays net premium to AEL • If case wins then AEL keeps the premium • If the case loses then AEL keeps the premium but a sum equivalent to the premium + IPT forms part of the claim” and, at the end:- “Compliance Overview CLE is appointing Pure as an Introducer Appointed Representative within the FCA framework.” It appears that the reference to “ Pure Legal ” was in fact to PCSS rather than PLL, given that (a) the document indicates that the case “ goes to ” ‘Pure Legal’ after the initial case review by the “ law firm ”, (b) PLL was only one of the prospective law firms which would, after its own case review, send cases to PCSS and (c) PCSS was the “administrative & vetting hub” referred to in the opening paragraph.

71. The same day, Mr Matthew Williams sent the overview to AmTrust for underwriting approval.

72. On 20 September 2017 (which postdates the entry into the PLL TOBA), Mr Gilchrist responded to an email the previous day from Ms Ashton saying “Sorry I can't seem to find the email with the Amtrust solicitors agreement on it. Please can you send it to me again” . Mr Gilchrist in response emailed to Ms Ashton a template TOBA, in similar form to the PLL TOBA, and said:- “Sorry if this didn't ever get to you. The attached is our standard document, I think we may need to do a little work on this when scanning it, primarily my concern is this document details a Delegated Authority Scheme but you are vetting — I've not seen your contract with the firm [could probably do with a copy for the file] as you act as the firms agent:? Not sure how that interacts with you also vetting their cases, but I'm sure the agreements explain it! Do you have the Box panel agreement? …” As Mr Warr accepted in cross-examination was probable, the “ you ” here must refer to PCSS rather than the solicitors’ firm (referred to as “ the firm ”). What Mr Gilchrist was saying in this email was that, because PCSS was vetting, the present Scheme was not one under which the Scheme Solicitor had delegated authority. (E) CONTRACTUAL ARRANGEMENTS

73. The contracts to which the individual clients were parties were as follows:- i) Each of the clients entered into a retainer with one of the Scheme Solicitors incorporating a conditional fee agreement (CFA). Most of the claims were conducted by PLL, but some were conducted by other firms including HSS. ii) Each client entered into a CCA loan with Novitas, in order to pay the ATE premium and to fund the client’s own disbursements as his or her claim progressed. iii) Each client entered into an ATE policy with AmTrust, in order to indemnify the consumer for their disbursements and any adverse costs in the event that his or her claim failed. It was a requirement of each of the CCA loans that any proceeds of the ATE policy were assigned by the consumer to Novitas.

74. The contracts between the various commercial entities involved, entered into between August and October 2017, were as follows:- i) AmTrust entered into a 14th Endorsement to its Binding Authority Agreement with CLE, which authorised CLE to bind risks presented to it as part of the Scheme. ii) CLE entered into a Service Level Agreement with PCSS by which PCSS agreed to provide certain services to CLE in return for a fee. iii) AmTrust entered into a TOBA with each of the Scheme Solicitors, including PLL and HSS. iv) Novitas entered into a Services Provision Agreement with PCSS, and agreed to pay PCSS for certain services. v) Novitas entered into a Global Terms Agreement with PLL by which PLL agreed to refer clients to Novitas for loans. vi) Novitas entered into the Deed of Indemnity with AmTrust. By the Deed of Indemnity AmTrust agreed that it would pay to Novitas the amount which a consumer would have been entitled to claim under the terms of his or her ATE policy, had AmTrust not rejected the claim or avoided or cancelled the policy, and which had not been paid to Novitas “within 20 Business Days from the Final Conclusion of the Claim” .

75. I summarise the main terms of these various documents below. (1) Retainer/CFA between solicitor and client

76. PLL and HSS issued client care letters and CFAs in standard form. They provided for solicitors’ fees not to be charged if the claim failed (provided that the client complied with the CFA terms) and a success fee of 25% of damages if successful. The letters explained the Scheme’s funding model, including: (a) that a Novitas Loan would be provided to cover disbursements; and (b) that an ATE policy would repay the loan and interest, as well as any adverse costs, if the claim failed. (2) CCA Loan Agreement between Novitas and the client

77. The standard Novitas Loan documentation comprised (a) an explanatory note confirming, among other things, that the loan was intended to be non-recourse, with repayment expected to be funded by the ATE insurer if the claim failed; (b) pre-contract information required by the CCA; (c) the Novitas Loan offer and terms and conditions; (d) a template letter to be completed by the borrower (i.e. the client) authorising the Scheme Solicitor to disclose claim information to Novitas, to draw down funds and apply them to disbursements, and to use any recoveries to settle the Novitas Loan; (e) a further template letter, where the solicitor was not PLL, instructing transfer of the claim to PLL if the original solicitor could not continue the claim (other than due to lack of merit); and (f) an assignment of all “ Claim Proceeds ”, defined to include any “ proceeds ” from the ATE insurance, to Novitas as security for the loan. (The ATE policies contained an anti-assignment clause, clause 12.1, prohibiting the policyholder from assigning his/her “ rights ” under the policy without AmTrust’s prior consent .)

78. The key Novitas Loan terms included: (a) a condition that the borrower take out an ATE policy arranged by the Scheme Solicitor (because it was intended for the loan to be non-recourse); (b) provision for no drawdown to occur until the borrower signed the template letters and assignment agreement, and Novitas received a copy of the ATE policy; (c) two stages of funding, with part one to be available 14 days after the agreement (subject to conditions precedent) and part two after proceedings were issued (subject to confirmation the ATE policy remained valid); (d) fixed percentage daily interest; and (e) provision for repayment within 7 days of receiving “ Claim Proceeds ”, including interest, fees and the ATE premium. (3) ATE policy between AmTrust and the policyholder (client)

79. As noted earlier, it is an assumed fact that the policy was in the form of a specimen policy provided. This is an “ After The Event Legal Expenses Insurance Policy ” issued by CLE on behalf of AmTrust as insurer.

80. Clause 1 of the ATE policy provided that AmTrust would pay “ Your Insured Liability up to the Maximum Limit ”, where “ Insured Liability ” was “ Your legal obligation to pay Opponents’ Costs, Own Disbursements which We have agreed to indemnify up to the Maximum Limit ”.

81. “ Opponents’ Costs ” were defined as meaning costs ordered to be paid or agreed to be paid (with CLE’s approval), including on acceptance of a Part 36 offer or discontinuance. “ Own Disbursements ” meant the policyholder’s liability for medical records, experts’ reports, court fees, witness expenses, counsel’s fees (up to £5,000 including VAT), the ATE premium, Novitas Loan interest and other CLE approved expenses. The policyholder’s own solicitors’ fees were excluded, because they would fall within the CFA.

82. Clause 4 imposed further general obligations, by which the insured agreed among other things:- i) (clause 4.2) to allow CLE direct access to their solicitors throughout the litigation, and to instruct their solicitor to keep CLE informed and seek approval of specified steps, including (4.2.5) applying for and obtaining CLE’s approval before accepting or not accepting or rejecting any settlement offer, (4.2.3 bis) taking all reasonable steps to avoid or minimise Opponent’s Costs, and (4.2.4) complying with all court orders and the CPR; ii) (clause 4.4) throughout the litigation to:- “4.4.1 act in a manner which will minimise Your Insured Liability; 4.4.2 provide all information, evidence and documents requested by Your Solicitor and deal promptly and diligently with all requests by Your Solicitor to provide statements of truth, witness statements and to search for disclosable documents; 4.4.3 comply with all advice given by Your Solicitor; 4.4.4 co-operate with Your Solicitor in the conduct of the Litigation; 4.4.5 not change Your Solicitor without the prior written consent of the Scheme Manager, such consent not to be unreasonably withheld or delayed; 4.4.6 adhere to the terms and conditions of this insurance at all times; and 4.4.7 notify the Scheme Manager as soon as reasonably practicable if any matters come to Your attention which would have had a material impact on Our decision to provide cover under the Policy or the terms on which We would have provided cover under the Policy including but not limited to:  Your name or address  Litigation friend being appointed or changed  Change of Your Solicitor  Your refusal to follow Your Solicitors advice  Your death or bankruptcy  Change of Status of the Insured  Material change of facts  Material change of prospects of success below 51%” and iii) to obtain CLE’s consent to continue if prospects deteriorated materially. CLE could cancel the policy if it considered the claim more likely than not to fail, with disputes resolved by arbitration (clauses 4.5 and 4.6 under the heading “ Prospects of Success ”); and iv) to instruct the solicitor to resist any application for summary assessment of the opponent’s costs, and to resist any application for the opponent’s costs save with CLE’s approval (clause 4.7).

83. Clause 4.9 made provision for applications to CLE for “ Scheme Manager’s Approval ” to a proposed course of action, which was deemed to have been given unconditionally if no decision was provided within 5 working days.

84. Clause 5 addressed “ Own Disbursements ” cover, limiting it to unrecovered sums. Clause 7 required a “ Paid Premium ” to be paid within 14 days of inception and a “ Contingent Premium ” paid on successful claims. Clause 9 (“ Subrogation ”) stated:- “If We make a payment under the Policy, We will be subrogated to any and all of Your rights in connection with such payment. You also agree to give Us as much assistance as We may reasonably require in relation to the exercise by Us of Our subrogated rights.”

85. The Policy Summary stated, among other things, that “[i]n order to obtain cover your case must enjoy reasonable prospects of success.” (4) AmTrust/CLE: Binding Authority Agreement and 14th Endorsement

86. An existing Binding Authority Agreement, effective 18 March 2011, authorised specific individuals within CLE (the “ Coverholder ”) to market and bind insurance policies on behalf of AmTrust (the “ Underwriters ”) for specified classes of business.

87. In the 14th Endorsement, signed on 6 November 2017 though agreed to be effective 1 September 2017, AmTrust authorised CLE to bind risks under the “Pure Legal…introducing lawyers scheme (“Pure ATE Scheme”)” provided that they met the “ Eligibility Criteria ” in Annex 1 to the Endorsement.

88. Annex 1 specified, for each case type (e.g. MMS, housing disrepair including and excluding CWI) (a) the maximum limit of indemnity (with higher limits available upon request); (b) the gross premium plus IPT; and (c) the maximum commission payable to “ Pure Legal/Introducer/Agent ”. Although no explicit “Eligibility Criteria ” were directly set out (save for excluding certain risk types), Annex 1 required CLE to refer to AmTrust for its agreement certain quotation requests including “[w]here prospects of success are less than 51%” . (5) CLE/PCSS: Services Level Agreement (SLA)

89. On 16 October 2017, CLE and PCSS executed a “ Service Level Agreement ” (the “ SLA ”), under which PCSS was defined as “ Claims Manager ”.

90. The Recitals to the SLA stated:- “(A) Composite is an insurance intermediary within the AmTrust group of companies and is authorised by the Insurer to accept certain programmes of ATE on its behalf. (B) The Claims Manager maintains the Solicitors who act on behalf of Claimants and the Claims Manager wishes some of those Solicitors to utilise the services of Composite. (C) The Solicitors acting as principle wish to purchase ATE Policies for the protection and benefit of the Claimants. (D) Composite will arrange that the Solicitors purchase ATE Policies issued by Composite for the benefit of the Claimants on Composite's agreed terms. (E) Composite wishes to appoint the Claims Manager to monitor and supervise the quality and progress of the Cases for their duration in order to protect Composite and the Insurer's interests, and Composite is willing to pay the Claims Manager for those services.”

91. Clause 2 (“ OBLIGATIONS ”) provided, so far as material, as follows:- “… 2.2 From the Effective Date Composite appoints the Claims Manager to provide and perform the Services for the Cases within the Insurance Programmes. 2.3 The Claims Manager will at all times act as the Solicitor’s agent and not as the agent of Composite or the Insurer in relation to the ATE Policies. 2.4 The Claims Manger will not carry out any functions of Composite or the Insurer, in particular in relation to ATE Policy inception, amendment, endorsement, cancellation, termination and the Claims Manger agrees that any claim or complaint on an ATE Policy will be dealt with by Composite, the Insurer or their agents acting on their behalf and the Claims Manager shall not undertake any action in relation to claims or complaints. 2.5 The Claims Manager will arrange for the Solicitors to identify Claimants who require ATE Policies and Composite, will receive proposals for ATE Policies from the Solicitors that want to purchase ATE Policies as a disbursement for the benefit of their Claimants. 2.6 At its option, the Claims Manager may, as agent for the Solicitor, supply Composite with the information which the Solicitor is obliged to supply to Composite. 2.7 The Claims Manager shall provide and perform the Services exercising reasonable care and skill in a professional and efficient manner in accordance with the other terms of this Agreement. 2.8 Composite will enter into a Solicitor Agreement with each of the Solicitors which includes the Premiums. 2.9 Subject to its usual discretion, Composite will issue an ATE Policy in all circumstances where the conditions of the ATE Policy, this Agreement and the Solicitor Agreement are fulfilled.”

92. It will be noted that the activities in relation to which clause 2.3 stipulated that PCSS would act as agent for the Scheme Solicitor, “and not as the agent of [CLE] or [AmTrust]” , were “in relation to the ATE Policies” . That seems likely (especially when read with Schedule 2: see below) to have been intended to help address the regulatory concern identified in the documents summarised in §§ 67 and 69(v) above, which related to the possibility of PCSS falling within the FCA’s regulatory perimeter by reason of assisting in arranging and bringing about the insurance contracts.

93. It is also notable that clause 2.9 made clear that the issue by CLE, on behalf of AmTrust, of ATE policies remained “[s]ubject to its usual discretion” even where all the requirements set out in the ATE Policy, the SLA and the Solicitor Agreement (the TOBA) were satisfied.

94. The “ Services ”, referred in clause 2.2, were defined as “Case monitor services and administration services more particularly described in Schedule 2”. It is necessary to quote Schedule 2 in full:- “SCHEDULE 2 THE SERVICES A SERVICES

1. The Claims Manager will at all times communicate with Composite, and will promptly supply to Composite any communication received from Solicitors relevant to an ATE Policy.

2. In relation to ATE Policies, the Claims Manager will: 1.1 act on behalf of Solicitors to submit policy requests for Claimants to Composite 1.2 receive notifications, information and reminders from Composite on behalf of Solicitors (and where appropriate funders) in relation to any ATE Policy issued as a result of that request, and disseminate notifications, information and reminders as appropriate 1.3 act on behalf of Solicitors (and where appropriate funders) to make payment of ATE Policy premiums 1.4 act on behalf of Solicitors to notify Composite of the events and information as required under the ATE Policy in particular when: 1.4.1 court proceedings have been issued on a Case 1.4.2 a Case has been completed, so that ATE Policy cover can cease 1.4.3 a Solicitor wishes to make a claim on the ATE Policy 1.5 obtain each Solicitors’ authority to receive monies paid in respect of any claim on an ATE Policy, and 1.5.1 receive, process and disseminate all monies paid by Composite to the Claims Manager as a claim on any ATE Policy and 1.5.2 account to Composite for all payments made thereafter to any Client, Solicitor, funder or other party in respect of such monies received. 2 [bis]. The Claims Manager shall carry out in respect to each Case a full review of the Claimant’s Case, its prospects and suitability for cover under the ATE Policy in accordance with terms of the ATE Policy and the vetting criteria at Schedule 8 or as agreed with Composite in writing.

3. The Claims Manager will at the anniversary of each ATE Policy which continues on risk, review the current position of the Case to ensure that all reasonable steps are being taken by the Claimant and his/her Solicitor to conclude the Case successfully. The Claims Manager shall also ensure that each Case is being conducted in keeping with the terms of the ATE Policy.

4. Where the Claims Manager carries out a case review, it will: 4.1 record where liability is in dispute and promptly inform Composite when a Case which has been reviewed is compromised or settled. 4.2 record any Case with no activity for 90 days that is to remain open without further action and monitor that Case again within 90 days. The Claims Manager will retain for inspection a copy of the 90 day inactivity reports, which will have been signed to confirm it was actioned appropriately in accordance with this agreement. 4.3 ensure that all Cases continue to have in their reasonable opinion a greater than 51% chance of success. 4.4 monitor the last stage of any litigation on each Case and record the dates of any hearing, trial or assessment listed at the time of the annual review. 4.5 ensure at each annual review (or sooner if notified) that the limit of indemnity under the policy is sufficient to cover: a) the funded disbursements and any loan interest and b) the risk of adverse costs and disbursements and shall notify Composite within 3 business days of any shortfall or deficiency in cover.” (The Schedule contained two paragraphs numbered “2”, hence my interpolation of ‘bis’ for ease of exposition. The subclauses to the (first) paragraph 2 were numbered 1.1, 1.2 etc. as reproduced above.)

95. It will be noted that:- i) Schedule 2 paragraph 2 included a list of services, set out in subparagraphs 1.1 to 1.3, in relation to which PCSS was to act as the Scheme Solicitor’s agent. ii) Those services were, as the lead-in wording in paragraph 2 indicated, “[i]n relation to ATE Policies” , materially the same expression as used in clause 2.3 of the SLA. iii) By contrast, the case vetting and review services referred to in paragraphs 2 bis and 3 of Schedule 2 were not expressed to be undertaken as the Scheme Solicitor’s agent. AmTrust in oral argument suggested that paragraph 2 bis also related to the ATE policies, so that PCSS acted as agent for the solicitor (pursuant to clause 2.3) in relation to the activities it covered too (including case vetting). That does not in my view properly reflect the terms of the contract. Nor does it reflect the reality that PCSS would be deciding whether or not cases put forward by the solicitors could be admitted to the Scheme – in effect having a veto – a function that could scarcely be regarded as being carried out as the solicitor’s own agent. AmTrust sought faintly to argue that the position was comparable to solicitors accepting the decision of an internal conflicts committee, or the opinion of a barrister about the merits of a client’s case, but neither situation involves an agency relationship nor is otherwise comparable.

96. Schedule 2 § 2 referred to the “ vetting criteria at Schedule 8 ”. Schedule 8 was a compilation of the template “ Claim Vetting ” forms for RTA, holiday sickness, clinical negligence, public liability, industrial hearing loss, housing disrepair and employers’ liability cases. These forms were materially identical to those provided by Ms Robertson of PBG to CLE on 10 May 2017, which I describe in §§ 59-60 above.

97. Clause 7 of the SLA required PCSS to hold CLE harmless from any loss resulting from any breach of duty, and to maintain professional indemnity insurance of at least £3 million per claim or series of claims arising from negligence, errors or omissions.

98. In return for PCSS’s services, CLE (on AmTrust’s behalf) agreed to pay PCSS the fees set out in Schedule 3: a “ Vetting Fee ”, a “ Paid Case Management Fee ” and a “ Contingent Case Management Fee ”, varying by claim type and value. (6) Terms of Business Agreements (TOBAs) between CLE / Scheme Solicitors (a) CLE/PLL TOBA

99. The PLL TOBA was signed on behalf of PLL on 15 August 2017. Although not counter-signed by CLE, it is common ground that it took effect by no later than that date. It referred to CLE as the “ Administrator ”, AmTrust as the “ Insurer ” and PLL as the “ Scheme Solicitor ”.

100. The PLL TOBA was headed “ Delegated Authority ATE Scheme for Personal Injury ”. That appears to have been a misnomer: there is no evidence that AmTrust or CLE in fact delegated power to PLL to bind them to policies; there is no contractual document which purports to confer such authority; clause 2.9 of the SLA is inconsistent with any such delegation because it reserves CLE’s discretion as to the issue of policies (see § 93 above); and the SLA as a whole is flatly inconsistent with CLE having delegated authority to PLL, because it interposes PCSS as an entity with its own vetting responsibilities and, hence, the ability to refuse to seek ATE cover from CLE/AmTrust for cases put forward by PLL or other Scheme Solicitors. Further, the Scheme was not confined to personal injury cases.

101. The recitals to the PLL TOBA stated:- “WHEREAS: i. the Insurer is licensed by the Financial Conduct Authority (FCA) to carry on insurance business including legal expenses and related insurances; ii. the Scheme Solicitor specialises in procuring and handling personal injury claims, giving formal legal advice to the claimant as to the prospects of success in such claims; iii. the effect of this delegated authority scheme is that the Scheme Solicitor is solely responsible for risk assessing the merits of each personal injury claim which removes the need to submit a detailed proposal form for each claimant and the Scheme Solicitor therefore agrees that it will carry out a full and detailed risk assessment and will provide the Administrator and the Insurer with a professionally reasonable assessment of the prospects of success of each claim it proposes for After the Event (ATE) legal expenses cover; iv. the Administrator is authorised by the Insurer to accept ATE business on its behalf; v. the Administrator agrees to accept business on behalf of the Insurer who will underwrite those ATE risks on the basis that such personal injury claims are being pursued by the Scheme Solicitor by way of a Conditional Fee Agreement, standard retainer or any Damages Based Agreement and are reasonably considered to possess the prospects of success stated by the Scheme Solicitor in the application for ATE cover; vi. for the purposes of this Agreement, the Administrator is contracting on behalf of the Insurer and any reference to the Insurer herein shall be deemed to mean the Administrator.”

102. I return later to the effect of recital (iii), but at this stage note that it failed to reflect essential elements of the Scheme because (at the very least) (a) as already noted, it was not a delegated authority scheme, (b) the Scheme Solicitor was not “ solely responsible for risk assessing the merits ” of each claim: PCSS played at least a key role in that regard; and (c) the Scheme was not limited to personal injury cases. Mr Warr in cross-examination said, “it's a document that contains words that were in a prior version of the template that probably should have been changed” .

103. The key operative terms in the body of the PLL TOBA were as follows:- “1. THE SCHEME SOLICITORS OBLIGATIONS 1.1 The Scheme Solicitor will ensure that all declarations made when applying for cover via the Administrator are entirely accurate and reflect the risk being proposed to the best of the Scheme Solicitors knowledge, belief and professional opinion. 1.2 The Scheme Solicitor will provide the Insurers with a complete spread of risk and will not in any way unfairly select against them by utilising the Insurer’s policies solely for personal injury claims that are considered to be higher risk. 1.3 When applying for cover the Scheme Solicitor will advise the Administrator of the appropriate Broker to ensure that all commissions are paid to the correct sources of work. The Scheme Solicitor understands that any issues regarding the payment of commissions arising from their failure to select the correct Broker cannot be rectified at a later stage and the Scheme Solicitor will therefore be solely responsible for resolving any problems and financial claims/losses arising from their error. 1.4 Once an ATE policy has been issued the Scheme Solicitor must ensure that the Policyholder complies with all of the stated policy terms and conditions which includes, but is not limited to, the Scheme Solicitor immediately notifying the Administrator of: a) any material change of fact that is likely to affect the prospects of success of the claim; b) where an opponent makes any offer of compromise or settlement that either the Policyholder or Scheme Solicitor wishes to reject; c) where the Policyholder refuses to accept the advice of the Scheme Solicitor; d) where the Policyholder stops co-operating with the Scheme Solicitor; e) where the claim discontinues or the Scheme Solicitor ceases to act for the Policyholder; f) the need for the issue of legal proceedings; g) the date of any trial or trial period; h) any barrister expressing an opinion that the prospects of success of the claim falls below the percentage notified to the Administrator. 1.5 The Scheme Solicitor will at all times, and free of charge, allow the Administrator and/or the Insurer access to or copies of all ATE Policyholders full file of papers in accordance with the terms and conditions of the ATE policy. The Administrator and/or the Insurer will seek only to access the files for the purposes either of audit of the Scheme Solicitor, to allow for accurate underwriting decisions to be made on specific cases or when considering any potential claim under an ATE policy. 1.6 When the claimant has recovered damages, the Scheme Solicitor must pay the gross premium plus IPT due for the ATE policy to the Administrator as soon as those damages are received by the Scheme Solicitor. 1.7 When the claim does not result in a Successful Outcome, the Scheme Solicitor must immediately notify the Administrator and ensure that they carry out their absolute duty to mitigate losses incurred on behalf of the Insurer. 1.8 The Scheme Solicitor must provide immediate notice to the Administrator of any entry into or intention of entry into insolvency arrangement, insolvency procedure, administration, winding up or ceasing to trade. 1.9 The Scheme Solicitor will ensure that all data required by the Administrator to track the progress of the personal injury claim is provided in a timely manner directly to the Administrator by the Scheme Solicitor. 1.10 The Scheme Solicitor understands that at all times it has a duty of care to the Administrator and the Insurer. 1.11 The Scheme Solicitor must ensure that the Policyholder complies with the terms and conditions of the ATE Policy at all times.

2. THE ADMINISTRATOR’S OBLIGATIONS The Administrator will: a) handle all matters concerning this Agreement on behalf of the Insurer unless otherwise directed by the Insurer and advised accordingly to the Scheme Solicitor. b) provide the Scheme Solicitor with information and documentation within an acceptable timeframe on receipt of such a request, providing that the Scheme Solicitor has supplied all of the details requested by the Administrator to enable them to deal with such enquiry.

3. THE INSURERS OBLIGATIONS The Insurer will: a) maintain authorisation for the classes insured under the policies attaching to this Agreement; b) discharge its duties under the policies attaching to this Agreement.”

104. Clause 6 conferred extensive audit rights on CLE and AmTrust.

105. Clause 10 (“ Force Majeure ”) provided inter alia that a party was not liable for a failure to perform any of its obligations in so far as it was able to prove:- “a) that the failure was due to an impediment beyond its control (being an impediment other than insolvency or impending insolvency or ceasing to trade which are deemed to be within its control), acts of God, or refusal by any Government authority to permit a party to provide its services or limit either party from carrying out its obligations; b) that it could not reasonably be expected to have taken the impediment and its effects upon a party’s ability to perform into account at the time of entering into this Agreement; c) that it could not reasonably have avoided or overcome the impediment or at least its effect.”

106. Appendix 1 was as follows:- “ Appendix 1 Effective Date: 1st July 2017 Scheme Solicitor Name: Pure Legal Limited Scheme Solicitor Address: Pure House, Building 9 Kings Business Park, Kings Drive, Prescot, Merseyside, England, L34 1PJ Case Categories: Delegated Authority Road Traffic Accident (“RTA”) Further categories can be added by agreement between the Scheme Solicitor and CLE / AEL Premium Rating: Claim Type Net Premium Net Premium IPT (12%) Gross Payable RTA £224.61 £26.95 £251.56 Policy Wording: As supplied by CLE / AEL Eligibility Criteria: Acting for claimant Case is pre-issue Case must have Prospects of Success – as defined in the wording Fast Track”

107. On 10 November 2017, Mr Gilchrist of CLE sent to Mr Hodgkinson of PBG a “ First Endorsement ” to the PLL TOBA, which was intended to amend Appendix 1 to extend the categories from RTA claims to others, including CWI and MMS claims (“ the PLL 1st Endorsement ”). It stated that with effect from 1 November 2017, “ it is hereby noted and agreed that the existing details held within the Agreement in Appendix 1 are amended to read:” , followed by a table of twelve case types with their respective limits of indemnity, gross paid premia, gross contingent premia, total gross premia and maximum number of declarations per month. The endorsement stated that “[a]ll other terms and conditions of the [PLL TOBA] shall remain unaltered” .

108. A “ Second Endorsement ” was issued by AmTrust/CLE on 29 May 2018 (“ the PLL 2nd Endorsement ” ), which amended Appendix 1 to increase the ATE premium on CWI claims from £1,215 to £2,250.

109. There is no evidence that either the PLL 1st Endorsement or PLL 2nd Endorsement was signed. However, PLL did undertake work beyond RTA claims, and no point was taken on this in the present trial of issues. (b) CLE/HSS TOBA

110. The HSS TOBA was signed by Mr Rogers on behalf of HSS on 29 November 2017, and by Mr Gilchrist for CLE on 4 January 2018. It is common ground that it took effect no later than 4 January 2018.

111. This TOBA was headed “ Pure ATE Scheme for Personal Claimants ”, rather than referring to a delegated authority scheme.

112. The recitals were similar to those in the PLL TOBA, except that:- i) recital (ii) stated that HSS specialised in “procuring and handling inter alia personal injury claims, claims for housing disrepair, claims for the misselling of personal financial products and giving formal legal advice to the claimant as to the prospects of success in such claims” ; and ii) recital (v) referred to “ such claims ” rather than to personal injury claims. Recital (iii) was the same as in the PLL TOBA (including the reference to personal injury claims).

113. Clause 1 of the HSS TOBA mirrored the equivalent clause in the PLL TOBA, except that there were two additional sub-clauses:- “1.12 The Scheme Solicitor will comply with the maximum permitted monthly number of declarations for each Case Type as stated in Appendix 1. 1.13 The Scheme Solicitor will comply with the maximum monthly permitted total declarations as stated in Appendix 1.”

114. Clause 2 (CLE’s obligations), clause 3 (AmTrust’s obligations), clause 6 (audit rights) and clause 10 (force majeure) were materially identical to those in the PLL TOBA.

115. Appendix 1 was broadly similar to Appendix 1 to the PLL TOBA, except that (a) it did not refer to “ Delegated Authority ”, (b) it dealt with case categories and premium rating together in a Table similar to the one set out in the PLL 1 st Endorsement and (c) some of the figures for limits of indemnity and premia differed from those in the PLL 1 st Endorsement, and the maximum number of declarations per month were different. (7) Novitas/PCSS Services Provision Agreement

116. Three successive iterations of a “ Services Provision Agreement ” between Novitas and PCSS (the “ Novitas-PCSS SPA ”) were executed, dated 10 August 2017, 13 June 2018 and 5 March 2020.

117. Each recorded in its recitals that PCSS would provide “ intermediary and data management services ” in connection with Novitas Loans, and required PCSS to perform the services in Schedule 1. The services included introducing prospective solicitors to the Scheme and, on behalf of Novitas, vetting all Novitas Loan drawdown requests to “ verify that each qualifies for funding under the terms of a particular Loan ”.

118. PCSS was permitted to use Novitas’s name in providing the services, and to send correspondence in PCSS’s own name to a Scheme Solicitor for and on behalf of Novitas.

119. PCSS was required to act in the best interests of Novitas and its customers (subject to any declared conflict); to exercise reasonable care and skill in providing the services; and to maintain PI insurance covering liability for negligence or fraud.

120. In return, Novitas agreed to pay PCSS £15 for each drawdown (up to three) and, on repayment of a loan, a fee equivalent to interest at 0.3% on the repaid sums. (8) Novitas/PLL Global Terms Agreement

121. On 8 February 2021, Novitas and PLL entered into an “ Amended and Restated Global Terms Agreement ” (the “ Novitas-PLL GTA ”), replacing a prior agreement dated 19 September 2017 which has not been found. The recitals stated that the agreement set out the terms on which PLL would refer clients to Novitas for funding, to whom which Novitas would provide funding, and the procedure for introductions and financing.

122. Clause 3 appointed PLL to propose clients to Novitas. Clause 5 required PLL to conduct client identification and verification checks and to submit proposals in the form specified by Novitas. Clause 7 set out the procedure for requesting drawdowns from the loan advance. Clause 8 imposed ongoing obligations on PLL during the life of any Novitas Loan, including to share information and provide reasonable assistance to Novitas, as well as giving an undertaking on behalf of PLL’s client to comply with the ATE policy terms. Clause 9 required repayment to Novitas from claim proceeds on success, and made it a condition precedent to funding that the client assign to Novitas all rights in the claim proceeds and his/her ATE policy.

123. Schedule 2 contained further provisions governing litigation, including (a) that drawdowns could be requested once Novitas was satisfied the loan agreement had been executed, an ATE policy was in place, all conditions precedent to the loan had been satisfied, and client authority to initiate a drawdown for disbursements covered by the ATE policy had been received; and (b) that PLL undertook to repay the outstanding loan balance if claim proceeds on a successful claim were insufficient or the client had no entitlement to claim under the ATE policy. (9) Novitas/AmTrust Deed of Indemnity

124. The Deed of Indemnity was dated 11 August 2017. Its recitals stated:- “(A) The Lender is a finance company providing loans regulated under the Consumer Credit Act 1974 and will offer loans to individual claimants pursuing legal disputes. (B) The Lender will make such loans available for draw down by the claimant's solicitors for use in meeting the cost of disbursements as they fall due. (C) Solicitors will enter into conditional fee agreements with each claimant with respect to own solicitors' fees. (D) The Insurer will issue policies to claimants to cover the cost of disbursements in respect of failed cases. (E) In the event that the Insurer avoids a policy (or otherwise refuses to pay a claim for disbursements) then the Insurer will indemnify the Lender by making a payment on the basis set out in this Deed.”

125. The key operative provisions were in clause 2, including as follows:- “2.1. The Insurer [AmTrust] unconditionally and irrevocably undertakes to indemnify the Lender [Novitas], by making payment to the Lender in respect of all or any part of a Loan which: 2.1.1 the Claimant would have been entitled to claim under the terms of the relevant Policy had the Insurer not rejected the claim or avoided or cancelled the Policy; and 2.1.2 has not been paid to the Lender within 20 Business Days from the Final Conclusion of the Claim.” … 2.8 The Insurer’s Liability to the Lender under this Deed is a primary and independent liability and shall not be subject to avoidance on grounds of fraud, misrepresentation or non-disclosure by a Claimant, and shall not be conditional upon due observance of fulfilment by the Claimant of the terms and conditions of the Policy, nor by any change in the merits of the Claim”. (F) TERMS OF THE PI COVER (1) PLL’s PI policies

126. The PLL 20/21 Policy and PLL 21/22 Policy (together, the “ PLL Policies ”) are in largely identical terms. The key provisions were as follows.

127. The Schedule described the insurance as “ Professional Indemnity Insurance ”. It stated a “ Limit of Indemnity ” of £3 million for “[a]ny one Claim, Defence Costs in addition ”; and an “ Excess ” of £5,000 in the PLL 20/21 Policy, and £15,000 in the PLL 21/22 Policy, for “ each and every Claimant including costs and expenses ”.

128. The preamble stated:- “This Policy provides cover to the Insured in the form of the Minimum Terms and Conditions” defined as the SRA Minimum Terms in force at the time.

129. Section 1 (“Insuring Clauses”) contained the main insuring clause, clause 1.1 ( “Civil Liability” ). Under it, Sompo agreed:- “…to indemnify the Insured up to the Limit of Indemnity in respect of any civil liability (including liability for Claimants’ costs, expenses and disbursements) resulting either: (a) from a Claim or Claims first made against the Insured during the Period of Insurance ; or (b) from Circumstances first notified to the Insurer during the Period of Insurance , provided that such Claim , Claims or Circumstances arise out of and/or in connection with the conduct of any Professional Business carried on by, or on behalf of, the Insured .”

130. By virtue of Section 6 (“Definitions”) :- i) “ Circumstances means any state of affairs known to the Insured that may, when considered objectively, give rise to or result in a Claim ” (clause 6.4) ii) “ Claim means the receipt by the Insured of a demand for, or an assertion of a right to, civil compensation or civil damages or an intimation of an intention to seek such compensation or damages…” (clause 6.5) iii) “ Professional Business means the provision of services as a Solicitor or a registered European lawyer in private practice from offices in England and Wales…” (clause 6.27) iv) “ Solicitor means a person who has been admitted as a solicitor of the Senior Courts of England and Wales and whose name is on the roll kept by the Law Society…” (clause 6.32).

131. Section 2 ( “ Exclusions ”) included clause 2.4 (“Prior Cover”) , which provided that the policy would not indemnify PLL against any “ Claim…in respect of which the Insured is entitled to be indemnified by…any other insurance policy ”.

132. In addition, clause 2.6 (“Trading Debts and Liabilities”) provided that the Policy would not indemnify the Insured against any Claim: “arising out of or in connection with any: “(a) trading or personal debt of the Insured ; “(b) legal liability assumed or accepted by the Insured under any contract of [sc. or]agreement for the supply to, or use by the Insured of goods or services in the course of Professional Business, save that this Exclusion is not to apply to any civil liability in connection with the Insured’s use of or access to the HM Land Registry network …, other than an obligation to pay search fees or other charges for searches or services provided by HM Land Registry to the Insured ; or (c) guarantee, indemnity or undertaking given by or on behalf of the Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to the Insured .”

133. As part of Section 4 (“Special Conditions”) , clause 4.1 stated:- “ Minimum Terms and Conditions to prevail This insurance is to be construed or rectified so as to comply with the requirements of the Minimum Terms and Conditions . Any provision which is inconsistent with the Minimum Terms and Conditions and which is less favourable to the Insured is to be severed or rectified so as to comply with the Minimum Terms and Conditions .”

134. Clauses 4.13 (“Run-off Cover”) and 4.14 (“Scope of Run-off Cover”) together extended the “Period of Insurance” for six years following PLL ceasing business, on the same terms.

135. Section 5 (“Other Conditions”) included condition 5.9:- “ One Claim “All Claims against one or more Insured arising from: (a) one act or omission; (b) one matter or transaction; (c) one series of related acts or omissions; (d) the same act or omission in a series of related matters or transactions; and/or (e) similar acts or omissions in a series of related matters or transactions will be regarded as one Claim for the purposes of this Policy and the payment of any Excess.” (2) HSS’s PI policies

136. The HSS 20/21 Policy and HSS 22/23 Policy (together the “ HSS Policies ”) contained largely identical terms to each other and to the PLL PI Policy. The Schedule for the HSS 20/21 Policy provided for an indemnity limit of £3 million “any one claim excluding costs and expenses” , and that for the HSS 22/23 Policy provided for a limit of £3 million “Any one claim plus costs and expenses” . Each had an “Excess” of £15,000 for “each and every claimant excluding costs and expenses, uncapped” . Cover was provided “in the form of the Minimum Terms and Conditions” , i.e. the Minimum Terms.

137. Clauses 1.1 (“Civil Liability”), 2.4 (“Prior Cover”) , 2.6 (“Trading Debts and Liabilities”), 4.1 (“Minimum Terms and Conditions to prevail”) , 4.13 (“Run-off Cover”) , 4.14 (“Scope of Run-off Cover”) and 5.9 (“One Claim”) were in identical terms to those in the PLL Policies. Section 6 (“Definitions”) contained the same definitions as in the PLL Policies, in identical terms. (3) The SRA Minimum Terms and Conditions

138. The versions of the Minimum Terms in force over the relevant period were those dated 25 November 2019 and 13 December 2021. In both versions, the civil liability insuring clause (clause 1.1) stated:- “Subject to the limits of clause 2 [monetary limits], the insurance 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… ”

139. The SRA Glossary defined: i) “private legal practice” as “the provision of services in private practice as a solicitor or REL [registered European lawyer] in an authorised body …”; ii) “practice” as “whole or such part of the private legal practice of an authorised body as is carried on from one or more offices in England and Wales”; iii) “solicitor” as “a person who has been admitted as a solicitor of the Senior Courts of England and Wales and whose name is on the roll”; and iv) “insured firm’s practice” as the “legal practice carried on by the insured firm as at the commencement of the period of insurance .”

140. Clauses 6.1 and 6.6 of the Minimum Terms permitted exclusions materially identical to the “Prior Cover” and “Trading Debts and Liabilities” exclusions set out in the PLL Policies and HSS Policies. (4) The Presentations for Insurance by PLL and HSS

141. The preamble to each of the PLL/HSS Policies stated: “[w]hereas a representative of the Insured has made to the Insurers a written proposal containing particulars and statements made to the best of the representative’s knowledge and belief which, together with any other information supplied to the Insurers shall be incorporated into this contract”.

142. Disclosure was provided, pursuant to an order of the Court of Appeal, of communications between Sompo and each of PLL and HSS for five months before inception of each policy. AmTrust draws attention to a number of documents relating to policy presentation.

143. Before the inception of the PLL 20/21 Policy, Sompo was made aware that since October 2019 PLL had been under investigation by the SRA, and in September 2020 (nearly a year later) the investigation was ongoing. In response to a request from PLL’s broker for a quotation, Sompo replied:- “ We have provided terms, however this is way out of appetite for Sompo. ” “ Please can you keep us informed of the SRA investigation. ”

144. In the event, however, Sompo agreed to provide cover for the 20/21 year for a premium of £20,000 (plus IPT), subject to an excess of £5,000 for each and every Claimant. A year later, Sompo agreed to the renewal of the policy for the 21/22 year, for a premium of £100,000 (plus IPT), subject to an increased excess of £15,000 for each and every Claimant.

145. Prior to the inception of the HSS 20/21 Policy, Sompo had a discussion with HSS’s broker about the risk. The broker subsequently sent an e-mail to Sompo noting that “ you weren’t too keen on the financial miss selling work ”. The broker indicated that HSS was happy to carry a £10,000 excess, explaining that “ most claims are below this value which should give you some comfort. ” The broker also indicated that HSS was willing to pay a “ healthy target ” premium of £50,000 plus IPT. Sompo agreed to provide cover for the 20/21 year for a premium of £50,000 (plus IPT) and an excess of £15,000 for each and every Claimant. The policy was subsequently renewed. For the 22/23 year the premium was £80,000 (plus IPT) and the excess was £15,000 for each and every Claimant.

146. Because PLL and HSS have become insolvent, Sompo is liable to pay any valid claims to relevant third parties without deduction of the excesses. That is because of clause 5.7(b) of the policies – a provision required by the Minimum Terms – which states:- “If the Insured fails to pay to a Claimant any amount which is within the Excess within thirty days of it becoming due for payment, the Claimant may give notice of the Insured’s default to the Insurers , whereupon the Insurers will remedy the default on the Insured’s behalf. Any amount paid by the Insurers in this way shall erode the Limit of Indemnity .” It is accordingly in Sompo’s interests to argue that multiple claims should be aggregated. (AmTrust made the forensic point that, but for the insolvency, Sompo would no doubt have argued that it faced multiple claims, in order to rely on the excesses. However, it is not clear that that would have been the case, as the excess applies to “each and every Claimant” as opposed to each and every claim.)

147. AmTrust also notes that the proposal form for the PLL 20/21 Policy included the questions, “Do the Principals control the process by which decision are taken to accept and allocate instructions?” (answered ‘yes’) and “How and where is this recorded?”, answered “ Our claims team vet all claims upon receipt of a new instruction and if the claim passes the set criteria it is allocated” .

148. When considering cover for HSS, Sompo noted that HSS had outlined its internal procedures for litigation cases including as follows: “The process for each area of law will essentially be the same with a few exceptions. A new case will be vetted for prospects, followed with further details being obtained from the Client before being allocated to the relevant team…” .

149. AmTrust does not suggest that either of those two documents affected the correct construction of the PI Policies. However, it suggests that they make it “particularly unattractive for Sompo to assert that the vetting of claims by Pure and HSS fell outside the scope of the activities for which it provided insurance cover” . Insofar as the point might be thought to have some relevance to the legal issues, I should say that I do not agree. The solicitors’ vetting processes when taking on claims may have been considered relevant to Sompo’s decision whether (and, if so, on what terms) to provide PI cover for the solicitors in relation to work they would be doing for their clients. It does not follow that any vetting of claims by the solicitors, whether for themselves or for the benefit of third parties, was itself an activity that Sompo would reasonably expect to be covered by the PI insurance. (G) OPERATION OF THE SCHEME

150. On 19 October 2017, Mr Gilchrist informed CLE’s Board that the Scheme would “ go live shortly ”, with business to be written within “ the next week ” and eight firms signed up. A CLE/AmTrust presentation of early 2019 noted that MMS claims had been expected to make up the majority of claims under the Scheme, but that in practice CWI claims comprised most of the book. The case categories expanded over time. For instance, on 19 March 2018, Mr Gilchrist proposed adding UDC cases with a commission of over £10,000 to the “ Pure stable ”. By 14 May 2018, CLE/AmTrust was “ open for business ” on UDC claims.

151. It was originally envisaged by PBG that claimants would typically be introduced by claims management companies, including Pure Claims Limited. Many claims appear to have been received in this way, but, from 2019, PLL began sourcing its own work, including under the trading name “ Pure Claims ”. Some cases arrived in ‘packaged’ form from claims management companies, containing basic client information and (Ms Shaw said) usually some sort of triage type assessment report, and information about the type of damage claimed. These were still subject to the same vetting criteria. For example, (a) MMS cases were often packaged and came directly from MARS; and (b) some CWI claims were packaged by the introducer Your Helpline Ltd (t/a HART) and, Ms Shaw said, would often be received with installation documents and a surveyor’s report.

152. At PLL, at least, incoming claims were handled by an “onboarding” team, which conducted an initial client call. Ms Shaw said in cross-examination that the onboarding team was ultimately under the supervision of a solicitor. Ms Shaw said in her witness statement:- “36. Once a case was received, the case would go to the Pure Legal onboarding team who would conduct a call with the client. We would reject cases where we could not speak to clients within a certain amount of time.

37. During the call, the person from the onboarding team would engage in a conversation with the client and ask questions necessary for the type of claim. If, for example, it was a cavity wall claim, they would go through room by room and ask: "Where is the damage? What are the issues?" They would get evidence of the works and completion of works, and collect things like CIGA certificates, any sign off sheets that the client might have, EPC certificates and anything that they had access to that would be able to demonstrate which installer had completed the work as well as other matters. …

40. There had to be prospects of success at 51% or more based on the first assessment for us to be prepared to the case on a CFA. Pure Legal would make this assessment based on discussions with the client and the evidence and documents Pure Legal had been given.

41. On those cases being progressed, the clients would proceed to sign up to the CFA, sometimes with the assistance of sign up agents, and obtain an assessment report if necessary (generally if the case had come packaged from a CMC, it would already have an assessment report, but if it was direct client / website lead, we would need to obtain an assessment report ourselves). Depending on where the case came from, there were different types of assessment report. Ultimately, there was a requirement to have an assessment report in order to apply for funding.” Ms Shaw said in cross-examination that PLL rejected at least half of the cases as they did not meet its criteria. She also said that there was ultimately a requirement for an assessment report in order to apply for funding, though she could not recall whose requirement that was. It needed to support the conclusion that the case was more likely to succeed than fail.

153. Ms Shaw explained in her second witness statement that, for a certain period of time, some PCSS employees carried out onboarding work on behalf of PLL under an agency agreement between PLL and PCSS. They remained under the ultimate supervision of a PLL solicitor. Ms Shaw was asked about a presentation dating from April 2018 by Ms Furlong to staff (it would appear from its contents and tone), one slide of which said:- “Within PCSS we have two areas of work that is completed on a day to day basis First is 'Administration of Pure Funding' this entails Processing and vetting all new applications from solicitors to determine if their cases are eligible for funding. And the Second is we provide a vetting function for Pure Legal Limited We have a strict vetting process to follow, as each case type we fund, has different criteria's to qualify. The funding covers all disbursements incurred to run the solicitors cases, which varies from medical reports to surveyors reports.” Asked about the third paragraph, Ms Shaw said she was not sure what Ms Furlong meant by providing a vetting function for PLL, though it might have meant that PCSS was doing a vetting function for PLL “as in the people who were working on behalf of the onboarding team” . This presentation (made by a non-lawyer to staff) does not in my view suggest, or provide any basis for inferring, that when PCSS was carrying out its own vetting function it was doing so as agent for PLL or whichever other Scheme Solicitor had put forward the case. Ms Furlong’s comment is more likely to have referred to the discrete agency work for which PCSS provided some staff to PLL as Ms Shaw had explained.

154. If the case was accepted, the standard CFA documentation was issued for signature, and an administration fee would be charged for the sign-up. In some instances, it appears that Pure Claims Limited (not PLL) conducted this initial assessment/sign-up process (e.g. as shown by Pure Claims Limited’s March 2019 assessment process for MMS claims ). The signatures on CFA documents (and later on loan documents as well) were often obtained by a sign-up agent, UK Legal Assist Limited. Ms Shaw stated that where claims were not already ‘packaged’ an assessment report was obtained at this stage as well. This, she said, would follow the signing of the CFA and provided a further layer of confidence in the merits of a claim before it moved on to the next stage. It would follow, in such cases, that the risk assessment carried out when filling in the Funding Application Form would be based on more detailed information than was available when the CFA was signed.

155. After CFA execution, claims were referred to PCSS by the Scheme Solicitors. PCSS vetted all Scheme cases against criteria approved by Novitas and AmTrust, which changed over time. Ms Shaw said in her witness statement:- “42. The claim would then be sent to PCSS who would be presented with essentially all of the relevant case file materials and the documents that were present on the Pure Legal file, or the file of whoever the Scheme Solicitor was. It was PCSS's responsibility to go through the material and to vet the case against the relevant criteria for approving cases for funding, to ensure that they were happy that the case had good prospects and that the case met the other relevant criteria.

43. The criteria documents for the vetting exercise by PCSS were drawn up with the input of various businesses within the Group of Companies including Pure Legal, PCSS, and PALL. The criteria documents were approved by the funders and insurers. My understanding is that before anything was approved, funders and insurers did all of their own due diligence and took their own advice. We were learning throughout the process and feeding back and tightening criteria throughout the life of the Scheme. For example, on Cavity Wall cases it became a requirement of the funding for assessment reports to be completed by RICS qualified experts before the case could be presented for funding.

44. Criteria would go through various iterations, but, as I recollect, they were sent over to funders and insurers for them to approve any changes. From memory, there were about ten to twelve variations to the cavity wall criteria across the period of a few years.

45. If PCSS looked at the documents and it said that the clients' evidence was that they were first made aware of a potential claim at a particular point in time, they would check that date to make sure that it came within the parameters for the type of case.

46. If PCSS were not happy, then they would push cases back to Pure Legal or the relevant Scheme Solicitor and would either refuse to proceed or seek further information.

47. PCSS would not interact with the lay clients directly. PCSS would interact with the Scheme Solicitors, funders and insurers.

48. If it did not reject a case, PCSS would then present the case to funders and ATE insurers. Pure Legal would not send anything directly to the funder or AmTrust at this stage because PCSS was the conduit for the application process.

49. PCSS would send over the information to Novitas first who would then review it. They had their own checks that they would complete and would seek further information from PCSS if necessary, who would then revert to Pure Legal or the Scheme Solicitor. If the client rang with any questions or queries when it came to the funding, we would refer them through to Novitas so that Novitas could have any conversations around that for their own regulatory requirements.

50. Once the client was signed up to the loan, there would then be a notification into PCSS and then they would issue a notification to the insurer asking for the ATE policy to be incepted so that the cooling off period on the loan ran concurrently with the cooling off period of the policy. I recall the cooling off period as being around fourteen days.

51. If AmTrust had any questions or needed to verify anything they could refer it to PCSS. I do not recollect PCSS referring many AmTrust queries back to Pure Legal.”

156. As regards her reference to the “ criteria documents ”, Ms Shaw in cross-examination said she recalled a document in bullet point form setting out the criteria PCSS applied. In re-examination she identified this as the “Criteria’s” tab of a spreadsheet, one iteration of which was emailed by Ms Furlong to Mr Hodgkinson on 20 November 2017. Ms Furlong’s email said, “Please see attached data split we have pulled together in prep for tomorrow’s meeting” . The first tab of the spreadsheet, “Data” , contained figures for the numbers of cases taken in by PCSS and what had happened to them. Among other things, it indicated that about 25% of the cases had by then been rejected by PCSS or closed, including 1,065 “closed due to PCSS believing no prospect of success/case does not meet our criteria” . (A later email, dated 6 August 2018, indicates that for one particular Scheme Solicitor PCSS had rejected 27 out of 62 cases presented to them.)

157. The ‘ Criteria’s’ tab of the spreadsheet set out “ Acceptance Criteria ” for CWI, holiday sickness, noise induced hearing loss and housing disrepair cases. For example, in relation to CWI it stated (under the overall rubric “ Pure Claims Support Services Limited ”):- PURE CLAIMS SUPPORT SERVICES LIMITED Acceptance Criteria - Cavity Wall Insulation - PCSS confirm good liability prospects. - Signed CFA and ID Documents (1 in date photographic ID and 1 proof of address, dated within last 3 months). - Electronic ID is also acceptable if it is either Experian or Lexis Nexis (Trace smart). - Client must be the owner (and provide proof of ownership) of the property affected. If the client was not the owner of the property when the cavity wall was installed, then no remedial work must have taken place and current problems with the property must be related to the installation of cavity wall (see below). - There must be a CIGA/BUFCA etc. guarantee on the cavity wall installation. - At Least 12 months prior to limitation expiring - either: • Date of knowledge (when the client is aware that the cavity wall is faulty) is less than 2 years ago; OR • 14 years or less from installation. Insulation installed within 10- 14 years ago, we require further information before we place the case onto Pure Funding. - Cavity Wall must be incorrectly or unsuitably installed and evidence from a surveyor must be provided as a mandatory document. - Cannot deal with cases which have previously be settled with CIGA, - The Cavity Wall installation must still be in place.”

158. Ms Shaw said she understood the above Criteria to have been agreed by all parties, including Novitas and AmTrust. The spreadsheet also had tabs containing the templates for the Scheme Solicitors’ Funding Application Form and the “PCSS Vetting Form” (i.e. the Claim Vetting form). A note on the former tab said “This application form is sent on each case for each product and we will not accept a case without this being fully completed with evidence to support aspects [of] this form” , and a note on the latter tab said “This form is completed on each case that is sent across to our funders and the case will not be accepted onto funding without this being completed” .

159. PCSS had access to the documents previously received by the solicitor. I have summarised in section (D) above the contents of the Claim Vetting Forms. As well as common criteria, these included criteria specific to claim types. For instance, MMS claims required a mortgage dated after 31 October 2004 and a MARS report, while CWI claims required a prescribed installer and installation within the last eight years. On UDC cases, an email from Ms Ashton dated 15 March 2019 indicated that PCSS undertook “ the vast amount of the investigatory work, obtaining the DSAR’s and compiling the initial overview and paperwork ”, justifying higher vetting/management fees.

160. Ms Shaw on 1 November 2017 sent an email to, it appears, an IT developer attaching a “simplified diagram of the flow of mortgage mis-selling cases” . The attached one-page diagram includes a box saying, “Case received into PLL for vetting, CFA sign up and obtaining MARS report” , with a comment saying, “This activity is outsourced to PCSS, however the staff of Pure Claims have been engaged to assist due to capacity constraints”. AmTrust in its written opening relied on this as example of PLL acknowledging that PCSS was acting as its agent in relation to the vetting of claims. The document was not put to Ms Shaw, and in my view no conclusions can be drawn from it about what particular activity was being ‘outsourced’, when or on what terms, still less that it relates to PCSS’s own vetting process pursuant to the SLA.

161. On 11 November 2017, before the first ATE policies incepted, Mr Hodgkinson said in an email to Mr Gilchrist:- “I ideally I want you to spend some time with Jeni Furlong to give you a feel for how robust our vetting is, particularly on Cavity Wall, but also across the piece.” This is one of numerous emails where there is potential ambiguity about the capacity in which the author is writing and, relatedly, about vetting process they refer to (the Scheme Solicitor’s or PCSS’s) and/or (sometimes) which entity is meant by the word “ Pure ”. In this instance, Mr Hodkinson wrote from a PLL email address, but signed as “ CEO PURE Business Group Ltd ”, and was in fact a director of several companies in the PBG.

162. On 26 November 2017, Mr Hodgkinson emailed Mr Gilchrist (this time using a PLL signature as well as email address) saying:- “… I wanted to run something by you on Cavity Wall. In essence, our vetting is becoming more and more robust by the day, which I am sure you are delighted to hear. On December 1st we add new layers to the vetting, including our own vet of the Surveyor who attended the property and their PI I Insurance. All in all there are around 10 additional layers of vetting on Cavity Wall compared to all other work types (barring Med Neg) but that is vetted by Barristers externally. To that end I have had to double the size of the team vetting cavity, which means our overhead has doubled. This also means that the £150 vetting fee from the Premium simply is not enough, and we are making a significant loss on it. We need to increase the PURE Fee to £350 from £150, and can go about it in one of 2 ways:

1. Reduce the referrer commission to £150 paid on won cases only back end, and move the additional £200 to PURE

2. Increase the premium by £200 + IPT (which it can stand), I would still want the referrer commission to be paid back end on won cases. Would you let me have your thoughts on this, as we could do with going live this week as we transfer cases. …” The references to surveyors and barristers indicate the breadth of the concept of ‘vetting’ in Mr Hodgkinson’s terminology. The £150 and £350 vetting fees appear to have been those payable by AmTrust to PCSS.

163. On 29 November 2017, Ms Shaw emailed Mr Gilchrist to “query what happens in the event of a claim becoming multi-track, as the criteria states fast track only” , noting that MMS and CWI cases would have a “high tendency” to be worth in excess of the fast-track limit, as would some clinical negligence claims. She asked whether an additional premium would need to be charged for these. Mr Gilchrist replied the same day, saying that he would need to “endorse those out for the relevant sections” but that there was no additional premium for multi-track cases. Mr Gilchrist then emailed Mr Warr, notifying him of this problem, stating that “[c]ontracts all state Fasttrack at the moment – policies are ambiguous but the two work in tandem…Damages on these cases are £25k or more – so there is a proportionality test” . Based on an email from Ms Shaw on the same date summarising a call with Mr Gilchrist earlier that day, a “side letter” was to be sent to all Scheme Solicitors “to confirm policy as it is covers MT” . In a later email, dated 19 June 2018, Mr Gilchrist sent an email to PLL saying “The below is the eligibility criteria” , followed by text like that set out in the Appendix to the TOBA but including reference to permissible types of multi-track case. It went on to note that “[i]f any case falls outside of the Eligibility Criteria , they should be referred to the Administrator for review.”

164. AmTrust suggests that Ms Shaw ‘accepted’ that this was a variation to the TOBAs (and supported its contention that the Eligibility Criteria in Appendix 1 to the TOBAs set out criteria which the Scheme Solicitors were bound to apply for AmTrust’s benefit). That suggestion appears to be based merely on Ms Shaw’s agreement in cross-examination that Mr Gilchrist “ had agreed that multi-track cases could be included ”. I do not agree that that evidence indicates that the TOBAs were, or needed to be, amended (even if it would be admissible for that purpose). Further, the email exchange indicates that the Scheme Solicitors would be informed that AmTrust regarded the ATE policy (“ policy as it is ”) as covering multi-track as well as fast track cases: that, rather than the contents of the TOBA, being the critical point.

165. Where claims did not meet criteria, PCSS either rejected them or requested further information from the Scheme Solicitor. Claims which passed PCSS vetting were submitted to Novitas for review and additional checks. Client funding queries went directly to Novitas for regulatory reasons.

166. Following Novitas Loan setup, PCSS made the application for ATE insurance to CLE, so aligning the cooling-off periods. Each ATE policy (on AmTrust’s case, generally) had a £25,000 indemnity limit. Ms Shaw said she believed that all Scheme Solicitors had access to identical funding arrangements and indemnity limits, with premiums set by AmTrust/CLE.

167. The documents include an example of AmTrust’s concerns about vetting being raised by underwriters directly with PCSS: an email exchange of February 2019 addressing the reasons for two CWI case failures: one where the insulation had already been removed (a fact not disclosed at vetting or in the expert report), and the other because of a time bar (where a CIGA (Cavity Insulation Guarantee Agency) certificate had been received after case vetting and had demonstrated a limitation problem).

168. On 12 December 2017 Novitas made an enquiry about a “PURE Panel vetting, management & oversight fee (50% cases)” of £500 plus VAT. Ms Shaw replied:- “The panel vetting fee is a fee applied by the team who deal with setting up, vetting, processing CFA and CCA on behalf of the Pure Legal panel law firms for cavity cases. There is a similar fee on mortgage cases. This is a different team to that which processes the funding and is for the work undertaken to set up the cases and to monitor and audit those cases through the lifecycle of the claim. The fee has been approved by AmTrust.” AmTrust prays this in aid as an example of PCSS being recognised as acting as PLL’s agent generally across the Scheme, including in relation to PCSS’s case vetting function. In cross-examination, Ms Shaw said she thought the fee related to the “ onboarding process ”, meaning “ setting up cases, processing CFAs and then passing them to the PCSS team on behalf of the CCAs ”. However, she was unsure precisely which activities were covered. I do not think any reliable conclusions can be drawn from this message.

169. The documents include an example of HSS’s standard CFA terms dating from January 2018, which included this:- “We have negotiated an after the event insurance policy with AmTrust which enables us to offer the policy to all our clients on a delegated authority basis. We have secured such favourable terms with the underwriter and to ensure we retain delegated authority and the ability to offer such a policy to our clients, on all similar type cases and are placed with this facility, subject to this being in the best interests of the client on an individual basis and subject to client counsel.” Similarly, HSS’s standard “ Statement of Demands and Needs ” stated:- “We have the benefit of delegated authority allowing us to put the policy and cover in place for you without having to obtain express approval from the insurer and submit various applications on your behalf so that you know the policy is in place from the start of your claim.” However, as Sompo points out, those statements were simply wrong. HSS was not able to issue ATE policies itself. All cases had to proceed to PCSS for vetting before any policy could be issued by CLE.

170. On 14 March 2018, Novitas sent PLL a query about GDPR requirements “in relation to Pure operating as Novitas’s agent through administering the CCA on our behalf” , leading to Mr Mares of PLL sending an internal message saying he was “trying to get to the bottom of the role PCSS play in the Funding model” . Mr Mares said that, having spoken to David (presumably Mr Gilchrist), he understood that PCSS were not acting as AmTrust’s agent but as an agent of the solicitor, and asked Ms Shaw and Ms Furlong whether that was their understanding. Ms Shaw replied on 28 March saying:- “Given that Amanda set it up, probably best to ask her but my understanding has always been we are agents of both Novitas and the Insurer, as we decide what goes on policy, we decide what is paid and not paid, and we decide whether to make a claim on the policy or not” and, following a query to her from Mr Mares, Ms Ashton said:- “As far as the ATE is concerned PCSS act as agent for the solicitor in requesting the Policy from Amtrust. Thereafter Amtrust pay PCSS to continue monitor the case on their behalf. PCSS provide verification services to the funder when vetting, checking and verifying the suitability of funding requests for the requested disbursements. PCSS do not authorise or distribute funds (at present) funds are authorised under the loan agreement and distributed directly by Novitas.” AmTrust suggests that this shows Ms Ashton believed PCSS acted as the Scheme Solicitor’s agent throughout the Scheme, including in relation to vetting. I do not agree. Her first paragraph related specifically to acting as agent when requesting the policy: that view was consistent with SLA Schedule 2 § 2, in particular subparagraph 1.1 of that paragraph (and is common ground in the present trial). Her second paragraph included vetting, and did not indicate that PCSS was in that capacity acting as the solicitor’s agent.

171. Also in March 2018, there were discussions about the vetting fees being charged on CWI cases, during the course of which Mr Gilchrist raised this query with Ms Shaw and Ms Ashton on 22 March 2018:- “… we will shortly be needing to put the Cavity Premiums up. In short the initial information had the average cost for a claim at around £1300. It isn't rocket science to see that isn't possible when the initial report is £1,500 + VAT. We also know that an increasing number of these cases now that the volume has increased will need to be issued - £500 — before we build in the trial and counsel costs. When I was pulling out these figures, I saw the: "PURE Panel vetting, management & oversight fee (50% cases)" at £500 [I presume plus VAT] I think I need some help here as I can't see how this is a disbursement within the definition of the policy and fees are already paid on behalf of AmTrust to Pure for vetting etc. Can you help me here please? As if this is simply the fees that come out of the policy then I don't need to look at them, if they are separate then I think we need to understand on what basis they are being funded within the terms of the insurance. As written in previous emails we don't pre-approve disbursements [each failed claim will be looked at on it's own merits], you are acting as the agent of the firm when making your representations to the Bank, but we do need to have an appreciation of likely costs.”

172. Ms Shaw forwarded Mr Gilchrist’s message to Mr Hodgkinson, who said it was “One for Amanda” and, shortly afterwards, “We can’t lose the up front money. Amanda needs to explain in detail why it’s a disbursement and also suggest he increases the premium as he wants to!” . Ms Shaw in cross-examination accepted that the vetting fees were “part of the revenue of the business” .

173. Ms Amanda Ashton, as PBG’s Chief Operating Officer, replied to Mr Gilchrist the following day, 23 March 2018, saying:- “Further to our discussion yesterday the payment for the initial vet and report payable to PCSS under the Cavity Wall claim arose because we restructured the system as we were concerned that the company preparing the report were too expensive (£2500) (off the record we were concerned they were perhaps profiteering) and so we broke down the process and decided that Pure Group could do a fair amount of that work cheaper. Pure Legal now instruct directly for the survey report from the Chartered Surveyor which is £1500 and instruct PCSS to carry out the company searches and the scheme searches and obtain the BBA [British Board of Agrémont] report and the Installation Guarantee Certificates so that we can confirm the product used also so that we can trace the entity who claimed the carbon credits and ultimately who is the Defendant, PCCS are doing this for £500 which means we have effectively reduced the fee by the same amount. As discussed I can see clearly that the overall risk has perhaps been under provided for and we are happy for AmTrust to increase the base premium by £500 to be retained by the underwriter.”

174. There was also some internal email correspondence that morning, in which Ms Shaw asked Ms Ashton whether she had responded to Mr Gilchrist “to explain the vetting fee is for the PLL panel work not the part of PCSS which runs the funding” , to which Ms Ashton replied “Yes. David [Mr Gilchrist] is sorted.” During cross-examination, Ms Shaw was taken to that response (but not to Ms Ashton’s response to Mr Gilchrist), leading to this evidence:- “Q. … So, your view was that the vetting fee was for the work done by Pure Legal Limited. A It says, "the PLL panel work", yeah. Q Is that what you'd call the onboarding work? A Like I said before, there's -- there's onboarding of the cases for the panel and there's the ongoing management of the panel. I'm not sure which it refers to. Q I see. A Probably both. Possibly both. I'm not sure.” (Day 3/159-17-160/1) In re-examination, Ms Shaw confirmed that the contents of Ms Ashton’s response to Mr Gilchrist would be the sort of matters Ms Shaw would expect to be within Ms Ashton’s knowledge.

175. I do not consider this evidence, taken together, to support AmTrust’s suggestion that these fees were being paid to PLL: rather, it indicates they were being received by PCSS for its work.

176. Statements on ProClaim of “ Approved Disbursements ” similarly refer to vetting fees, naming the ‘Supplier’ as PCSS: for example a form in Ms Bains’ case referring to a vetting fee of £1200 paid on 7 February 2018 and one in Mr Hayde’s case referring to a vetting fee of £1200 paid on 23 April 2018. AmTrust suggests that the supplier was in fact PLL, speculating that the document could not show PLL as having paid a ‘disbursement’ to itself. However, the document does precisely that in relation to CFA fees, where the supplier is shown as PLL. I see no reason, therefore, not to read the documents at face value.

177. In the “Claim Form Details” section of ProClaim, the vetting fees appear to have been incorporated, alongside the actual MARS expert fee of £2220, in an entry for £3420 described as “ Other Expert Fee ”. That may tally with an earlier email exchange in October 2017 in which Ms Shaw on 12 October requested a chat about “putting a vetting fee into cavity wall claims as we are now doing a limited number under a panel agreement as PLL”, saying she wanted to be able to word and charge the disbursement properly to ensure recoverability, and noting that it would be £500 plus VAT for PCSS. Ms Shaw then, on 16 October, emailed Ms Ashton cc others saying she had just had a chat with Ms Ashton about it and “there is already a vetting fee buried within the report fee, that’s why it is so much!” , following which Ms Ashton asked Ms Shaw to delete the email chain. I do not see, however, that this takes matters any further in terms of the supposed receipt of vetting fees by PLL, nor the correct interpretation of PLL’s and PCSS’s respective duties to AmTrust. As noted above, the service supplier named in the document was (as Ms Shaw confirmed in re-examination) PCSS.

178. There was also a query from Novitas sent to PBG about disbursements, in early April 2018. The questions which related to vetting fees, and Ms Shaw’s answers sent on 10 April 2018 (which I have shown in italics), were as follows:- • “Why for Cavity Wall claims, the Pure Vetting fee will apply for 50% of the cases and for Mortgage Mis-selling is for 100% of the cases? we are receiving cavity wall cases from outside of pure legal, where as we are only processing MMS cases through pure legal at present. This may change going forward… • For the above situations, what is the criteria for choosing the claims where the Pure Vetting fee will be applied for the CWs? This occurs where pure have completed the additional vetting, CFA sign up, CCA applications and will continue to have monitoring and supervision responsibilities for their panel firms … • What exactly does the Pure Panel Vetting fee covers? I know it covers the management & Oversight fee, however do you have a breakdown? We have assessed the time recording involved in us undertaking this work and I believe Dave Kirby has gone through this both with Jason and Steve as it is an accounts exercise ” In cross-examination, Ms Shaw said she thought that meant that the Pure Panel vetting fee was charged when the case came from PLL but not when it came from another firm. She agreed that the amount of the fee was based on the time it took to do the initial assessment by PLL, and that PLL therefore was being paid for that work, though she went on to add that the onboarding team “was PCSS on behalf of Pure Legal” . Asked what tasks the time recording related to, she said it was the onboarding, management and oversight, and then that she ‘believed’ it included onboarding. I do not consider that this rather vague evidence (which in any event relates to post-contractual events) demonstrates that AmTrust or CLE were in fact expected to pay, or did pay, PLL for its vetting of claims.

179. Novitas sent an email to Mr Gilchrist about vetting fees on 12 April 2018, saying:- “You are probably aware of the Disbursement Schedule that I have attached for you. We wanted to make sure that all parties have a full and clear understanding of the disbursements and fees that are being funded across our product. Fee Amount % of Cases applied to Model Pure Panel Vetting fee £1,200.00 100% Mortgage Mis-selling Pure Panel vetting fee £600.00 50% Cavity Wall Regarding the Pure Panel vetting fees, we've confirmed with Lee Salmon at Pure that these are not inclusive of any extra charges such as CFA Sign up fee or Land Registry fee. These disbursements are being drawn down separately. Let us know if there are any issues with the above that you weren't aware of.” Mr Gilchrist sent his proposed response to Mr Warr on 16 April:- “Many thanks for the email. We are aware of the two disbursements that you have highlighted for the Cavity and the MMS product. Our understanding of the Cavity vetting is that Pure undertake some of the more 'legal' elements of the case vetting that: originally the suppliers / surveyors would do. This has led to a decrease in the suppliers / surveyors report but an increase in the Pure costs. Whilst we are aware of the MMS vetting fee, we have less knowledge on how this interacts with the MARS report which we understood to be comprehensive. We will be asking for some clarity here both on the content / purpose and the gross margin.” Mr Warr in cross-examination said the reference to the change in fees appeared to relate to PCSS undertaking the additional elements of the case mentioned in the message, and to an increase in PCSS’s fees, consistent with the earlier email from Ms Ashton referred to in §173 above about PCSS’s fee rising because it was doing additional work.

180. On 25 April 2018 Ms Ashton told Mr Gilchrist that they were looking to achieve “vetting/management fees to PCSS” of £450 for initial vetting and £400 for ongoing management fees. Asked for more detail, she wrote:- “The initial vetting is a review of the merits of the claim, checking it is within the vetting criteria, a review of the initial report, confirmation of the loan status and claimant checks. The post insurance stuff will be in respect of the audit and file reviews pre issue of proceedings and pre trial. Happy to discuss repayment: of this part by PCSS if a claim fails pre-trial.” In a further email, on 27 April 2018, Mr Gilchrist asked (among other things):- “My query was more how the costs break down and what each costs represents. So if PCSS are being paid a disbursement by the client for `vetting' or management -- what is this made up of, and why is it complimentary to the expert's reports?” To which Ms Ashton replied:- “… The initial services are a form of vetting for the purposes of making sure that everything adds up and that all criteria are being met before proposing the case for cover. We see this as essential for the continued security of the scheme overall. PCSS currently reject over 55% of all cases proposed for funding and this has a real net cost to operate. There are circa 50 full time staff in PCSS now. The ongoing will include us managing the continued risk and vetting cases before they are set down for a hearing and reviewing the cases after issue to ensure they are suitable to stay on risk. This is a new are and the last thing we want is a panel solicitor going off on a frolic; and endangering the remaining cases on cover. This has a real cost to PCSS …” It is clear that the focus of those emails was on vetting by PCSS, as distinct from by the solicitor.

181. On 7 August 2018, Mr Gilchrist emailed Ms Ashton (cc Ms Shaw and others) saying:- “Following on from the issues that were raised in recent claims some points were discussed on the sales call this morning. One point stood out, that it's a `packaged case' and so the lawyer accepts. Whilst we understand this concept it only works if conditions precedent for a claim are met. It seems from discussion there may be multiple cases where those obligations are being missed. We need to resolve this ASAP. The lawyer is ultimately responsible for inception on a delegated authority scheme - but these have all been vetted by pure and so far it's fundamental errors that are creating failed cases. As per previous we need an urgent meet / call to rectify.” to which Ms Ashton replied (cc Ms Shaw and others):- “We must stress that we are making every effort to ensure the vetting criteria are adhered to and that there are regular checks on work quality of the staff carrying out these processes. I myself examined a small number of these cases last week and it appears that some of the cases were taken on when the vetting criteria was in a state of change and in another case it came to light that the initial evidence provided by the Client was incorrect, but we can review each case as part of the proposed meeting. We are constantly reviewing and tightening the criteria set as we go and any opportunity to improve quality and process is welcomed. That said it may have been more productive to have raised this and request a process review than to simply reject the claims on policy and any future such instances should be handled in that way. If Amtrust have an issue in such cases it can be communicated to us that the claim is being met under the deed of indemnity and that a review of the acceptance process is required in that case.”

182. AmTrust suggests that this exchange reflects an acknowledgement that the Scheme was a delegated authority scheme. I do not read it in that way. To the contrary, in my view Mr Gilchrist’s statement that “ The lawyer is ultimately responsible for inception on a delegated authority scheme - but these have all been vetted by pure ” contrasts (a) a typical delegated authority scheme, where the lawyer is ultimately responsible for inception, with (b) the Scheme in the present case, where ‘pure’ was vetting all the cases. In my view, the reference to vetting by ‘pure’ was to PCSS, which was the entity whom AmTrust had employed to vet all the cases, whether the ‘lawyer’ was PLL, HSS or another firm. Indeed, Mr Gilchrist’s statement would make no sense if by ‘pure’ he meant PLL, which was (on some cases) ‘the lawyer’. Equally, I read Ms Ashton’s response as relating to vetting by PCSS (and it was not suggested to Ms Shaw in cross-examination that Ms Ashton meant vetting by PLL or other Scheme Solicitors). Ms Ashton’s reference in the email to the vetting criteria being subject to change may well to have pertained to changes to PCSS Acceptance criteria for CWI cases in July 2018 to require a RICS report. On the same day, Mr Hodgkinson wrote in an email to Ms Shaw (using his PBG CEO signature) that “ We should NOT EVER be missing anything at vetting ”. I see no reason to regard that as relating to vetting by PLL and the other Scheme Solicitors, as opposed to PCSS.

183. AmTrust also relied, in support of its contention that the Scheme Solicitors had ‘delegated authority’ to issue ATE policies, on the notions that:- i) PCSS was able to ‘order’ policies, which were then issued automatically, and ii) in doing so, PCSS was acting as the Scheme Solicitor’s agent.

184. As to (i), AmTrust referred to Ms Shaw’s evidence about how the ProClaim system operated. This involved processing a “ workflow ” on ProClaim, which would in turn enable communication between ProClaim and AmTrust’s own system. Ms Shaw said that “ Information would pass over to AmTrust. That would be processed and a policy number and policy document would be passed back ”, and that a policy would come back “ pretty quickly .” According to process flowsheets for mortgage mis-selling cases, ATE policies would be ordered by PCSS. One such flowsheet set out a process which culminated in a step titled “ ATE – PCSS will order an ATE their end and send to Admin ”. Similarly, the final stage set out in a process sheet emailed on 13 March 2019, by Mr Ian McDermott to Ms Shaw stated: “ PCSS order ATE their end. Proclaim fires task over to Claims side with the ATE Policy Number (PCSS Ref). Admin in claims then access ATE Portal and attach to case. ” AmTrust points out that there is no evidence that CLE/AmTrust ever rejected an ‘order’ from PCSS for a policy, and Ms Shaw’s evidence was that “ [w]e would request a policy and we’d be provided with a policy .” Ms Shaw accepted that a policy would be issued if both the Scheme Solicitor and PCSS were happy.

185. Nonetheless, the SLA made clear that it was ultimately for CLE, not PCSS, to decide whether to issue a policy, and that CLE retained the usual ‘discretion’ in that regard: see §§ 91-94 above. AmTrust’s proposition (i) is therefore legally incorrect.

186. AmTrust’s proposition (ii) is also incorrect. The SLA made clear that, whilst PCSS acted as the Scheme Solicitor’s agent for some purposes, that did not include the issuing of policies, nor PCSS’s vetting of claims: see §§ 92 and 95 above. It would be absurd to suggest that PCSS was acting as agent for the Scheme Solicitor when deciding whether to admit cases to the Scheme, frequently rejecting, as it did, cases which the Scheme Solicitors had put forward.

187. Mr Mares in an email of 11 September 2018 to Ms Shaw and Mr Kirby of PLL said:- “Had a catch up meeting with AA this afternoon as we will need a couple of internal agreements in place prior to the MOJ audit in Oct. Jen following our discussion on Thursday last week I understand that the following is the process for both UDC and MMS cases. PLL have an agency agreement in place with PCSS who in turn have an agreement in place with PCL (so in effect PCL are acting as agent of PCSS who in turn are acting as agent of PLL). …” and requested some further details so that the agreement could be drafted. AmTrust suggests that this email indicates that PCSS acted, generally, as PLL’s agent. I do not agree. The message indicates merely that there was an agency agreement in place. No information is given about its scope. It is consistent with the arrangement mentioned earlier pursuant to which PCSS did some onboarding work on PLL’s behalf. It does not suggest that PCSS was PLL’s agent when PCSS did its own claim vetting, and any such suggestion would be contrary to the contractual scheme as a whole: see §§ 92, 95 and 186 above.

188. On 13 September 2018, Mr Hodgkinson wrote in a message to Mr Gilchrist (using a PLL email address but signing off as CEO of PBG) that “[a]s you know, one of our most important jobs on the scheme is vetting cases” . Given the ambiguity about who “ we ” meant, I do not believe this email takes matters any further.

189. On 29 November 2018, Mr David Kirby (who was Chief Finance Officer of PLL, in addition to holding various other posts including being a director of PBG) sent to another lender what he described as an “ Explanation of background ”, in the form of a two-page document headed “ Pure Business Group Limited ”. It includes the following points relating to fees:- “We are currently facilitating £5-6M a month of litigation funding For this PCSS receives two forms of fees Vetting Fees- £1,000 plus VAT for vetting the case — providing assurance to both the Insurer and the Bank Management Fee of £350 from the insurer for monitoring the payments on a case- payable by the Insurer Both these amounts are paid on the Commencement of the Case, this is then used to fund the Work in Progress in the Law Firm This process ensures that we do not have to tie up working capital on case costs and also we generate sufficient funds to enable the Law Firm to run the cases. Pure Legal Limited then progresses the cases and receives on average £12K profit costs and the end of the case. This is received 18-24 M after the case commences. Pure Legal Costs Consultants Limited will receive a further £2k for settling the Costs Summary- Mortgage Mis-Selling Day 1 PCSS receives £1,550 a case 15-24 Months- Pure Legal Limited receives £12K 15-24 Months — Pure Legal Costs Limited receives £2k”

190. In cross-examination, Ms Shaw said she had not seen the document before, but ‘assumed’ that the initial vetting fees were part of the funds needed to pay the salaries and running expenses of the (law) firm. In re-examination, she stated that, based on the document, PCSS was the entity in the Pure Business Group that was charging and receiving the fees for the vetting and management work.

191. However, even if funds derived from vetting fees charged by PCSS were at some stage during the operation of the Scheme being used internally (within PBG) to provide working capital for PLL, it is hard to see how that fact could impact on the correct construction of the contracts comprised in the Scheme, including the SLA and the TOBAs. As between AmTrust/CLE, PCSS and PLL/other Scheme Solicitors, it was PCSS to whom AmTrust was paying vetting fees.

192. Mr Hill of CLE on 23 January 2019 described the process for MMS claims as follows:- “…the case will come into the CMC [claims management company] … where it will be assessed… MARS report [will be obtained]… and assuming it passes this (currently about 13%) it will go out to a solicitor who will approach Pure for funding. PCSS will carry out their own vet (£100) and establish the case is good for funding…”. Mr Hodgkinson replied:- “As for vetting, we vet the cases in PURE Legal, then PCSS and then independently, so it is a 3 stage process.”

193. Similarly, on 12 February 2019, Ms Shaw explained the process in one case in a reply to Mr Hill of CLE:- “[1] Case received in Pure Claims [CMC] for vetting and CFA signing… [2] Case then into Pure funding for further vetting and CCA signing… [3] Case then transferred to a claims handler in Legal…”.

194. Once funding and ATE cover were in place, PCSS sent details of these to the Scheme Solicitor who would conduct the claim. There were in effect three categories of solicitors: (a) those acting in their own right under a TOBA with CLE/AmTrust (e.g. PLL); (b) those acting solely as PLL’s agents (with PLL on record and AmTrust/Novitas approval); and (c) those doing both (e.g. HSS). PLL had separate teams for pre-litigation and litigated claims. For proceedings to be issued in a case required team leader approval, client authority and usually counsel’s advice. Issue of proceedings also required AmTrust/CLE consent, although under the ATE policy consent was deemed given if no response was given within five days.

195. Failed claims required the submission of a “ Failed Claim Form ” to AmTrust/CLE. The practice appears to have been for a fee earner at a Scheme Solicitor to fill out the form and send it to PCSS, which would send it on to CLE for a claim to be made under the ATE policy.

196. Disagreements arose between PBG and AmTrust/CLE regarding the Scheme from late 2018. In November/December 2018, there were disagreements over vetting and case management fees for CWI cases. On 3 January 2019, Mr Warr of CLE proposed a meeting with Mr Hodgkinson of PBG to discuss various topics, including future plans, results and CWI pricing. One subject raised was replacing the existing TOBAs. CLE/AmTrust sought this in order to (a) control the claim types, (b) remove those firms doing limited (or no) Scheme business and (c) introduce termination rights for any party on 30 days’ notice. In the event, no new TOBA was executed with PLL or HSS. The meeting took place on 17 January 2019. PBG provided updates on case progress, and the discussion covered information sharing, audit processes and a potential ATE premium increase on CWI cases. Ms Shaw later provided a management information pack on PLL cases and updated disbursement forecasts.

197. On 6 February 2019, Mr Hodgkinson of PBG raised with CLE his growing concern that, despite a “ very mature ” caseload, CLE was failing to address outstanding issues and this was “ seriously testing our relationship ”, “ stifling business ” and “ more importantly…potentially putting our clients in a position whereby they do not have sufficient cover ”. He raised (a) the approval of revised report costs in MMS/UDC cases, (b) the delayed approval for new case types (MMC and mis-sold SIPP pensions) (c) top-up cover for some CWI cases; and (d) the approval of new Scheme Solicitors. Mr Hodgkinson asked Mr Gilchrist of CLE to address these issues or “ advise us of your intentions, to enable me to decide the next steps for my business ”.

198. Mr Gilchrist responded on 8 February 2019 acknowledging that some premium increases were necessary but saying that they could not be applied universally. He said CLE was reviewing the TOBAs and intending to issue new versions to “ live ” firms shortly. Mr Hodgkinson responded later that day, saying that CLE’s inaction was causing PBG to lose suppliers and work that it could not afford to lose. He pressed for answers and indicated that alternative arrangements would be made if CLE did not assist.

199. On 1 March 2019, Mr Warr outlined AmTrust’s principal concerns: (a) that performance was falling short of CLE’s expectations; (b) that he felt that some ‘failed’ cases should never have been insured; (c) that he perceived a misalignment of interests, as PBG and Novitas earned fees even when claims failed, while AmTrust would be out of pocket; (d) that he wanted claims abandoned within 120 days to be treated as “unwinds”, with fees refunded; (e) that expert reports were expensive; (f) that he had some issues over CFA arrangements involving solicitors acting as PLL’s agents; and (g) that sample MMS files had not been provided for audit. He concluded that CLE would suspend incepting new policies, and proposed a meeting.

200. Ms Ashton responded that day in Mr Hodgkinson’s absence, rejecting the criticisms and saying that (a) ATE claims represented less than 4% of gross written premium; (b) all requested audit data had been provided, save for ten cases which would be supplied that week; (c) PBG would discuss specific cases, but vetting criteria remained subject to underwriter approval; (d) expert fees could not be dependent on success of claims; (e) an “unwind” period could be discussed with experts in future; (f) report costs were competitive; (g) the agency arrangements had been approved by Novitas/underwriters; and (h) further MMS files would be supplied the next working day. She warned that suspending underwriting before PBG secured alternatives “ would likely lead to a catastrophic failure of the scheme and as a consequence Pure and would leave Am Trust as guarantor to the bank… ”.

201. On 4 March 2019, Mr Warr replied that AmTrust would honour existing commitments but wished to discuss a “mechanism whereby we can transfer this business to an alternative carrier as soon as possible…in an amicable manner that protects the interests of all parties ”. At around this point, AmTrust suspended service under the Scheme. PBG told CLE that this action was preventing it processing new claims or progressing existing ones.

202. On 5 March 2019, Mr Warr proposed that CLE exit the Scheme. He said that this would involve (a) CLE invoking the 90-day cancellation period under the CLE/PCSS SLA, (b) the suspension being lifted, allowing new claims to be taken on in the interim under new TOBAs, (c) CLE/AmTrust cooperating with any new ATE provider for an orderly handover (expected to be in place by mid-April 2019) and (d) policies written from 5 March 2019 being transferred to the new provider. Ms Ashton responded, confirming PBG’s general acceptance of the proposal and noting that CLE could serve notice as deemed appropriate. However, she objected to the resumption of business being conditional on new TOBAs (which she said would take days to execute), particularly given the lack of any suspension mechanism under the current TOBAs. Mr Warr agreed to lift the suspension from 6 March 2019.

203. AmTrust circulated revised TOBAs containing various changes: (a) adding AmTrust as a party, (b) requiring the solicitor to conduct risk assessments for CLE/AmTrust, (c) allowing termination on 30-days’ notice by any party (d) expanding permitted case types to all Scheme Solicitors and (e) amending “ Eligibility Criteria ” to require at least a 51% prospects of success and the claim being on the fast-track, except for housing disrepair cases (including CWI). It is not clear whether these revised TOBAs were ever executed.

204. AmTrust exited the Scheme in about June 2019, though it remained on risk for existing business.

205. As at 30 June 2021, PLL was handling over 28,000 cases, with a further 2,657 handled by external solicitors as agent.

206. Novitas and Close Invoice Finance Limited (“ CIFL ”) had provided PLL (and another PBG company) with secured revolving credit facilities, while CIFL had advanced a Coronavirus Business Interruption Loan of around £4.6 million on 16 October 2020, guaranteed by PLL. In 2021, Novitas/CIFL demanded repayment of about £6.4 million before interest, which PBG and its group companies could not meet. This led to Novitas/CIFL applying to place PLL and related companies into administration, a step which AmTrust in its pleadings in the Main Proceedings criticised as causing disruption of the Scheme. An administration order was made on 2 November 2021, and PLL remains in administration.

207. According to the Administrators’ Proposals for HSS, the firm faced financial difficulties by 2023, as did others pursuing similar low-value, high-overhead cases. Increasing PI insurance premiums had strained cash flow, leading to arrears with HMRC and other creditors. A winding-up petition was presented by a former employee, and so HSS’s director sought insolvency advice, resulting in it entering administration on 5 June 2023. A pre-pack sale of HSS’s business and assets to Angelus Law Ltd completed the same day. Later, on 20 May 2025, HSS entered creditors’ voluntary liquidation.

208. For whatever reason, the Scheme did not turn out to be a success. Very few of the claims produced any recoveries. As of 24 January 2023, some 14,000 claims conducted by PLL and HSS had either failed or been abandoned, and fewer than 200, or less than 1%, had settled.

209. Reports prepared by PLL’s administrators indicate as follows:- i) In their Statement of Affairs, the directors of PLL estimated that the realisable value of PLL’s work in progress at the time of administration (i.e. time recorded by fee earners on existing cases) was £30,017,081. ii) Having investigated the position, the administrators formed the view that recoveries from PLL’s work in progress would be “ materially lower ” than estimated by PLL’s directors. iii) By 1 November 2024, three years after PLL had entered administration, the administrators had recovered less than £500,000 in respect of its work in progress, i.e. less than 2% of the directors’ original estimate. iv) PLL’s approximately 5,800 CWI claims were transferred to a firm called SSB. However, SSB considered that none of those claims was feasible to pursue.

210. When HSS went into administration, its business and assets (including its work in progress) were sold to Angelus Law Limited for an initial consideration of £20,000 and a deferred consideration of £320,000. HSS and Angelus Law Limited had mutual directors and shareholders. However, Angelus Law Limited also ceased trading, and no deferred consideration was ever paid. (H) PRINCIPLES (1) Contractual interpretation: general

211. The general principles are common ground. For present purposes it is sufficient to refer to the summary by Lords Hamblen and Leggatt in FCA v Arch Insurance (UK) Ltd [2021] AC 649 at [47]:- “The core principle is that an insurance policy, like any other contract, must be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean. Evidence about what the parties subjectively intended or understood the contract to mean is not relevant to the court's task.”

212. Factual background specific to dealings between the parties is generally of limited value in construing standard-form agreements: see AIB Group (UK) plc v Martin [2002] 1 WLR 94 at [7]; Re Lehman Brothers (No. 8) [2017] 2 All ER (Comm) 275 at [48(2)]; and Lamesa Investments Ltd v Cynergy Bank Ltd [2021] 2 All ER (Comm) 573 at [19].

213. Where multiple contracts form part of a scheme, each is construed on its own terms, but the existence of related contracts known to the parties forms part of the ‘factual matrix’. If the contracts cross-refer or otherwise indicate an intention to operate as a ‘package’, they may be read together to determine their legal effect: see, e.g., Ingenious Games LLP v HMRC [2019] UKUT 0226 (TCC), at [108]-[110].

214. In the context of an aggregation clause, Eder J in in Standard Life Assurance Limited v Ace European Group and Others [2012] EWHC 104 (Comm), [2012] Lloyd’s Rep IR 655 stated:- “262. … Whereas in AXA the words used were “arising from”, and in Municipal Mutual and Countrywide the words used were “consequent on or attributable to”, the policy here uses the words “arising from or in connection with or attributable to” (emphasis added). The phrase “in connection with” is extremely broad and indicates that it is not even necessary to show a direct causal relationship between the claims and the state of affairs identified as their “originating cause or source”, and that some form of connection between the claims and the unifying factor is all that is required.” Similarly, in Stonegate Pub Co Ltd v MS Amlin Corporate Member Ltd [2022] EWHC 2548 (Comm), [2023] 1 All ER (Comm) 981, Butcher J described the words “in connection with” as “wide linking words” which require “only a relatively loose link” [113].

215. Exclusions in insurance policies are to be read in a ‘balanced’ way, with no predisposition to give them a narrow effect, rather than as if they were clauses exempting liability in tort or contract. They are treated as part of the set of terms by which the draftsman frames the scope of cover: see Impact Funding Solutions Ltd v AIG Europe Insurance Ltd [2017] AC 73 at [6]-[7] and [35].

216. When construing solicitors’ PI insurance policies, which provide cover in accordance with the Minimum Terms, a relevant background feature to their construction is the regulatory context, which aims to protect a solicitor’s clients and third parties to whom a solicitor owes professional duties. As Lord Toulson (with whom Lords Mance, Sumption and Hodge agreed) stated in Impact Funding :- “41. There are two points to highlight about the nature and purpose of the policy. One is that the relevant terms replicate the minimum terms of the cover which Barrington was required to maintain under the Solicitors’ Indemnity Insurance Rules 2009. As the House of Lords recognised in Swain v The Law Society [1983] 1 AC 598, 610, the paramount purpose of The Law Society being given statutory power to require solicitors to maintain insurance cover against professional liability was “the protection of that section of the public that makes use of the services of solicitors” (Lord Diplock). The second, and related point, is that the policy describes itself as a professional liability policy. These matters are important when considering its scope.” I shall return to Impact Funding in more detail shortly.

217. In a number of other cases the court has observed that solicitors’ PI policies are intended to protect parties who use the services of solicitors and should be construed so as to give effect to that intended purpose: see Sutherland Professional Funding Ltd v Bakewells [2011] EWHC 2658 (QB), [2013] Lloyd’s Rep IR 93 at [33] and [71]; Royal & Sun Alliance Insurance Ltd v Tughans [2024] 1 WLR 1651 at [54]; Axis Specialty v Discovery Land [2024] PNLR 16 at [10]; and AmTrust Specialty Ltd v Endurance Worldwide Insurance Ltd [2025] EWCA Civ 755 at [36]. Thus in Impact Funding , Lord Hodge (with whom Lords Mance, Sumption and Toulson agreed) stated:- “17. Thomas J took the same view in Kumar v AGF Insurance Ltd [1999] 1 WLR 1747, 1752A-C, where he said that one must approach the construction of this sort of professional indemnity policy against the regulatory background which aimed to make sure that protection was provided to the clients of solicitors. As a general rule, solicitors, when performing work on behalf of their clients, owe no duty of care to third parties whose interests are affected by that work: White v Jones [1995] 2 AC 207, 256C-D per Lord Goff of Chieveley. It is, nonetheless, well known and not disputed in this case that the professional indemnity policy protected not only clients of the solicitors but also those third parties to whom solicitors have been held to owe duties of care in their performance of legal services and to whom they have incurred liability in negligence, such as those who have acted in reliance on negligent misstatements or beneficiaries disappointed as a result of negligence in the preparation or execution of a will. In addition, as Lord Toulson points out (para 42), solicitors’ professional liability may include undertakings given to third parties in the course of acting for their clients.” (2) Recitals to contracts

218. The court will usually give precedence to the operative terms of the contract over any recitals: see MacKenzie v The Duke of Devonshire [1896] AC 400, where the House of Lords held that the operative terms of a trust disposition could not be qualified by reference to the settlor’s motive as stated in the narrative. At pp405-406, Lord Halsbury LC said:- “…it seems to me to be absolutely unarguable that the true meaning of those words, and the purposes of the trust so set forth, can be in any way controlled, qualified, or modified by the initial statement of what the motive of the author of the deed was. It would be to my mind be disastrous to introduce such a system of construing a deed…” At p407 Lord Watson said:- “…the narrative words come to no more than this: ‘My intention is to do’ so and so, and you may add this, ‘and I have accomplished that purpose by the provisions which follow’. In such a case, the safer and only legitimate course is to look to the provisions which follow, and to read them according to their natural and just construction…”

219. Occasionally, obvious gaps in a contract may be filled by reference to recitals, as in Aspdin v Austin 114 ER 1402, (1844) 5 QB 671, an extreme case where the main subject-matter of the contract (the construction of a mill) appeared only in the recitals. In that case, Lord Denman said:- “where words of recital or reference manifested a clear intention that the parties should do certain acts, the courts have from these inferred a covenant to do such acts, and sustained actions of covenant for the non performance, as if the instruments had contained express covenants to perform them.”

220. Further, in H TV Ltd (formerly Can Associates TV Ltd) v ITV2 Ltd [2015] EWHC 2840 (Comm), Flaux J stated:- “[37] … the conversation which Mr Hendricks contends took place in which he said he could not guarantee her exclusivity because of her bankruptcy and ITV2 was apparently prepared to accept that, is wholly inconsistent with the preamble to the Agreement. Even if Mr Mallin were right that this was a reference to some prior agreement or commitment, what is referred to, a “commitment to procure the exclusive television services of Kerry Katona during the Term”, is in unqualified terms, pointing strongly to there having been some such commitment, as Ms Clarke said in her evidence. [38] In any event, it seems to me that the point about the commitment being “pre-operative” is a non-point on analysis. … it is well established that, where the wording of a recital manifests a clear intention that the parties should do certain acts, the Court may infer from that wording a covenant to do such acts as if the instrument had contained an express agreement to that effect, citing Chitty on Contracts 31st edition [13-025]. Furthermore, where there is ambiguity within the operative parts of a contract and a recital is clear, the recital will govern the construction of the contract: see per Lord Esher MR in Re Moon (1886) 17 QBD 275.” The recitals there included the statement “ We also refer to…CATV’s commitment to procure the exclusive television services of Kerry Katona during the Term so as to enable CATV to produce and deliver the KK Programmes ”. However, the question of the exclusive or non-exclusive nature of the services to be provided was not dealt with in the operative terms of the agreement.

221. The passage from Chitty cited in H TV states (now):- “17-037 Where words of recital or reference manifest a clear intention that the parties should do certain acts, the courts may from these infer a covenant to do such acts, just as if the instrument had contained an express agreement to that effect. So a recital in a separation deed that a wife had agreed to live apart from her husband implied a covenant by the wife to live apart. In contrast, however, with the use of words of recital in order to ascertain the meaning of a written contract, the courts are reluctant to imply such a covenant in the absence of a manifest intention to do so: “It is one thing for the court to effectuate the intention of the parties to the extent to which they may have, even imperfectly, expressed themselves, and another to add to the instrument all such covenants as upon a full consideration the court may deem fitting for completing the intentions of the parties, but which they, either purposely or unintentionally, have omitted.” So the recital of an agreement will not of itself suffice to create a covenant where there is an express covenant to be found in the witnessing part relating to the same subject matter.” (§ 17-037 in the 36 th ed., footnotes omitted) The quoted passage is from Aspdin at p684.

222. The authority cited for the final proposition in the passage from Chitty quoted above is Dawes v Tredwell (1881) 18 Ch. D. 354, 359. In Dawes , a marriage settlement recited that on a treaty for the marriage it had been agreed that all real and personal property which should vest in the wife, or in the husband in her right, to the value of £200 at any one time should be settled upon the trusts thereinafter declared. In the operative terms, it was agreed and declared, and the husband thereby covenanted with the trustees, that if any real or personal estate should devolve on or vest in the wife or the husband in her right to the amount in value of £200 at any one time, then the husband would (in summary) do everything necessary to vest that property in the trustees upon the trusts therein declared. After the marriage, a deed was executed by the wife's mother, under which a sum exceeding £200 became payable to the wife for her separate use. The Court of Appeal held that as the operative part of the deed was clear, the recital could not control it. The operative part of the deed related only to acts to be done by the husband, and did not import a covenant by any other party; and the husband’s covenant could not apply to property over/in which he had no power or interest.

223. In J Toomey Motors Limited v Chevrolet UK Limited [2017] EWHC 276 (Comm) it was held, after citing MacKenzie , that a recital to a franchise agreement, referring to support the manufacturer would provide, did not import further obligations in addition to those provided for by operative terms. HHJ Waksman QC (sitting as a judge of the High Court) stated:- “[T]here should be a degree of caution before finding operative provisions in recitals since they are not in the most obvious place. All the more so if the part of the recital relied upon deals with subject matter which is also dealt with in the main body of the agreement…” [73] The judge found that the recital dealt with the same subject-matter as the main substantive terms of the contract [77], and concluded that it did not contain any operative provisions [81].

224. Lewison, “The Interpretation of Contracts” (8 th ed.) states:- “In an appropriate case the court may interpret a recital as carrying with it an obligation to carry into effect that which is recited. 10.56 Any words in a contract which show an agreement to do a thing amount to an obligation. No special language is necessary. Accordingly, the court may interpret a recital as carrying with it an obligation.”

225. Lewison cites various statements and examples, including Aspdin , H TV and Easterby v Sampson (1830) 6 Bing. 644, where a lease of an undivided third part of mines recited an agreement made between the lessee and the lessor under which the lessee was to pull down an old smelting mill and replace it with another of larger dimensions. The lease itself contained no such covenant, but contained a covenant to keep the new mill in repair. Alexander CB said:- “We are all of opinion that in this demise there is a distinct covenant on the part of the defendant below to erect a smelting mill. Any words in a deed which show an agreement to do a thing amount to a covenant … and it is here recited that the defendant and others had, with the permission of Sir C. Turner and two others, taken down a smelting mill, and did engage to erect at their own expense a smelting mill of larger dimensions.” Lewison notes that “The essential feature of the case was not the express covenant to keep the new mill in repair but the recital of the antecedent agreement.”

226. Lewison goes on to quote Cairns LJ’s statement in Isaacson v Harwood (1868) L.R. 3 Ch. App. 225 that:- “Now it is well settled that there is no magic in the words of a covenant. Whatever words are used by a party to a deed, if he intends that they shall operate as a covenant, he will be held liable. In the simple case of a debtor acknowledging a debt by deed under seal, without any other object declared by the deed, no doubt it must be assumed that, although no words of covenant are used, the debtor meant to be bound, or else why should he go through the form of executing the deed?” and Mackenzie v Childers (1889) 43 Ch. D. 265, where a building estate was offered for sale in plots. Over a period of 20 years, each contract for the sale of a plot referred to a deed of mutual covenant between the vendors and all the purchasers. That deed itself recited that it was intended to be a part of all future contracts of sale of the plots that the several purchasers should execute the deed and be bound by the stipulations in it. However, the vendors in the instance case gave no express covenant to that effect. It was held that a covenant was to be inferred. Kay J said:- “No formal words are necessary to make a covenant in such a deed. A statement of a binding intention on the part of the vendors who execute the deed, made, on the face of it, for the purpose of inducing the several purchasers to buy, is as good a covenant as could be made by the most formal words.”

227. However, Lewison adds that the court will in any case be cautious in spelling a covenant out of a recital, because that is not the part of the deed in which covenants are usually expressed (citing Farrall v Hilditch (1859) 5 C.B.N.S. 840 and Fairstate Ltd v General Enterprise and Management Ltd (2010) 133 Con. L.R. 112); and says the court must be satisfied that the language does not merely show that the parties contemplated that the thing might be done, but it must amount to a binding agreement upon them that the thing shall be done (citing James v Cochrane (1852) 7 Exch. 170). Lewison continues:- “One circumstance where the court is reluctant to imply a covenant from a recital is where the contract already contains obligations relating to the same subject. In Dawes v Tredwell , Jessell MR said: “There is another rule that the recital of an agreement does not create a covenant where there is an express covenant to be found in the witnessing part relating to the same subject matter.” This is simply an aspect of the principle expressio unius est exclusio alterius .” (§ 10.61, footnotes omitted) (3) Previous cases on the scope of ‘solicitors’ business’ in the PI context

228. Though the fact patterns differ from case to case, it is useful to consider as comparators previous cases in which the scope of solicitors’ business has been considered. The parties cited the cases summarised below.

229. First, four cases arising from litigation funding arrangements of some kind: Haseldine v Hosken [1933] 1 KB 822; Sutherland ; Impact Funding ; and Doorway Capital Ltd v AIG UK Ltd [2022] EWHC 182 (Comm), [2023] Lloyd’s Rep IR 83; followed by some cases from outside of that context. (a) Haseldine

230. In Haseldine , a solicitor contracted with his client to pursue and fund a claim in return for a share of the proceeds. The claim failed and the defendant sought its costs against the solicitor on the ground that his agreement with the client was champertous. The solicitor claimed indemnity under a PI policy which provided cover for claims made “by reason of any neglect, omission or error… in or about the conduct of any business conducted by or on behalf of the firm… in their professional capacity as solicitors” . The Court of Appeal held that the policy did not respond, because (a) the conduct giving rise to the liability was deliberate and unlawful, and (b) the liability fell outside the scope of the insuring clause.

231. As to the latter point, Greer LJ said:- “With regard to the policy sued on it is important that its construction should be approached from the point of view that it was not intended to indemnify against a criminal act. What it was intended to do was to cover the case of a solicitor who, in conducting the business of his client, either in conveyancing or when representing him in litigation, made a mistake about the facts or a mistake about the law, or did something while acting on behalf of his client which rendered him, the solicitor, liable to a third party. The acts intended to be covered were those he was doing not to secure a benefit for himself, but those he was doing on behalf of his client. Read in that way this policy does not indemnify Mr. Haseldine in respect of the consequences of his making the two agreements by which he was to secure an interest in the result of the litigation - agreements which, in view of the law of this country, he ought not to have made. The damage that arose did not arise owing to any neglect, omission or error of Mr. Haseldine in his professional capacity as a solicitor, and therefore was not covered by the policy sued on.” (pp.837-838) Slesser LJ said:- “But, quite apart from the question of illegality, I have come to the conclusion that in this case Mr. Haseldine fails to show that he comes within the indemnity policy at all. The obligation of the policy to indemnify Mr. Haseldine for loss is limited to cases “in or about the conduct of any business conducted .... in [his] professional capacity as a solicitor.” In my view, looking at the agreements made by Mr. Haseldine, and quite apart from any question of champerty, they were agreements by which he was undertaking a personal speculation and was not acting as a solicitor. It seems to me to be playing with words to say that when a solicitor assists litigation for the purpose of making a private profit out of the transaction, it can be described as a profit, if it be ultimately acquired, obtained in his professional capacity as solicitor, because from the very nature of the case he would have to account, if he were acting as solicitor, to his client.” (p.839) (b) Sutherland

232. In Sutherland , the court considered coverage of a claim by a litigation funder against a firm of solicitors. The firm had entered into an agreement with the funder governing a scheme whereby the funder loaned money to clients of the firm to cover their disbursements, including an ATE premium. The agreement obliged the firm to pay outstanding loan sums to the funder if the client failed to pay as required or the loan was unenforceable. The court (HHJ Hegarty QC, sitting in the Mercantile Court) held that a claim by the funder based on that obligation was not within the scope of the insuring clauses in two solicitors’ PI policies, because any liability would not arise from the provision of services as a solicitor in private practice. The judge began his analysis with the following general point:- “75. … in the end it must be the terms of the particular policy, construed if necessary by reference to the Minimum Terms and Conditions laid down by the Solicitors Regulation Authority, which determine whether a solicitor is or is not entitled to an indemnity in respect of any particular form of liability. Nonetheless, in the absence of clear words in the Minimum Terms and Conditions or in the policy itself, I have some difficulty in seeing how an indemnity against civil liability arising from the provision of services as a solicitor would extend to a claim by a third party to whom no professional duty was owed by the solicitor, whether as his client or otherwise.”

233. The PI policy in Sutherland covered (subject to exclusions) “ all Loss resulting from any Claim for any civil liability of the Insured which arises from the performance of or failure to perform Legal Services ” [44]. It did not therefore include the words “ and/or in connection with ” contained in the PI policies in the present case. The firm could not and did not argue that the funder was itself a client in receipt of legal services. Instead, it argued that the funder’s claim “ arose from ” the firm’s provision of legal services to its underlying clients. The court rejected that argument, because the causal link between the two was not satisfied. (Accordingly, Sutherland did not grapple with the question of whether a party in the position of litigation funder was provided with legal services by a firm directly, as AmTrust contends happened in the present case.)

234. The court concluded that the claim was not covered, even if the policy required only a relatively loose causal connection between the liability for which cover was claimed and the provision of professional services as a solicitor:- “[94] For my part, in the context of both the AIG policy and the RSA policy, I consider that the expression “arising from”, standing, as it does, on its own, should be construed as referring to the dominant, effective or operative cause of the liability in question in accordance with the general principles summarised at paragraph 19-001 of MacGillivray. In the present case, there is no direct causative link between Bakewells’ liability to Sutherland and the way in which Mr Collins performed or failed to perform the legal services which he provided to the firm’s clients. On the contrary, the obvious and direct cause was Bakewells’ failure to fulfil the contractual obligations which they had undertaken under the Agreement. [95] The circumstances which have given rise to the present dispute are very far removed from the paradigm case in which a solicitor incurs a liability towards a client for breach of his duty to that client. Any liability to Sutherland [the funder] in the present case represents the coming to pass of a commercial risk arising out of a contractual obligation towards a party to whom Bakewells [the solicitors’ firm] owed no professional duties. It may well be the case that [the solicitor’s] breaches of duty towards his clients were the principal reason why individual loans were not repaid by the clients in question and that, but for their failure to do so, Bakewells would not have been faced by the claim made against them by Sutherland in the main proceedings. But it seems to me that the causal link between the claim made upon them by Sutherland and the assumed negligence of [the solicitor] is simply too tenuous to justify the conclusion that the one ‘arose from’ the other, even if one were to take the somewhat wider meaning of the phrase adopted in Dunthorne v Bentley .”

235. By the “ wider meaning of the phrase adopted in Dunthorne v Bentley ”, Judge Hegarty meant the view taken by the Court of Appeal in Dunthorne v Bentley [1999] Lloyd’s Rep I.R.560 that the expression “ arising out of ” contemplated more remote consequences than those envisaged by the words “ caused by ” (see Sutherland at §§ 89-90). Judge Hegarty went on to give the following example:- “96. Mr Cannon QC provided a telling analogy in order to illustrate his proposition that the claim was simply the outcome of the commercial risks undertaken by Bakewells. Suppose, suggested Mr Cannon QC, that a firm of solicitors such as Bakewells had embarked upon complex group litigation on CFA terms seeking damages for industrial disease on behalf of a large number of clients. Suppose also that they had arranged funding to enable them to conduct the litigation in question by means of a bank loan in the hope and expectation that, in due course, they would recover their costs and disbursements. But let it also be supposed that the litigation ended in failure owing to the negligent manner in which it was pursued by the solicitors, so that they were unable to recover their costs and disbursements from the opposing parties or from their clients. If the bank then sought to recover the amount outstanding on the loan account from the solicitors, could it seriously be argued, asked Mr Cannon QC, that the claim would be covered by their professional indemnity insurance?

97. The obvious answer to this rhetorical question is in the negative. The liability would be no different from any other commercial liability undertaken by the solicitors for the development of their practice. Whatever the nature of the loan, they would no doubt have anticipated that funds would be available to them in due course out of the profits their professional practice so as to enable them to repay the monies outstanding. But, of course, expectations may be dashed for any number of reasons. The mere fact that the monies which they expected to receive were not ultimately forthcoming because of the negligent way in which they had conducted some of their professional activities does not mean that any claim against them by their bankers is one which can fairly be said to “arise from” the performance or non-performance of legal services as required by the Minimum Terms and Conditions and by both the AIG and the RSA policies.

98. The reality, submitted Mr Cannon QC, is that Bakewells chose this specific method of funding litigation on behalf of their clients and undertook certain contractual liabilities to Sutherland as part of the arrangements for the provision of that funding. No doubt that was for the benefit of the clients; but it was also for their own benefit as it enabled them to attract new business. So it was no different in principle from any other funding arrangements of the kind instanced by counsel”

236. In the alternative, Judge Hegarty considered the application of the three exclusions from cover in the PI policy, concluding ( obiter ) that the claim fell within all three of them.

237. The second exclusion covered liability in respect of 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 Firm’s practice / providing Legal Services]” corresponding with an exclusion in the Minimum Terms at the time. It therefore predated the later revision, reflected in the PI Policies in the present case, which instead of referring to breach of contract/arrangement applies to any “ legal liability assumed or accepted under… any contract [or] agreement … ”. (As I consider under Issue 3, AmTrust submits that that narrowed the scope of the exclusion.)

238. Judge Hegarty held that the second exclusion applied, although he considered the point to be not entirely straightforward, because: (a) the contract governed and related to the provision of financial services by the funder; (b) “a major purpose of the arrangements embodied in the agreement was to enable [the solicitors’ firm] to arrange loan finance for the benefit of its clients” ; (c) the full amount of the loan was payable directly to Bakewells to enable them to pay fees and disbursements which they would or might otherwise have had to carry out of their own resources; and (d) accordingly, the agreement between the funder and the firm was for the supply of financial services to the firm in the course of its practice:- “156. For my part, I find the argument that the provision of forms by Sutherland to Bakewells amounted to a “supply of goods” within the meaning of the exclusion to be highly artificial. I am also unpersuaded that a payment of an “administration fee” in itself means that Sutherland must be regarded as having agreed to provide administration services in return for the fee. But I agree with the submission of Mr Purchas that the substance of the arrangements embodied in the Agreement amounted to a contract for the provision of financial services. The question is whether it can properly be said that those services were supplied to or for the use of Bakewells in the course of their practice.

157. One purpose of the arrangements, perhaps the primary purpose, was to provide loan finance to individual clients. The provision of financial services of this kind to the clients would not, in itself, mean that there was a supply of such services to or for the use of Bakewells. But, in each case, the full amount of the loan was payable directly to Bakewells to enable them to pay fees and disbursements which they would or might otherwise have had to carry out of their own resources.

158. Furthermore, on any view, a major purpose of the arrangements embodied in the Agreement was to enable Bakewells to arrange loan finance for the benefit of its clients. In the circumstances, though the point is not entirely straightforward, I take the view that, at least in part, the Agreement between Sutherland and Bakewells was one for the supply of financial services to Bakewells in the course of its practice and is, therefore, within the exclusion set out at clause 6.6(b), as adopted by both AIG and RSA in the policies under consideration.”

239. The third limb of the exclusion in Sutherland covered liability in respect of any:- “guarantee, indemnity or undertaking by any Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to that Insured”, which again corresponded to an exclusion in the Minimum Terms at the time. This exclusion was essentially similar to exclusion 2.6(c) in the PI Policies in the present case, save that the clause in the present case extends to any undertaking “ given by or on behalf of ” the Insured.

240. The court in Sutherland concluded that the claim was under a guarantee or indemnity, and that it was connected with the provision of a financial service of benefit to the solicitors’ firm:- “160. It is not particularly easy to discern the purpose behind this exception or to be entirely confident of the circumstances in which it might apply. The words “guarantee” and “indemnity” would seem to presuppose that it applies only where the liability is, in some way, ancillary to or dependent upon arrangements made with some other party. There seems little doubt that, in the present case, the obligations accepted by Bakewells under the provisions of clause 5.1 of the Agreement are to be regarded as amounting to either a guarantee or an indemnity, or both, for these purposes, since they arise only where their clients have failed to repay their individual loans within the time stipulated. What is much less clear is whether the word “undertaking” in this context should be construed as meaning any form of contractual obligation undertaken by the insured or whether it should be confined more narrowly to solicitors’ undertakings in the strict sense. I incline to the latter. What is also quite unclear is what weight, if any, is to the given to the reference to “any particular insured” in this context, as opposed to the more usual reference simply to “the insured”.

161. Nonetheless, since it seems plain that the obligations under clause 5.1 of the Agreement amount to a guarantee or indemnity for these purposes, the question which arises is whether they were given by Bakewells “in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to that insured .” I do not find this easy to construe.

162. On the face of it, the guarantee or indemnity in question is given in connection with the provision of finance to the firms’ clients’ rather than to the firm itself. Indeed, it is not easy to see how a guarantee or indemnity in the true sense can be given by a firm in respect of an obligation owed by itself.

163. So the exclusion would seem to be designed to cover cases where a firm enters into a guarantee or indemnity in relation to the obligations of a third party, provided that it does so in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to the firm. The mere fact that the party whose obligations are the subject of the guarantee or indemnity may himself, as in the present case, obtain finance, property, assistance or other benefit or advantage from the arrangements in question does not, as it seems to me, necessarily mean that the guarantee or indemnity is not given in connection with the provision of finance and so forth directly or indirectly to the insured.

164. On that analysis, the question is simply, therefore, whether Bakewells accepted the obligations under clause 5.1 of the Agreement “in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly” to themselves. It seems to me that a question framed in these terms must be answered in the affirmative. For reasons which I have already given, I consider that, under the arrangements in question, finance was provided directly to Bakewells. Furthermore, a major purpose of the arrangements was to allow Bakewells to act, for reward, for clients for whom they might not otherwise have been able to act and to extend their practice. It seems to me that this must be regarded as a benefit or advantage provided at least indirectly to Bakewells.

165. I conclude, not without some hesitation, that the circumstances of the present case are such as to fall within this final limb of the exclusion, since Bakewells’ obligations under clause 5.1 of the Agreement amount to a guarantee or indemnity given by the firm in connection with the provision of finance directly to the firm and in connection with the provision of other benefits or advantages indirectly to the firm.” (c) Impact Funding

241. In Impact Funding , the funder of a scheme, which enabled solicitors (Barrington) to pursue personal injury claims for clients, claimed under a contract which contained (a) an express warranty that the firm would properly perform its professional duties to its clients, and (b) an obligation to repay loan advances if the client breached the loan agreement or it was held unenforceable. When a series of clients’ claims failed, the funder sought to claim damages under those provisions. The funder alleged that the claim was covered by the solicitors’ PI policy, which applied, subject to exclusions, to:- “all Loss resulting from any Claim for any civil liability of the Insured which arises from the performance of or failure to perform Legal Services.”

242. At first instance, HHJ Waksman QC noted that the contract between the solicitors and the funder included, among others, the following provisions:- “(7) By Clause 6.1, each party undertook to the other that it would comply with all applicable laws, regulations and codes of practice from time to time in force (including, without limitation, the Act, DPA and, in the case of the Firm, the FSMA and the rules of the FSA) and each party indemnified the other against all loss, damages, claims, costs and expenses (including reasonable legal costs) which the other party might suffer or incur as a result of any breach by it of this undertaking; (8) By Clause 7.2, in the event of any breach of a Credit Agreement by the Customer, if any circumstance arose which entitled Impact to terminate a Credit Agreement, Barrington undertook and agreed to pay to Impact immediately upon first demand an amount equal to all sums payable by the Customer under that Credit Agreement ; (9) By Clause 13.1 Barrington warranted that the services to be provided by it to the Customer would be provided in accordance with the agreement with the Customer set out in the relevant CFA.” [9] Clause 13 also provided that Barrington “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” (clause 13.4, quoted in the Court of Appeal’s judgment at [9]).

243. HHJ Waksman QC concluded that the claim prima facie fell within the insuring clause in the solicitors PI policy:- “32. In my judgment, if one stands back, the proximate cause here is clearly the Clause 6/13 Breaches. They meant that the loans which were made were “doomed from the start”. This is, first, because absent those breaches the loans would never have been made. There would have been insufficient merit in the underlying claims to warrant funding and if Barrington could not have paid the referral and other fees from the loan monies they were in no position to fund such payment themselves, even if the loans had been made. If so, there would have been no point in taking the funding. AIG argues in response that the disbursement breaches were not causative because if the claims had succeeded the disbursement monies would have been recovered and repaid in any event. But that presupposes that the claims had merit, which they did not and that the loans would have been made initially, which they would not.

33. The second reason for identifying the Clause 6/13 Breaches as the proximate cause is that in real terms it meant that there was no real prospect of the lay clients repaying the loans — or indeed of them even being pursued. So the clients’ non-payment resulted from the Clause 6/13 Breaches. As for non-payment by Barrington, while in theory it might have been in a position to discharge its Clause 7.2 Obligation, given the nature of its operation (and for example its need to resort wrongfully to the disbursement loans to pay referral fees), in reality, once there was no prospect of the claims succeeding or of there being ATE insurance when they failed, Barrington was simply not going to have the resources to repay en bloc, as it were, all of these loans.”

244. HHJ Waksman QC distinguished Sutherland on the basis that there was no allegation there along the lines of the alleged breaches of clauses 6 and 13 in Impact Funding . He stated:- “37. However in the case before me, (1) The liability under scrutiny here is for precisely the same breaches of duty as would have been owed by a solicitor to his client; and (2) I found specifically that the Clause 6/13 Breaches did cause the loss claimed, being the loans unpaid; it is ironic that AIG which had every chance of participating in the trial of the main action and chose not to do so, now seeks to challenge that basic finding after the event and by way of submissions, but not on the basis of any further evidence of any kind.” As to whether the losses therefore fell within the insuring clause, the judge said:- “46. On the footing that the Clause 6/13 Breaches were the proximate cause of the loss, it must inevitably follow that they arose out of the performance or failure to perform legal services. They were entirely concerned with the services purportedly rendered by Barrington to its clients as solicitors. It was faintly argued by AIG that they instead arose simply from a breach of contract which facilitated legal services. To the extent that this is a separate point from that concerned with proximate loss, there is nothing in it. The fact that this misperformance of legal services leads to a liability not (or not only) to Barrington’s clients but also to Impact via Clauses 6 and 13 is irrelevant.” It is fair to point out that the judge’s consideration of the insuring clause was relatively brief, and he did not consider all of the previous authorities in this area, with the main consideration being given to the exclusions.

245. HHJ Waksman QC concluded that the claim was, however, excluded by the ‘trade debts’ exclusion in the policy:- “[Trade Debts] arising out of, based upon or attributable to any: (i) trading or personal debt incurred by an Insured ; (ii) breach by any Insured of terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of providing Legal Services ; and (iii) guarantee, indemnity or undertaking by any Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to that Insured.”

246. The judge’s key reasoning was as follows:- “52. I would therefore agree that it would be wrong to characterise the Agreement as one by which financial services in the narrow sense of a loan were being provided to or for the use of Barrington. But that is not the end of the story.

53. The principal obligation on the part of Impact under the Agreement was to provide funding to clients whose claims were first located by Barrington through the Veracity database and claims progression facility and then nominated by it for funding from Impact through the same system. The funding enabled the clients to discharge their obligations to Barrington to pay for the disbursements. Without that funding the claims would not be progressed, and Barrington would not have the benefit of those claims and those clients and thus the opportunity to earn profit costs therefrom. Barrington would not have funded all these disbursements themselves, i.e. without being put in funds, and these clients would not have put them in funds if it meant using their own money.

54. Looked at realistically and commercially, I consider that in these circumstances Impact was providing a service to Barrington. The service was the disbursement funding for a particular claim. The funding would not be provided (through Barrington) unless Barrington requested it via Veracity. Since the loans were not made to Barrington in any beneficial sense (see above) it would be wrong to characterise the services as “financial services”. But they do not have to be. Impact was making available to Barrington a valuable facility at Barrington’s option, namely claims whose disbursement element (including the all-important ATE insurance) was fully-funded leaving the solicitors to provide their services under the CFA. The fact that the funding is made by way of loans to the clients does not affect the fact that the overall facility is provided to Barrington and it is properly described as a “service” and one which, if used, enables it to trade by bringing in more cases. While it is correct to say that Impact was not bound by the Funding Agreement to make Veracity available to Barrington, that facility was bound up with the disbursement funding because it was when Barrington chose a claim and client made available on Veracity that Impact (once selected) then became obliged to provide the disbursement funding. …

56. I accept that this may not be considered a paradigm example of a contract for the supply of services under this exclusion. It was probably not even contemplated when these standard clauses were first drawn up, as opposed, for example, to commercial practice- funding loans, or ancillary service contracts like those relating to IT, where the liability on the part of Barrington might more easily be described as a “trading” liability (to use the “trade” epithet in the heading of this group of exclusions in both the Policy and the Minimum Terms). But in my judgment the Funding Agreement nonetheless firmly falls within the exclusion.”

247. The Court of Appeal allowed an appeal against HHJ Waksman QC’s conclusion on the exclusion clause, but its decision was in turned reversed by the Supreme Court. AmTrust nonetheless relies on the following passage from the Court of Appeal’s reasoning:- “19. In order to assess these rival arguments, one has to stand back from the detail and ask oneself what is the essential purpose of the exclusion clause 6.6 in the minimum terms of the solicitors’ professional indemnity insurance. To my mind the essential purpose of the exclusion is to prevent insurers from being liable for what one might call liabilities of a solicitor in respect of those aspects of his practice which affect him or her personally as opposed to liabilities arising from his professional obligations to his or her clients. Thus if a solicitor incurs liability to the supplier of, for example, a photocopier, insurers do not cover that liability nor would they cover obligations to a company providing cleaning services for the solicitor’s offices. If the office premises are leased by the partnership or held subject to a mortgage to a bank, the obligations under such lease or mortgage (or any guarantee of such lease or mortgage) would not be covered either. It is these sort of personal obligations (which may nevertheless be part of a solicitor’s practice as a solicitor) which are not intended to be covered. These obligations are to be distinguished from the obligations which are incurred in connection with the solicitor’s duty to his clients which are intended to be covered.”

248. The sole issue in the Supreme Court was whether the funder’s claim was excluded from cover by the second limb of the trading debts and liabilities exclusion, which was materially identical to the provision considered in Sutherland . The Court held that the claim was excluded from cover by this provision. Lord Hodge (with whom Lords Mance, Sumption and Toulson agreed) began by outlining the facts, including noting the basis of the claim against the solicitors by the funders:- “2. … Barrington failed to perform its professional duties towards its clients in the conduct of litigation, both through its failure adequately and timeously to investigate the merits of their claims and also through the misapplication of funds provided by Impact, and so breached its duty of care to them. Barrington thereby put itself in breach of a warranty in its contract with Impact that it would perform its professional duties towards its clients. Barrington’s clients were not able to repay their loans. Impact sought to recover from Barrington the losses which it suffered on those loans by seeking damages for the breach of the warranty. ...” and noted his disagreement with the approach by which Impact sought to uphold the decision of the Court of Appeal:- “3. … The Court of Appeal, by standing back from the detail and asking itself what was the essential purpose of the exclusion clause in question, concluded that the loans which Impact gave to cover disbursements in intended litigation were inherently part of the solicitors’ professional practice and that the liabilities which Barrington incurred under its warranties to Impact were liabilities professionally incurred which came within the cover of the Policy. ...

4. Impact supports the conclusion which the Court of Appeal reached. It refers to the wide terms of the cover … and submits that the subsequent exclusions … should be construed strictly. In particular, the fact that Barrington obtained a commercial benefit from its agreement with Impact did not mean that Impact was providing services to Barrington within the terms of the exclusion. I do not accept that this is the correct way to read the exclusion clause in this insurance contract and set out my reasons below.”

249. As to the overall approach, Lord Hodge said:- “18. A reader of the Policy ascertains the boundaries of AIG’s liability by construing the broad statement of cover … and also the broad exclusions … in the context of the regulatory background. The exclusion … requires the reader to look to the category of the claim and, in this case, ask whether the claim or loss arises out of, is based upon, or is attributable to a breach by Barrington of a term or terms of a contract or arrangement for the supply of services to it in the course of its provision of legal services. Prima facie, if Impact’s cause of action was a breach of a term of a contract or arrangement by which Impact supplied such services to Barrington, the clause would exclude cover, notwithstanding that Impact’s loss could be said to have arisen from Barrington’s failure to perform legal services for its clients. …”

250. Lord Hodge’s reasons for holding the claim to be within the exclusion were these:- “29. The provision of loans to Barrington’s clients as envisaged by the DFMA was undoubtedly the provision of financial services to the clients. But were the DFMA and the resulting loans to clients also a service which Impact provided to Barrington? In my view they were, for the following four reasons. First, Barrington contracted as a principal with Impact and not as agent for its clients. A contract between two principals might have provided for a service to be given to a third party alone. But that is not what happened in this contract. This is because, secondly, Barrington clearly obtained a benefit from the funding of its disbursements. Solicitors are personally responsible for paying the persons whom they instruct to do work or provide services in relation to a particular case, whether or not they receive funds from their clients. But for that funding from Impact, Barrington would have had to obtain funds from its clients, who might not have been able to afford to pay, thus making pursuit of the claim impossible, unless Barrington itself funded the disbursements in the hope of recovering its outlays through success in the claim. Impact’s loans were available to fund not only the disbursements but also the premiums on the legal expenses insurance, thereby enabling the litigation to be fully funded. Thirdly, this was not an incidental or collateral benefit to Barrington derived from a service provided to its clients but was part of a wider arrangement … by which solicitors were able to take up claims, which their clients could not otherwise fund, and earn fees and success fees if the claim succeeded. Fourthly, it was a service for which Barrington paid the administration fee under clause 2 of the DFMA, undertook the onerous obligation to repay Impact if a client breached the credit agreement (clause 7.2), and entered into the obligation under clause 6.1 and gave the warranty in clause 13.1, on which Impact won its claim for damages against Barrington.”

251. Lord Toulson (with whom Lords Mance, Sumption and Hodge agreed) gave a concurring judgment, in which he agreed with Lord Hodge’s conclusions, adding the following points:- “42. What sort of liabilities are commonly understood as professional liabilities of solicitors or, in Lord Diplock’s language, what is the sector of the public that makes use of their services? First, and most obviously, there are the liabilities which solicitors may incur to their clients as a result of their professional retainer. Secondly, in connection with acting for their clients, they may give undertakings to third parties. “As officers of the court solicitors are expected to abide by undertakings given by them professionally, and if they do not do so they may be called upon summarily to make good their defaults” ( John Fox v Bannister, King & Rigbeys (Note) [1988] 1 QB 925 , 928, per Nicholls LJ). That is plainly a form of professional liability. Exceptionally, there are also other cases where a solicitor has been held liable to a “quasi-client”, as in White v Jones (the disappointed beneficiary under a will) [1995] 2 AC 207. There is a detailed treatment of the scope of solicitors’ professional liability to third parties in Jackson & Powell on Professional Liability , 2011, 7th ed, paras 11-043 & ff. It is a developing topic and the boundaries are not entirely clear.

43. In laying down the minimum terms of professional liability cover required to be maintained by solicitors, it would have been possible for the drafting committee to have attempted to structure them by defining in positive terms the scope of a solicitor’s professional liability for which indemnity cover was required, but it opted to delineate the liability against which solicitors should be required to maintain cover for public protection by a process of elimination, which involved combining an insuring clause far broader than any ordinary understanding of a solicitor’s professional liability with a list of exclusions. It is important to recognise that list for what it is, namely an attempt to identify the types of liability against which solicitors are not required by law to be covered by way of professional liability insurance.

44. I would reject the first stage of Impact’s argument about the way in which this policy and the list of exceptions are to be approached. It treats the minimum terms set by the Law Society as requiring, through the opening clause, a far broader scope of cover than would have been necessary for the protection of clients and third parties to whom they may undertake professional responsibilities, subject only to exceptions which (it is argued) are to be construed as narrowly as possible. That involves a misapprehension of the true nature and purpose of the minimum terms.

45. This brings me to the second point, which is the meaning of the language of clause 6.6. The Court of Appeal approached the clause by saying that it was necessary to stand back from it and consider its essential purpose. I do not disagree, but I would make two further comments. First, the “essential purpose” of the clause has to be seen in the context of the essential purpose of the policy, as to which I have expressed my view. Secondly, there is substance in AIG’s complaint that the court omitted to grapple with the language of the clause.

46. I agree with Lord Hodge that the DFMA was a contract for the provision of services to Barrington, for the reasons given by him and by Judge Waksman QC in his impressive judgment. I would add that this conclusion to my mind accords well with the essential purpose of clause 6.6. Barrington and Impact made a commercial agreement as principals for their mutual benefit, as well as for the benefit of Barrington’s clients. Impact was not a client or quasi-client of Barrington, and the promise by Barrington which led to the judgment obtained by Impact was part of the commercial bargain struck by them. It did not resemble a solicitor’s professional undertaking as ordinarily understood, and it falls aptly within the description of a “trading liability” which the minimum terms were not intended to cover.” (d) Doorway

252. In Doorway Capital Ltd v AIG UK Ltd [2022] EWHC 182 (Comm), [2023] Lloyd’s Rep IR 83, a litigation funder entered into a receivables funding agreement with the firm, providing for the funder to purchase the firm’s claims against third parties and for the firm to hold received remittances on trust. In breach of trust, the firm failed to pay all remittances into a nominated trust account. The funder sued the firm, and Butcher J held that the claim was not covered by the firm’s PI policy because it had not arisen from the provision of services as a solicitor.

253. The PI policy covered, subject to exclusions:- “civil liability to the extent that it arises from Private Legal Practice in connection with the Insured Firm’s Practice” “ Private Practice ” was defined to include regulated activities (including the conduct of litigation) and “ all the professional services provided by the Insured Firm including acting as a personal representative, trustee … or in any other role in conjunction with a Practice ”. “ Private Legal Practice ” was defined as “ the provision of services in private Practice as a solicitors ” including (among other things) acting as a trustee in conjunction with a Practice.

254. Butcher J concluded that (a) the claim did not fall into any of the three categories mentioned by Lord Toulson in Impact Funding at [42], and (b) the obligation on which the claim was based did not fall within the recognised categories of professional legal services:- “ Cover for liability “as a trustee”?

33. In my judgment the liability which SL was under as a trustee was not of such a kind as to have been covered by the Policy. This is because it did not, in my view, arise from the provision of services in private Practice by SL. SL was not providing services as a trustee to a client, or in connection with services provided to a client. DCL was not SL’s client, and it is no accident that in the RFA SL is referred to as DCL’s client. SL was to hold sums on trust for DCL, not as part of or incidentally to a service provided in private Practice, but as part of a mechanism to secure the repayment of amounts which, pursuant to a commercial agreement, DCL advanced to SL for the purposes of its business.

34. Nor in my view, to the extent that it is relevant, was DCL a ‘quasi-client’ of SL. This is a concept utilised in this area by Lord Toulson JSC in his judgment in Impact Funding Solutions Ltd … at [42] … …

35. In the present case, as I have said, the liability of SL to DCL was not a liability to a client as a result of a professional retainer. Nor was it a liability under an undertaking given by solicitors in connection with acting for clients. The category of ‘quasi-client’ identified by Lord Toulson, and exemplified by White v Jones , is in my judgment intended to refer to the category of exceptional cases in which a solicitor, acting in a professional capacity, and who fails to take reasonable care in doing what (s)he was engaged to do in that capacity, may be liable to someone who has not retained the solicitor, but who is foreseeably affected by the ill performance of what the solicitor was engaged to do. It is a category intended to be of persons who fall just short of being clients of the solicitor’s professional services. DCL does not fall into such a category here.

36. Mr Yeo, in his careful and well-structured submissions on behalf of DCL, emphasised that one aspect of SL had to do, pursuant to the RFA, was to determine that in its reasonable belief the Notified Value of Notified Receivables was payable to it as a matter of law and would be recovered in full without enforcement. This, he argued, involved the application of professional judgment in relation to the assessment of obligations which would arise in the course of the solicitor’s practice, including sums arising under costs awards and settlements. I do not consider that this argument is correct or at least does not support DCL’s argument as to cover. Quite apart from the fact that DCL has not alleged that SL was in breach of its obligations in relation to valuation, the requirement that SL should value what it considered to be recoverable is, in my view, not accurately or helpfully described as the provision of a professional service. I consider that it is most appropriately described as a part of the mechanism of operating the RFA. As explained by Mr Din in paragraph 14 of his witness statement, the effect of receipts by the law firm not amounting to at least 97% of the aggregate value which it had attributed to the Notified Receivables over a rolling three month period, was that DCL had the right, which it almost invariably exercised, to offer the law firm a lower price for purchasing any further Receivables. … Did the liability arise from the conduct of litigation?

38. Nor do I accept that what SL did and was required to do in accordance with clause 12 of the RFA and the trustee relationship which it imposed was part of the conduct of litigation. The potentially relevant litigation was SL’s client’s claim against a tortfeasor or other defendant for compensation (for example for personal injury or for misselling). Once the Remittances had been received into SL’s client account, however, what was done with them was not part of that litigation (which, in any event, in most cases, would have already concluded). As Mr Yeo accepted, subject to the assignment to DCL, the relevant monies were at that point, vis-à-vis its client, SL’s: ie they were not the client’s money. What SL did with such amounts was not part of the conduct of litigation on behalf of the client. Nor in my view can it be said to have been ancillary to those proceedings. While the sums would not have been received by SL but for the proceedings, the holding of those sums after receipt was not for any purpose concerned with the prosecution of those proceedings, and was not analogous to entering appearances to actions, which is the example of an ancillary function given in para. 4 of Schedule 2 of the Legal Services Act 2007. Sutherland and Impact Funding

39. Finally on the issue of whether there was cover under the insuring clause, I should refer to the fact that each side addressed arguments as to the support which it said could be gained by a comparison between the present case and another case involving questions of cover in respect of funding arrangements. In the case of AIG, reliance was placed on the decision in Sutherland Professional Funding Ltd v Bakewells [2011] EWHC 2658 (QB) ; for DCL, on the first instance decision of HHJ Waksman QC (as he then was) in Impact Funding Solutions Ltd v Barrington Support Services Ltd [2013] EWHC 4005 (QB) . I did not find the comparisons with the facts of those cases of particular assistance in relation to whether there was cover under the insuring clauses of the Policy, as the nature of the liability in question in those cases was different from the present. In particular, I considered that there were material differences between the present case and the liability which was at issue in Impact Funding. In that case, the feature which was critical to HHJ Waksman QC’s decision on coverage was that the relevant liability of the solicitors arose from breaches of clauses 6 and/or 13 of the Funding Agreement in that case, which were ‘precisely the same breaches of duty as would have been owed by a solicitor to his client’ ( paragraph 37 ).

40. For these reasons, I conclude that there is no cover under the Policy for the claim, because it did not arise from Private Legal Practice in connection with SL’s Practice.”

255. In the alternative, Butcher J concluded ( obiter ) that the claim was excluded by Exclusion 83(b) in the PI policy, which applied to:- “b) legal liability assumed or accepted by an Insured under any contract or agreement for the supply to, or use by, the Insured of goods or services in the course of the Insured Firm’s Practice.”

256. The judge stated:- “46. Applying the approach to construction indicated in Impact Funding to the words of exclusion 83(b), I consider that that the liability of SL to DCL was excluded by that clause. There can be no real doubt that the RFA was a ‘contract or agreement for the supply to, or use by, the Insured of goods or services in the course of the Insured Firm’s Practice’. The RFA provided a service, namely a facility to provide working capital, for the purposes of SL’s practice.

47. DCL’s principal submission was that, even if the RFA was such a contract or agreement, SL’s liability to DCL did not arise ‘under’ that contract or agreement, but under and by virtue of its fiduciary and trust duties, which were independent of any contractual obligations. I do not accept this argument. The liability which SL was under arose from having entered into the RFA, including clause 12. Its liability as a trustee / fiduciary in respect of Remittances can, I think, be said to be a liability ‘assumed or accepted’ under the RFA. ‘Accepted’, used in addition to ‘assumed’, indicates that a wider category of obligations is embraced than ones which would have no existence other than by reason of the entry into of the agreement. Equally, the clause refers to a ‘contract or agreement’, which envisages that the relevant arrangement may not have all the attributes of a contract. This supports the conclusion that the exclusion was not designed to apply only to causes of action framed in contract.

48. Similarly with the arrangement which was the subject of Impact Funding , the relevant liability which SL was under as trustee or fiduciary was in reality a part of a commercial bargain struck between SL and DCL, which was not the type of liability which solicitors’ professional liability insurance was principally designed to indemnify against, and was, in Lord Toulson’s words, a ‘trading liability’.” (e) Cases outside the litigation funding context

257. In Solicitors’ Liability Committee v Gray (1997) 147 ALR 154, the Federal Court of Australia considered whether a solicitor’s PI policy covered him for claims arising from work he had done establishing and administering a tax-effective investment scheme. It held that liability was not covered because it was not “ in connection with the Practice [defined as the private practice of a solicitor carried on by the Firm]” (at 171). The court reached that conclusion even though the firm did advise on such schemes. It drew a distinction between liabilities incurred as a result of acts and omissions characteristic of a professional, and other liabilities. The judges reasoned that the conduct on which the claim was based was not the provision of professional services to those who were now claiming against the solicitors: the solicitors “ were not sued by the [claimants] in respect of any legal or tax advice tendered by them ” and accordingly “ were not sued as professionals ” (at 197).

258. A similar claim was considered in Carr v Swart [2007] NSWCA 337, where the New South Wales Court of Appeal laid particular emphasis on the absence of a solicitor/client relationship between the solicitor and the investor, as well as on factors indicating that the solicitor was not providing legal services to the investor: see [44]-[53]. The court reached that conclusion even though the contract on which the claim was based referred to the insured providing services “ as a solicitor ”: see [50]-[51].

259. In Cassels Brock & Blackwell LP v LawPro (2007) 85 OR (3d) 318, the Court of Appeal of Ontario concluded that, where a firm of solicitors made its trust account available as the vehicle for the receipt and distribution of investment funds, this activity did not involve the provision of “ professional services ”, defined as “ the practice of the law of Canada… and specifically, those services performed or which ought to have been performed, by or on behalf of the Insured in such Insured’s capacity as a lawyer…” (at 319). The critical feature was, again, that the firm was not providing any legal services to the claimant.

260. Halliwells LLP v NES Solicitors [2011] EWHC 947 (QB), [2011] PNLR 30 concerned solicitors’ liability under an undertaking they had given on behalf of their client. The firm was retained solely to provide the undertaking and had done no other legal work. The court concluded that the liability had not arisen from “ Private Legal Practice ”, i.e. “ the provision of services in private Practice as a solicitor ”, and so fell outside the scope of the insuring clause in the firm’s PI insurance, holding that giving an undertaking for the benefit of a client otherwise than in connection with provision of legal services for the client was not a solicitorial function.

261. In Zurich Professional Ltd v Brown [2011] 1 Lloyd’s Rep IR 607, it was held that administrative work by a solicitor as personal representative of two estates had not been provided in a solicitorial capacity, and that liability for the work was not covered. (4) Subrogated claims

262. MacGillivray on Insurance Law (16th ed. (2025)) states at §22-024:- “The insurer is entitled to exercise rights of subrogation if: (a) the insurance is an indemnity insurance; (b) he has made payment under it; and (c) his rights of subrogation are not excluded by a term of the parties’ contract.”

263. As to condition (b), Lord Esher said in Castellain v Preston (1883) 11 QBD 380 at p. 389:- “He cannot be subrogated into a right of action until he has paid the sum insured and made good the loss.” Similarly, Greer LJ in Page v Scottish Insurance Co (1929) 33 Lloyd’s LR 134, 139 stated:- “Until the insurance company have proved that they have fulfilled their promise under the insurance policy, they are not entitled to bring an action based on the right of subrogation.”

264. It is unnecessary for the insurer to show that the insured had a valid claim under the policy. In King v Victoria Insurance Co [1896] AC 250 the defendant argued that, in order to bring their claim for damage done to insured goods by the defendant, insurers had to show that (if they had disputed the insured’s claim for an indemnity) the insured would have succeeded in showing it was entitled to an indemnity. That argument was rejected:- “To their Lordships it seems a very startling proposition to say that when insurers and insured have settled a claim of loss between themselves, a third party who caused the loss may insist on ripping up the settlement, and on putting in a plea for the insurers which they did not think it right to put in for themselves…It is not alleged that there was anything but perfect good faith in the claim made by the bank and satisfied by the insurance company. But it is claimed as a matter of positive law that, in order to sue for damage done to insured goods, insurers must shew that if they had disputed their liability the claim of the insured must have been made good against them. If that be good law, the consequence would be that insurers could never admit a claim on which dispute might be raised except at the risk of finding themselves involved in the very dispute they have tried to avoid, by persons who have no interest in that dispute, but who are sued as being the authors of the loss. … Still if, on a claim being made, the insurers treat it as within the contract, by what right can a stranger say that it is not so?...Such settlements of claims between the parties concerned ought not to be reopened for a by-purpose at the instance of parties not concerned. To hold otherwise would convert rules of law framed for the purpose of checking speculations in lawsuits into instruments promoting lawsuits which the parties’ interest are wise enough to avoid by agreement.” (pp.254-255) “Their Lordships…rest their judgment on the broader and simpler ground that a payment honestly made by insurers in consequence of a policy granted by them and in satisfaction of a claim by the insured, is a claim made under the policy, which entitles the insurers to the remedies available to the insured. On this view, the highly artificial defence of the Queensland Government fails ...” (p.256)

265. That reasoning was followed by the Court of Appeal in Sobrany v UAB Transtira [2016] Lloyd’s Rep IR 266 at [45]:- “The fact that the insurer did not seek to rely on a policy exclusion did not mean that the sums paid were not to be regarded as the fruits of the insurance or that the tortfeasor could take them: King v Victoria Insurance Co Ltd [1896] AC 250 at 254-5…”

266. Nonetheless, it remains necessary for the insurer’s payment to the insured to have been made as an honest and bona fide settlement of a loss under the policy, as opposed to on some other basis. In John Edwards & Co v Motor Union Insurance Co [1922] 2 KB 249, 254-255 McCardie J described subrogation as follows:- “It derives its life from the original contract. It gains its operative force from payment under that contract. Not till payment is made does the equity, hitherto held in suspense, grasp and operate upon the assured’s choses in action. In my view the essence of the matter is that subrogation springs not from the payment only but from actual payment conjointly with the fact that it is made pursuant to the basic and original contract of indemnity.” He concluded that there could therefore be no subrogation as the result of a payment under an honour policy.

267. Thus, where an insurer denies liability and pays on a basis other than under the policy, no subrogation rights arise. In Wellington Insurance Co Ltd v Armac Diving Services Ltd (1987) 37 DLR (4th) 462 (Canada), a vessel sunk and a claim was made on a marine insurance policy. The insurer denied indemnity, and after commencement of proceedings it paid half the sum claimed by way of settlement, while expressly denying liability and saying that the payment was made for public relations reasons. The Court of Appeal of British Columbia held that the insurer had acquired no right of subrogation by virtue of its payment. Having reviewed the authorities, including John Edwards , McLachlin JA held:- “None of the authorities deviate from the principle that before the right of subrogation arises, the insurer must have made a payment pursuant to its contract of indemnity with the insured. The only qualification, if it can be called that, is the rule that where, with the benefit of hindsight it emerges that the payment may not have been legally required under the policy, the right to subrogation remains if the payment was honestly intended to be a satisfaction of a loss under the policy: King v Victoria Ins. Co. Ltd [1896] AC 250 (PC). That case does not support a departure from the basic proposition that a right of subrogation does not arise unless the insurer has made a payment indemnifying the insured for loss under the policy…In the case at bar, the insurer’s payment cannot be said to have been made with the intention of reducing the loss claimed under the policy. The insurer unequivocally denied any liability to pay that loss.” (p.465)

268. Similarly, in Qureshi v Nickerson (1991) 77 DLR (4th), subrogation was refused to a medical defence association which had paid a member’s costs under rules which gave it an absolute discretion regarding payment of claims, because it was not a payment under a valid insurance policy.

269. More recently, in Insurance Corporation of British Columbia v Teck Metals Ltd (2020) BCSC 259, Riley J said that, to establish a right of subrogation, an insurer was “obliged to prove, in relation to each and every insured for whom they claim a right of subrogation, that benefits or insurance moneys [were] paid or liability for such was assumed. This requires evidence of a payment or an assumption of liability with a bona fide intention of covering the insured’s loss under a valid insurance contract” [38].

270. Finally, in Technology Swiss Pty Ltd v AAI Ltd (t/a Vero Insurance) [2021] FCA 95 (Australia), an insured under a marine insurance policy made a claim for damaged cargo, and a dispute arose over the basis of the claim. The insurer paid part of the sums claimed while disputing liability for the balance. The insurer and insured later achieved a settlement at $425,000, which resolved claims referable to the policy and for other sums. The insured then brought proceedings against the party responsible for the damage, recovering over $800,000. The court decided that only a small proportion of the sum paid by the insurer (about $116,000) was paid as indemnity by way of claims under the policy. Allsop CJ cited John Edwards and Wellington with approval, and stated the essential issue to be:- “Was the payment (and in what amount) made in such circumstances as to lead to the conclusion that the parties to the insurance policy and to the dispute honestly and bona fide treated the payment (whether or not disputed or compromised) as a payment representing a reduction of the loss covered by the policy and so indemnity under the policy, and so negate any proposition that the payment was unrelated to the policy and voluntary or that it was related to some other consideration bargained for that is not capable of characterisation as indemnity under the policy?” [108] Consistently with that principle, clause 9 of the specimen ATE policy in the present case states:- “[i]f We make a payment under the Policy , We will be subrogated to any and all of Your rights in connection with such payment…” (my emphasis).

271. Absent an express assignment, the doctrine of subrogation does not permit an insurer to sue in its own name. The insurer must obtain the insured’s authority to sue in their name. If authority is refused, the insurer can seek an order compelling the insured to lend their name, usually by suing the alleged wrongdoer while naming the insured as an additional defendant: see Esso Petroleum Ltd v Hall Russell & Co [1989] 1 AC 643 at 663C-F where Lord Goff said:- “In normal cases, as for example under contracts of insurance, the insurer will on payment request the assured to sign a letter of subrogation, authorising the insurer to proceed in the name of the assured against any wrongdoer who has caused the relevant damage to the assured. If the assured refuses to give such authority, in theory the insurer can bring proceedings to compel him to do so. But nowadays the insurer can short-circuit this cumbrous process by bringing an action against both the assured and the third party, in which (1) he claims an order that the assured shall authorise him to proceed against the third party in the name of the assured, and (2) he seeks to proceed (so authorised) against the third party. But it must not be thought that, because this convenient method of proceeding now exists, the insurer can without more proceed in his own name against the third party. He has no right to do so, so long as the right of action he is seeking to enforce is the right of action of the assured. Only if that right of action is assigned to him by the assured can he proceed directly against the third party in his own name (see, e.g., Compania Colombiana de Seguros v. Pacific Steam Navigation Co. [1965] 1 Q.B. 101). I have no doubt that the like principles apply in the present case. It follows that Esso could only proceed directly in its own name against Hall Russell in respect of the crofters’ claims against Hall Russell if, on paying the crofters, it received from them a valid and effective assignation of their claims.”

272. An order granting authority to sue in the insured’s name is a form of equitable relief, and so discretionary. The court is entitled to impose terms, such as requiring the insurer to provide security for any costs to which the insured is exposed: see Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 800E to 801C.

273. Subrogated rights engage only once the insurer has fully discharged its obligations under the policy. Until then, it cannot bring a claim in the insured’s name and so, to protect its position, has to rely on any express or implied terms of the policy to require the insured to preserve or not prejudice contingent subrogated rights: see John Edwards at 255; Page v Scottish Insurance Corp. Ltd (1929) 33 Ll L Rep 134, 137; Rathbone Brothers plc v Novae Corporate Underwriting Ltd [2014] 1 Lloyd’s Rep IR 203 at [60]; AXA SA v Genworth Financial International Holdings, Inc . [2020] 1 Lloyd’s Rep 229 at [177].

274. Where the insurer has fully discharged its policy obligations but has not provided a full indemnity for losses from the relevant wrongdoing ( e.g. uninsured losses), the insured retains exclusive control of the proceedings and the insurer cannot act as dominus litis : see Commercial Union Assurance Co Ltd v Lister (1874) LR 9 Ch App 484; AXA v Genworth at [179]; Johnston v Endeavour Energy [2015] NSWSC 1117 at [148]-[174]. In Johnston , the court decided that an insurer could not opt insureds out of a group action (so that it could pursue claims for insured loss by other means), since it had not provided a full indemnity for losses which might be claimed within the group action.

275. The consequences of the insurer not being dominus litis does not seem to have been fully worked out. MacGillivray states:- “It is therefore submitted that rights of subrogation may arise after payment even if the insured is not fully indemnified, although the manner in which those rights are exercisable will depend on whether the insurer or the insured is dominus litis . So, even if the insured is not fully indemnified, the insurers may take subrogation proceedings in the insured’s name, although the insured remains the dominus litis .” (§ 22-031, footnote omitted) Colinvaux’s Law of Insurance (14 th ed., 2025) states:- “Where, however, the policy does not cover the entire amount of the assured’s loss, the indemnification requirement becomes ambiguous: it may mean that the assured must recover the entire amount of his loss before the insurer can pursue the assured’s rights; or it may mean that it is sufficient for subrogation rights to be exercised if the insurer has satisfied its own liability under the policy, even if the result is that the assured has not received the entire amount of his loss. The true position where an assured has not recovered his entire loss under the policy because of a policy limit on recovery or the incurring of uninsured losses, is that the insurer may under its rights of subrogation insist that the assured sues the third party once its own liability under the policy has been satisfied. However, until the assured has received a full indemnity for his loss, presumably by a combination of payments from the insurer and the third party, the assured retains the exclusive right to control the proceedings against the third party.” (§ 12-015, footnotes omitted) What remains unresolved is whether this means (a) that the insured cannot pursue proceedings at all while any uninsured loss remains, or merely (b) that they are at risk of the insured intervening and taking control of the proceedings. I did not understand Sompo to be inviting me positively to conclude, as a matter of law, that (a) is the position, and I refrain from doing so. (5) “Claims” and aggregation in insurance policies

276. The conventional conception of a “claim made” against the insured for the purposes of PI insurance is the making and receipt by the insured of a demand for some remedy as due or an assertion of a right to some form of relief: West Wake Price & Co v Ching [1957] 1 WLR 45 at 55; Thorman v New Hampshire Insurance Co [1988] 1 Lloyd’s Rep 7, 11.

277. In West Wake , a solicitor’s clerk stole from two clients, each of whom sued. Devlin J held there to be one claim per client, despite three causes of action being asserted. He said:- “I think that the primary meaning of the word ‘claim’ — whether used in a popular sense or in a strict legal sense — is such as to attach it to the object that is claimed; and is not the same thing as the cause of action by which the claim may be supported or as the grounds on which it may be based. … “If you say of a claim against a defendant that it is for £100, you have said all that is necessary to identify it as a claim; but if you say of it that it is for fraud or negligence, you have not distinguished it from a charge or allegation. In particular, if you identify a claim as something that has to be paid … it must be something that is capable of separate payment: you cannot pay a cause of action. It follows, I think, that if there is only one object claimed by one person, then there is only one claim, however many may be the grounds or the causes of action which can be raised in support of it...” Those statements were cited with approval by the Privy Council in Haydon v Lo & Lo [1997] 1 WLR 198.

278. In Thorman , a series of design defects by an architect were alleged, which affected multiple properties on a development. An attachment issue arose because different insurers covered different periods. A letter was sent on 29 June 1982 giving notice to appoint an arbitrator, and saying that “Serious problems have arisen in this development, inter alia, with regard to cracking and defective brickwork, for which we hold you responsible.” This followed the issue two days previously of a writ endorsed in general terms alleging breaches of professional duty, though the writ was not served for another 18 months. The Court of Appeal concluded that a single “claim” had been made against the architects for the purposes of their PI insurance. Sir John Donaldson explained (at p12 lhc) that, while the issue depended on the facts of the particular case, a complaint made at one time that a single professional firm had committed multiple breaches of a single contract in relation to various properties on a development ought to be regarded as a single “claim”. In relation to the letter, the judge said:- “Note the words “inter alia”. This is the clearest possible claim in respect of all serious problems which had arisen by that date and is not confined to brickwork. The fact that it was unparticularized and uninformative is nothing to the point. All the matters listed in the Scott Schedule are in this category and it follows that all were the subject-matter of a claim before New Hampshire came off risk.” (p12 lhc)

279. Haydon v Lo & Lo concerned an insurance dispute under a PI policy covering a firm of solicitors in relation to numerous thefts by an employee, comprising (a) HK$50m of thefts from the Tang estate on 43 occasions by four different methods, and (b) fraudulent transfers of shares in 31 parcels from the Tso estate on eight occasions. Under clause 2 of the PI policy, the primary insurers were liable for up to HK$5 million for “ any one claim hereunder ”. Clause 3(a) provided that the firm was to be indemnified against all loss arising from any claim or claims made against it during the period of insurance.

280. The Privy Council concluded that each estate had made only a single “claim” against the firm, seeking recovery of the amounts stolen from it. The Board rejected the excess insurers’ argument that a separate “claim” arose with each theft, and also their fallback argument that a separate “claim” arose with each method of theft. It held that such arguments erroneously equated a “claim” with a cause of action. It is worth setting out Lord Lloyd’s reasoning in relation to the Tang estate at some length. He concluded that, although in one place in the PI policy the word “ claim ” referred to the solicitors’ claim against the insurers under the policy, in general it referred to the claim made against the solicitor. Lord Lloyd continued:- “That leaves open the question whether the Tang estate made one claim under clause 3, or 43 separate claims. Just as the word “claim” is used in two separate senses in the certificate, so it can bear two different meanings in ordinary usage. It can mean a claim for something or a right to something. Mr. Kentridge submits that it is used in the latter sense in clause 3. According to this view a claim arises whenever something happens which creates a liability on the part of the insured towards a third party. ... Putting it shortly, the effect of Mr. Kentridge's argument is to equate claim with cause of action. The strength of the argument is that it focuses on the subject matter of the claim rather than the form in which the claim is put forward. If in every case claim is to be equated with demand for payment by the third party the results could be capricious. The liability of insurers would depend on the way the third party chooses to formulate his claims. It is the underlying facts which, he says, should determine the extent of insurer's liability, not the chosen form of claim. The parties must have intended that the test should be objective and easy to apply. In this connection Mr. Kentridge relies heavily on the decision of McNair J. in Australia & New Zealand Bank Ltd. v. Colonial & Eagle Wharves Ltd . [1960] 2 Lloyd's Rep. 241 . The policy in that case was an all-risks policy on goods taken out by a firm of wharfingers. There was an excess of £100 each and every claim. During the currency of the policy the wharfingers misdelivered a total of 246 bales on 30 separate occasions. McNair J. held, at p. 255, that the word “claim” in the excess clause meant “the occurrence of a state of facts which justifies a claim on underwriters and does not mean the assertion of a claim on underwriters.” He went on the say, at p. 255: “It seems to me quite absurd that the wharfingers' right of recovery should be determined either by the form of the bank's letter of claim against the wharfingers or the form of the wharfingers' claim against the underwriters. In other words, in my judgment, the operation of the excess clause is determined by the facts which give rise to the claim and not by the form in which the claim is asserted.” Accordingly McNair J. held that there were 30 separate claims covering 30 separate misdeliveries, and that the deductible of £100 applied to each claim. Their Lordships agree with Mr. Kentridge that it is the underlying facts which are determinative, and that the formulation of the claim by the third party cannot be decisive of an insurer's liability, whether for the purpose of calculating the deductible, or for any other purpose. Mr. Hunter on behalf of the primary insurers concedes as much. But it does not follow that there was a separate claim whenever a separate cause of action arose, nor that there were, as a consequence, 43 claims. In the first place there is a linguistic difficulty. Just as you cannot “pay” a cause of action (see West Wake Price & Co. v. Ching [1957] 1 W.L.R. 45 , 57, per Devlin J.), so you cannot “make” a cause of action within the meaning of clause 3(a) of the policy. Secondly, and more important, it seems unnatural to say, on the facts of the Tang case, that there were 43 separate claims. The reality is that there was only one demand, namely, the demand made by the Tang estate on Lo & Lo. Although the nature of the demand cannot be decisive, it at least provides a useful starting point in a claims made policy, such as this was. There is nothing here to displace that first impression. On the contrary, as soon as the thefts came to light, Lo & Lo wrote to their brokers as follows: “We write to report that we may be subject to a claim of negligence by the executors and beneficiaries of the above estate the probate and administration of which our firm has been handling. The extent of the claim is not yet ascertained but may be very substantial and will in any event exceed H.K.$5m. The claim may arise out of possible fraud by one of our employees. A report of the possible fraud has already been made to the police.” The subsequent conduct of the parties cannot, of course, throw light on the meaning of the policy. But the use of the singular is interesting. It certainly does not bear the stamp of artificiality. The point was put forcibly by Liu J., when he said: “It would be ludicrous for the estate to even think in terms, such as: ‘We have over 43 claims of money,’ or ‘We are claiming against Lo & Lo 43 times over’ instead of: ‘We have a claim against them to the extent of H.K.$50m.’” As for Australia & New Zealand Bank Ltd. v. Colonial & Eagle Wharves Ltd . [1960] 2 Lloyd's Rep. 241 it has already been noted that the policy in that case was an all-risks policy. Their Lordships do not find the decision of any assistance in the very different context of a claims made policy. Moreover McNair J. was careful to point out that he was concerned only with the meaning of the word “claim” in its particular setting. He was far too careful a judge to lay down any general rule, or to suggest that the word would always bear that meaning.” (pp.204-205)

281. As to the Tso case, the Privy Council noted that the facts were different because the estate did not sue the solicitors, but instead brought proceedings against 14 companies seeking rectification of their share registers to reverse the effects of the fraud. The companies brought in third parties, ultimately resulting in the solicitors being brought in as fifth parties. Lord Lloyd concluded that this made no difference:- “… the underlying facts are, in their Lordships' view, in all significant respects the same as in the Tang case. There was only one plaintiff in all the multifarious proceedings, namely, the Tso estate. There was only one underlying cause of the plaintiff's loss, namely, Yim's dishonest course of conduct in forging the power of attorney and using it to procure the share transfers. It was obvious from the start that the loss suffered by the Tso estate would ultimately fall on Lo & Lo. … … If, as their Lordships have said, the underlying facts are the same in all significant respects, then Mr. Kentridge's main argument that there were 31, or alternatively eight, separate claims must fail for the same reasons as those already given in the Tang case. But what about the alternative argument that there were as many claims as there were proceedings brought against Lo & Lo by the defendant companies, the third parties and the brokers? … although the formulation of the claim by the third party is a good starting point for determining whether there is one claim or more than one claim, it cannot in all circumstances be decisive. The Tso claim is an excellent illustration of that proposition. The estate commenced 14 separate sets of proceedings. But in reality they all rested on the single claim by the estate to recover the loss resulting from Yim's dishonesty. The “claims” by the defendant companies and others all stemmed from that one claim. So far from being decisive of the question in issue on this appeal, the intermediate “claims” were, in truth, irrelevant. ....” (p.207)

282. In Citibank NA v Excess Insurance Co Ltd [1999] 1 Lloyd’s Rep IR 122, one issue was whether proceedings brought by Citibank against a cable installer arising from a fire constituted one or multiple claims for the purposes of the installer’s public liability insurance. Citibank argued that it was making two claims: one for damage to the cabling which had been installed (for which the installer was solely liable); and the second for damage to other property (for which multiple defendants were liable). Thomas J rejected that argument, citing West Wake Price and Haydon before saying:- “It is clear from [ Haydon v Lo & Lo ] that it is the underlying facts that are determinative of the question whether there is one claim and not the formulation of the claim by the claimant, but that it does not follow that there is a separate claim for each separate cause of action. The way the demand is made initially is a useful starting-point, but what is paramount is the reality of the position.” (p.127 rhc - p.128 lhc) and:- “In my view, looking at the demand in the letter before action, the formulation of the statement of claim and the annexed schedule of damages (where one single sum was claimed) and the reality of the position, I have no doubt but that there was one claim by Citibank for the damage caused by the fire.” (p.128 lhc) The former statement was approved by Morrison J in Mabey v Johnson Ltd v Ecclesiastical Insurance Office Ltd (No 2) [2003] EWHC 1523 (Comm) [2004] Lloyd’s Rep IR 10 at [12].

283. As regards aggregation, it has been held that the expression “ matter or transaction ” is to be given a broad meaning. In AIG v Woodman [2017] UKSC 18, [2017] 1 WLR 1168, the Supreme Court considered whether claims made against solicitors by investors in two development projects were to be aggregated as arising from similar acts or omissions in a series of related matters or transactions. (At that time, the standard aggregation clause did not contain a limb providing for aggregation of claims arising from one matter or transaction.) The Supreme Court concluded the claims in relation to each development should be aggregated. In doing so, it rejected the Court of Appeal’s narrow view of the relevant “ transactions ”, explaining that these were not the payments of money from escrow but the wider set of arrangements by which any investment was made, involving multiple contracts. Lord Toulson stated:- “14 Aggregation clauses have been a long-standing feature of professional indemnity policies, and there have been many variants. Because such clauses have the capacity in some cases to operate in favour of the insurer (by capping the total sum insured), and in other cases to operate in favour of the insured (by capping the amount deductible per claim), they are not to be approached with a predisposition towards either a broad or a narrow interpretation. There is a further reason for adopting a “neutral” approach in the interpretation of the MTC. The Law Society is not in a position comparable to an insurer proffering an insurance policy. It is a regulator, setting the minimum terms of cover which firms of solicitors must maintain. In doing so it has to balance the need for reasonable protection of the public with considerations of the cost and availability of obtaining professional indemnity insurance. … 23 In considering the application of the phrase “a series of related matters or transactions” it is necessary to begin by identifying the (matters or) transactions. The Court of Appeal appears to have taken a narrow view of the transactions when it spoke, at para 19, of the relevant transaction being “the payment of money out of an escrow account which should not have been paid out of that account.” That was an act giving rise to a claim, but the act occurred in the course of a wider transaction. The transaction involved an investment in a particular development scheme under a contractual arrangement, of which the trust deed and escrow agreement were part and parcel, being the means designed to provide the investor with security for his investment. The transaction was principally bilateral, but it had an important trilateral component by reason of the solicitors’ role both as escrow agents and as trustees, and the trust deed created a multilateral element by reason of the investors being co-beneficiaries.”

284. For claims to be aggregated as “ arising from ” a common matter, it is enough that they have some causal connection to the relevant matter. A relationship of proximate cause is not required, and a causal link that is not very remote will suffice: see Caudle v Sharp [1995] 4 Re LR 389 at 394-395 per Evans LJ. In Various Eateries Trading Ltd v Allianz Insurance plc [2024] EWCA Civ 10, [2024] 2 All ER (Comm) 414, the Court of Appeal at [27] quoted with approval §§ [78]-[90] of Butcher J’s judgment in Stonegate , including as follows:- “87. Whether any and if so what causal link is required between the unifying factor and the losses must depend on the linking words used. Typically aggregation clauses require a significant causal link. In Scott v Copenhagen Re the relevant clause was 'arising from one event'. It was accepted, in line with Caudle v Sharp [1995] 4 Re LR 389 , that 'arising from one event' did not necessarily import a requirement of proximate causation. It nevertheless required a significant causal connection. Rix LJ said this, at [68]: '… Nevertheless, it seems to me ultimately to be inherent in the concept of aggregation ("arising out of one event") that a significant causal link is required. … A plurality of losses is to be regarded as a single aggregated loss if they can be sufficiently linked to a single unifying event by being causally connected with it. The aggregating function of such a clause is antagonistic to a weak or loose causal relationship between losses and the required unifying single event. This is the more easily seen by acknowledging that, once a merely weak causal connection is required, there is in principle no limit to the theoretical possibility of tracing back to the causes of causes. The question therefore in my judgment becomes: Is there one event which should be regarded as the cause of these losses so as to make it appropriate to regard these losses as constituting for the purposes of aggregation under this policy one loss?'

88. There is also usually a distinct requirement of lack of remoteness between the aggregating event and the losses. Thus in Caudle v Sharp at 394 Evans LJ, with whom Rose and Nourse LJJ agreed, said: 'In my judgment, the three requirements of a relevant event are that there was a common factor which can be properly described as an event, which satisfied the test of causation and which was not too remote for the purposes of the clause.'

89. In Scott v Copenhagen Re , Rix LJ referred to the requirement of a lack of remoteness recognised in Caudle v Sharp , and referred to it as a 'tool to limit the otherwise infinite reach of the workings of causation', and 'a legal tool to separate out relevant from irrelevant causes' (at 713). As a result of its use, the court will look for a 'nearer and more relevant cause than for a more distant one' (ibid).

90. The issue of whether losses can properly be aggregated and if so around what event or cause is to be answered by an exercise of judgment based on all the relevant facts and the purpose of the clause. Rix LJ in Scott v Copenhagen Re said, at [81]: '… Are the losses to be aggregated as all arising from one event? That question can only be answered by finding and considering all the relevant facts carefully, and then conducting an exercise of judgment. That exercise can be assisted by considering those facts not only globally and intuitively and by reference to the purpose of the clause, but also more analytically, or rather by reference to the various constituent elements of what makes up one single unifying event. It remains an exercise of judgment, not a reformulation of the clause to be construed and applied.'” See also §§ [53]-[54] of Various Eateries , confirming the need for a causal link and for the event not to be too remote. (I) PART 20 PROCEEDINGS: COVERAGE ISSUES ISSUE 1 – ATTACHMENT “What is the correct analysis as to the HSS 20/21 Policy and HSS 22/23 Policy to which AmTrust’s claim, or claims, in the Part 20 Proceedings, attach? In particular, is it the case that (a) the claim or claims attach to the HSS 20/21 Policy (Sompo’s position); (b) the claim or claims attach to the HSS 22/23 Policy (AmTrust’s primary position); or (c) the claim or claims attach to the HSS 20/21 Policy to the extent advanced before the re-re-amendment to the Part 20 Particulars of Claim and otherwise attach to the HSS 22/23 Policy (AmTrust’s alternative position)?”

285. The PI Policies cover “any civil liability … resulting either (a) from a Claim or Claims first made against the Insured during the Period of Insurance; or (b) from Circumstances first notified to the Insurer during the Period of Insurance”. As noted earlier, “Circumstances” are defined as any state of affairs known to the Insured that may, when considered objectively, give rise to or result in a Claim; and “ Claim ” means:- “the receipt by the Insured of a demand for, or an assertion of a right to, civil compensation or civil damages or an intimation of an intention to seek such compensation or damages…” (clause 6.5)

286. A significant document in this context (though clearly not decisive, in view of the authorities summarised earlier) is AmTrust’s Preliminary Notice to HSS under the Pre-Action Protocol on professional negligence (“ the HSS February 2021 Notice ”), given by a letter dated 9 February 2021 from AmTrust’s solicitors, which read as follows:- “Dear Sirs Pre-Action Protocol for Professional Negligence Preliminary Notice 1 Introduction 1.1 We act for AmTrust Europe Limited ("AmTrust") of Exchequer Court, 33 St Mary Axe, Lime Street, London EC3. This letter is our clients Preliminary Notice in relation to its potential claim against High Street Solicitors Limited, 420 Cotton Exchange, Old Hall Street, Liverpool, L3 9LQ for negligence and breach of contractual duties relating to the Pure litigation funding Scheme ("the Scheme") and the Terms of Business Agreement ("the TOBA") in place. 1.2 This letter is being sent to you in accordance with the Practice Direction on Pre-action Conduct and Protocols ("the Pre-Action PD") contained in the Civil Procedure Rules ("CPR"). 2 Grievance 2.1 We have identified that a large proportion of the claims made under the Scheme to date relate to policies that were issued outside the requisite criteria for cover under the Scheme. We have also identified that disbursements were incurred that did not properly fall for cover under the policies issued and/or that costs were incurred following unauthorised action taken. These failures have caused significant loss to AmTrust and we consider that your breach of the TOBA has caused or contributed to this loss. 2.2 We have identified the following breaches of the TOBA by you in respect of policies issued to your clients under the Scheme: • Cases were submitted for cover by you that did not meet the applicable eligibility criteria; • Cases were submitted for cover by you that were not the subject of a risk assessment; • Disbursements were incurred by you that did not meet the definition of "Own Disbursements" under the relevant policy and therefore did not fall for cover; and • Actions were taken by you that did not receive approval from Arc, as required by the relevant policy, including the issuing of proceedings or discontinuance of cases. 2.3 Your breaches, including but not limited to the above examples, have caused significant loss to AmTrust. 3 Next Steps 3.1 AmTrust is finalising its investigation into these breaches and will write once these are concluded. 3.2 A copy of this letter should be sent to notify your professional indemnity insurer immediately. 3.3 In accordance with paragraphs 5.5 of the Pre-Action Protocol for Professional Negligence this Notice is to be acknowledged, in writing, within 21 days of receipt, which we estimate to be 2 March 2021.”

287. AmTrust makes the point, first, that the relevant question is to which policy the claim(s) advanced in the proceedings attach: not, to which policy the claim(s) advanced in the HSS February 2021 Notice attach. It submits that its Group 1 Claims against HSS attach to the 22/23 Policy, as the Part 20 Proceedings were commenced in January 2023; and that its Group 2 Claims against HSS were first made on 3 October 2025, following AmTrust’s settlement with Novitas, when it served its Part 20 RRAPoC on Sompo.

288. AmTrust submits that the HSS February 2021 Notice was a mere preliminary notice under the Pre-Action Protocol on Professional Negligence, which stated only that there was a “ potential claim ” and that AmTrust was “ finalising its investigations into these breaches ”. The Protocol provides for a Preliminary Notice to be sent once a claimant decides that “there is a reasonable chance that he will bring a claim” against the professional; whereas a “ detailed Letter of Claim ” should be sent as soon as the claimant decides that “there are good grounds for a claim” .

289. In my view, however, the claim(s) against HSS attach to the 20/21 policy year.

290. The policy definition of “ Claim ” extends beyond (i) a “ demand for ” civil compensation so as also to cover (ii) an “ assertion of a right ” to such compensation, and (iii) an “ an intimation of an intention to seek ” such compensation: the evident intention being that the latter two situations are progressively wider than the first. The HSS February 2021 Notice, although styled a Preliminary Notice, asserted that AmTrust had a potential claim against HSS, and went on to state (a) that HSS had breached the TOBA in several respects, which were then spelt out on a non-exhaustive basis (“[y]our breaches, including but not limited to the above examples” ), and (b) that those breaches had caused significant loss to AmTrust. That was tantamount to an assertion of a right to damages for breach of contract, the essential elements of which the Notice asserted to exist. Alternatively, it was an intimation of an intention to seek civil compensation.

291. Further, the civil compensation claim asserted in the HSS February 2021 Notice is the same claim (or claims: see Issue 5 as to the number of claims) as AmTrust subsequently particularised in the Part 20 Proceedings, in respect of both the Group 1 Claims and, following amendment, the Group 2 Claims. It is clear from AmTrust’s RRAPoC in the Part 20 Proceedings that the gist of all its claim(s) is breach by HSS of the TOBA (and concurrent duties in tort), including breaches of the kind indicated by the specific examples set out in the HSS February 2021 Notice (see, e.g., RRAPoC §§ 21, 30, 31, 31A and 32). That Notice was, in fact, rather more informative that the letter which was held to be sufficient in Thorman to give rise to a claim. Moreover, there is no difference in substance between the way in which the Group 1 Claims and the Group 2 Claims are put (as illustrated by RRAPoC §§ 3 and 4). The recasting of the claim following the Novitas settlement leaves its substantive nature unaffected. Accordingly, in terms of AmTrust’s submission as recorded above, it is the 20/21 policy year to which the claim(s) advanced in the proceedings attach(es).

292. I therefore conclude on Issue 1 that AmTrust’s claim, or claims, in the Part 20 Proceedings attach(es) to the HSS 20/21 Policy.

293. Issue 1A related to the attachment of AmTrust’s claim(s) against PLL. However, the parties have now agreed that the Group 1 and Group 2 Claim(s) attach/es to the PLL 20/21 Policy. ISSUE 2 – SCOPE OF COVER ‘Would any of the contractual and/or tortious liabilities which AmTrust alleges that Pure and HSS have to it fall within clause 1.1 of the PI Policies as being civil liabilities arising out of and/or in connection with “the conduct of any Professional Business [as defined] carried on by, or on behalf of, the Insured”; and, if so, which of the liabilities alleged?’

294. This Issue involves considering the allegations of breach of duty against PLL/HSS and whether the claim(s) thus fall(s) within clause 1.1 of the PI Policies. The categories of allegations are: (a) a failure to vet cases properly; (b) breach of, in effect, a collateral warranty to minimise the risk of loss to AmTrust in handling claims; and (c) a failure to ensure client compliance with ATE policy terms.

295. AmTrust submits that the claims it advances by way of the Part 20 Proceedings fall within the PI cover on two separate bases:- i) because PLL/HSS undoubtedly provided solicitorial services to their clients in the underlying claims, and AmTrust’s claims “ arise out of and/or in connection ” with that conduct; and ii) PLL/HSS provided solicitorial services to AmTrust itself pursuant to the TOBAs and/or owed duties to it at common law. AmTrust was therefore itself a client of PLL/HSS and a beneficiary of solicitorial services.

296. As to the first of these bases, AmTrust relies on the approach set out by the Supreme Court in Impact Funding , affirming that the paramount purpose of Law Society-mandated insurance is the protection of the consumers of solicitors’ services, and explaining the technique used in the Minimum Terms of a broad insuring clause qualified by exclusions, reducing the prima face broad coverage by process of elimination. AmTrust submits that clause 1.1 of the PI Policies is not limited to the three categories elucidated by Lord Toulson in § 42 of Impact Funding which usually delineate the scope of solicitors’ liabilities (i.e., to (i) clients, (ii) third parties to whom undertakings have been given, and (iii) White v Jones -type quasi-clients).

297. Further, AmTrust says, the insuring clause here is wider than that in the Minimum Terms. Those provide (in the relevant edition) that:- “Subject to the limits in clause 2, the insurance 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 …” (my emphasis) The PI policies in the present case say cover prima facie exists:- “Provided that such Claim, Claims or Circumstances arise out of and/or in connection with the conduct of any Professional Business carried on by, or on behalf of, the Insured ” (my emphasis) The phrase “and/or in connection with” does not reflect a mere re-ordering of the language of the Minimum Terms provision (as Sompo submits) but, AmTrust says, expressly widens it. Since the draftsmen of, and parties to, a policy of insurance can be presumed to have considered existing case law, it is reasonable to infer that Sompo must have deliberately chosen wording that is wider than the already wide language of clause 1.1 of the MTC: cf MDIS v Swinbank [1999] 2 All ER (Comm) 722 at pp. 728F and 735H. Moreover, AmTrust says, the phrase “ in connection with ” is extremely broad: see Standard Life Assurance (§ 214 above) .

298. It is true, AmTrust accepts, that the lead-in wording above the Insuring Clauses states:- “This Policy provides cover to the Insured in the form of the Minimum Terms and Conditions.” However, AmTrust says, clause 4.1 makes clear that this is a one-way process: the cover can be greater than, but cannot be less than, that provided for in the Minimum Terms.

299. AmTrust’s case is that PLL and HSS were bringing consumers into the Scheme and pursuing their Claims as solicitors. This was so whether their liability is connected with their consumer work – which involved advising on the success of claims – or with the provision of legal services to AmTrust through the TOBAs: the work identified inter alia in recital (iii), clause 1.1 and clause 1.10 is all classic solicitorial work. In more detail, AmTrust submits that:- i) The vetting duties required an application of professional knowledge to determine prospects of success even if, as alleged by Sompo, the focus was on filtering out cases to be entered into the Scheme. As part of providing services to the underlying consumers, PLL/HSS should have advised them about the merits of their case and/or the eligibility of their case for the Scheme. That would have involved the same, or largely the same, analytical exercise being carried out on behalf of the consumers as the vetting exercise to be conducted on behalf of AmTrust. Recital (ii) to the TOBAs recorded that PLL/HSS were giving such advice to their clients, and the evidence indicates that, even after CFAs were signed, the firms were obtaining further reports in order to be able to say whether the prospects of success were at least 51%. (It was not clear whether clients were in fact given advice on the merits, other than in the letters offering a CFA, examples of which were in the evidence, which told the client that on the information available his/her claim had a reasonable prospect of getting compensation.) Even if the solicitors’ advice to the client was negative, that would still be part of their professional duties and could give rise to liability: see, e.g., Jackson and Powell on Professional Liability (9 th ed.) § 11-043. ii) The case handling duties concerned the conduct of litigation; this is squarely solicitorial work. PLL/HSS should have handled the cases with due care and skill. Any misconduct in the discharge of those duties would give rise to a liability to the consumer and a liability to AmTrust, to whom PLL/HSS also owed a duty to conduct cases competently. iii) The Policy breaches also fall within the scope of solicitorial work: solicitors ordinarily assist clients with obtaining ATE insurance and ensuring they make no false declaration under it. PLL/HSS were required to advise consumers about their ATE cover and terms of their ATE Policy. This exercise would have overlapped with, and directly contributed to, the work of PLL/HSS in ensuring compliance by consumers with their ATE Policies, which they were obliged to do for AmTrust.

300. AmTrust relies on HHJ Waksman QC’s conclusion at first instance in Impact Funding , not challenged on appeal (and arguably implicitly endorsed by the Supreme Court’s reasoning), that the solicitors there (Barrington) owed various obligations to the funder in respect of the conduct of underlying cases and the standard of service to be provided; and that Barrington’s liabilities for breach of those duties “ arose from ” their provision of services to the underlying claimants, since the breaches “ were entirely concerned with the services purportedly rendered by Barrington to its clients as solicitors ” [46].

301. Conversely, AmTrust submits that Sutherland and Doorway do not assist. In Sutherland, it was not pleaded that the relevant scheme solicitors owed a duty of care to the funder (see § [79]), and, in any case, the relevant insurance policy did not have the “in connection with” wording. Likewise, Doorway involved a lender funding a litigation scheme (not an insurer) in which funds were advanced to the solicitors directly. The firm had contracted to hold funds on trust for the funder, which was part of a mechanism to secure the repayment of sums which the funder had advanced to the firm. That was a very different type of arrangement to the wide-ranging obligations owed by PLL/HSS to AmTrust under the TOBAs.

302. As to its second basis, AmTrust submits that it was itself a beneficiary of solicitorial services under the TOBAs and at common law, because:- i) The TOBAs are contracts between CLE (acting for AmTrust) and different firms, each of which is described at the start of the relevant TOBA as a “ Scheme Solicitor. ” The TOBAs are also described as “ Solicitor Terms of Business Agreement ” (underlining added). Accordingly, it is inherent in the design of the TOBAs that PLL/HSS entered them in their capacity as solicitors. ii) The impression of PLL/HSS providing services to AmTrust as a solicitor is reinforced by recital (iii), which confirms that the Scheme Solicitor is “ solely responsible for risk assessing the merits of each personal injury claim…and…agrees that it will carry out a full and detailed risk assessment and will provide the Administrator and the Insurer with a professionally reasonable assessment of the prospects of success of each claim it proposes for After the Event (ATE) legal expenses cover. ” Risk assessing and/or considering the merits of a claim are both examples of services routinely performed by solicitors for their clients. Furthermore, recital (iii) states that these assessments are to be “ professionally reasonable ”, i.e., they are to be carried out by PLL/HSS to a professional standard. That is a clear reference to PLL/HSS exercising their professional judgment as solicitors on AmTrust’s behalf. iii) By Clause 1.10 of the TOBAs, the Scheme Solicitor accepted that “ at all times ” it had a duty of care to AmTrust. The language of duty supports the view that AmTrust was a client of PLL/HSS, or at least that the firms were doing professional business (legal work) for AmTrust. iv) The contractual and tortious liabilities which AmTrust alleges PLL/HSS had to it are concerned with the provision of services as a solicitor. In particular:- a) Vetting duties : such work involved PLL/HSS providing services as a solicitor because the risk assessment of claims required the exercise of their professional judgment as solicitors. Recital (ii) draws particular attention to PLL/HSS “giving formal advice to the claimant as to the prospects of success in such claims” . b) Handling duties : conducting the underlying claims with the care and skill to be expected of a reasonably competent solicitor involved the provision of services as a solicitor. c) Policy duties : ensuring that each consumer complied with the terms of their ATE policy was a solicitorial service provided by PLL/HSS, since it required their expertise as solicitors.

303. In assessing those submissions, I consider first the wording of the insuring clause in the present case. Linguistically it is wider than the equivalent provision in the Minimum Terms, as it expressly uses the expressions “ arises from” and “ in connection with ” as alternatives. In the Minimum Terms, on the other hand, the liability must “arise[] from” private legal practice “in connection with” the firm’s legal practice. Although it is not entirely clear what the “ in connection with ” phrase adds there, it does not appear to expand the scope of the connecting link required by the words “ arising from private legal practice ”.

304. Further, the fact that each PI Policy states that it “provides cover to the Insured in the form of the Minimum Terms and Conditions” does not necessarily limit the scope of the cover. That phrase can naturally be read as an assurance that the policy complies with the Minimum Terms by providing at least the required level of cover. That would be consistent with the first sentence of clause 4, providing that the cover is to be construed or rectified so as to “ comply with the requirements ” of the Minimum Terms; and the second sentence of that Clause which provides for severance/rectification, on a ‘one way’ basis, in order to bring the policy cover up to (but not down to) the Minimum Terms level.

305. At the same time, however, the words “ arising out of and/or in connection with ” still require a causal link and are not of unlimited scope. Generally, the addition of “in connection with” to “arising from” in a linking phrase does not remove the requirement for a demonstrable causal link: see Stonegate at [113]-[114], where, after quoting the passage from Standard Life on which AmTrust relies, Butcher J said:- “[113] To my mind it is clear, as a matter of ordinary language, and without any need to refer to authority, that the words ‘in connection with’ are wide linking words. I doubt, however, that a reasonable policyholder would understand there to be much if any distinction between ‘arising from’ and ‘attributable to’, or perceive a ‘cascade’ of provisions. I nevertheless consider that a reasonable policyholder would understand the use of the three phrases, and in particular the words ‘in connection with’ to denote that only a relatively loose link was required, and thus that a wide range of losses might potentially fall to be aggregated as being at least ‘connected with’ an occurrence. [114] I am not persuaded, however, that a reasonable policyholder would understand the linkage, albeit broad, to extend to a relationship which was not causal in any sense. The fact that ‘in connection with’ appears alongside ‘arising from’ and ‘attributable to’ indicates, to my mind, that the parties were contemplating a causal linkage. Moreover, I find it difficult to think why parties would agree to treat losses which were simply ‘connected with’ an event in an entirely non-causal way as being one loss for the purposes of the Policy. Unless there were some causal relationship the types of ‘connection’ might be very wide indeed, and the definition might be of highly uncertain application. Thus, on such an approach it might be possible to say that there was a ‘connection’ between losses which had been sustained and a subsequent occurrence. That would be a surprising basis for aggregation.”

306. Moreover, Standard Life and Stonegate were considering aggregation clauses, where it is to be expected that a relatively broad causal link will be sufficient (see Caudle v Sharp cited earlier). It does not necessarily follow that the use of the same words in an insuring clause means that a very loose or tenuous link is enough. I therefore agree with Sompo that the words “and/or in connection with” do not radically change the ambit of the insuring clauses here. A reasonable policyholder would not in my view regard the expression “arising from” and “in connection with” in the insuring clause as substantially different.

307. Equally, I do not read the Supreme Court’s observations at §§ 43 and 44 of Impact Funding as meaning that the insuring clause prescribed by the Minimum Terms is of almost unlimited scope, subject only to the exceptions, or should be construed more widely than its language would suggest. In § 43, Lord Toulson stated that the insuring clause was “far broader than any ordinary understanding of a solicitor’s professional liability” . However, in § 44 he rejected Impact’s submission that the Minimum Terms “require[e], through the opening clause, a far broader scope of cover than would have been necessary for the protection of clients and third parties to whom they may undertake professional responsibilities, subject only to exceptions which (it is argued) are to be construed as narrowly as possible” . Examples can be envisaged of liabilities prima facie falling within the insuring clause even though they go beyond solicitors’ professional obligations (e.g. duties owed to employees working on clients’ cases, excluded by clause 2.1, or the use of a courier when acting for a client, excluded by the trading debts exclusion). It does not follow, however, that the insuring clause applies to liabilities which do not arise in the course of work done by the solicitor for his/her client but instead derive from a separate transaction entered into by the solicitor, collaterally, outside of the ambit of work being done for clients and outside of the characteristic duties of a solicitor. It is relevant also to bear in mind that the only live issue before the Supreme Court in Impact Funding concerned the second limb of the trading debts and liabilities exclusion: the court did not hear argument about, or provide specific, authoritative guidance in relation to, the scope of the insuring clause itself.

308. Thus Impact Funding does not, in my view, do away with the distinction recognised in Haseldine and Sutherland between solicitorial work on the one hand, and transactions undertaken by the solicitor for his own benefit, or for his own as well as the client’s benefit, on the other hand. It remains relevant to consider, as a starting point, whether the situation falls within any of the three classic categories of solicitorial liability referred to in § [42] of Impact Funding : as Butcher J did in Doorway, and as the courts in substance did in the cases summarised in section (H)(2)(e) above. It also remains relevant to consider, as Judge Hegarty did in Sutherland , whether the civil liability in question arose in substance from the conduct of solicitorial business, or whether (as the judge put it there) “the obvious and direct cause was [the solicitor’s] failure to fulfil the contractual obligations which they had undertaken under [a separate] Agreement” [94], so that liability “represents the coming to pass of a commercial risk arising out of a contractual obligation towards a party to whom [the solicitors’ firm] owed no professional duties” : even if the liability has a ‘but for’ link with the solicitors’ breaches of duty to his clients [95]. I note that Judge Hegarty considered those distinctions apt even if “ arising from ” meant something wider than “ caused by ” (see § 234 above), and I agree.

309. In the present case, PLL’s and HSS’ position is in my view analogous to that of the solicitors’ firm in Sutherland , who “chose this specific method of funding litigation on behalf of their clients and undertook certain contractual liabilities to Sutherland as part of the arrangements for the provision of that funding. No doubt that was for the benefit of the clients; but it was also for their own benefit as it enabled them to attract new business” [98].

310. The alleged vetting and/or eligibility breaches in the present case concern (a) failures properly to assess the prospects of claims for AmTrust’s benefit; (b) failing to investigate limitation and the solvency or insurance of the proposed defendant; (c) entering ineligible claims into the Scheme (e.g. small claims); (d) failing to investigate whether the customer had before-the-event legal expenses insurance; and (e) failing to investigate whether likely damages would be sufficient to repay the Novitas Loan. They are all framed as arising from alleged duties to protect AmTrust by not taking on claims outside its risk appetite or criteria, compliance with which would result in no legal services being provided to the relevant clients at all. These activities may partly overlap with work which PLL/HSS did for their clients. For example, as noted earlier, the solicitors stated in letters sent to clients that on the information available the claims had a reasonable prospect of getting compensation. However, the duties were different. A key duty said to be owed to AmTrust was to ensure that cases without at least 51% prospects were not taken on. However, PLL/HSS did not owe solicitorial duties to prospective clients not to take on their cases. They may have owed duties of care if they in fact advised clients not to pursue cases, but (a) at the case inception stage, they did not necessarily have any duty to advise at all, and (b) they may not in fact have provided advice. Further, the duties allegedly owed to AmTrust relating to eligibility criteria do not correspond to duties owed to clients; nor does the alleged duty to ensure ability to repay Novitas: a matter that would have been of less concern to the clients given the non-recourse nature of loans.

311. More broadly, the source and content of the alleged PLL/HSS duties to AmTrust in relation to vetting/eligibility differ from the source and content of any duty owed to their clients. In the context of considering whether a restriction should be implied into the trading debts exclusion, Lord Hodge in Impact Funding said:- “31. I see no basis for implying additional words into the exclusion in order to limit its scope. In Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742 this court confirmed that a term would be implied into a detailed contract only if, on an objective assessment of the terms of the contract, the term to be implied was necessary to give the contract business efficacy or was so obvious that it went without saying (paras 15-31 per Lord Neuberger). This court also held that the express terms of the contract must be interpreted before one can consider any question of implication (para 28).

32. In my view, it cannot be said that the Policy would lack commercial or practical coherence if a term restricting the scope of the exclusion were not implied. In the present case it is fairly said that the breach of duty in the warranty on which Impact relies is a breach of duty by Barrington to its clients. But Impact’s claim is not a claim which is derived from the clients’ claims. Defences which Barrington might be able to plead against its clients cannot be advanced against Impact. For example, if a client were careless in informing Barrington of the circumstances of the injury on which his or her claim was based, and Barrington also was negligent in failing properly to investigate and prosecute the claim, which then failed, the client’s claim might be met with a defence of contributory negligence. No such defence would arise out of those circumstances in relation to a claim by Impact against Barrington. Thus Impact’s entitlement under the warranty would not be the same as the client’s claim in all cases and might be larger in some cases. In short, Impact’s cause of action under the DFMA is an independent cause of action. Excluding such a claim creates no incoherence in the Policy, as it is the combination of the opening clause and the exclusions that delimits AIG’s contractual liability. Indeed, it would be consistent with the purpose of the Policy suggested by the context, which I discussed in paras 16 and 17 above, if such a claim were excluded from that liability.” (my emphasis) Those observations are also pertinent when considering whether the alleged breaches by PLL/HSS in the present case arise from or in connection with solicitorial services within the insuring clause.

312. The same considerations apply to the alleged breaches relating to the handling and conduct of the clients’ cases. As set out below under Issues 9(e) and 12, I do not consider that any such duties were owed to AmTrust. Even if they were, however, the alleged breaches were not in my view within the insuring clause. As Sompo points out, ordinarily, a solicitor handling litigation owes an obligation only to its client as regards the conduct of that litigation. It is not a characteristic part of a solicitor’s duties or work to give a collateral warranty to a third party about the solicitor’s conduct of the client’s claim. If a solicitor decides to give such a warranty to a third party, any liability results from the warranty rather than from or in connection with the provision of services as a solicitor: cf the observations of Lord Hodge in Impact Funding quoted above. In this respect, I would, if necessary, respectfully depart from the briefly-reasoned conclusion of HHJ Waksman QC about the insuring clause at first instance in Impact Funding (see § 135 above). In my view, entering into an express collateral warranty in favour of a third party about the conduct of clients’ cases falls outside the scope of solicitorial business, even if the content of the warranty mirrors the duties owed to clients.

313. The alleged policy breaches mainly involve ensuring that clients informed AmTrust of specified developments in the litigation. Any liability in respect of such breaches would not arise from the provision of legal services for clients. It would arise from the firm failing to discharge a distinct obligation assumed to AmTrust (i.e. a duty to cause clients to supply specified information to AmTrust in certain events). That is different from any duty of care owed by the solicitor to the client if and when the solicitors assists the client with any declarations or other information provided to the ATE insurer. It was no part of PLL/HSS’s duties to their clients to give a commitment to a third party (AmTrust) that the clients would comply with their duties under the ATE policies in this or any other respect: still less so when duties under the policy could conflict with the solicitor’s ordinary duty to his/her client (as with clause 4.7 of the ATE policy, which required the solicitor to oppose any application for summary assessment of opponents’ costs, and to oppose any application for opponents’ costs unless approved by CLE).

314. I would also reject AmTrust’s submission that PLL/HSS were providing solicitorial services to AmTrust itself under the TOBA and/or concurrent duties in tort:- i) There is no evidence of any retainer letters between AmTrust and either firm, as one would normally expect, and no reference in any of the contracts or surrounding communications to AmTrust as the firms’ client. A retainer can generally be implied only if parties’ conduct is consistent only with the existence of a retainer: see e.g. Caliendo v Mishcon de Reya [2016] EWHC 150 (Ch) at [679]-[682]. ii) The TOBAs do not state that AmTrust is either firm’s client. iii) The references to the firm being the “ Scheme Solicitor ” and “ Solicitor Terms of Business Agreement ” do not assist. The firms were solicitors, and were acting for clients in that capacity. It does not follow that they were solicitors to AmTrust. iv) Recital (iii) to the TOBAs does not accurately describe the relationship between the parties: see Issue 9(a) below. Even if it did, it would not give rise to solicitorial duties to AmTrust in relation to each case as a whole. v) The duty of care referred to in clause 1.10 applies only in the context of the specific services required by the TOBA: see Issue 9(e) below. vi) The duties allegedly owed to AmTrust were different from the duties owed to the firms’ clients (see, e.g., §§ 310 and 313 above) and were not solicitorial in nature. Further, recital (ii) concerned the giving of advice to clients, not to AmTrust.

315. For all these reasons, I conclude that the contractual and/or tortious liabilities which AmTrust alleges that PLL and HSS have to it fall outside clause 1.1 of the PI Policies because they do not arise out of and/or in connection with “the conduct of any Professional Business [as defined] carried on by, or on behalf of, the Insured” . ISSUE 3 – EXCLUSION 2.6(B) ‘If and to the extent that the answer to Issue 2 above is “yes”, would any such liabilities be excluded from cover under the PI Policies by clause 2.6(b) of each PI Policy, which excludes cover for any claim “arising out of or in connection with any… legal liability assumed or accepted by the Insured under any contract o[r] agreement for the supply to, or use by the Insured of goods or services in the course of Professional Business [as defined]”?’

316. As a preliminary point, the words “ in connection with ” do not appear in, and are wider than, the equivalent provisions under the versions of the MTC which were current at the time of the inception of the PI Policies, namely Clauses 6.6(b) and 6.6(c). Those provisions exclude only claim(s) which “ arise from ” the matters set out. Accordingly, AmTrust submits, pursuant to clause 4.1 of the PI Policies, clauses 2.6(b) and 2.6(c) must be read down and construed so that the words “ in connection with ” do not give the exclusions any wider scope than they would have had if those words had not been incorporated. I raised during argument the question of whether the Minimum Terms require such an approach to be taken on a clause by clause basis, or whether they require only that the level of cover provided by the policy as a whole – reading the insuring clause and the exclusions together – provides at least the required level of cover. It is unclear what the answer to that question is, and I find it unnecessary to decide it for the purposes of the present case. I therefore proceed on the basis that AmTrust is correct.

317. Clause 2.6(b) contains two conditions:- i) the insured must have “ assumed or accepted ” a legal liability, and ii) the insured must have done so under a contract for the supply to, or use by, the insured of goods or services during their Professional Business.

318. As to the first condition, AmTrust submits that:- i) The phrase “ assumed or accepted ” naturally implies the assumption or acceptance of a specific liability, e.g., agreeing to a pay a price in return for goods or services. The words imply deliberate action: the assumption or acceptance, by the insured, of a particular liability, like the obligation to pay fees. That is different from assuming or agreeing an obligation to do something which, if breached, will give rise to a legal liability. ii) Clause 2.6(b) contains a carve-out excluding civil liability in connection with an insured’s use of or access to the HM Land Registry network, except for the “ obligation to pay search fees or other charges for searches or services provided by HM Land Registry ” to the Insured. In other words, clause 2.6(b) still applies in relation to any obligation to pay “ search fees ” or “ other charges ” for these services. That feature is consistent with the view that clause 2.6(b) is concerned with a liability to pay (for example) an agreed fee, price, or charge, but not any wider category of liabilities. iii) The phrase “ assumed or accepted ” under clause 2.6(b) is narrower than earlier versions of the equivalent provision in the Minimum Terms. In Sutherland , for example, the court considered an exclusion for loss in respect of “ 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… ”. The same wording was also considered by the Supreme Court in Impact Funding . Neither of those decisions is applicable, however, given the materially different wording used. iv) There appears to be only one reported decision that considers an equivalent exclusion to clause 2.6(b), namely Doorway . In that case, Butcher J held that the words “ assumed or accepted ” could encompass the liability of an insured as a trustee or fiduciary in respect of receivables payable to a funder under a funding agreement. The judge’s decision on this point was obiter , however, because he had already found that the claim fell outside the scope of the insuring clause under the policy. The insured was a trustee only by virtue of having entered the funding agreement. It is therefore understandable why its liability for breach of trust was found to be “ accepted or assumed .” v) Clause 2.6(b) can in any event have no application to any liability which PLL/HSS have to AmTrust in negligence. It is concerned with liability “ under any contract of [sic] agreement ” rather than a liability in tort.

319. I am unable to accept those submissions. I do not agree that the words “assumed or accepted” naturally refer only to obligations in the nature of a specific debt or other liability. They are equally capable of applying to a liability in damages for breach of a contract which the firm has entered into, and indeed the word ‘liability’ seems particularly appropriate there. For example, in Doorway , Butcher J considered ( obiter ) that the firm’s liability as a trustee / fiduciary could be said to be a liability ‘assumed or accepted’ under the relevant agreement. Any other approach would also lead to arbitrary distinctions: for example, the exclusion would apply to the firm’s liability for rent on its office premises or to pay an invoice to its photocopier supplier, yet would not apply (so PI cover could apply) to a liability to the firm’s landlord for failure to repair its office premises or to its photocopier supplier for late redelivery of a photocopier. The Land Registry provision appears to reflect no more than a policy decision that there should be cover for non-fee-related liabilities which solicitors may incur due to their use, in the course of conducting clients’ business, in connection with the Land Registry Network. I do not consider it to shed any particular light on the scope of the exclusion as a whole.

320. As to liability in tort, the tortious liabilities alleged by AmTrust in this case arise by reason of the firms having entered into the TOBAs. They are, in my view, liabilities accepted or assumed under the TOBAs within the scope of the exclusion. It would, moreover, be strange if duties in contract were excluded yet concurrent duties in tort were not.

321. As to the second condition, AmTrust submits that:- i) The purpose of the exclusion is to exclude liabilities arising from aspects of his/her practice which affect him/her personally, such as office expenses, as opposed to liabilities arising from professional obligations to clients, citing § [19] of the Court of Appeal’s judgment in Impact Funding. ii) The TOBAs are contracts for the provision of services by PLL/HSS to AmTrust (rather than vice versa ). iii) A useful litmus test is whether the solicitor was paying any fee to AmTrust for doing anything under the TOBAs. In Impact Funding , for example, the solicitors were required to pay an administration fee and quarterly monitoring fee if the funder advanced sums to a client. Those fees were characterised as “ remuneration for the services of Impact .” In Sutherland , the solicitors had to pay an administration fee in respect of any loan [154]. In Doorway , there were fees and charges payable by the firm to the lender including a service charge. PLL/HSS did not pay any such fee to AmTrust and nowhere in the TOBAs is AmTrust described as providing “ services ” to PLL/HSS. iv) The reality is that under the TOBAs PLL/HSS provided services to AmTrust, not the other way round. The TOBAs set out the obligations of PLL/HSS in extensive detail. The obligations on AmTrust, by contrast, are very limited, namely to “ maintain authorisation for the classes insured under the policies attaching to this Agreement ” and to “ discharge its duties under the policies attaching to this Agreement ”. Neither of those constituted the provision of services to PLL/HSS. Alternatively, they were minimal and incidental to the services being provided to the clients. v) Sutherland, Impact Funding and Doorway are distinguishable because they were concerned with a litigation funder, not an ATE insurer. vi) In addition, in Sutherland , the agreement provided for financial services to clients, which were tantamount to services to the firm, because the loan was payable directly to the firm and used to pay the firm’s disbursements; and a major purpose of the arrangements embodied in the agreement was to enable the firm to arrange financing for its clients. In Impact Funding, the Supreme Court found that the “ Disbursements Funding Master Agreement ”, under which the funder entered loan agreements with the firm’s clients, thereby providing funding for disbursements, was a contract for the supply of services by the funder to the solicitors. Similarly, in Doorway , the funder and solicitor entered a “ Receivables Funding Agreement ” whereby the funder purchased the firm’s receivables; and the court considered that the funder was providing a service, namely “ a facility to provide working capital .” vii) By contrast, in the present case, the TOBAs are not contracts for the supply of services to PLL/HSS and, to the extent that they provide for services to consumers, those cannot be considered as tantamount to services to PLL/HSS (the proceeds of the ATE insurance, for example, were not payable directly to PLL/HSS to be used to fund their disbursements). The TOBAs do not provide for any funding of disbursements or other funding to PLL/HSS, and any benefit to the firms was incidental. Nor do the TOBAs provide for any analogous payment of fees and undertaking of obligations in exchange for services provided by AmTrust to PLL/HSS. The purpose of the arrangements embodied in the TOBAs was to define the duties of PLL/HSS to AmTrust as Scheme Solicitors, rather than to enable PLL/HSS to arrange ATE insurance for their clients. The placing of cover under the Scheme was a matter dealt with separately, as provided for in (e.g.) the CLE/PCSS SLA. viii) The previous cases are also distinguishable because they did not involve the firm providing any professional services to the funder. More broadly, the exclusion cannot be concerned with liability for solicitorial services, otherwise it would drive a coach and horses through the insuring clause. If, for example, a firm agreed to accept architectural services from a client in lieu of fees for professional work done for the client, the exclusion could not apply: the exclusion is not intended to exclude liability for professional negligence.

322. In my view, however, the alleged liabilities in the present case do arise from a contract for the supply to, or use by, the firms of goods or services in the course of their Professional Business. The circumstances are materially similar to those in Impact Funding : (a) the TOBAs were entered into by the solicitors’ firms as principals, not as agents for clients; (b) the firms obtained a benefit from the supply to clients of ATE insurance as provided for in the TOBAs (and which would not have been provided without the TOBAs), i.e. that their clients’ claims could be pursued; (c) this was part of a wider scheme enabling the law firms to take up claims and earn fees; and (d) the law firms undertook significant obligations under the TOBAs so that ATE insurance was available to their clients. Lord Toulson’s reasoning (at [46] of Impact Funding ) also applies: the TOBAs were commercial agreements between principals for their mutual benefit, and the contractual promises on which AmTrust relies formed part of the bargain struck. The equivalent reasoning in Sutherland also applies: each TOBA was a contract for the provision of services for the benefit of the law firm, because “ a major purpose of the arrangements embodied in the agreement was to enable [the law firm] to arrange [the provision of a financial service] for the benefit of its clients” (at [158]).

323. I do not agree with AmTrust that the purpose of the exclusion is limited to liabilities arising from aspects of the solicitor’s practice that affect him or her personally, such as office expenses, as opposed to liabilities arising from professional obligations to client. That view is inconsistent with the Supreme Court’s reasoning, and the outcome, in Impact Funding . The liabilities in that case were closely related to the firm’s work for its clients, especially its liabilities under clauses 6 and 13 arising from breaches of duty to its clients.

324. Equally, I do not agree that the exclusion has no application because the TOBAs are contracts for the provision of services by PLL/HSS to AmTrust (rather than vice versa). The TOBAs made express provision for AmTrust to maintain authorisation and comply with its duties under ATE policies issued under the Scheme. Further, they were part of a wider scheme which involved AmTrust in providing ATE cover that was an essential element, thereby enabling the solicitors to take on cases they could not otherwise have pursued. Provision of the ATE cover was a far from incidental or minimal benefit from the firms’ point of view: it was a vital part of the Scheme by which they were able to undertake all these cases. It was, to adopt Judge Waksman’s words at first instance in Impact Funding , a “valuable facility” [53] which enabled the firms to bring in more cases: in return for which the solicitors accepted defined obligations to AmTrust under the TOBAs. It makes no difference in my view that the solicitors here, unlike in previous cases, were not paying a specific fee but were instead providing consideration in other ways.

325. Nor does it matter than the present case involves an ATE insurer rather than a litigation funder: AmTrust’s role in the Scheme was no less essential than that of the funders in the previous cases. Although it was not providing a direct funding benefit to the firms e.g. in terms of working capital, it was providing a real and valuable benefit by enabling the firms to take on large numbers of cases. That kind of benefit was recognised as falling within the exclusion in Sutherland at [164]; by HHJ Waksman QCat first instance in Impact Funding at [54] (referring to the facility as resulting in fully funded claims, including the “all-important ATE element”, leaving the solicitors to provide their services under the CFA); and by Lord Hodge in the same case at [29] (referring to “a wider arrangement … by which solicitors were able to take up claims, which their clients could not otherwise fund, and earn fees and success fees if the claim succeeded” ).

326. I also do not accept AmTrust’s submission that the exclusion cannot apply because the firms were providing professional services to AmTrust. I would accept that the exclusion would be unlikely to apply to solicitorial services provided by a solicitor to its own client merely by virtue of the fact that the client had agreed to remunerate the solicitor by providing goods or services in lieu of fees. However, AmTrust was not the firms’ client and the firms’ duties to AmTrust under the TOBAs were not the equivalent of duties owed to clients: see § 314 above.

327. For these reasons, if I were wrong about Issue 1, I would conclude that the contractual and/or tortious liabilities which AmTrust alleges that PLL and HSS have to it would be excluded from cover by clause 2.6(b), because they arise out of or in connection with any legal liability assumed or accepted by the Insured under any contract or agreement for the supply to, or use by the Insured of goods or services in the course of Professional Business. ISSUE 4 – EXCLUSION 2.6(C) ‘If and to the extent that the answer to Issue 2 above is “yes”, would any such liabilities be excluded from cover under the PI policies by clause 2.6(c) of each PI Policy, which excludes cover for any claim “arising out of or in connection with any… guarantee, indemnity or undertaking given by or on behalf of the Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to the Insured”?

328. As with clause 2.6(b), this exclusion contains two conditions. There must be:- i) a guarantee, indemnity or undertaking given by or on behalf of PLL/HSS; ii) in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to PLL/HSS.

329. In relation to condition (i), Sompo submits that:- i) “Undertaking” in ordinary usage (and in relevant statutory definitions) means a formal promise, typically creating a legal obligation. Dictionaries define it as a promise or a formal promise. Section s.313 of the Income and Corporation Taxes Act 1988, for instance, provided for taxation of sums paid in consideration of an employee giving an undertaking in connection with their employment which had the effect of restricting their conduct or activities. ii) The definition of “undertaking” in the SRA Glossary is broad: “a statement, given orally or in writing, whether or not it includes the word ‘undertake’ or ‘undertaking’, to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something” . iii) Clause 2.6(c) does not limit “undertaking” to a solicitor’s undertaking engaging the supervisory jurisdiction of the court. iv) Even if it did, such undertakings only require a commitment given in the capacity of a solicitor as part of their professional practice: see Harcus Sinclair LLP v Your Lawyers Ltd [2022] AC 1271, where one issue was whether an undertaking given to other solicitors not to accept instructions from claimants in the emissions (‘Dieselgate’) litigation was a solicitors’ undertaking. The Supreme Court held that it was not, because it was not given by the solicitor in their “ capacity as a solicitor ”, but otherwise proceeded on the basis of the word ‘undertaking’ having a broad meaning (see §§ [93]ff). If AmTrust’s claim(s) fall(s) within the insuring clauses in the first place, it must follow that they are in respect of obligations assumed by PLL / HSS in their capacity as solicitors and as part of their professional practice. v) The firms’ obligations under the TOBAs constitute undertakings, either (a) as solicitors’ undertakings or (b) because the exclusion is not limited to such undertakings.

330. I do not accept those submissions. i) Clause 2.6(c) applies to a “guarantee, indemnity or undertaking” . If ‘undertaking’ included any contractual obligation, then (a) it would subsume ‘guarantee’ and ‘indemnity’, and (b) there would be no reason for the clause simply to refer to ‘obligation’, ‘other obligation’ or ‘other contractual obligation’. ii) Conversely, ‘undertaking’ is a well-recognised term of art in the context of solicitors’ business, referring to solicitors’ undertakings in the classic sense; and it is easy to see why the exclusion would be needed to apply to that sort of undertaking: for example where the solicitor gives a solicitors’ undertaking in respect of a conveyancing or leasing transaction in respect of the firm’s own office premises. Further, that was the view taken by HHJ Hegarty in Sutherland at [160], where he inclined to the view that ‘undertaking’ in this exclusion meant a solicitors’ undertaking in the strict sense. I agree with that view. iii) The obligations undertaken under the TOBA were not solicitors’ undertakings in the classic sense, even on the hypothesis that (in order to be within the insuring clause) they were given in connection with solicitorial business, any more than a solicitors’ ordinary contractual duties to his/her client in respect of professional work done amount to solicitors’ undertakings. They were straightforward contractual obligations undertaken to a third party as part of a litigation funding scheme, and would not qualify as solicitors’ undertakings under the approach set out in Harcus Sinclair (see, in particular, §§ [112]-[115]). They were not undertakings to do something which solicitors do regularly as part of their ordinary professional practice, but rather involved the solicitors acting in their own right and for their own business interests rather than on behalf of any client; and the reason for entering into the TOBA obligations was in furtherance of the firms’ business interests rather than those of any client.

331. In these circumstances, it is unnecessary to consider the second condition.

332. I conclude that the contractual and/or tortious liabilities which AmTrust alleges that PLL and HSS have to it would not be excluded from cover under the PI policies by clause 2.6(c) of each PI Policy. ISSUE 5 – NUMBER OF CLAIMS ‘For the purpose of the PI Policies and the “Claim” definition in Clause 6.5, is AmTrust by the Part 20 Proceedings pursuing (a) a single “Claim” in respect of Pure and a single “Claim” in respect of HSS (as Sompo contends); or (b) a separate “Claim” in respect of each of the thousands of underlying clients of Pure and HSS (as AmTrust contends)?’

333. The conventional conception of a “claim made” against the insured for the purposes of PI insurance is the making and receipt by the insured of a demand for some remedy as due or an assertion of a right to some form of relief: West Wake Price at p55; Thorman at p11. Clause 6.5 of the PI Policies defines “Claim” to similar effect, although (a) it is limited to a demand for or assertion of a right to compensation or damages, rather than other forms of relief, and (b) it extends to an intimation of an intention to seek such compensation or damages.

334. AmTrust contends that the Part 20 proceedings make multiple claims, one in respect of each of the underlying cases handled by PLL and HSS. It makes the following submissions. i) The relevant question is how many claims AmTrust is making in the Part 20 proceedings, not how many claims were notified by its February 2021 Notices to Sompo. It is the Claims being brought in the proceedings that will result in the civil liability which is the subject of cover under the PI Policies. ii) What matters is the substance of AmTrust’s actual case, rather than the contents of the February 2021 Notices (or even, perhaps, necessarily the form in which it is pursuing claims in the proceedings): see Haydon v Lo , quoted earlier, making clear that “ it is the underlying facts which are determinative ” rather than the formulation of the claim by the third party. iii) As a matter of substance, AmTrust is bringing individual claims in respect of each individual case conducted by PLL/HSS:- a) The breaches pleaded by AmTrust are concerned with alleged misconduct by PLL/HSS in relation to specific underlying claims. Further particulars of these breaches across 20 sample claims are set out in Schedule 2 to the Part 20 RRAPoC. b) AmTrust alleges that each individual breach in relation to each underlying claim has caused it to suffer a specific head of loss, e.g. because a particular disbursement was improperly incurred or cover was wrongly incepted in the first place. c) AmTrust seeks multiple awards of damages in respect of PLL/HSS and individual declarations that PLL/HSS are liable to pay damages for each of its claims. iv) As a matter of presentation, AmTrust is pursuing multiple claims. a) AmTrust’s claims are expressly pleaded as individual claims (see, e.g., §§ 20-30, 34, 55c and Schedules 1 and 2 of its RRAPoC). Further, even in its original Particulars of Additional Claim, AmTrust pleaded at § 44 that:- “For the avoidance of doubt, all of AmTrust’s claims arising out of Pure’s conduct in respect of each and every one of Pure’s clients who was an AmTrust ATE Policyholder amounts to a separate “claim” for the purposes of the Pure’s policy with Sompo (and therefore attracts a separate £3,000,000 limit of indemnity).” and similarly in relation to HSS at § 53. Further particulars of these individual claims were also provided in Schedule 2. Where amendments have been made, Sompo consented to AmTrust’s amendments introducing the relevant language and those amendments now stand as AmTrust’s pleaded case. b) The ‘claim by claim’ nature of AmTrust’s pleaded case is reflected in the agreed List of Issues for the Part 20 Proceedings. Issue 39, for example, states:- “Whether and (if so) to what extent, if AmTrust can establish breach of duty by Pure and HSS, causation and loss, AmTrust is entitled to claim damages for losses which they have suffered in relation to each of the Pure Claimants’ claims and HSS Claimants’ claims.” v) The February 2021 Notices in fact gave notice of AmTrust’s intention to bring multiple claims. They referred to multiple “breaches” of the TOBA in relation to “ a large proportion of the claims made under the Scheme to date ”, and went on to identify four broad categories of breach committed in relation to multiple cases within the Scheme. The Notices are in any event not determinative. vi) Sompo’s argument seeks to achieve aggregation of claims by the back door, where the requirements of the relevant aggregation clause are not satisfied. Clause 5.9 of the PI Policies sets out five scenarios in which multiple claims will be considered a single claim for the purposes of the PI Policies, but none treats multiple claims as a single claim on the ground that they were intimated in a letter which itself falls within the policy definition of “ Claim .” vii) AmTrust contended, in an earlier version of its pleaded case, for the court to give directions for the selection of sample cases, the determination of which would allow the parties to form a view on the merits of AmTrust’s claims “ and the application of its decision on those sample of cases across all of the Pure Claimants’ claims and all of the HSS Claimants’ claims respectively .” That does not establish that AmTrust’s case is inherently a single claim: it is implicit in a trial by sample that multiple different claims fall for determination. viii) As to AmTrust’s claim in the Part 20 proceedings for an indemnity or contribution in respect of Novitas’s claim against AmTrust:- a) The definition of a “ Claim ” in the Policies does not depend on the nature of any underlying dispute which gives rise to that claim. b) Novitas did not make a unitary claim against AmTrust. It sought damages from AmTrust in relation to multiple underlying cases, alleging that, in breach of the Deed of Indemnity, AmTrust had failed to make payment in respect of each one of these cases. c) In any event, AmTrust is no longer pursuing any indemnity. The indemnity claim related to AmTrust’s (then disputed) liability to Novitas. Following the Settlement Agreement, AmTrust has amended its case to advance the Group 2 Claims (in addition to the Group 1 claims). These are all individual claims. ix) AmTrust’s position is consistent with case law. Applying Devlin J’s definition of a “claim” in West Wake , AmTrust in the Part 20 Proceedings is seeking multiple ‘objects’, namely awards of damages for the losses suffered by AmTrust in relation to each underlying case conducted by PLL and HSS. Using Thomas J’s formulation in Citibank , the reality of AmTrust’s position is that it is pursuing multiple claims.

335. In my view, however, AmTrust is pursuing a single claim in respect of PLL, and a single claim in respect of HSS, against Sompo in the Part 20 proceedings.

336. First , AmTrust’s claim against each of PLL and HSS is based on breaches of a single business agreement, the TOBA, and on a single set of commercial dealings (alleged to give rise also to non-contractual duties affecting every case in the same way). AmTrust’s situation in relation to each firm is directly analogous to the position of each of the two estates in Haydon v Lo , for example the Tang estate which had suffered thefts on 43 occasions by four different methods; and to the position of the architect’s firm in Thorman , alleged to have committed multiple breaches of a single contract in relation to various properties on a development. That is not altered by the fact that, as in those cases, each of the breaches by PLL and HSS involved its own particular failing, causal mechanism and loss. Nor is it altered by the fact that, in theory, AmTrust could (like each of the estates in Haydon or the client in Thorman ) have brought separate proceedings in respect of the alleged breaches in relation to each underlying consumer claim. Further, it is not in my view a point of distinction from Haydon that that case involved one individual at the firm stealing from two particular clients. In the present case, the Part 20 proceedings similarly relate to breaches committed by the firm vis-à-vis one person, viz AmTrust.

337. Secondly , although the February 2021 Notices are not determinative, they have some value as an indication of the true position. Each of them gave preliminary notice of a “potential claim” against the firm, and alleged systemic breaches of duty in support of that claim ( e.g. failure to properly apply eligibility criteria, inadequate risk assessments, incurring disbursements which did not qualify for ATE, and failing to obtain the approvals required under the policies).

338. Thirdly , despite the plea in § 44 quoted above, AmTrust pleaded in § 45 of its original Part 20 Particulars of Claim that:- “… AmTrust sent Pure a pre-action notice of claim in February 2021 and requested that Pure make its insurers aware of the notice. The claim therefore falls within the period of insurance in the Policy.” Although AmTrust subsequently (and by consent) amended this paragraph to refer to claims in the plural, the original plea is notable. In any event, each February 2021 Notice did, as indicated above, in fact refer to a single potential claim.

339. Fourthly , in the original version of its Part 20 Particulars of Claim, AmTrust’s primary case was to seek damages in respect of PLL and HSS representing the difference between (a) its hypothetical liability if the firm’s clients had succeeded in their claims and (b) its actual liability. “[33] AmTrust’s primary case is that if Pure and HSS had acted with due skill and care in relation to the vetting and handling of claims, then the overall success rate of the Scheme would be as anticipated by Pure in their models dated 31 March 2017. Accordingly, AmTrust claims damages from Sompo and HSS respectively based on the difference between (1) what its liability would have been had the Pure Claimants and HSS Claimants achieved such success in their claims; and (2) AmTrust’s actual liability in relation to the Pure Claimants’ claims and HSS Claimants’ claims.” That could only have been the formulation of a single “Claim” in respect of each firm. Although AmTrust later abandoned that basis of claim, it continues to allege systematic breaches by each firm with the result that the Scheme did not perform as expected. It has pleaded (i) the success rate which the Scheme was allegedly represented as expected to achieve (RRAPoC § 18); (ii) the rates of success and failure of claims in practice ( ibid .); and (iii) generic allegations of systematic breach of duty and causation, which are pleaded as applying across the board (e.g. RRAPoC § 19). AmTrust also asserted that those allegations should be tried by sample, with a view to extrapolating findings from a small number of cases to its entire claim. These features point to a single “ Claim ” in respect of each of PLL and HSS. Further, RRAPoC paragraph 29(a) continues to refer to “the general nature of [AmTrust’s] claim against Pure and HSS”.

340. Fifthly , before its Settlement with Novitas, AmTrust claimed an indemnity in respect of Novitas’s claim and damages for payments it had already made. Novitas’s claim against AmTrust was in my view a single, unitary claim. It is true that Novitas in its Particulars of Claim referred to the separate underlying consumer claims, listing them out, and that each involved its own facts, so Novitas might have succeeded or failed in relation to individual claims. However, Novitas’s claim form sought a single sum of £55 million said to be due under the Deed of Indemnity, and its Particulars of Claim stated:- “35. In the light of AmTrust having rejected claims and avoided or cancelled the AmTrust ATE Policies in relation to the Claims set out in Schedule 2 in circumstances in which, had AmTrust not done so, the Claimants would have been able to recover the sums claimed from AmTrust under the AmTrust ATE Policies, Novitas is entitled to claim, and does claim, under the Indemnity, from AmTrust, the sum of £55,629,721.79 which is the principal amount lent by Novitas in relation to the Claims listed in Schedule 2” with the word “ Claims ” defined in § 4.1 to mean the underlying claims, rather than Novitas’s claim against AmTrust.

341. Since the Settlement, the first part of the claim has been replaced with a claim seeking (in respect of each of PLL and HSS) a pro-rata portion of the sum paid to Novitas. Paragraph 3 of AmTrust’s RRAPoC now states:- “Following its entry into the Settlement , by this additional claim AmTrust seeks to recover from Sompo (under the Third Parties (Rights against Insurers) Act 2010) (in respect of both the Pure Claimants and the HSS Claimants) or HSS (in respect of the HSS Claimants, and subject to the existing stay) respectively: (i) AmTrust’s payment to Novitas of approximately £44m that relates to the Pure Claimants or the HSS Claimants; and/or (ii) any adverse costs that AmTrust has paid or is liable to pay in respect of the Pure Claimants or the HSS Claimants. AmTrust claims and is entitled to damages for breaches of contractual obligations and/or tortious duties owed by Pure and/or HSS to AmTrust.” In these circumstances, it is far more natural to regard this part of the claim as a single claim in relation to each firm rather than thousands of separate “ Claims ”. Similarly, AmTrust’s RRAPoC in § 4 states that AmTrust has already paid “a total sum of approximately £15.1 million under the Scheme” in relation to ATE policies set out in Schedule 1 (which it then splits out as between PLL and HSS), and in § 5 that “ By this additional claim, AmTrust seeks and is entitled to recover the amounts set out in paragraphs 3 and 4 above .” This formulation lends further support to the view that AmTrust is in substance pursing a single claim against each of PLL and HSS.

342. Sixthly , I do not consider this approach to involve aggregation by the ‘back door’. The question of the number of Claims logically precedes consideration of aggregation, and (in any event) as set out under Issue 6 below, I do not accept AmTrust’s proposition that what it regards as its individual claims would not be aggregated under clause 5.9 of the PI Policies.

343. For these reasons, I conclude that for the purpose of the PI Policies and the “ Claim ” definition in Clause 6.5, AmTrust by the Part 20 Proceedings is pursuing a single “ Claim ” in respect of PLL and a single “ Claim ” in respect of HSS. ISSUE 6 – AGGREGATION ‘If the answer to Issue 5 above is that AmTrust is bringing multiple “Claims” against each of Pure and HSS in the Part 20 proceedings, do the “Claims” to any extent fall to be aggregated under Clause 5.9 of each PI Policy on the basis that they arise from the same matter or transaction?’

344. This issue arises if I am incorrect in my conclusion on Issue 5.

345. Sompo relies on two grounds for aggregation under Clause 5.9. One of these is not being considered at this trial because it turns on whether AmTrust’s claims arise from “ similar acts or omissions in a series of related matters or transactions ”, which would involve considering individual claims conducted by PLL/HSS.

346. The other ground relied on by Sompo is that AmTrust’s claims arise from “ one matter or transaction ” within clause 5.9(b), which is based on clause 2.5(b) of the Minimum Terms. Sompo pleads that the relevant “ transactions ” are the TOBAs with PLL/HSS (and the relationship between AmTrust and PLL/HSS thereunder), and that AmTrust’s claims arise from those transactions.

347. AmTrust disagrees, advancing the following submissions. i) The words “ arise from ” in this context denote either a proximate cause, or a significant causal link or connection, as held for example in Various Eateries . ii) Clause 5.9(b) is intended to apply where claims arise from one matter or transaction, even if the acts or omissions giving rise to the claim in the first place are very different. An example would be the various different pieces of work or advice which different parts of a solicitors firm may provide in connection with the various facets of a corporate share acquisition transaction. Claims in relation to those various matters would be aggregated because they arose from the same matter or transaction, namely the share acquisition and the retainer relating to that transaction. All the work would probably be done under a single matter number; and the firm could limit its liability to the client, by its retainer letter, so as to fall within its insurance cover. iii) The TOBAs are not, however, analogous to a share acquisition or the retainer relating to such a transaction. They are effectively “umbrella” agreements between AmTrust and PLL/HSS, which govern the approach of the Scheme Solicitors in respect of underlying claims within the Scheme. It is those underlying claims that are the matters and transactions out of which the claims against PLL/HSS arise. iv) The TOBAs are analogous to a collective conditional fee agreement (CCFA), under which (for example) a firm agrees to pursue recovery actions for the insurer on discounted terms. If a firm were to pursue 100 such cases, and negligently conduct cases 2, 28 and 93, then claims for professional negligence in respect of those cases would not aggregate under clause 5.9(b): the claims brought by the insurer against the solicitor would, AmTrust says, “ arise from ” claims 2, 28 and 93, rather than from the CCFA. Another analogy would be an agreement for a solicitor to do repeat work for their client, e.g. a bank retaining a solicitor to register a revised charge every time one of the bank’s customers remortgages. If the solicitor negligently failed to register revised charges on ten remortgages over a 3-year period, the bank’s claims against the solicitor would arise from those particular remortgages, not the umbrella agreement, and would not aggregate under clause 5.9(b). A further example would be a solicitor working for trade union members on employment cases pursuant to an agreement with the union. v) AmTrust’s claims do not “ arise from ” the TOBAs. They arise from the mishandling by PLL/HSS of individual cases in respect of individual consumers under the Scheme. The TOBAs merely served as the umbrella agreement under which those cases were pursued. vi) The point can be tested by reference to the scope of work envisaged by the TOBAs. Both are open ended, in the sense that no specific figure is set for the number of cases to be entered into the Scheme and then pursued by PLL/HSS. Had the TOBAs fixed the number of cases to be pursued, such that they formed a single cohort, then AmTrust’s claims might be said to “ arise from ” one matter or transaction incorporating that cohort. However, that particular relationship immediately breaks down if the relevant matter or transaction is open ended, since the total universe of claims to which the transaction relates is by definition unknown and unknowable at the time of contracting. vii) It was not suggested in AIG v Woodman that the claims arose from a single matter or transaction. viii) It would be wrong to apply the aggregation clause too broadly, as that would tend to reduce the cover available to solicitors’ clients, particularly if they use a firm’s services over a period of years on different cases.

348. I am unable to accept those submissions. In my view, AmTrust’s claims against each of PLL and HSS arise from one matter or transaction, viz the TOBA. That is the source of the firm’s liability in respect of the claims, and (as discussed under Issue 5) AmTrust’s claims include complaints of systemic breaches by PLL and HSS of their respective TOBAs.

349. It is unsurprising that the ‘one matter or transaction’ limb was not addressed in AIG v Woodman , because (so far as one can tell from the judgment) the aggregation clause there did not include that provision (see judgment § [1]). In any event, the present case is in one sense a fortiori AIG v Woodman because each firm’s liability to AmTrust derives from a single contract. Each TOBA has a clear causal connection with the claims, and the claims are not remote from the TOBA, because it is the TOBA which defines the duties undertaken and AmTrust’s claim is, specifically, for breach of the TOBA.

350. I do not consider AmTrust’s analogies with repeat business arrangements to be apt. It seems likely in those situations that, in addition to an umbrella agreement setting out fee bases and perhaps other matters, each individual case will involve an express or perhaps implied retainer between the firm and the client (who may, in the trade union example, even be a different person from the party to the umbrella agreement). If so, then there may be a cogent argument that it is the individual retainer that gives rise to the solicitor’s essential duties to the client and, further, that aggregation may not apply. Here, by contrast, AmTrust was not the firms’ client in relation to the individual consumer claims the firms handled, and no solicitor/client retainer arose as between the firm and AmTrust in relation to each case. Insofar as any ‘retainer’ existed between AmTrust and the firm, it was the TOBA alone.

351. Further, it is not in my view a bar to aggregation that the number of cases or potential claims could not be known in advance. Indeed, that may well be the case in other situations where aggregation occurs. Finally, it is not appropriate to seek to construe the aggregation clause more narrowly than would otherwise be the case in order to avoid a risk of prejudice to consumers of legal services: see the observations quoted earlier from AIG v Woodman and Various Eateries about there being no need for predisposition in this regard.

352. Accordingly, I conclude that if the answer to Issue 5 were that AmTrust is bringing multiple “ Claims ” against each of PLL and HSS in the Part 20 proceedings, then the claims against PLL and the claims against HSS would each fall to be aggregated under clause 5.9 of each PI Policy on the basis that they arise from the same matter or transaction, viz the relevant TOBA. (J) PART 20 PROCEEDINGS: GENERIC LIABILITY ISSUES ISSUE 9(A) – RISK ASSESSMENT UNDER THE TOBAS ‘Was the Scheme Solicitor obliged to carry out a detailed risk assessment for each claim for the purpose of AmTrust deciding whether or not to issue ATE cover, by virtue of Recital iii and/or clause 1.10?’

353. AmTrust argues that, by recital (iii) and clause 1.10 of the TOBAs, PLL and HSS expressly agreed that they were responsible for and would carry out a detailed risk assessment for each claim. For ease of reference, recital (iii) states:- “the effect of this delegated authority scheme is that the Scheme Solicitor is solely responsible for risk assessing the merits of each personal injury claim which removes the need to submit a detailed proposal form for each claimant and the Scheme Solicitor therefore agrees that it will carry out a full and detailed risk assessment and will provide the Administrator and the Insurer with a professionally reasonable assessment of the prospects of success of each claim it proposes for After the Event (ATE) legal expenses cover” Recitals (iv) and (v) state:- “iv. the Administrator [i.e. CLE] is authorised by the Insurer to accept ATE business on its behalf; v. the Administrator agrees to accept business on behalf of the Insurer who will underwrite those ATE risks on the basis that such personal injury claims are being pursued by the Scheme Solicitor by way of a Conditional Fee Agreement, standard retainer or any Damages Based Agreement and are reasonably considered to possess the prospects of success stated by the Scheme Solicitor in the application for ATE cover;” Clause 1.10 provides:- “The Scheme Solicitor understands that at all times it has a duty of care to the Administrator and the Insurer.” In short, AmTrust says recital (iii) goes far beyond providing background material, and specifically imposes an obligation on the Scheme Solicitor to carry out a full and detailed risk assessment.

354. AmTrust’s submissions may be summarised as follows:- i) Pre-TOBA exchanges demonstrate that multiple layers of vetting were a key point for AmTrust, at the heart of the Scheme – that could not be said if only PCSS was providing vetting. These include the emails of 31 March, 9 May and 10 May 2017 (including its attached template forms) referred to in §§ 54, 55 and 56 above. Where the Pure Funding Application Forms required the solicitor to indicate prospects of success, that was clearly a legal assessment. ii) The PCSS forms – such as the Holiday Sickness Form – demonstrate that even before any PCSS vetting, a legal assessment of the prospects was envisaged. iii) By contrast, the PCSS check was mostly a tick box exercise; at most, the assessment checked factual matters, such as whether the relevant limitation period had expired, or whether the facts were consistent. Recital (iii) was therefore accurate in saying that the Scheme Solicitor was “solely responsible” for risk assessing the merits of each claim. iv) If PLL and HSS were under no duty to risk assess the consumers’ claims, the Scheme could be populated with unvetted claims liable to fail, for which AmTrust would have to pay the disbursements. AmTrust relied on PLL and HSS. The number of claims brought into the Scheme was too high and the value of those claims too low for AmTrust or CLE to vet the claim themselves. v) PCSS’s involvement was not a sufficient safeguard: PCSS was not staffed by lawyers and had no contact with the consumers; it could not make independent, substantiated assessments of the claims’ merits. vi) The terms of the TOBAs support AmTrust’s case. As indicated in the cases summarised in section (H)(2) above, recitals such as recitals (iii) and (v) can create substantive obligations where they manifest a clear intention to do certain acts. No special language is necessary, nor is any special language used in most of the ‘operative’ provisions of the TOBAs which are accepted to create obligations. Moreover, the second half of recital (iii) uses the specific words “ the Scheme Solicitor agrees that it will carry out….”. vii) Recital (iii) also expressly relates to the Scheme Solicitor applying for ATE insurance from AmTrust and to provide the assessment to AmTrust . It is plainly concerned with the obligations owed to AmTrust and says nothing about the obligations owed to the consumer clients, who are not parties to the TOBAs and presumably never saw them. viii) The substantive clauses of the TOBAs also indicate that PLL and HSS were obliged to perform vetting, namely clauses 1.1, 1.2 and 1.4(a). It is notable that reference is made to the “ professional opinion ” of Pure and HSS in Clause 1.1; the use of the phrase indicates that something more than the mere transmission of information was being done. Similarly, in order to avoid adverse selection of cases “ considered to be higher risk ”, the solicitor had to do a risk assessment. In order to decide whether there had been a material change of fact likely to affect “ the prospects of success of the claim ” within clause 1.4, the Scheme Solicitor needed to have carried out a risk assessment at the outset. ix) Further, the scope of the contractual and/or tortious duty imposed on the Scheme Solicitor by clause 1.10 is informed by the recitals to the TOBAs, which at the very least record the common understanding and intention of the parties. Accordingly, part of the duty owed under clause 1.10 was to carry out reasonable assessments of the claims before obtaining ATE insurance pursuant to the TOBAs. x) In practice, there was a ‘quasi-delegated authority’ or de facto delegated authority, by which CLE and AmTrust had only a narrow, residual discretion – which was never exercised – to reject claims vetted by PLL and HSS, and it is misleading to distinguish between the Scheme Solicitor and PCSS in this context. The practical effect of the delegated authority was that AmTrust relied on the solicitors to decide whether cover should be accepted, and when requesting ATE policies PCSS acted as agent for the Scheme Solicitor. xi) Alternatively, recital (iii), together with recitals (iv) and (v), shows that there was a regular delegation of authority from AmTrust to CLE which was limited by the ‘prospects of success’ threshold in the 14th Endorsement to the TOBA. xii) Recital (v) confirms that risk assessment is central to the bargain struck and is a condition that must be satisfied by the Scheme Solicitor in order to obtain cover. Similarly, the ATE Policy Summary states under the heading “ Significant features and benefits ” that “ In order to obtain cover your case must enjoy reasonable prospects of success ”. Before incepting an ATE policy, and to identify the “ prospects of success ” for the agreed vetting criteria discussed above, the Scheme Solicitors therefore had to carry out a risk assessment. xiii) The Scheme Solicitors were not risk-assessing claims solely for CFA purposes: as noted earlier, the documents indicate that they obtained further reports, having already entered into a CFA for the purpose of completing the Pure Funding Application Forms. xiv) This arrangement was put in place before the PCSS SLA came into effect, albeit that it was known from the Scheme’s outset that PCSS would provide vetting additional to Pure and HSS’s own vetting. xv) Even if, as Sompo suggests (albeit without making any application for rectification), recital (iii) includes mistakes and is a ‘relic’ from a previous delegated authority scheme, the minimum violence to the contractual language should be done to correct the error. That would result merely in deleting the words ‘delegated authority’ and ‘solely’ from the recital. xvi) AmTrust has paid substantial vetting fees for risk assessments done by or on behalf of the Scheme Solicitors, which are different from and greater than the fees payable to PCSS. xvii) None of the solicitors who received the TOBAs challenged this description of the TOBAs; they likely thought that a ‘delegated authority scheme’ was a suitable way of describing the Scheme, and HSS said so in its standard form CFA letter and Statement of Demands and Needs quoted in § 169 above. xviii) Recital (iii) should be construed as not being confined to personal injury claims (as its express terms would suggest). Appendix 1 to the TOBAs makes clear that “[f]urther categories [of case] can be added by agreement between the Scheme Solicitor and CLE/[AmTrust]” . The endorsements to the TOBAs do add other categories, and recital (iii) should be read in that light (notwithstanding the line in the endorsements saying that “[a]ll other terms and conditions of the Agreement shall remain unaltered” ). Moreover, the factual matrix, including the template forms circulated in May 2017, indicates that the same process is to be applied for all categories of claim. Further, the reference to personal injury claims appears only in the first half of recital (iii).

355. I am unable to accept those submissions.

356. First , as to the context provided by the pre-TOBA exchanges, it is certainly true that PBG representatives emphasised the various levels of vetting, including the Scheme Solicitors, PCSS and, in some cases, barristers’ opinions. Further, as the 9 May 2017 email shows, AmTrust was keen to understand the stages of vetting and how they worked. It does not follow, though, that AmTrust would be owed legal duties in relation to each level of vetting: there was, for example, no attempt to impose duties on advising barristers in favour of AmTrust. It was ultimately PCSS who would have the decisive say about whether a case would be taken on, since they were in a position to accept or reject cases put forward for the Scheme by Scheme Solicitors, applying the criteria prescribed by AmTrust pursuant to Schedule 2 § 2 (bis) to the SLA; and were paid by AmTrust for undertaking that role. The substance of the arrangements set out in the SLA were in contemplation from the outset, and were in place when the PLL TOBA was amended by endorsement to cover the categories of case now of most relevance, so it makes no difference that the SLA post-dated the PLL TOBA as originally agreed.

357. Secondly , the criteria PCSS were required to apply, initially set out in the templates in Schedule 8 to the SLA, cannot fairly be described as a ‘tick box exercise’. They involved close consideration of factors relevant to the merits of the case, as illustrated by the housing disrepair form quoted in § 59 above, and in most cases would specifically require PCSS to decide whether the claimant had at least a 51% prospect of success on liability. Even the forms that would not require a statement in terms to that effect still required, in effect, an assessment of the merits (see § 60 above). I also note that, in due course, the Criteria’s tab pages which Ms Shaw said PCSS used began “ PCSS confirm good liability prospects ”.

358. Thirdly , it follows that recital (iii) was incorrect – in the sense of being inconsistent with both the contractual documents as a whole and the parties’ actual expectations – in stating that the Scheme Solicitor would be “solely responsible” for risk assessing the merits of each claim thereby removing the need for a detailed proposal form for each claimant. PCSS was also assessing the risks of the claims, and it was PCSS, not the Scheme Solicitor, that was submitting cases to AmTrust via CLE.

359. Fourthly , recital (iii) was inaccurate in stating that it was a delegated authority scheme. AmTrust during its oral submissions made (as noted above) an alternative submission that even if AmTrust had not delegated authority to the Scheme Solicitor to effect insurance cover on AmTrust’s behalf, AmTrust had delegated that power to CLE, with the result that recital (iii) was correct. I do not accept that submission. The whole logic of recital (iii) turns on the Scheme Solicitor being the person on whom authority is supposed to have been delegated and the person with sole responsibility for deciding whether ATE policies should be issued: that is the express premise for the ensuing statement in the recital about a full and detailed risk assessment. However, it is abundantly clear from the contractual documents, as well as the surrounding documents, that under this Scheme (as opposed to other schemes for which the TOBA template may have been used) the Scheme Solicitor did not have, and was never intended to have, delegated authority from AmTrust: see §§ 72, 100, 181-186 above. Nor was PCSS given or expected to have delegated authority: see §§ 67 and 93 above. The fact that some HSS documentation referred to delegated authority in my view does not alter this (see § above), and it is notable that the delegated authority language was removed in two places in the HSS TOBA as compared to the PLL TOBA.

360. Fifthly , PCSS did not act as the Scheme Solicitor’s agent when vetting cases, and plainly could not have done so: see §§ 91, 92, 95, 153, 170 and 186 above.

361. Sixthly , as this was not a delegated authority scheme in the relevant sense and the Scheme Solicitor did not have sole responsibility for risk assessment, the stated premise in recital (iii) for the ‘full and detailed risk assessment’ aspect of the recital (iii) is inconsistent with the true nature of the Scheme and the contractual documents as a whole.

362. Seventhly , recital (iii) is also at odds with the operative provisions of the TOBAs, which state in clause 1.1 the nature and scope of the Scheme Solicitor’s obligations insofar as they might relate to risk assessment. That is, to “ ensure that all declarations made when applying for cover via the Administrator are entirely accurate and reflect the risk being proposed to the best of the Scheme Solicitors knowledge, belief and professional opinion ”. The precise import of that duty, in itself or read with clause 1.10 of the TOBAs, is outside the scope of the present trial. However, it clearly relates to the same subject-matter as recital (iii) (cf. the caselaw and commentary referred to in §§ 221-223 and 227 above). The references in clause 1.2 and 1.4 to cases’ risks and prospects do not necessarily imply that a “ full and detailed risk assessment ” must have been done at the outset (albeit I make no finding either way at this stage of the case); but even if they did, then that would underline the point that it is to the operative terms of the TOBAs rather than recital (iii) than one should look when determining the Scheme Solicitor’s obligations.

363. In these circumstances it would in my view be wrong to construe recital (iii) as giving rise to a substantive obligation on the Scheme Solicitor to “carry out a full and detailed risk assessment and will provide the Administrator and the Insurer with a professionally reasonable assessment of the prospects of success of each claim it proposes for After the Event (ATE) legal expenses cover” . Insofar as the recital might purport to impose an obligation, it does so (a) expressly on the premise (“ and the Scheme Solicitor therefore agrees ” – my emphasis) that is contrary to operative provisions of the Scheme contracts read as a whole, and contrary to the nature of the Scheme as spelt out by those documents, and (b) on a subject-matter which is covered in different terms by a specific operative provision of the TOBA itself, viz clause 1.1.

364. Eighthly , on that basis, it would be equally wrong to read recital (iii) back in to the operative terms of the TOBA via clause 1.10. Clause 1.10 in my view recognises a duty of care in relation to the obligations the solicitor has undertaken elsewhere in the TOBA (see further issue 9(e) below).

365. Ninthly , whilst PCSS was not staffed by lawyers (though two of its officers were legally qualified: see § 46 above), there is no evidence that there was expected to be, in practice, any difference in the level of relevant training and skills of the people involved at PCSS, on the one hand, and Scheme Solicitors, on the other hand, dealing with the cases. There is no indication that they were legally complex cases, and AmTrust chose to contract with PCSS to perform its case vetting function, paid it fees for doing so, and (in clause 7 of the SLA) required it to carry professional indemnity insurance of at least £3 million per claim or series of claims. The fact that recital (v) to the TOBAs, and the ATE Policy Summary, make reference to risk assessment and the need for reasonable prospects of success does not mean that AmTrust would be entitled, contractually, to look to the Scheme Solicitors, as opposed to PCSS, in that regard.

366. Tenthly , the facts that (a) the Scheme Solicitors had to provide their view on prospects on the forms they submitted to PCSS, as part of the body of evidence on which PCSS would consider, and (b) (it appears) the solicitors will have done so on the basis of more evidence than they necessarily had when they entered into a CFA with the client, also do not mean that AmTrust was contractually entitled to look to the Scheme Solicitors, as opposed to PCSS, in that regard: even if AmTrust or CLE may have had access to the Scheme Solicitors’ forms via the ProClaim system.

367. Eleventhly , it would make no sense simply to treat recital (iii) as modified by removal of the references to ‘delegated authority’ and ‘solely responsible’. Those features are the express basis for what follows in the remainder of the recital.

368. Twelfthly , at the time the Scheme contracts were made, there was no suggestion that AmTrust would be paying vetting fees to the Scheme Solicitors. Nor, on the preponderance of the evidence, did AmTrust in fact pay vetting fees to Pure Legal Limited (or other Scheme Solicitors): see §§ 171-180 above.

369. Finally , the fact that recital (iii) referred only to personal injury claims serves to underline the point that it did not reflect the Scheme as agreed by the parties in their contractual documents read as a whole, but seems more likely to have been a relic from an existing template (as Mr Gilchrist’s email of 20 September 2017 and Mr Warr’s oral evidence suggested: see §§ 72 and 102 above). There is certainly no warrant for reading recital (iii) “ up ” to apply to the claims as a whole.

370. I therefore conclude that the Scheme Solicitor was not obliged to carry out a detailed risk assessment for each claim for the purpose of AmTrust deciding whether or not to issue ATE cover, by virtue of Recital iii and/or clause 1.10. ISSUE 9(B) – VETTING AND ATE COVER ‘Did any such obligation apply in any cases in the following categories: (i) cases which had been vetted by PCSS prior to the Scheme Solicitor being instructed; (ii) cases which were to be vetted by PCSS after the Scheme Solicitor being instructed; and/or (iii) cases where ATE cover was incepted before the Scheme Solicitor was instructed?’

371. This Issues arises if I am incorrect in my conclusion on Issue 9(A).

372. AmTrust suggested that I need not consider this Issue in any event because there is no evidence that situations (i) or (iii) actually arose. Situation (ii) is the ‘base case’ that I have already considered under Issue 9(A). However, Sompo points out that, according to the Defence filed by HSS (§ 19(b)(iv)) there were some such cases. I am not asked at the present trial of issues to decide whether that is so or not. I therefore consider Issue 9(B) for completeness.

373. Sompo submits that if a case was vetted by PCSS before the Scheme Solicitor was instructed, then the Scheme Solicitor was not required to re-do a job already done by PCSS. However, it appears to me that if I am wrong in my conclusion on Issue 9(A), that is likely to be because recital (iii) to the TOBA placed a substantive obligation on the Scheme Solicitor to carry out a full and detailed risk assessment and “ provide the Administrator and the Insurer with a professionally reasonable assessment of the prospects of success of each claim it proposes for After the Event (ATE) legal expenses cover” . That would appear to be a freestanding duty to provide an assessment to CLE/AmTrust, in parallel with the tasks PCSS was carrying out under the SLA. There could, of course, be questions about reliance. If CLE placed cover in reliance on PCSS’s vetting process alone, then any separate assessment by the solicitor may not have been relied on, or reasonably relied on. Those questions are, however, outside the scope of Issue 9(B), which concerns only the obligations.

374. On the other hand, if the ATE cover had already incepted before the Scheme Solicitor is instructed, it would make no sense for the solicitor to be (in terms of Issue 9(A) and hence Issue 9(B)) “obliged to carry out a detailed risk assessment for each claim for the purpose of AmTrust deciding whether or not to issue ATE cover, by virtue of Recital iii and/or clause 1.10” . The cover decision will already have been taken, so such an obligation cannot sensibly arise. The only potential exception would be if the solicitor in fact, prior to formal instruction, became involved in the case and submitted a case to PCSS in order to seek ATE cover.

375. Accordingly I consider that, if I am wrong about Issue 9(A), then the obligation applied to (i) cases which had been vetted by PCSS prior to the Scheme Solicitor being instructed and (ii) cases which were to be vetted by PCSS after the Scheme Solicitor being instructed, but not (iii) cases where ATE cover was incepted before the Scheme Solicitor was instructed (unless, possibly, the solicitor prior to formal instruction presented a case to PCSS in order to seek ATE cover). ISSUE 9(C) – DUTY TO MITIGATE LOSS ‘In clause 1.7, is the reference to a duty to mitigate loss concerned with a duty of the client/policyholder to mitigate loss or a duty of the Scheme Solicitor to do so?’

376. Clause 1.7 states:- “When the claim does not result in a Successful Outcome, the Scheme Solicitor must immediately notify the Administrator and ensure that they carry out their absolute duty to mitigate losses incurred on behalf of the Insurer”

377. “ Successful Outcome ” is defined as:- “(i) the award in the Litigation after all Appeals of any sum of money in favour of the Claimant and/or in favour of any individual associated with the Claimant regardless of any description which may be attributed to the sum of money by the Claimant, the Opponent or a third party; and/or (ii) the agreement in the Litigation by the Opponent to pay any sum of money to the Claimant and/or to any individual associated with the Claimant regardless of any description which may be attributed to the sum of money by the Claimant, the Opponent or a third party.”

378. AmTrust submits as follows:- i) The obligation in clause 1.7 relates to the Scheme Solicitor’s own duties and is not (as Sompo suggests) merely to ensure that the client/policyholder complies with their duty to mitigate losses incurred on behalf of AmTrust. ii) The words “ they ” and “ their ” must refer back to the Scheme Solicitor, which is mentioned earlier in clause 1.7. Sompo’s approach involves re-writing the clause by changing “ they ” to “ the Policyholders .” iii) Had the parties intended to refer to the policyholders in clause 1.7 then the Policyholders would have been expressly mentioned in that clause. This was the approach taken in clauses 1.4, 1.5 and 1.11, which specifically refer to the Policyholders. iv) On Sompo’s case, clause 1.7 would add nothing to clause 1.11 of the TOBAs and would therefore be rendered otiose. Clause 1.11 already requires the Scheme Solicitors to ensure that the Policyholder complies with his or her duty to mitigate, as: a) clause 1.11 provides that: “ The Scheme Solicitor must ensure that the Policyholder complies with the terms and conditions of the ATE Policy at all times ”; and b) the terms and conditions of the ATE policy require the Policyholder to minimise their Insured Liability (see e.g. clause 4.4.1 of the ATE policy). v) The Scheme Solicitor is best placed to ensure that mitigation is carried out, for example by limiting adverse costs, whereas the client in reality has no economic exposure. The solicitor has the conduct of the negotiation or assessment of the opponent’s costs. Clause 1.7 imposes a duty on the solicitor, in that context, to run the appropriate arguments and take reasonable steps to negotiate the costs. The reference to an ‘absolute’ duty is capable of meaning an absolute requirement on the solicitor to carry out its duty of skill and care.

379. Though I see some linguistic force in AmTrust’s argument, as a matter of the literal wording of clause 1.7, I do not consider it to be correct:- i) Clause 1.7, in the words “their absolute duty to mitigate losses” , presupposes an existing duty to mitigate. That can only refer to the duty of the policyholder under clause 4.4.1 of the ATE policy to “ act in a manner which will minimise Your Insured Liability ”. The language does not fit with the imposition of a fresh duty. ii) If a claim is unsuccessful, only the policyholder (not the solicitor) will have incurred “ losses ”, notably adverse costs and disbursements. iii) The only losses incurred by anyone on “ behalf of ” AmTrust/CLE were the policyholder’s losses, for which AmTrust/CLE was obliged to provide indemnity under the ATE policy. There is accordingly logic in Sompo’s submission that the word “ they ” in clause 1.7 must refer to the policyholder (who features in the “ Successful Outcome ” definition in the first part of the clause), with the result that clause 1.7 requires the solicitor to act reasonably to ensure that the client mitigates their losses. (On that basis, there may be little difference between Sompo’s approach and AmTrust’s position, or fallback position, alluded to in § 378.v) above.) iv) I do not attach great weight to AmTrust’s point that, on Sompo’s reading of clause 1.7, it duplicates clause 1.10. It is more specific than clause 1.10, and in fact the TOBA already contains duplication in clauses 1.4 and 1.11 with regard to ensuring that the clients comply with the ATE policy. In the context of these contractual documents, avoidance of duplication is not a compelling argument.

380. I therefore consider that the reference in clause 1.7 to a duty to mitigate loss is concerned with the client/policyholder’s duty to mitigate loss rather imposing than a duty of the Scheme Solicitor to do so. ISSUE 9(D) – ABSOLUTE OR QUALIFIED DUTIES? ‘For each of the duties in clauses 1.4, 1.7 and 1.11, is the duty an absolute one, or is it (i) a duty to take reasonable care to ensure the matters set out and/or (ii) qualified as being subject to the Scheme Solicitor’s obligations to their clients?’

381. For ease of reference, clauses 1.4, 1.7 and 1.11 state:- “1.4 Once an ATE policy has been issued the Scheme Solicitor must ensure that the Policyholder complies with all of the stated policy terms and conditions which includes, but is not limited to, the Scheme Solicitor immediately notifying the Administrator of: a) any material change of fact that is likely to affect the prospects of success of the claim; b) where an opponent makes any offer of compromise or settlement that either the Policyholder or Scheme Solicitor wishes to reject; c) where the Policyholder refuses to accept the advice of the Scheme Solicitor; d) where the Policyholder stops co-operating with the Scheme Solicitor; e) where the claim discontinues or the Scheme Solicitor ceases to act for the Policyholder; f) the need for the issue of legal proceedings; g) the date of any trial or trial period; h) any barrister expressing an opinion that the prospects of success of the claim falls below the percentage notified to the Administrator. … 1.7 When the claim does not result in a Successful Outcome, the Scheme Solicitor must immediately notify the Administrator and ensure that they carry out their absolute duty to mitigate losses incurred on behalf of the Insurer. … 1.11 The Scheme Solicitor must ensure that the Policyholder complies with the terms and conditions of the ATE Policy at all times.”

382. AmTrust submits that:- i) The phrase “[ must] ensure that ” in each of these provisions has a clear, unqualified meaning. ii) Had the sophisticated parties to the TOBAs intended to qualify the clauses, they could have imposed an obligation to use ‘reasonable endeavours’ or ‘best endeavours’. iii) Where the parties qualified obligations elsewhere in the TOBAs, that was expressly set out: see, for example: a) the vetting obligation in recital (iii), which was to make a “ professionally reasonable ” assessment; b) clause 1.1, which provides that certain information must be provided “ to the best of the Scheme Solicitors knowledge, belief and professional opinion ”; and c) clause 6.2, which only requires the Scheme Solicitor to provide “ all reasonable assistance and co-operation ”. iv) Clause 1.11 stresses that the obligation on the Scheme Solicitor is to ensure compliance “ at all times ”, which confirms that the obligation is unqualified. v) The TOBAs contain a force majeure clause (clause 10) which sets out the specific circumstances in which the parties agree that they will not be liable for a failure to perform their obligations, and therefore protects Sompo’s position. That is sufficient to address Sompo’s point that, for example, clients may not provide their solicitors with the full facts relevant to their litigation prospects or changes in them, or clients may give the solicitors particular instructions or decline to follow advice. It is, in any event, not to be expected that clients would often give their solicitors instructions that contravened the clients’ duties under the ATE policies. vi) Moreover, where clause 1.4 requires the solicitor to ensure that CLE is immediately notified of “any material change of fact that is likely to affect the prospects of success of the claim” , it should be read as applying to facts of which the solicitor has been made aware. vii) Subject to the effect of the force majeure clause, clauses 1.4, 1.7 and 1.11 allocate risk, reasonably, as between AmTrust and the Scheme Solicitors. It is reasonable to do so in circumstances where the solicitors have access to the client and the conduct of the proceedings, whereas AmTrust would otherwise face the prospect of having to pursue multiple individuals across the country for small individual losses. viii) Clauses 1.4, 1.7 and 1.11 are also consistent with the Scheme Solicitor’s duties to their clients. The policyholders should comply with the ATE policy terms and conditions (TOBA clauses 1.4 and 1.11) and are required to notify AmTrust when a claim fails (clause 1.7) in any event. There could therefore be no justification for qualifying those obligations by reference to the Scheme Solicitor’s duties owed to the policyholders.

383. Again, I see some linguistic force in AmTrust’s submissions, as a matter of the literal wording of these provisions, but do not consider that they should be construed in the way AmTrust suggests. The parties entering into the TOBAs must have understood that a Scheme Solicitor could not be expected to guarantee the client’s compliance with the terms of the ATE policy and/or any duty to mitigate, nor in practice enforce compliance, both of which would be impossible. It was obvious that the solicitors would act for clients on a professional retainer, as well as on CFA terms, as was reflected in recitals (i) and (ii) to the TOBAs and the definition of “ Claimant ” as being a “ client ” of the solicitor. All parties would thus have known from the start that the solicitors owed overriding professional duties to their clients. The SRA Code of Conduct sets out in rules 2 and 3 duties owed to the court in litigation and to follow clients’ instructions.

384. As Sompo points out, the main general responsibilities of a solicitor are to act on instructions from the client (which can be withdrawn) and to comply with the “ overriding obligation to protect your client’s best interests ”. Those duties are themselves subordinate to obligations owed to the court in the context of litigation. As ATE insurers, AmTrust/CLE could be expected to have been familiar with those obligations. There is a presumption that an obligation on a professional is to do their professional best to achieve objectives, rather than a warranty that they will be achieved: see Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 at 1100 and Thake v Maurice [1986] 1 QB 644 at pp687-688. That must particularly be the case where, as in the present context, the achievement of the objective depends on a third party (here, the client).

385. Just to take one example, clause 1.7 by its literal terms refers to “their absolute duty” to mitigate losses. Even if (as I conclude under Issue 9(d) above) that clause concerns the client’s duty to mitigate, it would be highly problematic if the clause imposed an absolute duty on the solicitor to ensure that that occurred. The solicitor would be professionally (and, vis a vis its client, legally) obliged to exercise judgment in advising the client about such matters as whether to object to summary assessment of costs and whether to reach agreements (and, if so, at what level) about the successful opponent’s costs; and professionally obliged to follow the client’s instructions. Whatever the position as between AmTrust and the client under the ATE policy, those professional and legal duties would be incompatible with the imposition of an ‘absolute’ mitigation duty on the solicitor itself.

386. I do not consider that the force majeure clause meets these points in the way AmTrust suggests. It requires the party rely on the clause to “ prove ” among other things that (a) “ that the failure was due to an impediment beyond its control ” and (b) “ that it could not reasonably be expected to have taken the impediment and its effects upon a party’s ability to perform into account at the time of entering into this Agreement” . Yet it must have been obvious from the outset that (i) the client might fail to give the solicitor full and accurate facts about matters relevant to clause 1.4, (ii) as to clause 1.7, the client might give the solicitor instructions which the solicitor was professional and/or legally bound to follow in relation to opponents’ costs, (iii) also in relation to opponents’ costs, the solicitor would have to exercise its own professional judgment (rather than having an absolute duty) in advising the client about what offers to make/accept and whether or not to oppose summary assessments of costs, and (iv) the solicitor could never be in a position to “ensure” that the client complied with the ATE policy terms (clause 1.11): for example the duties imposed on the policyholder in clauses 4.2, 4.4.2, 4.4.3, 4.4.4, 4.4.7 and 4.7.1 of the policy. The client might, for instance, instruct the solicitor to accept a settlement offer which CLE had declined to approve, or without seeking CLE’s approval. Thus limb (b) of the force majeure clause would not be satisfied in relation to any of these matters.

387. Further, I do not accept AmTrust’s submission that limb (b) prevents reliance on force majeure only where the specific circumstance that has arisen was foreseeable and could be taken into account when entering into the TOBA. In my view, it is designed to bite on categories or types of impediment that could be foreseen and taken into account at the time of contracting: it would have little or no purpose had it been intended to preclude reliance on force majeure only where the exact circumstances that later arise could have been foreseen.

388. Nor would I accept AmTrust’s suggestion that clause 1.4 would apply only to facts made known to the solicitor: that would in my view interpret its wording too narrowly (e.g. by eliminating any duty to enquire). That approach would in any event not address the problems with clauses 1.7 and 1.11.

389. As a result, I accept Sompo’s submission that these duties are to be interpreted as obligations to exercise reasonable skill and care (consistent with clause 1.10: see Issue 9(e)), and as being qualified by the solicitors’ professional duties. ISSUE 9(E) – TOBA CLAUSE 1.10 ‘In the case of the “duty of care” obligation in clause 1.10, is that an obligation to exercise due care and skill in respect of express obligations set out elsewhere in the relevant TOBA, or does it amount to a warranty by the Scheme Solicitor to AmTrust concerning its conduct of the litigation more generally?’

390. Clause 1.10 states:- “The Scheme Solicitor understands that at all times it has a duty of care to the Administrator and the Insurer.”

391. AmTrust makes these submissions:- i) Clause 1.10 imposes a general contractual duty of care on the Scheme Solicitors. That is apparent from the language used which is in unqualified and broad terms, applying “ at all times ”. ii) The Scheme Solicitor therefore owes a duty to protect AmTrust from foreseeable losses when entering cases into the Scheme and pursuing those cases as part of the Scheme. This is not a ‘collateral warranty’ by the Scheme Solicitor to AmTrust, as Sompo suggests, but a duty of care in relation to the Scheme Solicitors’ consideration and conduct of the claims, including the vetting and conduct of claims. iii) To read clause 1.10 as imposing an obligation on the Scheme Solicitor to exercise due care and skill only in respect of the express obligations set out elsewhere in the relevant TOBA would require re-writing it and would make little sense. If the Scheme Solicitors already had express obligations in the TOBA, then they were obliged to comply with those obligations. The additional duty of care would serve no purpose, and clause 1.10 would be rendered otiose. iv) Sompo’s approach would also be inconsistent with:- a) the phrase “ at all times ” in Clause 1.10, which shows that the duty of care is not limited to the performance of the specific obligations in the TOBAs; and b) the absolute obligations elsewhere in the TOBAs, because those obligations are unqualified whereas the duty of care requires the Scheme Solicitors only to act with reasonable care and skill. v) There are also good reasons why the parties agreed to a duty of care which covered the vetting of claims and the conduct of the proceedings:- a) When claims failed, AmTrust was liable to pay adverse costs, disbursements and interest. AmTrust therefore bore most of the risk and it was reasonably foreseeable that AmTrust would suffer loss if the Scheme Solicitors did not consider and conduct the proceedings competently. b) The Scheme Solicitors were well-placed, and better placed than AmTrust, to protect AmTrust from such loss. The Scheme Solicitors had conduct of the proceedings, possessed greater information about the claim, and had access to the Policyholders. c) AmTrust had not separately instructed lawyers to monitor the proceedings or assess the claims (as the Scheme Solicitors knew), and was relying on the Scheme Solicitors to vet and conduct the claims competently. vi) Recitals (iii) and (v) at least show that the Scheme Solicitor had a responsibility for case vetting/risk assessment, even if they do not themselves impose obligations. Clause 1.10 means that the solicitor owes a duty to AmTrust in that regard. vii) Clause 4.2 of the ATE policy requires the client to give CLE “ direct access” to the solicitor, and requires the client to instruct the solicitor to do various things, including complying with all court orders and the CPR, obtaining CLE’s approval before accepting or not accepting any settlement offer, and taking all reasonable steps to avoid or minimise opponents’ costs. The solicitor by placing the ATE policy on its client’s behalf accepts that it will be instructed to do those various things. Clause 1.10 avoids a gap in the contractual structure, for example if the client gives an instruction but the solicitor fails to comply with it. viii) The fact that PLL was receiving vetting fees is a strong indicator that it owed a duty of care to AmTrust in relation to vetting.

392. I am unable to accept those submissions. Clause 1.10 comes at the end of a series of duties spelt out in reasonable detail in clauses 1.1 to 1.9. They do not impose duties on the Scheme Solicitor in relation to the conduct of the claims in general, and, if and insofar as they impose duties in relation to the vetting of claims, any such duties are in the terms specifically set out in clauses 1.1 and 1.2. If the parties had intended to impose duties, or further duties, in relation to the vetting or conduct of claims, then one would expect to see them in clauses 1.1 to 1.9. The parties might, for example, have agreed a provision along the lines of clause 13 of the contract in Impact Funding , in which the solicitor “ warranted that the services to be provided by it to the Customer would be provided in accordance with the agreement with the Customer set out in the relevant CFA ”, and indemnified Impact against inter alia all loses Impact incurred arising out of any act, omission, negligence or breach of contract by the solicitor. Such a duty would potentially have different effects from the solicitor’s duty to its client, for example if there were contributory negligence on the part of the client. As it is, the TOBA contains no such provision.

393. Clause 1.10 does not purport to impose any new obligation. It states that the solicitor “ understands ” that it owes a duty of care. That naturally refers to a duty owed in respect of obligations the solicitor has already undertaken elsewhere in the TOBA, rather than to the creation of some new obligation, of broad and uncertain scope, and likely cutting across the delineation of responsibilities set out in clauses 1.1 to 1.9. Further, on the basis that (as I conclude under Issue 9(a)), recital (iii) does not impose an obligation as AmTrust suggests, clause 1.10 cannot be read with recital (iii) as creating a new duty in favour of AmTrust.

394. I do not consider that clause 1.10 is otiose on this approach. It may, for example, underline the point that the solicitor needs to exercise reasonable care to seek relevant information from the client in relation to material changes of fact (clause 1.4(a)). It may also in due course be found to have a bearing on the solicitor’s duties under clause 1.1 of the TOBA. Clauses of this kind can underline matters that already flow from the general law, but parties may nonetheless consider them to serve a useful purpose in confirming each other’s duties.

395. I also do not agree that the words “ at all times ” broaden the effect of clause 1.10. They are temporal in nature, and underline the fact that care needs to be exercised in relation to the solicitor’s express obligations at all stages of the litigation.

396. I therefore conclude that the duty of care obligation in clause 1.10 is an obligation to exercise due care and skill in respect of the express obligations set out elsewhere in the relevant TOBA, and not a warranty by the Scheme Solicitor to AmTrust concerning its conduct of the litigation more generally. ISSUE 10 –TOBA APPENDIX 1 ELIGIBILITY CRITERIA ‘Was there an express or implied term of each of the TOBAs that the Scheme Solicitor would only apply for ATE insurance cover from CLE and/or AmTrust for cases which met Eligibility Criteria as set out in Appendix 1 to each TOBA? If so, was such obligation only applicable (a) in cases where the Scheme Solicitor in fact made an application for ATE insurance cover on behalf of the client and/or (b) in cases where ATE insurance cover was incepted after the Scheme Solicitor had been instructed?’

397. I have quoted Appendix 1 to the PLL TOBA in §106 above, and refer to later amendments to it in §§ 107 to 108 above. I refer to the HSS TOBA in §115 above.

398. Appendix 1 is mentioned in the body of the TOBA only in the statement of parties (Scheme Solicitor’s name and address), clause 12 (as regards effective date) and clause 18 (effective date). The ‘Eligibility Criteria’ are not mentioned anywhere in the body of the TOBA. AmTrust nonetheless makes the following submissions. i) The common intention of the parties was that claims could not be entered into the Scheme unless those criteria were satisfied. This is the only sensible explanation for why the Eligibility Criteria were set out in Appendix 1. ii) That approach is supported by:- a) paragraph 14(b) of HSS’s Defence, in which HSS pleaded that its understanding was that only claims that had been assessed (albeit by PCSS) as having “ reasonable prospects of success ” would be entered into the Scheme; b) recitals (iii) and (iv) to the TOBAs, which require or refer to risk assessments being carried out. Those risks assessments must be carried out against certain criteria, which must be those set out in Appendix 1; c) the rest of Appendix 1 to the TOBAs. The TOBAs do not expressly say, for example, that the premiums will be as stated in Appendix 1, but that is obviously what is intended and reflects the premiums actually charged. The reference in Appendix 1 to the premium, like recital (v), reflects a promise by AmTrust to provide cover for the premium set out in Appendix 1. Similarly, the statement in the endorsements of the maximum numbers of declarations is a requirement to be satisfied by the solicitor, reflected in the HSS TOBA in clause 1.11; d) the terms of the AmTrust ATE policies, including the Policy Summary, which refer to prospects of success of 51% and/or set out the parties’ rights and obligations if and when it became “ more likely than not ” that the claim would fail; e) the 14th Endorsement to the Binding Authority Agreement between AmTrust and CLE, which authorised CLE to bind risks “ if (1) such risks meet the ‘Eligibility Criteria’ set out in Annex 1” . Annex 1 identifies that where the prospects of success are less than 51%, then the risk will be “referred to AmTrust for agreement” – i.e. CLE did not have delegated authority to bind AmTrust to such risks; f) both parties’ witness evidence: Mr Warr’s evidence was that “prospects of success” means at least 51% and that AmTrust relied on the cases being reviewed against the Eligibility Criteria in Appendix 1 of the TOBAs, in that he said:- “5.6. From our point of view, we believed that cases were being reviewed individually by reference to their prospects of success, as required by the TOBAs. Cases would then be declared for cover. Our understanding, based on the TOBAs and our experience in the ATE market, was that cases were being reviewed by the actual law firm which signed the TOBAs. AmTrust was relying on the Scheme Solicitors to review each case properly to ensure that only claims with prospects of success or reasonable prospects of success were included in the Scheme. …. … 5.7. As I say, there needed to be - and the Scheme Solicitors would have been aware that there needed to be - some prospect of a successful outcome for all the cases insured under the Scheme. …” (witness statement §§ 5.6 to 5.7) Ms Shaw’s evidence was that “ There had to be prospects of success at 51% or more based on the first assessment for us to be prepared to [take] the case on a CFA ” (witness statement § 40). Ms Shaw also accepted in cross-examination that only cases which met the Eligibility Criteria set out in Appendix 1 could be entered into the Scheme; g) the agreed vetting and re-vetting forms, together with SLA Schedule 2 paragraph 4.3 and the vetting criteria in Schedule 8, which refer to prospects of success as being at least 51%; and h) the parties’ conduct during the Scheme, whereby cases were assessed against a requirement to have 51% prospects of success, and the parties both understood that the Eligibility Criteria applied: see for example, the exchanges between the parties referred to earlier about the inclusion of multi-track claims (§§ 163 and 164 above). iii) Any other approach would mean AmTrust lost the benefit of the first stage of vetting i.e. that done by the solicitor. iv) The TOBAs should therefore be construed as containing express or implied terms that the Scheme Solicitor will apply for ATE cover only for cases which met the Eligibility Criteria set out in Appendix 1 to each TOBA. Such a construction can be achieved by various routes, including: a) by finding that the assessment required by recital (iii) has to be carried out against the Eligibility Criteria; b) by interpreting the phrase “Eligibility Criteria” in Appendix 1 as itself imposing requirements on the cases for which cover could be sought from CLE / AmTrust; c) by finding that the Scheme Solicitor’s duty of care referred to in clause 1.10 entailed that the Scheme Solicitor will enter into the Scheme only those cases which it reasonably considers meet the Eligibility Criteria; and/or d) by implying a term into the TOBAs to like effect, on the basis that it ‘goes without saying’ and/or is ‘necessary for business efficacy’ (see Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] AC 742). v) The obligation on the Scheme Solicitor would apply even if, as a matter of procedure, the way in which the Scheme Solicitor applied for ATE insurance was by arranging for PCSS (or another entity) to apply for the ATE cover. As the PCSS SLA makes clear, when it applied for cover PCSS was acting on behalf of the Scheme Solicitor (see Schedule 2, para. 2.1.1). vi) If the Scheme Solicitor arranged for ATE insurance to be incepted before it was instructed by its consumer client, then the Scheme Solicitor would be under the same obligation to AmTrust as it would have been if it had applied for ATE insurance cover post-instruction.

399. I do not accept those submissions.

400. Starting with the express terms, the fact that the ‘Eligibility Criteria’ listed in Appendix 1 are not mentioned anywhere in the body of the TOBA is a significant initial pointer to the view that they do not set out substantive obligations and are more likely to constitute information. That would be unsurprising in circumstances where other parts of the Appendix also do not reflect obligations imposed on the solicitor, in particular all the premia details set out in the various iterations of Appendix 1. I am also unpersuaded that those details reflect a promise by AmTrust to the solicitor to provide cover to clients on those terms, given that the statement of AmTrust’s obligations in section 3 of the body of the TOBA refrains from including a promise to provide cover.

401. I have addressed recital (iii) under Issue 9(a) above, and have concluded that it does not impose obligations on the solicitor. Nor, on any view, does recital (v). Clause 1.10 does not impose duties other than in respect of obligations otherwise set out in the TOBA: see Issue 9(e) above. The maximum number of declarations set out in Appendix 1 does not impose an obligation on the solicitor, though in the HSS TOBA clauses 1.12 and 1.13 do (by reference to the figures in Appendix 1). The provisions in other documents, including the SLA, the ATE policies and the Binding Authority Agreement, referring to prospects of success do not indicate that the solicitor has any positive duty in that respect: they are consistent with the requirement for PCSS to vet cases by reference to the criteria set out in the SLA.

402. The witness evidence is not admissible as to the construction of the TOBA, but in any event is consistent with the Eligibility Criteria providing information about the prospects of success for which actual provision is made in other agreements, including in particular the SLA and the Binding Authority Agreement. The same applies to the parties’ conduct during the Scheme.

403. I do not agree with AmTrust’s suggestion that the correspondence about multi-track claims shows that there was a need to amend the TOBAs in order to correct obligations placed on the solicitor by Appendix 1: see §§ 163 and 164 above. I also do not agree that, on this approach, AmTrust lost the benefit of the first stage of vetting, i.e. by the solicitor. Vetting by the solicitor remained a component part of the process, and in principle provided a benefit even if the solicitor did not owe a contractual obligation to AmTrust in respect of it. Contractually, AmTrust was entitled to the benefit of such duties as were expressly placed on PCSS by the SLA and on the Scheme Solicitor by clauses 1.1 and 1.2 of the TOBAs.

404. In my view there is no need to imply a term of the kind AmTrust proposes. The TOBAs would function perfectly well without it, especially given that PCSS was vetting cases for CLE/AmTrust according to agreed criteria. The TOBAs themselves contain a detailed, apparently comprehensive, list of the obligations the Scheme Solicitor undertook. Further, the proposed term would be in conflict with, or at least hard to square with, the express terms of the TOBA. Clause 4.5 of the ATE policy gave CLE a discretion to take on cases with lower than 51% prospects. It is not clear how such cases would reach PCSS, and hence CLE, if the solicitor were obliged not to put any such case forward in the first place. More generally, in circumstances where TOBA clauses 1.1 to 1.3 set out the Scheme Solicitor’s pre-ATE cover duties, it is hard to see how it could be either obvious or necessary to imply the proposed term.

405. Finally, I agree with Sompo that any duty on the solicitor to ‘apply’ for ATE cover only if the “Eligibility Criteria” were met, could apply only where the solicitor in fact made such an application before the ATE cover was placed (whether or not formally instructed).

406. Accordingly, in my view there was no express or implied term of each of the TOBAs that the Scheme Solicitor would apply for ATE insurance cover from CLE and/or AmTrust only for cases which met Eligibility Criteria as set out in Appendix 1 to each TOBA. Even if there were any such duty, it could apply only where the solicitor in fact made such an application before the ATE cover was placed (whether or not formally instructed). ISSUE 11 – PCSS AS AGENT FOR SCHEME SOLICITOR ‘To the extent that PCSS conducted risk assessments in respect of cases and/or applied for ATE cover from CLE/AmTrust, did it do so as an agent of the Scheme Solicitor?’

407. It is common ground that PCSS acted as agent for the Scheme Solicitor (with the solicitor in turn acting as agent for the client) when making the formal request to CLE for issue of a policy, consistently with SLA Schedule 2 § 2 subparagraph 1.1. However, AmTrust contends that PCSS acted as the Scheme Solicitor’s agent more widely, including in relation to PCSS’s case vetting and risk monitoring functions. It makes the following points:- i) Clause 2.3 of the PCSS SLA expressly stipulates that PCSS was acting as the Scheme Solicitor’s agent:- “The Claims Manager [PCSS] will at all times act as the Solicitor’s agent and not as the agent of Composite or the Insurer in relation to the ATE Policies.” ii) PLL acknowledged that PCSS was acting as Pure’s agent throughout the Scheme, citing the communications referred to in §§ 153, 160, 168, 170 and 187 above. iii) PLL viewed the sums received by way of vetting fees, whether directly by PLL or the PCSS, as their own money, citing emails dated 22 March, 29 March and 14 May 2018.

408. I do not accept those submissions. For the reasons already given in §§ 91, 92, 95, 153 and 186 above, PCSS did not act as the Scheme Solicitor’s agent when vetting cases, and plainly could not have done so. Further, the SLA alone could not in any event have appointed PCSS as the agent of PLL or HSS: see Garnac Grain Co Inc v H.M.F. Faure & Fairclough Ltd [1968] AC 1130, at 1137B-C ( “The relationship of principal and agent can only be established by the consent of the principal and the agent… the consent must have been given by each of them, either expressly or by implication from their words and conduct…” .) Nor is there any other document appointing PCSS as the solicitors’ agent in this regard, as one might reasonably expect in the context of a heavily documented Scheme. Further, the notion that PCSS’s vital vetting function was in fact carried on as agent for the solicitor is hard to square with the requirement, set out in the SLA, for PCSS to hold at least £3 million of PI cover, for AmTrust’s benefit.

409. As to the communications referred to in (ii) above, I have explained in the paragraphs cited why I do not consider that PLL did give any such acknowledgement.

410. As to (iii) above, the 22 March 2018 email was the message from Mr Hodgkinson referred to in § 172 in the context of up-front fees. For the reasons given in §§ 172-180 above, I do not consider that any of these exchanges supports the view that PCSS acted as the solicitor’s agent when performing PCSS’s vetting function. Ms Shaw’s message of 29 March 2018 about ‘refunding our own fee’, in the context of two failed claims, was written as Group Operations Director of PBG. It does not indicate precisely who she meant by ‘our’ when referring to ‘our fee. Mr Gilchrist’s email of 14 May 2018 referred to “agreed income streams to Pure”, which is unspecific as to the entities involved. Conversely, CLE’s own “Pure Scheme Overview” dating from August 2017 listed PCSS’s roles, referring to some activities, but not case vetting, as being done as agent for the law firm:- “PCSS • Market PFP • Initial vetting of firms • Case vetting • Presentation of case to insurer (as agent of law firm) • Disbursement approval and processing • Case Monitoring • Distribution of settlement funds • Claim presentation to insurer (as agent of law firm)”

411. For these reasons, I conclude that when formally applying for ATE cover from CLE/AmTrust, PCSS acted as agent of the Scheme Solicitor (itself acting as agent for the client), but PCSS did not act as agent when it conducted risk assessments in respect of cases. ISSUE 12 – DUTIES OF CARE ‘Did Pure and/or HSS (a) owe tortious duties to AmTrust co-extensive with the contractual obligations alleged by AmTrust to have been owed in paragraphs 21 and 24 of its Re-Re-Amended Particulars of Additional Claim and/or (b) a non-contractual duty of care to AmTrust, to consider and conduct each Claimant’s claim with due skill and care as alleged and on the basis alleged in paragraph 26 of its Re-Re-Amended Particulars of Additional Claim?’

412. AmTrust’s RRAPC § 21 pleads the alleged express terms of the TOBAs, including the alleged detailed risk assessment duty said to flow from recital (iii) and/or clause 1.10. Paragraph 24 pleads the alleged express and/or implied term that the Scheme Solicitor would apply for cover from CLE and/or AmTrust under the Scheme only for cases which met the Eligibility Criteria, including that the cases had prospects of success of at least 51%. I have already addressed those contractual arguments under Issues 9(a), (b) and (e) and 10 above.

413. RRAPC § 26 alleges:- “Further, Pure and HSS knew that AmTrust was providing ATE insurance for each of the claims which were entered into the Scheme (once AmTrust had become the ATE insurer for the Scheme). It was reasonably foreseeable that, in the event that a Scheme Solicitor failed to pursue a Claimant’s claim with due skill and care, then this might cause AmTrust to suffer loss (by reason of AmTrust’s potential liability as ATE insurer). Pure and HSS assumed a responsibility to AmTrust to consider and conduct each Claimant’s claim with due skill and care. Accordingly, in relation to each Claimant’s claim, Pure and HSS owed a duty to AmTrust to consider and conduct the claim with the skill and care to be expected of a reasonably competent solicitor.”

414. AmTrust says Issue 12 is less important now that Sompo accepts that the TOBAs are binding and effective for cases within the Scheme; however, it could still be significant if, for example, it is found (as I have found) that the recitals and/or the Eligibility Criteria in the TOBAs do not impose contractual obligations on the Scheme Solicitors.

415. Insofar as the solicitors owed contractual duties of care, pursuant to clause 1.10 of otherwise, then they owed concurrent duties of care in tort (see Henderson v Merrett Syndicates Ltd (No.1) [1995] 2 AC 145 at 193C-D).

416. Further, AmTrust says that even if the Scheme Solicitor did not owe a contractual duty of care in relation to case vetting and conduct, it owed a duty in tort. The defendant’s “ voluntary assumption of responsibility remains the foundation of this area of law ” (per Lord Sumption in Playboy Club London Ltd v Banca Nazionale del Lavoro SpA [2018] 1 WLR 4041 at [7]), and depends on the facts. Relevant factors include: (i) the purpose of the service; (ii) whether the defendant knew that the claimant would be relying on the defendant’s performance of the service; and (iii) whether it was reasonable for the claimant to rely on the defendant’s performance of the service (see Clerk & Lindsell on Torts , 24th ed. (2023) at §§7-117 to 7-141). AmTrust relies on the following factors in the present case:- i) The Scheme Solicitors undertook to assess cases and accepted that they were “ solely responsible ” for doing so (see recital (iii) to the TOBAs), and willingly provided other services to AmTrust. ii) The purpose of the Scheme Solicitor’s risk assessment (and performance of other services to AmTrust) was to reduce the risk that AmTrust would have to pay out under the ATE policies. iii) As set out in the recitals to the TOBAs, the Scheme Solicitor knew (or should have known) that AmTrust was relying on the assessments carried out and the conduct of the Scheme Solicitor in pursuing the underlying claims. It was also reasonably foreseeable that AmTrust would be affected by the Scheme Solicitors’ poor performance. iv) It was reasonable for AmTrust to rely on the Scheme Solicitors’ risk assessment and their conduct of the claim more generally, in circumstances where: (a) the Scheme Solicitors had the material information about the claims and access to the Policyholders which AmTrust did not; (b) the Scheme Solicitors had conduct of the proceedings; (c) the Scheme Solicitors were qualified lawyers, i.e. had special skills, which they applied for AmTrust’s benefit when completing Pure Funding Application Forms, and on which AmTrust relied, and (d) the Scheme Solicitors did not disclaim liability to AmTrust. v) Even if they do not constitute binding contractual terms, the recitals and Eligibility Criteria reflect the duties and responsibilities assumed by the Scheme Solicitors and agreed by the AmTrust. vi) It was, or should have been, obvious to the Scheme Solicitors that AmTrust bore most of the risk of the claims failing and that AmTrust was relying on the Scheme Solicitors to mitigate that risk. vii) There is no reason why the solicitors could not owe duties both to AmTrust and to their own clients (see Henderson at p195C). viii) It would be extraordinary if the Scheme Solicitor could be grossly negligent in assessing a case as having greater than 50% prospects and yet have no liability.

417. I do not accept those submissions, largely for the reasons set out in Sompo’s written opening.

418. First , as a starting point, the “ general rule is well established that a solicitor acting on behalf of a client owes a duty of care only to his client ” and “ when a solicitor is performing duties to his client, he will generally owe no duty of care to third parties ”: White v Jones [1995] 2 AC 207 at 256C-E. The House of Lords there recognised an exception, finding a duty to be owed to the disappointed beneficiary under a will. That exception was made in order to fill a lacuna and so prevent injustice (p.268B), where in the absence of that remedy neither the testator’s estate nor the disappointed beneficiary would have a claim for the loss caused by the solicitor’s negligence (p.269D).

419. It cannot be said that such a lacuna would exist here. AmTrust retains all its rights against PCSS in relation to case vetting (in respect of which AmTrust required PCSS to take out PI insurance), and in principle could be expected to have subrogated rights against the solicitors if it had to meet ATE claims on cases that, due to their negligence, were the subject of cover when they ought not to have been.

420. Secondly , the principles relevant to voluntary assumption of responsibility were considered in detail by the House of Lords in Customs and Excise Commissioners v Barclays Bank Plc [2007] 1 AC 181, which concerned whether a bank notified of a freezing order owes a duty of care to the beneficiary of the order to comply with it. Adopting Mr Hough KC and Mr Archer’s helpful summary:- i) Lord Bingham explained that there are some cases where a party can accurately be said to have assumed responsibility to another, the paradigm situation being a relationship with “ all the indicia of contract save consideration ”: [4]. More generally, the assumption of responsibility test is to be applied objectively, considering whether a party has chosen to do something denoting an assumption of legal responsibility to another: [5]. He rejected the suggested duty, distinguishing the cases relied upon by the Commissioners as each had involved a clear voluntary assumption of responsibility: [17]-[22]. ii) Lord Hoffmann considered how the concept of an assumption of responsibility might apply in a case where it was said that responsibility had been assumed for conduct, rather than for a statement or prospectus. In this respect, he said that the concept of an assumption of responsibility was useful “ in drawing attention to the fact that a duty of care is ordinarily generated by something which the defendant has decided to do: giving a reference, supplying a report, managing a syndicate, making ginger beer…” , not merely by a person omitting to take action in circumstances where an identifiable party could suffer loss (at [38]). iii) Lord Walker explained why the Commissioners could not succeed on the basis of an assumption of responsibility, noting that this required “voluntary” action, which meant “conscious”, “considered” or “deliberate”, not just without compulsion or remuneration: [73]-[74].

421. Where parties have regulated their rights and duties by contract, that has a major bearing on the extent to which a voluntary assumption of responsibility can be found. The Court of Appeal stated in Briscoe v Lubrizol Ltd [2000] ICR 694, 705C-D and 706D that the existence of a contractual regime is a powerful indication against additional duties (not merely concurrent and co-extensive duties) being assumed. The parties are generally taken to have assumed the duties set out in their contract(s). That principle was applied in Hall v Saunders Law Ltd [2020] EWHC 404 (Comm), a dispute concerning the duties owed by solicitors to litigation funders. The court rejected the idea that there might be a non-contractual duty on the solicitor to make reports to the funders if there was no such obligation in their business agreement, stating that it had been rightly conceded that “[i]n circumstances where the parties are in a contractual relationship, it is the terms of that contract which will normally define their duties to each other” (see [50]-[51]).

422. Thirdly , in the present case, the mere fact that it was reasonably foreseeable that AmTrust might suffer loss if a claim failed is not enough to give rise to an obligation on the part of the solicitor to AmTrust to vet or conduct the case with reasonable skill and care. If that were the case, such an obligation would arise in every case where a solicitor seeks out ATE insurance on behalf of a client.

423. Fourthly , I would accept that, unlike in the typical case, the Scheme Solicitors in the present case have decided to do something additional, because they have completed Pure Funding Application Forms as part of the arrangements for seeking funding and ATE cover. However, the parties have, in that regard, specifically regulated their rights and obligations by contract. The Scheme contracts, including the TOBAs and the SLA, regulate in express terms the scope of which entity (in particular, the Scheme Solicitor and PCSS) has undertaken which obligation: and those provisions reflect the responsibilities which each party has voluntarily assumed to other parties. I therefore agree with Sompo’s fundamental submission that the contractual framework here militates against the notion that the parties assumed separate responsibilities outside its scope.

424. I therefore conclude that PLL and HSS did owe duties in tort concurrent with such contractual duties of care as they owed, but did not owe duties in tort (or ‘non-contractual duties of care’) to AmTrust to consider and conduct each Claimant’s claim with due skill and care as alleged and on the basis alleged in paragraph 26 of its Re-Re-Amended Particulars of Additional Claim. (K) SUBROGATED PROCEEDINGS: SUBROGATION AND COVERAGE ISSUES ISSUES 13 (ENTITLEMENT) AND 14 (PAYMENT) [ Issue 13 ] ‘Is AmTrust entitled (on any basis, whether as a matter of contract and/or as a matter of common law and/or equity) to be subrogated to claims of policyholders against Pure and HSS in respect of disbursements funded by Novitas Loans (and interest thereon)? In particular, does any entitlement depend on any of the following considerations: (a) whether AmTrust received claims by or on behalf of the relevant insureds; (b) whether it accepted liability under the ATE Policies; (c) whether it made payment expressly or impliedly pursuant to the ATE Policies; and/or (d) whether it made payments in good faith with the intention of satisfying the relevant Policyholder’s losses?’ [ Issue 14 ] ‘Is AmTrust not entitled to be subrogated to any such claim(s) if: (a) the payment made by AmTrust in respect of disbursements funded by Novitas Loans (and interest thereon) was made pursuant to the Indemnity with Novitas; (b) AmTrust has at any relevant times disputed an obligation to indemnify the relevant policyholder in respect of the disbursements funded by Novitas Loans (or interest thereon); and/or (c) AmTrust had no obligation to indemnify the relevant policyholder in respect of disbursements funded by Novitas Loans (or interest thereon)?

425. These Issues concern AmTrust’s claimed entitlement to exercise rights of subrogation on behalf of ATE policyholders. In the Subrogation Proceedings, AmTrust claims about £15.1 million which it says it has paid: (a) £7.4 million in disbursements and £2.7 million in adverse costs in PLL cases; and (b) £4.8 million in disbursements and £270,000 in adverse costs in HSS cases. Issues 13 and 14 focus on the payments made in respect of disbursements.

426. The ATE policy provided the clients with an indemnity in respect of their “ Insured Liability ”, defined as their legal obligation to pay “ Opponents’ Costs ” and “ Own Disbursements ”. “ Own Disbursements ” were defined as:- • “medical records; • expert reports; • court fees; • witness expenses; • counsel’s fees provided always that counsel is retained on a privately paying basis and subject always to a maximum aggregate sum of £5,000 inclusive of VAT; • the Premium • interest due under the CCA Loan as at Conclusion of the Litigation ; and • such other fees as are reasonably required for the proper advancement of Your claim as the Scheme Manager agrees in writing prior to the cost of the same being incurred; but excluding Own Solicitor’s Fees , and those of any other person providing legal or paralegal or other claims investigation or claims management services.” with the “ CCA Loan ” meaning the client’s loan from Novitas.

427. The client’s liability for interest arose via clause 11 of the Novitas Loan:- “11.1 The rate of interest payable by you shall be fixed at % per annum (the “Interest Rate”). 11.2 We will charge interest on a daily basis (based on a 365-day year) on the aggregate amount of the Instalments, and all fees and costs applied under this agreement, from the date of draw down or application of the fee or cost until the day that you repay the total amount due under this agreement in full.”

428. The client’s liability for the premium arose under the ATE policy, as indicated in the policy summary:- “Details of the premium which you will have to pay for this insurance are shown in the policy schedule. You agree to pay us the premium within 14 days of the commencement of cover (clause 7.1) and the contingent premium within 21 days of a successful outcome (clause 7.2).”

429. Liability for other disbursements arose under the CFAs. The documents indicate that it was anticipated that disbursements would be incurred by the Scheme Solicitors in the usual way on behalf of clients, who would then be liable for those disbursements. For example, PLL’s welcome letter explained that disbursements would be incurred and that, in the absence of an alternative payment method (e.g., payment on account, personal loan or credit card), the cost of these disbursements could be funded by taking out a loan. Clauses 2 and 4 of PLL’s Terms and Conditions referred to disbursements being made and paid on a consumer’s behalf by PLL, and its Terms of Business stated that:- “We will also incur disbursements which are fees that we have to pay to other parties…If you decide not to fund and insure your disbursements, either with PURE funding or with your pre-existing insurance cover, we will require you to pay for your disbursements in advance” Similarly HSS’s welcome letters stated that disbursements would be incurred and paid for using funding. HSS’ Terms of Business explained under the heading “ Disbursements ” that:- “Under our terms of business, you hereby agree to us incurring reasonable and necessary disbursements in order to progress your claim. These are payments we have to make to other people on your behalf, such as experts, court fees and barristers. Ultimately you are responsible for these fees.”

430. Accordingly clients had liabilities for (i) interest under the Novitas loan, (ii) the premium under the ATE policy and (iii) other disbursements incurred by the Scheme Solicitors. The ATE Policies were contracts of indemnity in respect of these liabilities as well as in relation to liabilities for opponents’ costs.

431. AmTrust claims that, having made the payments referred to in § 425 above in respect of disbursements and adverse costs, it is entitled to bring subrogated claims against PLL and HSS (in effect, following their insolvencies, against Sompo directly), pursuant to (i) the general law and (ii) clause 9 of the ATE policies:- ““ If We make a payment under the Policy , We will be subrogated to any and all of Your rights in connection with such payment. You also agree to give Us as much assistance as We may reasonably require in relation to the exercise by Us of Our subrogated rights. ”

432. Applying the conditions for subrogation listed in the passage from MacGillivray quoted in § 262 above:- i) It is common ground that the ATE policy was an indemnity insurance. ii) There is a dispute about whether AmTrust’s payments have been made ‘under’ (or pursuant to) it. iii) It is common ground that subrogation rights are not excluded by the terms of the parties’ contract (i.e. the contract between AmTrust and the clients).

433. Disputed question (ii) above is prima facie a question of fact for determination at the full trial of these claims. However, Issues 13 and 14 address certain questions of principle raised by Sompo relevant to its determination. In short, Sompo says it believes that AmTrust made the relevant payments (or at least many of them) under the Deed of Indemnity between itself and Novitas, rather than under ATE policies. AmTrust made those payments despite declining cover in many cases. It has disputed the validity of the policies, as well as asserting, in correspondence with Novitas and in the Main Proceedings, that many policies were void for lack of authority and that it had no liability. Sompo contends that payments made by AmTrust under the Deed of Indemnity while it disputed cover, denied the validity of the policies and maintained that its insureds had not suffered indemnifiable loss, did not give rise to rights of subrogation. The present trial is not intended to address the factual question of whether AmTrust in fact made its relevant payments under the Deed of Indemnity, or whether it did so while disputing policy coverage. The Issues here are strictly legal ones: would AmTrust be subrogated to policyholders’ rights in the situations set out in Issues 13 and 14?

434. In principle, there appear to be two bases on which AmTrust may have made payments to Novitas in respect of disbursements. The first is pursuant to the client’s assignment to Novitas of rights under the ATE policy, as explained in the Novitas loan documentation. The explanatory note to the loan stated:- “ How does the loan work? This loan is designed to finance the payment of disbursements (such as court fees and expert or counsel's fees) you incur in relation to your legal proceedings. If your claim is successful, the loan will be repaid from the proceeds of the claim (in other words, the loan will be paid by the other side). In case the claim is not successful, or the disbursements are not fully recovered as part of the claim, we make it a condition of the loan that a Legal Expenses Insurance policy is put in place. Having the Legal Expenses Insurance policy means that if the claim is not successful, or if the disbursements are not fully recovered as part of the claim, the loan will be paid by your insurers. Is this loan suitable for me? The loan is designed to finance the payment of disbursements (such as court fees and expert or counsel's fees) you incur in relation to your legal proceedings. If you need finance for any other purpose, this loan won't be suitable for you. What if I am a litigation friend for someone else? If you are entering into the loan as a litigation friend for someone else, then you should read anything in the loan agreement that refers to "you" as referring to the claimant. For example, "your claim" will refer to "the claimant's claim" and a reference to "sums due to you in connection with your claim" will mean "sums due to the claimant in connection with the claimant's claim". When will I be bound by the loan agreement? You will be bound by the loan agreement once you sign it (but see "Can I change my mind? below). It has no fixed duration, as it is designed to be paid out of the proceeds of your claim when itis resolved.” What happens if the loan is not paid? We have designed this loan so that it is always repaid on your behalf either by your solicitors out of the proceeds of your claim or by your insurer. Do I have to provide any security? Yes, we will require you to sign a document which assigns to us the amounts payable to you in money or money's worth either: • under any court order which is made at the end of your legal proceedings; or • from the proceeds of the Legal Expenses Insurance. We will also enter into an agreement with your solicitor under which he or she will be required to remit to us, on your behalf, the total amount that you will have to repay under the loan agreement.” Similarly, Condition Precedent 3 in Schedule 1 to the Loan Agreement referred to an assignment agreement to Novitas of the claim proceeds and the ATE policy “which will be used as security to discharge all sums owed by you to the Lender. The remaining sums will be returned to you by your Solicitor”.

435. Thus the documents certainly appear to have envisaged that, in the event that a claim failed, Novitas might seek payment from AmTrust direct, in respect of loans Novitas had made to cover disbursements, as assignee of the client’s rights under the ATE policy. In that event, I do not consider that the fact that the ATE insurer paid Novitas direct would affect the parties’ rights. As AmTrust points out, the identity of the recipient of the proceeds of an insurance policy does not necessarily affect the legal analysis of whether payment is being made under that policy. As noted by HHJ Mackie QC in W v Veolia Environmental Services (UK plc) [2012] 1 All ER (Comm) 667 at [34], insurers routinely make payments directly to a third party on behalf of their insureds. An example is where judgment is given against a party for adverse costs, which are covered by an ATE insurance policy. The ATE insurer may pay direct to the solicitors for the successful opponent, but the payment can still properly be regarded as made pursuant to the ATE policy.

436. Secondly, even if there was no liability under the ATE policy, AmTrust is likely to have been liable to Novitas under the Deed of Indemnity, the key provisions of which are quoted in section (E)(9) above. Recital (E) indicates that the Deed of Indemnity was designed to be called upon:- “In the event that [AmTrust] avoids a policy (or otherwise refuses to pay a claim for disbursements)” and clause 2.1 entitles Novitas to payment in circumstances where AmTrust has:- “rejected the claim [under the ATE policy] or avoided or cancelled the Policy” Clause 2.8 confirms that AmTrust’s liability to pay Novitas “shall not be conditional upon due observance [or] fulfilment by the Claimant of the terms and conditions of the Policy”.

437. Issue 13(a) is whether AmTrust’s entitlement to be subrogated to claims of policyholders depends on whether AmTrust received claims by or on behalf of the relevant insured. Sompo submits in its skeleton argument that unless there had been insurance claims by or on behalf of insurers, payments cannot have been made under the ATE policies, such that no subrogation rights arise. It refers to an email of 28 June 2017 from CLE to Novitas (copied to AmTrust), when negotiating the Deed of Indemnity, that “if the deed [of indemnity] has been called upon by default, no claim has been made on the ATE and no right of subrogation exists”.

438. In my view Sompo’s submission puts the point somewhat too starkly. The case law indicates that the critical question is whether the insurer has made the payment, alleged to give rise to subrogation rights, pursuant to the insurance policy, including (as it was put in King ) “ a payment honestly made by insurers in consequence of a policy granted by them and in satisfaction of a claim by the insured” (see § 264 above). Strictly speaking, that does not necessarily require a claim to have been made by or on behalf of the insured, though that seems likely almost always to be the case. In the present case, Novitas may have made claims on behalf of the underlying clients in its capacity as assignee of rights under the ATE policies (though I am not asked in this trial to determine whether or not it did so, or whether the anti-assignment provision in the ATE policy could present a problem in that regard). As a matter of principle, I agree with Sompo that if there were no claim made by or on behalf the client, then that may be a strong evidential sign that AmTrust’s subsequent payment was not made pursuant to the ATE policy. I do not, however, consider that the point can be taken any further than that.

439. Issues 13(b) and 14(b) are conveniently considered together. They are whether AmTrust’s entitlement to be subrogated to claims of policyholders depends on whether AmTrust “ accepted liability ” under the ATE policies, and whether AmTrust is not entitled to be subrogated to any claims if it has at any relevant times disputed an obligation to indemnify the relevant policyholder in respect of disbursements funded by Novitas Loans (or interest thereon).

440. In my view the case law does not support the proposition that having disputed an insurance claim – a common enough occurrence – of itself precludes a subrogation claim. Equally, I do not consider it to be a requirement that the insurer must overtly have accepted liability under the insurance policy. An insurer may (in the phraseology of Greer LJ in Page v Scottish Insurance ) in the end fulfil its promise under the insurance policy even though it has never explicitly accepted liability and even though it has disputed it. The ultimate question in my view was encapsulated by Allsop CJ in the Federal Court of Australia in Technology Swiss Pty Ltd (see § 270 above) as:- “Was the payment (and in what amount) made in such circumstances as to lead to the conclusion that the parties to the insurance policy and to the dispute honestly and bona fide treated the payment (whether or not disputed or compromised) as a payment representing a reduction of the loss covered by the policy and so indemnity under the policy , and so negate any proposition that the payment was unrelated to the policy and voluntary or that it was related to some other consideration bargained for that is not capable of characterisation as indemnity under the policy?” (my emphasis)

441. Issue 13(c) is whether AmTrust’s entitlement to be subrogated to claims of policyholders depends on whether AmTrust made payment expressly or impliedly pursuant to the ATE Policies. The parties agreed that the answer is ‘yes’. That is consistent with the case law I have outlined in section (H)(4) and § 440 above.

442. Issue 13(d) is whether AmTrust’s entitlement to be subrogated to claims of policyholders depends on whether AmTrust made payment in good faith with the intention of satisfying the relevant policyholders’ losses. I agree with Sompo that this is a necessary but not sufficient condition. It is not sufficient, because it could encompass payments made other than pursuant to the ATE policy in the sense indicated in § 440 above.

443. Issue 14(a) is whether AmTrust is not entitled to be subrogated to any such claim(s) if (a) the payment made by AmTrust in respect of disbursements funded by Novitas Loans (and interest thereon) was made pursuant to the Deed of with Novitas. AmTrust contends that it will be subrogated to a claim of a policyholder in respect of disbursements even if the payment was made pursuant to the Deed of Indemnity with Novitas, because:- i) AmTrust’s liability to Novitas is based on, and is parasitic upon, AmTrust having agreed to provide ATE cover for a policyholder, and the policyholder being “ entitled to claim under the terms of the relevant Policy ” (clause 2.1 of the Deed of Indemnity). ii) If AmTrust had not issued any ATE policies, it could have had no liability to Novitas. AmTrust was not a guarantor of the loans that Novitas made to consumers. Novitas could have asked AmTrust to act as a guarantor of those loans, but it did not. Instead, AmTrust could only have had any liability to Novitas based upon the fact that it (AmTrust) issued ATE policies to consumers. iii) Accordingly, even if any payment was made pursuant to the Deed of Indemnity, it does not follow that the same payment cannot also be considered a payment under the ATE Policies so as to trigger AmTrust’s rights of subrogation. The two are not mutually exclusive. iv) If Sompo were right, then a policyholder who successfully claimed damages from PLL/HSS (and so Sompo) on the basis that PLL/HSS had negligently caused it to incur disbursements, could then retain those damages, despite AmTrust having paid them on its behalf. That would be entirely unfair.

444. I am unable to accept those submissions. Novitas’s claims against AmTrust under the Deed of Indemnity (as distinct from claims made on the basis that it was policyholders’ assignee: see §§ 434-436 above) were not parasitic upon the policyholder being “ entitled to claim under the terms of the relevant Policy ”. To the contrary, they were rights to payments that “the Claimant would have been entitled to claim under the terms of the relevant Policy had the Insurer not rejected the claim or avoided or cancelled the Policy” (clause 2.1.1 of the Deed of Indemnity) . They were accordingly (and as recital (E) to the Deed confirms) expressly premised on the client not being entitled to claim under the ATE policy. In my view, payments made on that basis cannot be regarded as having been made pursuant to the ATE policy, even in the broader sense indicated in the case law summarised in section (H)(4) and § 440 above.

445. The fact that liability to Novitas would not have arisen but for the existence of the ATE policies is not sufficient in my view. The liability to Novitas depends on the existence of the policies, but arises, explicitly, in circumstances where there is no liability under them. In terms of Allsop CJ’s formulation in Technology Swiss quoted above, although the payment was not entirely “ unrelated to the policy”, it was, more immediately and logically, “ related to some other consideration bargained for that is not capable of characterisation as indemnity under the policy” : that bargain being, of course, the Deed of Indemnity.

446. AmTrust notes that the Privy Council in King , in the passages quoted earlier, made the following statement (including in particular the passage I have underlined):- “As regards the question whether the loss was or was not within the terms of the policy, their Lordships will make no observation but this, that whatever might have been the result of a dispute between the parties to it, there is nothing to suggest that the claim was not one which the insured might not honestly and reasonably make, or to which the insurer might not honestly and reasonably accede. They will assume, as the Court below has assumed, that the bank could not by the terms of the policy have compelled the insurers to indemnify them. Still if, on a claim being made, the insurers treat it as within the contract, by what right can a stranger say that it is not so? The payment would not be made if no policy existed ; and it seems to their Lordships an extravagant thing to say that a payment made under such circumstances is a voluntary payment made by a stranger, and that it would be at least an excess of refinement to hold that it is not a payment on the policy, carrying with it the legal incidents of such a payment. Such settlements of claims between the parties concerned ought not to be reopened for a by-purpose at the instance of parties not concerned. To hold otherwise would convert rules of law framed for the purpose of checking speculations in lawsuits into instruments promoting lawsuits which the parties interested are wise enough to avoid by agreement.” (pp.254-255)” However, it does not follow that any payment that would not have been made, but for the existence of a policy, should be regarded as made pursuant to the policy. On that approach, the payment made for public relations reasons in Wellington Insurance Co would have given rise to subrogation rights. The Privy Council’s reasoning remains premised on the insurers having “treat[ed] it as within the [policy]” and as “a payment on the policy” . It does not apply, in my view, where payment is made pursuant to a different contract and on the basis of there being no liability under the insurance policy.

447. As to AmTrust’s fourth point, regarding fairness, the answer appears to me to be that, in order to avoid being left with the outlay itself in such circumstances, AmTrust would have needed to obtain from the clients an additional right allowing it to recoup the benefit of recoveries from the solicitors reflecting payments AmTrust had had to make under the Deed of Indemnity as opposed to pursuant to the ATE policy. In other words, the problem may be inherent in the contractual scheme, but does not in my view lead to the conclusion that AmTrust must have subrogation rights.

448. Finally, Issue 14(c) is whether AmTrust is not entitled to be subrogated to any such claim(s) if it had no obligation to indemnify the relevant policyholder in respect of disbursements funded by Novitas Loans (or interest thereon). I broadly agree with AmTrust: subrogated rights can arise where an insurer pays a claim and it turns out that the insurer was not liable. At the same time, for AmTrust to have paid a Novitas loan sum while disputing policy coverage may be evidence that the payment was made under the Deed of Indemnity rather than under the ATE policy (in which case, on the conclusions I have reached, subrogation rights would not arise).

449. I therefore conclude that:- i) (Issue 13(a)) AmTrust’s entitlement (on any basis, whether as a matter of contract and/or as a matter of common law and/or equity) to be subrogated to claims of policyholders against PLL and HSS in respect of disbursements funded by Novitas Loans (and interest thereon) does not depend on whether AmTrust received claims by or on behalf of the relevant insureds, though the absence of any such claim may be a strong evidential sign that AmTrust’s subsequent payment was not made pursuant to the ATE policy. ii) (Issues 13(b) and 14(b)) AmTrust’s entitlement to be subrogated to such claims does not depend on whether AmTrust “ accepted liability ” under the ATE policy, and nor can it be said that AmTrust is not entitled to be subrogated to any claim if it has at any relevant time disputed its obligation to indemnify the relevant policyholder in respect of the relevant disbursements. AmTrust’s entitlement depends, rather, on whether it has made the relevant payment pursuant to the ATE policy in the sense used in the case law summarised in section (H)(4) and § 440 above. iii) (Issue 13(c)) AmTrust’s entitlement to be subrogated to claims of policyholders does depend on whether AmTrust made payment expressly or impliedly pursuant to the ATE Policies. iv) (Issue 13(d)) It is a necessary but not sufficient condition of AmTrust’s entitlement to be subrogated to claims of policyholders that AmTrust made payment in good faith with the intention of satisfying the relevant policyholders’ losses. v) (Issue 14(a)) AmTrust is not entitled to be subrogated to any such claim(s) if the payment made by AmTrust in respect of disbursements funded by Novitas loans (and interest thereon) was made pursuant to the Deed of Indemnity with Novitas. vi) (Issue 14(c)) AmTrust’s entitlement to be subrogated to claims of policyholders does not depend on whether it had an obligation to indemnify the relevant policyholder in respect of the relevant disbursements, though if AmTrust made a payment in respect of a Novitas loan sum while disputing policy coverage, that may be evidence that the payment was made under the Deed of Indemnity rather than under the ATE policy (in which case, on the conclusions I have reached, subrogation rights would not arise). ISSUE 15 – RELIEF FROM POLICYHOLDERS ‘Is AmTrust entitled to the relief it seeks against the policyholders, namely orders that they lend their names to its claim(s)? If so, to what extent is AmTrust so entitled? Does any such entitlement depend upon AmTrust engaging further with the policyholders and/or establishing that they have been informed of and understood their options for pursuing a claim and the implications of the relief sought by AmTrust against them?’

450. As a matter of law, a policyholder’s cause of action remains vested in an insured: Yorkshire Insurance Co v Nisbet Shipping Co [1962] 2 QB 330 at p. 340. For this reason, an insurer must obtain their insured’s consent – or an order from the court – to bring legal proceedings in their name: John Edwards v Motor Union Insurance Co [1922] 2 KB 249 at p. 254 (and see MacGillivray at §22-046).

451. Once an insurer has indemnified its insured, the insured may be compelled to lend his name to any proceedings that the insurer may wish to bring: MacGillivray at §22-046; Wilson v Raffalovich (1881) 7 QBD 553 (at p. 558); King at p. 256.

452. In the present case, AmTrust has joined 2,420 policyholders as defendants to the Subrogated Proceedings. It has done so in order to obtain an order that they lend their name to each of AmTrust’s claims against Sompo. If such an order is made, then it will allow Sompo to make payment to AmTrust, without Sompo being exposed to a potential claim by any of the policyholders in due course. The Subrogation Proceedings were issued on 17 November 2023 and served on Sompo on 30 November 2023, shortly before the first CMC. Sompo makes the point that there was no prior protocol correspondence with Sompo, nor any warning to the policyholders.

453. The Subrogated Proceedings have been served on each of these policyholders. Apart from Ms Grierson (see below), none has served an acknowledgement of service stating that he or she has an intention to defend AmTrust’s claim for the relief it seeks against them.

454. Only one of the policyholders has filed a Defence, namely Ms Grierson. In her Defence she agrees to AmTrust being able to pursue a subrogated claim in her name, without prejudice to her right to recover any uninsured / non-subrogated losses.

455. After the first CMC, AmTrust in early February 2024 sent standard-form letters to all the policyholders, notifying them of the claim and offering three options: to admit the claim or ignore it (without costs consequences); to enter a defence; or to challenge jurisdiction. The letters explained that, if policyholders wanted to bring a claim for any uninsured losses, then they would need to take an active part in the proceedings (as Ms Grierson has chosen to do). The letters expressed it in this way:- “Further, if you have suffered any losses that you would wish to claim in these proceedings against the insurers of your former solicitors, then you would need to take an active part in these proceedings and we suggest you contact us in the first instance, or alternatively seek independent legal advice.”

456. Letters sent later in February 2024 or thereabout said:- “ Other losses If you have had to pay out any money as a result of your claim failing, or have other losses (both commonly known as “uninsured losses”), please let us know as we may be able to recover such sums for you as part of the claim. This will require further input from you and will be subject to further assessment.”

457. After the second CMC, AmTrust over the summer of 2024 sent a second round of letters to policyholders, serving a copy of the CMC order. One example dealt with uninsured losses in this way:- “If you have other losses arising from Pure Legal Limited's negligence You have previously indicated to us that you may have "uninsured losses" which have not been included in the subrogated claim brought by AmTrust. What are "uninsured losses"? These are losses that you have suffered in connection with your claim which are not covered by your ATE insurance policy. Uninsured losses may include, for example, any amounts you have personally had to pay in respect of the opponent's costs if proceedings were issued and/or an amount to discharge the loan to Novitas Loans. These are just possible examples; uninsured losses will depend upon your individual circumstances. * Please note that, for loses to be claimed from the insurers of Pure, the losses must have been caused by a failure of Pure.”

458. Another example said:- “If you have other losses arising from Pure Legal Limited's negligence If you have other losses, known as `uninsured losses', arising from Pure Legal Limited negligence, please do let us know as soon as possible. We may be able include a claim for these losses in our claim and recover them for you. Uninsured losses may include, for example, any amounts you have personally had to pay in respect of the opponent's costs if proceedings were issued and/or an amount to discharge the loan to Novitas Loans. These are just possible examples; uninsured losses will depend upon your individual circumstances. If you have any doubt as to whether you have any losses to include in our claim, please let us know or alternatively seek your own legal advice.”

459. After a third CMC, a third round of letters was sent, including this passage:- “If you have other losses arising from [Pure Legal Limited / High Street Solicitors' negligence If you have other losses, known as `uninsured losses', arising from [Pure Legal Limited / High Street Solicitors] negligence, please do let us know as soon as possible. We may be able include a claim for these losses in our claim and recover them for you. Uninsured losses may include, for example, any amounts you have personally had to pay in respect of the opponent's costs if proceedings were issued and/or an amount to discharge the loan to Novitas Loans. These are just possible examples; uninsured losses will depend upon your individual circumstances. If you have any doubt as to whether you have any losses to include in our claim, please let us know or alternatively seek your own legal advice.”

460. AmTrust’s letters to policyholders made clear that it was not seeking any money or costs from the policyholders

461. AmTrust submits that, in the light of these matters, it is entitled, in the usual way, to obtain an order that the policyholders do lend their name to its subrogated claims. If the court takes the view that, as a condition of obtaining the relief it seeks, AmTrust ought to provide further information to the policyholders, then AmTrust will of course happily provide such further information.

462. Sompo counters that AmTrust’s letters fail to state that an admission or non-response could bar future claims for uninsured losses, as well as not warning of any potential costs liability to Sompo if any particular policyholder’s claim should fail. It points to correspondence disclosed in the Subrogation Proceedings indicating that some policyholders have been confused or distressed by the letters. It makes three main substantive points, as follows.

463. First , for each relevant policyholder, AmTrust must prove it has fully discharged its policy obligations, i.e. settled all disbursements and any adverse costs liability, up to policy limits. The case law indicates that this is an essential precondition to the exercise of subrogated rights: see § 273 above. I do not accept AmTrust’s suggestion that clause 9 of the ATE policy alters that: in my view it merely aims to confer a right of subrogation (reflecting the general legal position) in simple language, and its use of the language “a payment … such payment” is not sufficiently clear to alter this well-established and important legal protection for the insured by allowing a subrogation claim in respect of such amount as the insurer has paid while other insured loss remains unpaid (compare, Rathbone §§ 60-61).

464. Secondly , AmTrust must show that each relevant policyholder has no claim for uninsured loss arising from any alleged wrongdoing of their former solicitor (PLL or HSS). Until indemnity is provided in respect of the entire loss stemming from the relevant wrongdoing, control of the litigation remains with the insured as dominus litis (see § 274 above). Schedule 1 to the RRAPC in the P20 Proceedings suggests that there are 32 cases where AmTrust made a payment of £25,000 (the limit of indemnity) in respect of adverse costs, which suggests that in at least those cases AmTrust did not provide a full indemnity and so cannot establish an entitlement to control the proceedings. For other cases, AmTrust must demonstrate full settlement of disbursements; that there is no adverse costs liability; and that there is no claim for uninsured loss (e.g. the loss of chance to recover damages in the underlying proceedings). It could deal with the last of those matters by obtaining confirmations from the policyholders.

465. As a fallback, Sompo submits that, at a minimum, AmTrust should still be required, as a condition of any equitable relief from the court, to take further steps to ensure that policyholders’ legitimate interests are not prejudiced. As matters stand, if AmTrust is given the right to pursue its claim using a policyholder’s name and it pursues that claim to judgment, then the policyholder either may or would be precluded from later claiming uninsured loss. AmTrust’s letters to date do not explain that. Moreover, Sompo says, they studiously ignore the most likely form of uninsured loss, viz that the client may have a claim against PLL or HSS for negligence in handling what would have been a good claim.

466. At minimum, Sompo submits, AmTrust should demonstrate, for each policyholder, that the individual has been informed of and acknowledged understanding of: (a) their options for pursuing a claim against Sompo; (b) the implications for them of the relief sought (including that it could prejudice any later attempt to bring a claim for uninsured loss); and (c) the consequences of challenging AmTrust’s claim.

467. Thirdly , any order permitting AmTrust to use a policyholder’s name should require it to indemnify the policyholder against any adverse costs liability to Sompo.

468. Sompo accordingly submits that AmTrust should be granted the relief if seeks only:- i) if it proves full discharge of its policy obligations by reference to each individual, i.e. that there is no potential outstanding claim for insured loss; ii) if it establishes that the insured has no claim for uninsured loss, alternatively, and at minimum, that the insured has been properly informed of and understands the implications of its claim; and iii) on the basis that AmTrust is required to indemnify the policyholders for any adverse costs liabilities they may incur to Sompo in these proceedings.

469. As to the first requirement (payment of insured losses), the cases make clear that this is a precondition to the exercise of subrogated rights. In deciding whether it has been satisfied, the court is entitled to form a view on the evidence, taking into account the difficulties in practice that arise in cases involving large numbers of insureds with small claims, and must be entitled to draw reasonable inferences. One would ordinarily expect policyholders to come forward if they considered that they had further claims under the ATE policies (yet none had done so), and it is now some six years since AmTrust ceased underwriting this business (and, presumably, at least several years since the underlying claims will have failed). Further, it seems the policyholder retained legal representation, at least for a time, after PLL and HSS became insolvent, because the cases were transferred to new solicitors.

470. Conversely, however, counsel for Sompo told me that there had been cases (and, Sompo believed, many cases) where AmTrust has paid the Novitas loan sum, representing disbursements, but not all adverse costs ordered against insureds. If such unpaid costs were within the policy limit, then AmTrust would not have paid all the insured losses and so would not be entitled to exercise subrogated rights. AmTrust’s records would presumably show the position in these cases.

471. In my view, the court does not at present have a sufficient evidential basis on which to conclude that the insured losses have been made good. That may well be the position, and it may be possible to draw inferences, but I consider that AmTrust would need to adduce evidence setting out the position more fully (including addressing the point Sompo has made as indicated above).

472. As to the second requirement (uninsured losses), there is real prospect that there were some uninsured losses, as appears from the fact that in some cases AmTrust paid the exact amount of the limit of indemnity. (It would be an unlikely coincidence if that sum happened to reflect the totality of the loss.) Again, it can be said in AmTrust’s favour that policyholders have now had some time to come forward with such losses, especially now that they have been written to three times about them. As it is, there have been some clients whose adverse costs exhausted the limit of indemnity and who have sued the solicitors. Counsel for AmTrust told me that AmTrust believe all such claims to have been settled. In addition, one client (Ms Grierson) has commenced proceedings to recover uninsured losses: a claim which would have to be brought in the present proceedings instead if the court were to permit AmTrust to exercise subrogated rights in relation to her.

473. Conversely, there is force in Sompo’s point that AmTrust’s letters to the clients did not make the point that uninsured losses could in principle include claims (probably on a loss of a chance basis) against the former solicitors on the basis that the client had a good claim against the underlying client, which the solicitor negligently mishandled (e.g. by missing a limitation period). In all the circumstances, I do not consider that the court is currently in a position to conclude that there are no uninsured losses.

474. As indicated in § 274 above, I have not concluded that the existence of uninsured losses operates as a legal bar to subrogation proceedings being pursued at all. Nonetheless, as noted in § 272 above, an order allowing the insurer to sue in the insured’s name is an equitable remedy and conditions can be attached. Unless AmTrust were able to provide evidence to satisfy the court (drawing inferences if necessary) that there are no remaining uninsured losses, I would, as a matter of fairness to the clients, attach a condition that AmTrust should write to the clients once more, making clear the point made in § 473 above. A negative response, or a lack of response after a reasonable time, would provide evidence that might enable the court to conclude that there are indeed no other uninsured losses.

475. As to the third requirement (indemnity against adverse costs liabilities), AmTrust accept that such an indemnity should be provided as regards insured losses.

476. For these reasons, I conclude that before AmTrust may be entitled to the relief it seeks against the policyholders, namely orders that they lend their names to its claim(s), (a) the court will need to be satisfied that those policyholders have no unpaid losses; (b) unless AmTrust were able to provide evidence to satisfy the court (drawing inferences if necessary) that there are no remaining uninsured losses, any relief should be conditional in the way mentioned in § 474 above; and (c) the clients should be indemnified against any adverse costs arising from AmTrust’s pursuit in their name of insured losses. ISSUE 16 – NO RELIEF FROM POLICYHOLDERS ‘If and to the extent that AmTrust does not obtain the relief it seeks against the policyholders, is it entitled to pursue a subrogated claim against Sompo?’

477. If only in practical terms, the answer to this question is ‘no’.

478. AmTrust points out that MacGillivray includes this statement:- “If the insured refuses to allow the insurer to use his name as a claimant, the insurer may institute an action against the defendant in his own name, join the insured as a second defendant and ask the court to order him to lend his name to the action as a claimant or, perhaps, ask for an order that the first defendant pay damages to the second defendant and for a declaration that the second defendant holds such damages on behalf of the insurer .” (my emphasis) (§ 22-046, citing King v Victoria Insurance Co [1896] A.C. 250 at 255–256; J. Edwards & Co v Motor Union Assurance Co [1922] 2 K.B. 249 at 254; Re Miller, Gibb & Co [1957] 1 W.L.R. 703 at 707; Jubilee Motor Policies Syndicate 1231 at Lloyd’s v Volvo Truck & Bus (Southern) Ltd [2010] EWHC 3641 (QB) at [14]).

479. However:- i) both MacGillivray and the cases cited state the proposition only tentatively; ii) it would be wrong in principle for the court to allow any such route to be deployed in order to circumvent the three conditions discussed under Issue 15 above; and iii) in any event, the condition that no unpaid insured losses remain would have to be complied with because it is a pre-condition for the existence of subrogated rights arising at all (see § 263 above). ISSUE 17 – ADVERSE COSTS ‘Is AmTrust entitled to be subrogated to the claims of the Policyholders against Pure and/or HSS in respect of adverse costs?’

480. The parties agree that the answer to this question follows from the answers to Issues 13 to 16 so far as applicable (i.e. save insofar as they relate to the payments under the Deed of Indemnity with Novitas, which will not arise in respect of adverse costs). ISSUES 18 (ATTACHMENT) AND 19 (NUMBER OF CLAIMS) [Issue 18] ‘Do AmTrust’s subrogated claims in the Subrogated Proceedings against Sompo in its capacity as the insurer of HSS attach to (a) the HSS 20/21 Policy or (b) the HSS 22/23 Policy?’ [Issue 19] ‘For the purposes of the PI Policies and the “Claim” definition in Clause 6.5, is AmTrust by the Subrogated Proceedings pursuing (a) a single “Claim” in respect pf Pure and a single “Claim” respect of HSS (as Sompo contends); or (b) a separate “Claim” in respect of each underlying client of Pure and HSS (as AmTrust contends)?’

481. It is convenient to consider these two issues together.

482. In outline, AmTrust contends that, by the Subrogation Proceedings, it is bringing multiple claims, one in respect of each insured, and that they attached to the year in which those Proceedings were commenced. Sompo contends that it is necessary to focus on the ‘object’ of the claim: in substance, AmTrust in the Subrogation Proceedings is pursuing, via alternative causes of action, a portion of the unitary claim that it is pursuing against each of PLL and HSS in the Part 20 Proceedings, being a claim first notified by the 2021 Notices in respect of PLL or HSS as the case may be.

483. It is common ground that subrogated claims in respect of PLL attach to the Pure 20/21 PI Policy, though the parties’ reasons are different. AmTrust says it is simply because (unlike the HSS 2021 Notice) the PLL 2021 Notice was passed on to Sompo in March 2021. It is common ground that that was a notification to Sompo of “ Circumstances ” that may give rise to or result in “ Claims ” (or, on Sompo’s case, a singular “ Claim ”) within clause 1.1(b) of the PI Policy. Sompo agrees with that as a secondary reason, but its primary position is that the Pure 2021 Notice itself constituted a claim against PLL which AmTrust now seeks to pursue via, in addition to the Part 20 Proceedings, the Subrogation Proceedings.

484. AmTrust’s essential submissions may be summarised as follows:- i) In the context of subrogation, the cause of action in respect of any loss caused to an insured by a third party remains vested in the insured, and as such an insurer cannot sue that third party in its (i.e., the insurer’s) own name (see, e.g., John Edwards at p. 254 and Yorkshire Insurance at p. 340). Accordingly, although AmTrust is the only claimant in the Subrogated Proceedings, the reality is that it is litigating the underlying causes of action vested in each one of the 2,420 individual defendant policyholders. Therefore, AmTrust is pursuing individual claims on behalf of individual policyholders. ii) The coverage position must be the same whether (a) AmTrust commenced 2,420 separate sets of proceedings in its own name, (b) AmTrust commenced a single set of proceedings in its own name, (c) 2,420 sets of proceedings had been commenced in the name of the policyholders, or (d) 2,420 sets of proceedings had been commenced in the name of consumers (had they not been indemnified by AmTrust). Faced with 2,420 sets of proceedings, it would be absurd for Sompo to argue that they all amounted to a single claim. Furthermore, a court would not find that Sompo’s total liability to indemnify PLL and HSS in respect of each of the 2,420 consumers was limited to a single sum insured of £3m each. iii) As a matter of substance, AmTrust is pursuing multiple subrogated claims. The breaches pleaded against PLL and/or HSS concern their negligent mishandling of cases for specific policyholders. As to causation, it is alleged that individual policyholders suffered losses because of individual breaches. As to losses, AmTrust accordingly seeks damages in respect of each policyholder’s loss for each claim conducted by PLL/HSS. iv) Adopting the language approved in Haydon and West Wake (considered under Issue 5 above), AmTrust is seeking individual “ objects ” (i.e., awards of damages) on behalf of each of the Policyholders. This is consistent with AmTrust pursuing multiple claims. Equally, if one looks at the “reality” of the position ( Mabey at p. 14), AmTrust is litigating individual causes of action to recover individual heads of loss, even if, as a matter of presentation, AmTrust is the only claimant. v) So far as attachment is concerned, the relevant question is: when were AmTrust’s claims in the Subrogated Proceedings first made against HSS? The relevant question is not: when were the claims (or claim) in the HSS 2021 Notice first made against HSS? It is the claims advanced in the Subrogated Proceedings that AmTrust is pursuing and which may give rise to “ civil liability ” covered by the PI Policies. vi) AmTrust’s claims in the Subrogated Proceedings were not made against HSS in the HSS 2021 Notice. The HSS 2021 Notice refers only to breaches of duties owed by HSS to AmTrust, whether in tort or under the TOBA. The Notice does not refer to any breaches of duties owed by HSS to the policyholders. Accordingly, the Notice is irrelevant to the Subrogated Proceedings. vii) Accordingly, the subrogated claims in respect of HSS attach to the HSS 22/23 Policy because that is when they were first made: the subrogated claims were first intimated in January 2023, and first provided to Sompo on 6 February 2023.

485. I have found this one of the more difficult parts of the case. However, I have come to the conclusion that Sompo is correct.

486. Focussing on the ‘object’ of the claim(s), I have concluded under Issue 5 that in the Part 20 Proceedings, AmTrust is pursuing a single “ Claim ” in respect of PLL and a single “ Claim ” in respect of HSS. Under Issue 1, I have concluded that the claim against HSS attaches to the 20/21 policy year: because the civil compensation claim asserted in the HSS February 2021 Notice is the same claim as AmTrust subsequently particularised in the Part 20 Proceedings, in respect of both the Group 1 Claims and, following amendment, the Group 2 Claims. The same logic applies to the PLL February 2021 Notice and the Part 20 claim(s) relating to PLL.

487. Those claims in the Part 20 Proceedings originally comprised (a) a claim for contribution or indemnity in respect of Novitas’s potential claim in the Main Proceedings, and (b) damages for sums AmTrust says it has had to pay under ATE policies, which AmTrust put at about £15.1 million.

488. Following the Settlement, AmTrust amended its pleadings to seek a pro-rata portion of the settlement sum paid to Novitas. That did not introduce new “ Claims ”, but simply substituted an unquantified indemnity/contribution with a quantified sum in damages relating to the same liability.

489. In the Subrogation Proceedings, AmTrust is in substance pursuing a portion of the same claim, against each of PLL and HSS, namely the second element of the “ Claim ” pursued against each firm in the P20 Proceedings (i.e. damages for sums paid by AmTrust before the P20 Proceedings were commenced), once again put at about £15.1 million and reflecting the same payments out made by AmTrust. Any sum secured in this part of the Part 20 Proceedings will diminish the sum recoverable in the Subrogation Proceedings, and vice-versa.

490. Thus, the ‘object’ claimed through the Subrogation Proceedings is the same as that claimed through the second part of the Claim in the P20 Proceedings, with the same losses. That is not altered by the fact that it is now pursued by a different procedural route and based on different causes of action. It is the object of the claim, rather than the causes of action by which it is pursued, that matters in this context. In that respect the position is similar to that in Haydon , where the Privy Council concluded that there was a single “ claim ” against the firm under its PI insurance, even though it had been pursued through 14 actions against the transferees and the various third-party claims: see 207E-G.

491. Nor, in my view, does it make a difference that each claim could, in principle, instead have been pursued by means of 2,420 separate proceedings. In the hands of AmTrust, the Subrogation Proceedings in fact pursue a portion of the same unitary claim (one in respect of each firm) that AmTrust already pursued via the Part 20 Proceedings.

492. Like the remainder of the Claim advanced against each firm in the Part 20 Proceedings, the subrogated claim against each firm was originally made in the February 2021 Notice to that firm, in that each notice sought (at that stage) unquantified and continuing losses resulting from the conduct of PLL/HSS in accepting and handling cases under the Scheme.

493. Even if the February 2021 notices did not constitute “ Claims ”, the Part 20 Proceedings did, viz one Claim in respect of each firm; and in the Subrogation Proceedings AmTrust is pursuing a portion of each of those same two “ Claims ”.

494. For these reasons, I conclude on Issues 18 and 19 that AmTrust’s subrogated claim(s) in the Subrogated Proceedings against Sompo in its capacity as the insurer of HSS attach to the HSS 20/21 Policy; and that for the purposes of the PI Policies and the “ Claim ” definition in clause 6.5, AmTrust by the Subrogated Proceedings is pursuing a single “ Claim ” in respect of PLL and a single “ Claim ” respect of HSS. (L) CONCLUSIONS

495. For the reasons set out in this judgment, I reach the conclusions set out in the Annex to this judgment on the Issues for determination.

496. I am grateful to all counsel for their clear and cogent written and oral submissions, including the role played by junior counsel (Mr McDonald) in oral submissions at the trial of these complex issues. ANNEX –PRELIMINARY ISSUES AND CONCLUSIONS REACHED Part 20 Proceedings: Coverage Issues Attachment

1. What is the correct analysis as to the HSS 20/21 Policy and HSS 22/23 Policy to which AmTrust’s claim, or claims, in the Part 20 Proceedings attach? In particular, is it the case that (a) the claim or claims attach to the HSS 20/21 Policy (Sompo’s position); (b) the claim or claims attach to the HSS 22/23 Policy (AmTrust’s primary position); or (c) the claim or claims attach to the HSS 20/21 Policy to the extent advanced before the re-re-amendment to the Part 20 Particulars of Claim and otherwise attach to the HSS 22/23 Policy (AmTrust’s alternative position)? AmTrust’s claim, or claims, in the Part 20 Proceedings attach to the HSS 20/21 Policy. 1A. What is the correct analysis as to the Pure 20/21 Policy and Pure 21/22 Policy to which AmTrust’s claim, or claims, in the Part 20 Proceedings attach? In particular, is it the case that (a) the claim or claims attach to the Pure 20/21 Policy (Sompo’s position); or (b) the claim or claims attach to the Pure 20/21 Policy to the extent advanced before the re-re-amendment to the Part 20 Particulars of Claim and otherwise attach to the Pure 21/22 Policy (AmTrust’s position)? The parties have agreed that the Group 1 and Group 2 Claim(s) attach/es to the PLL 20/21 Policy. Scope of Cover

2. Would any of the contractual and/or tortious liabilities which AmTrust alleges that Pure and HSS have to it fall within clause 1.1 of the PI Policies as being civil liabilities arising out of and/or in connection with “ the conduct of any Professional Business [as defined] carried on by, or on behalf of, the Insured ”; and, if so, which of the liabilities alleged? The contractual and/or tortious liabilities which AmTrust alleges that PLL and HSS have to it fall outside clause 1.1 of the PI Policies because they do not arise out of and/or in connection with “ the conduct of any Professional Business [as defined] carried on by, or on behalf of, the Insured” . Exclusions

3. If and to the extent that the answer to Issue 2 above is “yes”, would any such liabilities be excluded from cover under the PI policies by clause 2.6(b) of each PI Policy, which excludes cover for any claim “ arising out of or in connection with any… legal liability assumed or accepted by the Insured under any contract of [sic] agreement for the supply to, or use by the Insured of goods or services in the course of Professional Business [as defined] ”? If and to the extent that the answer to Issue 2 above is “yes”, the contractual and/or tortious liabilities which AmTrust alleges that PLL and HSS have to it are excluded from cover by clause 2.6(b), because they arise out of or in connection with any legal liability assumed or accepted by the Insured under any contract or agreement for the supply to, or use by the Insured of goods or services in the course of Professional Business.

4. If and to the extent that the answer to Issue 2 above is “yes”, would any such liabilities be excluded from cover under the PI policies by clause 2.6(c) of each PI Policy, which excludes cover for any claim “ arising out of or in connection with any… guarantee, indemnity or undertaking given by or on behalf of the Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to the Insured” ? If and to the extent that the answer to Issue 2 above is “yes”, the contractual and/or tortious liabilities which AmTrust alleges that PLL and HSS have to it are not excluded from cover under the PI policies by clause 2.6(c) of each PI Policy. Number of claims

5. For the purposes of the PI Policies and the “ Claim ” definition in clause 6.5, is AmTrust by the Part 20 Proceedings pursuing (a) a single “ Claim ” in respect of Pure and a single “ Claim ” in respect of HSS (as Sompo contends); or (b) a separate “ Claim ” in respect of each of the thousands of underlying clients of Pure and HSS (as AmTrust contends)? For the purpose of the PI Policies and the “ Claim ” definition in clause 6.5, AmTrust by the Part 20 Proceedings is pursuing a single “ Claim ” in respect of PLL and a single “ Claim ” in respect of HSS. Aggregation

6. If the answer to Issue 5 above is that AmTrust is bringing multiple “ Claims ” against each of Pure and HSS in the Part 20 proceedings, do the “ Claims ” to any extent fall to be aggregated under clause 5.9 of each PI Policy on the basis that they arise from one matter or transaction? If the answer to Issue 5 above is that AmTrust is bringing multiple “ Claims ” against each of PLL and HSS in the Part 20 proceedings, then the claims against PLL and the claims against HSS each fall to be aggregated under clause 5.9 of each PI Policy on the basis that they arise from the same matter or transaction, viz the relevant TOBA. Part 20 Proceedings: Generic Liability Issues

7. Was the date on which the terms of the Pure TOBA document became contractually effective and binding on or about 1 July 2017 or on or about 15 August 2017? The parties have agreed that the relevant date should be taken as 15 August 2017.

8. Was the date on which the terms of the HSS TOBA document became contractually effective and binding on or about 28 November 2017 or on or about 4 January 2018? The parties have agreed that this issue should be resolved in the following way:- (a) The original version of the HSS TOBA, which was signed by Mr Rogers on 29 November 2017 and forwarded by Ms Shaw to CLE on 30 November 2017, became contractually effective and binding with effect from 30 November 2017; and (b) The amended version of the HSS TOBA, which was signed by Mr Cornick on 30 November 2017 and forwarded by Ms Shaw to CLE on 4 December 2017, became contractually effective and binding (in substitution of the previous version) with effect from 4 December 2017.

9. As a matter of the proper construction of each TOBA document: (a) Was the Scheme Solicitor obliged to carry out a detailed risk assessment for each claim for the purpose of AmTrust deciding whether or not to issue ATE cover, by virtue of Recital iii and/or clause 1.10? The Scheme Solicitor was not obliged to carry out a detailed risk assessment for each claim for the purpose of AmTrust deciding whether or not to issue ATE cover, by virtue of recital iii and/or clause 1.10 of the TOBA. (b) Did any such obligation apply in any cases in the following categories: (i) cases which had been vetted by PCSS prior to the Scheme Solicitor being instructed; (ii) cases which were to be vetted by PCSS after the Scheme Solicitor being instructed; and/or (iii) cases where ATE cover was incepted before the Scheme Solicitor was instructed? If the answer given above to Issue 9(A) is ‘yes’, then the obligation applied to (i) cases which had been vetted by PCSS prior to the Scheme Solicitor being instructed and (ii) cases which were to be vetted by PCSS after the Scheme Solicitor being instructed, but not (iii) cases where ATE cover was incepted before the Scheme Solicitor was instructed (unless, possibly, the solicitor prior to formal instruction presented a case to PCSS in order to seek ATE cover). (c) In clause 1.7, is the reference to a duty to mitigate loss concerned with a duty of the client / policyholder to mitigate loss or a duty of the Scheme Solicitor to do so? The reference in clause 1.7 to a duty to mitigate loss is concerned with the client/policyholder’s duty to mitigate loss rather than imposing a duty on the Scheme Solicitor to do so (d) For each of the duties in clauses 1.4, 1.7 and 1.11, is the duty an absolute one, or is it (i) a duty to take reasonable care to ensure the matters set out and/or (ii) qualified as being subject to the Scheme Solicitor’s obligations to their clients? These duties are to be interpreted as obligations to exercise reasonable skill and care (consistent with clause 1.10: see Issue 9(e)), and as being qualified by the solicitors’ professional duties. (e) In the case of the “ duty of care ” obligation in clause 1.10, is that an obligation to exercise due care and skill in respect of express obligations set out elsewhere in the relevant TOBA, or does it amount to a warranty by the Scheme Solicitor to AmTrust concerning its conduct of the litigation more generally? The duty of care obligation in clause 1.10 is an obligation to exercise due care and skill in respect of the express obligations set out elsewhere in the relevant TOBA, and not a warranty by the Scheme Solicitor to AmTrust concerning its conduct of the litigation more generally.

10. Was there an express or implied term of each of the TOBAs that the Scheme Solicitor would only apply for ATE insurance cover from CLE and/or AmTrust for cases which met Eligibility Criteria set out in Appendix 1 to each TOBA? If so, was such obligation only applicable (a) in cases where the Scheme Solicitor in fact made an application for ATE insurance cover on behalf of the client and/or (b) in cases where ATE insurance cover was incepted after the Scheme Solicitor had been instructed? There was no express or implied term of each of the TOBAs that the Scheme Solicitor would apply for ATE insurance cover from CLE and/or AmTrust only for cases which met Eligibility Criteria as set out in Appendix 1 to each TOBA. Even if there were any such duty, it could apply only where the solicitor in fact made such an application before the ATE cover was placed (whether or not formally instructed).

11. To the extent that PCSS conducted risk assessments in respect of cases and/or applied for ATE cover from CLE / AmTrust, did it do so as the agent of the Scheme Solicitor? When formally applying for ATE cover from CLE/AmTrust, PCSS acted as agent of the Scheme Solicitor (itself acting as agent for the client), but PCSS did not act as agent when it conducted risk assessments in respect of cases.

12. Did Pure and/or HSS owe tortious duties of care to AmTrust co-extensive with the contractual obligations alleged by AmTrust to have been owed in paragraphs 21 and 24 of its Re-Re-Amended Particulars of Additional Claim and/or (b) a non-contractual duty of care to AmTrust, to consider and conduct each Claimant’s claim with due skill and care as alleged and on the basis alleged in paragraph 26 of its Re-Re-Amended Particulars of Additional Claim? PLL and HSS did owe duties in tort concurrent with such contractual duties of care as they owed, but did not owe duties in tort (or ‘non-contractual duties of care’) to AmTrust to consider and conduct each Claimant’s claim with due skill and care as alleged and on the basis alleged in paragraph 26 of its Re-Re-Amended Particulars of Additional Claim. Subrogated Proceedings: Subrogation and Coverage Issues

13. Is AmTrust entitled (on any basis, whether as a matter of contract and/or as a matter of common law and/or equity) to be subrogated to claims of policyholders against Pure and HSS in respect of disbursements funded by Novitas Loans (and interest thereon)? In particular, does any entitlement depend on any of the following considerations: (a) whether AmTrust received claims by or on behalf of the relevant insureds; (b) whether it accepted liability under the ATE Policies; (c) whether it made payment expressly or impliedly pursuant to the ATE Policies; and/or (d) whether it made payments in good faith with the intention of satisfying the relevant Policyholder’s losses?

14. Is AmTrust not entitled to be subrogated to any such claim(s) if: (a) The payment made by AmTrust in respect of disbursements funded by Novitas Loans (and interest thereon) was made pursuant to the Indemnity with Novitas? (b) AmTrust has at any relevant times disputed an obligation to indemnity the relevant policyholder in respect of disbursements funded by Novitas Loans (or interest thereon)? (c) AmTrust had no obligation to indemnify the relevant policyholder in respect of disbursements funded by Novitas Loans (or interest thereon)? (Issue 13(a)) AmTrust’s entitlement (on any basis, whether as a matter of contract and/or as a matter of common law and/or equity) to be subrogated to claims of policyholders against PLL and HSS in respect of disbursements funded by Novitas Loans (and interest thereon) does not depend on whether AmTrust received claims by or on behalf of the relevant insureds, though the absence of any such claim may be a strong evidential sign that AmTrust’s subsequent payment was not made pursuant to the ATE policy. (Issues 13(b) and 14(b)) AmTrust’s entitlement to be subrogated to such claims does not depend on whether AmTrust “ accepted liability ” under the ATE policy, and nor can it be said that AmTrust is not entitled to be subrogated to any claim if it has at any relevant time disputed its obligation to indemnify the relevant policyholder in respect of the relevant disbursements. AmTrust’s entitlement depends, rather, on whether it has made the relevant payment pursuant to the ATE policy in the sense used in the case law summarised in section (H)(4) and § 440 above. (Issue 13(c)) AmTrust’s entitlement to be subrogated to claims of policyholders does depend on whether AmTrust made payment expressly or impliedly pursuant to the ATE Policies. (Issue 13(d)) It is a necessary but not sufficient condition of AmTrust’s entitlement to be subrogated to claims of policyholders that AmTrust made payment in good faith with the intention of satisfying the relevant policyholders’ losses. (Issue 14(a)) AmTrust is not entitled to be subrogated to any such claim(s) if the payment made by AmTrust in respect of disbursements funded by Novitas loans (and interest thereon) was made pursuant to the Deed of Indemnity with Novitas. (Issue 14(c)) AmTrust’s entitlement to be subrogated to claims of policyholders does not depend on whether it had an obligation to indemnify the relevant policyholder in respect of the relevant disbursements, though if AmTrust made a payment in respect of a Novitas loan sum while disputing policy coverage, that may be evidence that the payment was made under the Deed of Indemnity rather than under the ATE policy (in which case, on the conclusions referred to above, subrogation rights would not arise).

15. Is AmTrust entitled to the relief it seeks against the policyholders, namely orders that they lend their names to its claim(s)? If so, to what extent is AmTrust so entitled? Does any such entitlement depend upon AmTrust engaging further with the policyholders and/or establishing that they have been informed of and understood their options for pursuing a claim and the implications of the relief sought by AmTrust against them? Before AmTrust may be entitled to the relief it seeks against the policyholders, namely orders that they lend their names to its claim(s), (a) the court will need to be satisfied that those policyholders have no unpaid losses; (b) unless AmTrust were able to provide evidence to satisfy the court (drawing inferences if necessary) that there are no remaining uninsured losses, any relief should be conditional in the way mentioned in § 474 above; and (c) the clients should be indemnified against any adverse costs arising from AmTrust’s pursuit in their name of insured losses.

16. If and to the extent that AmTrust does not obtain the relief it seeks against the policyholders, is it entitled to it pursue a subrogated claim against Sompo? No .

17. Is AmTrust entitled to be subrogated to the claims of Policyholders against Pure and/or HSS in respect of adverse costs? The parties agree that the answer to this question follows from the answers to Issues 13 to 16 so far as applicable. Attachment

18. Do AmTrust’s claims in the Subrogated Proceedings against Sompo in its (Sompo’s) capacity as the insurer of HSS attach to (a) the HSS 20/21 Policy, or (b) the HSS 22/23 Policy? AmTrust’s subrogated claims in the Subrogated Proceedings against Sompo in its capacity as the insurer of HSS attach to the HSS 20/21 Policy Number of claims

19. For the purposes of the PI Policies and the “ Claim ” definition in clause 6.5, is AmTrust by the Subrogated Proceedings pursuing (a) a single “ Claim ” in respect of Pure and a single “ Claim ” in respect of HSS (as Sompo contends); or (b) a separate “ Claim ” in respect of each underlying client of Pure and HSS (as AmTrust contends)? For the purposes of the PI Policies and the “Claim” definition in clause 6.5, AmTrust by the Subrogated Proceedings is pursuing a single “ Claim ” in respect of Pure and a single “ Claim ” in respect of HSS.