Update on Outstanding Loans and Litigation Recoveries

Impact is pleased to announce that its disbursements funding subsidiary, Impact Funding Solutions Limited ("IFSL") has been successful in the Court of Appeal.

IFSL has been pursuing recovery of disbursements funding loans from solicitors and their insurers. In one particular instance, IFSL obtained judgment but the professional indemnity insurers of the solicitors in question, AIG Europe Insurance UK Ltd ("AIG") refused to meet the award. AIG asserted that the sums awarded to IFSL were excluded under the terms of professional indemnity insurance dictated by the Solicitors Regulation Authority (the "PI Policy"). The coverage dispute was heard at first instance before HHJ Waksman QC in the Manchester Mercantile Court. The Learned Judge found for AIG when he concluded that the sums sought by IFSL were excluded under the PI Policy. IFSL appealed and was successful by a unanimous decision of their Lordships Longmore LJ, Patton LJ and Gloster LJ. In his leading judgment, Longmore LJ held that the loss suffered by IFSL arose from the solicitors' negligence and was precisely the type of loss that solicitors' compulsory insurance is designed to cover. The decision is reported at [2015] EWCA Civ 31.

This appears to be the first occasion in which the construction of the "trade debt" exclusion under a PI Policy in respect of claims by litigation funders has been dealt with in the Court of Appeal. Permission to appeal to the Supreme Court was sought by AIG but refused by the Court of Appeal. AIG is entitled to seek permission to appeal directly from the Supreme Court. If permission is granted, AIG will need to persuade the Supreme Court that the Court of Appeal was wrong in its judgment.

The successful appeal means AIG must now pay to IFSL the sum of £986,515 representing damages and interest. In addition, AIG was ordered to pay £175,000 on account of the costs incurred by IFSL.

Paul Davies, Chief Executive Officer of Impact said "The Board and I are delighted with the Court of Appeal decision as this follows hard on the heels of litigation IFSL is pursuing. Even if AIG receives permission to appeal, I am confident that the Board has the resolve and is fully committed to continuing the efforts for recovering loans from those errant law firms that misused the disbursements funding provided by IFSL. The solicitors that advised IFSL on the disbursements funding arrangements before loans were made are also being pursued and will continue to be pursued until IFSL obtains redress."



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