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PI claims consultants sue insurer in battle over cancelled contract

Contract: who repudiated it? [1]

Contract: who repudiated it?

A specialist motor claims handler is suing an insurance company in a row over a cancelled contract, involving almost 12,000 third-party personal injury claims.

The High Court heard that C&S Associates UK, based in Hampshire, claimed damages from Enterprise Insurance Company for terminating its contract.

In a preliminary hearing, Mr Justice Males said Enterprise argued that it was entitled to terminate, on the grounds of repudiation. C&S argued that the insurer was not entitled to terminate, and its conduct itself amounted to a repudiatory breach, which C&S accepted.

Males J described how C&S sent over 2,000 paper claims files to Enterprise’s law firm, Manchester-based Ozon Solicitors, after the insurer launched a file review.

The judge said that after reviewing around 290 files, the law firm claimed to have identified about £500,000 in “savings”, leading the insurer to decide that Ozon should settle as many claims as possible and that the relationship with the claims handler should be terminated.

After only around 80 files were returned to C&S, Males J said the claims handler “took the view that this rate of return was far too slow and was impeding its ability to manage the files and thereby to protect Enterprise’s interests”.

Delivering judgment in C&S Associates v Enterprise Insurance [2015] EWHC 3757 [2], Mr Justice Males said the two companies were introduced to each other at the end of 2011.

“C&S was told that Enterprise was dissatisfied with its existing motor claims handlers and that it was hoping to grow its business, which would lead to an increase in the volume of claims. It was therefore looking for a new claims handler with the capacity to handle its third party motor claims.”

Males J said a contract was signed, taking effect in July 2012, as a result of which C&S handled 11,995 claims on behalf of Enterprise until the contract was terminated in January 2014.

The judge said the order for trial of the preliminary issues provided that Enterprise was not required to prove allegations of defective performance by C&S.

Despite this, he said both parties gave evidence on the issue, particularly from Michael Smith, a director and founder of C&S, and Andrew Flowers, the chief executive and principal shareholder of Enterprise, “no doubt because it is an issue which gives rise to strong and (as I accept) genuinely held feelings on both sides”.

The judge ruled that C&S was not obliged to send a “further batch of 1,500 claims files” to Ozon, and “even if it was under such an obligation, its refusal to do so was not repudiatory”.

He went on: “The breaches of C&S’s duties alleged by Enterprise are capable, if proved, of amounting to a repudiatory breach of the contract. Whether, if proved, they do so amount is a matter to be determined at trial.

“If Enterprise’s case on repudiation fails at trial, its purported termination of the contract by Ozon’s letter dated 13 January 2014 was itself repudiatory. C&S’s solicitors accepted Ozon’s letter as a repudiation bringing the contract to an end by their letter dated 16 January 2014.”

Males J further ruled that the contract had been varied by an exchange of emails in October 2013 so as to increase the fees payable to C&S and provide that the contract should run for at least two years from October 2013.

The judge ruled that the insurer was entitled to restrict “the number of claims handled by C&S on its behalf to whatever level it saw fit and to refuse to allow C&S to handle any new claims on its behalf”.

However, it was not entitled to withdraw from C&S those claims it “had hitherto been handling”, unless the claims handler had repudiated the contract.

Mr Justice Males warned: “Bearing in mind the wide-ranging nature of the allegations made by Enterprise and the number of claims being handled by C&S, the parties will need to give careful thought to the further conduct of this action in the light of this judgment.

“A cost-effective and proportionate way of resolving the remaining issues will need to be found.”