Birmingham Civil Justice Centre: Ruling on assignment of Claims Direct actions
Colin Poole, the former chief executive of Claims Direct and a struck-off solicitor, has won a High Court battle with shareholders over an alleged £21m debt.
Peter Carroll, a former franchisee and director of Claims Direct, sued Mr Poole for £9.75m plus compound interest – a total of over £21m.
In 1999, Mr Poole practised as a solicitor trading as Poole & Co. His firm had an agreement with Claims Direct to vet the personal injury claims that had come in.
Mr Poole was appointed as a director of Claims Direct in June 2000, and 15 days later he agreed to sell Poole & Co’s vetting business to Claims Direct for £9.75m. A week after that, Claims Direct floated on the London Stock Exchange. On 1 September 2000, the sale of the vetting business was completed.
Claims Direct’s share price fell after flotation and within two years it was in administration.
Mr Carroll claimed the £9.75m sale was a “fraud on the shareholders of Claims Direct” and the transaction was a “sham”.
He became managing director of Judica in 2004, a claims management company representing hundreds of Claims Direct shareholders.
Four former directors of Claims Direct, including Mr Poole, entered into a settlement agreement with shareholders in 2008, including a “substantial number” represented by Judica.
This was followed in 2009 by a deed of assignment between Claims Direct and Mr Carroll, giving him the right to bring claims on its behalf, which he relied on in making his £21m claim.
Judgment in default was entered against Mr Poole for £21m in 2015, but Mr Poole was declared bankrupt before he could challenge it.
The judge said HMRC, which brought the bankruptcy petition, claimed £1.3m from Mr Poole’s trustee in bankruptcy, Lloyd Hinton. The liquidator rejected a claim of £75m brought by the Claims Direct Franchisee Group.
However, having taken legal advice, Mr Hinton admitted Mr Carroll’s claim for over £21m based on the judgment in default. Mr Poole appealed against that.
Delivering judgment in Poole v Hinton and another [2019] EWHC 2331 (Ch), His Honour Judge Worster, sitting as a High Court judge in Birmingham, had to consider the terms of the assignment and found it did not cover “all and any potential claims”.
It allowed Mr Carroll to bring a claim against one of Claims Direct’s “agents… for matters arising out of the operation of its business including its insurance, underwriting and funding arrangements”.
The judge said the word ‘agent’ could include a director of the company, but only if he was “acting as an agent for purposes of the matters giving rise to this claim”, which Mr Poole was not in this situation. This meant that the claim was not validly assigned.
On a second issue of interpretation, HHJ Worster said the 2008 settlement agreement only prevented Mr Carroll as a claims manager from assisting others in bringing further claims against the directors.
“There is nothing in the language of the settlement agreement which contemplates Mr Carroll bringing a claim of his own, whether as assignee or otherwise, or prohibits him from doing so.”
He added: “It cannot properly be said that the intention of the agreement was to bring total peace between Mr Carroll and Mr Poole.”
Counsel for Mr Poole argued that this result did not make commercial sense. The judge said: “I appreciate that as events have happened, it allows Mr Carroll to sidestep the assistance provision, but in the context of an agreement which would have been negotiated to some extent, I cannot assume too much.
“This may be a bad bargain. It may be that the issue of assignment was considered and a decision made not to deal with it. It may be that it was not considered at all. I cannot say, and it would be wrong to speculate.”
This outcome was not commercially incoherent nor the result such “an absurdity” that the court should imply a term into the agreement, the judge ruled.
Despite this, as HHJ Worster found for Mr Poole on the assignment point, his appeal succeeded.
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