DOORWAY CAPITAL LTD V AMERICAN INTERNATIONAL GROUP UK LTD

[2022] EWHC 182 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Butcher, 3 February 2022

Insurance (liability) – Solicitors’ liability policy – Liability incurred under receivables funding agreement – Whether liability arising in course of professional practice – Exclusion for trading liabilities – Third Parties (Rights against Insurers) Act 2010

In April 2016 Doorway Capital Ltd (DCL) entered into a Receivables Funding Agreement with solicitors Seth Lovis & Co Solicitors Ltd (SL). Under the Agreement SL was to sell and DCL was to purchase receivables in the form of any claims by SL against third parties. The advances were fixed at 75 per cent of the value of the receivables, capped at a total of £1.5 million. SL was appointed as DCL’s agent for collection, and all sums were to be held on trust for DCL. DCL alleged that between late 2017 and late 2018 SL received £2,079,755.58 but only £394,000 was transferred for the benefit of DCL. A claim was brought for breach of fiduciary duty. SL became insolvent and DCL brought the claim against SL’s insurers under the Third Parties (Rights against Insurers) Act 2010.