High Court rejects bid for summary judgment in £1.5million escrow dispute involving IPS Law
A claim against a law firm over the payment of £1.5million held in escrow will proceed to trial after the High Court found that the underlying agreement suffered from unclear and confused drafting. Master McQuail, sitting in the Chancery Division, ruled that the provisions of the bridging loan agreement at the centre of the dispute were too uncertain to justify summary judgment.
The case concerns IPS Law, a Cheshire-based firm that held £1.5million on behalf of Dubai-based businessman Mihir Choksi. The money had been deposited under a bridging loan agreement so that IPS client Biodex Trade Solutions could use it as proof of funds in securing an investment. Mr Choksi argues that the terms required the money to remain in the escrow account and not be released. However, IPS paid out almost the entire sum at Biodex’s direction, including payments towards its own fees. IPS has not returned the money and contends that the dispute is solely between Mr Choksi and Biodex.
Mr Choksi applied for summary judgment on the basis that IPS had no realistic prospect of defending the claim. Master McQuail rejected this application, describing the agreement as “a classic example of muddled drafting” in which the extensive use of legal language obscured rather than clarified the intended meaning. She said the provisions created uncertainty over whether the funds were required to remain in escrow or could be deployed by Biodex.
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The judge noted that Mr Choksi’s argument that the escrow would be rendered pointless if Biodex could simply direct payments had some force. However, she observed that the counterargument also had merit, namely that allowing the funds to sit untouched would offer little commercial value to an arrangement intended to help Biodex secure a profitable investment. Because of these uncertainties, she found that the issue of construction must proceed to trial.
Master McQuail also criticised the second witness statement of IPS founder Chris Farnell. She described it as prolix and repetitive and said it cited many authorities that were irrelevant, incorrectly cited, or, in some cases, did not exist. She directed earlier in the year that Mr Farnell and the team member responsible explain how the statement had been prepared.
The court was told that Justice Okafor, a paralegal at IPS who drafted the statement, had used an internal research memorandum that he was responsible for checking. He also relied on the AI overview section from Google searches and did not appreciate its limitations. Mr Okafor said the firm had since adopted new measures to improve accuracy and quality control of legal references in court documents.
Mr Farnell apologised to the court and to the claimant. He said the errors were an isolated and unintended departure from usual verification standards and that he had repeatedly instructed Mr Okafor to verify case citations. Master McQuail noted that the witness statement did not explain the use of AI overview material or why Mr Farnell did not verify the sources himself. She also observed that the corrective measures mentioned were not supported by documentary evidence. The judge did not indicate whether further action would be taken.