Broker claims for unpaid bonus payments against LEBC which acquired firm

A former insurance broker is seeking more than £260,000 in unpaid bonus payments from the Independent Financial Advisors (IFA) that acquired her firm.

Lindsey Joseph has been in a legal tussle with LEBC since September 2017. She claims the company valuation of her healthcare insurance intermediary business CHS, acquired in 2004 by LEBC, was inaccurate, leading to a smaller-than-expected bonus payment.

LEBC had submitted a strike-out application with the High Court, claiming there was no substance to the case, but this was rejected in late March.

The case how looks set to proceed to a full hearing.

Documents from the strike-out hearing reveal a bonus agreement was signed in 2009 entitling Joseph to a percentage between 30-40% (dependent on the turnover of the company) of the ‘fair value’ of CHS.

In September 2014, Joseph triggered payment of the bonus by serving written notice, but objected to the valuation produced by valuers Moore Stephens.

The documents show Joseph, who worked for LEBC until 2016, is claiming the valuation was made “without the benefit of the information which allegedly should have been produced LEBC.”

LEBC denies wrongdoing

LEBC denies failing to produce the relevant information required.

The value of the business as of the date of Joseph’s written notice was in December 2015 given as £293,538.

Joseph was subsequently paid 38% of this value by LEBC, which after income tax and national insurance came to around £65,000.

Joseph subsequently obtained a further valuation from Grant Thornton, which valued CHS at around £1.09m.

She claims she is entitled to 40% of the Grant Thornton valuation – a gross sum of £435,200.

Valuation discrepancies

Court documents showed wide discrepancies in how LEBC and Joseph saw the value of the business. The solicitors of LEBC had written to Moore Stephens in May 2015 stating the revenue structure of CHS comprised mainly of “commission income which is initial income upfront, where there is a risk of clawback should a plan/policy be cancelled before the anniversary or renewal.”

Two weeks later the solicitors representing Joseph wrote to Moore Stephens giving a contrasting account of income. It said CHS income was “mainly renewal income, which is recurring, year on year, and deemed low risk in the insurance sector.” It added that “cancellations of the whole policy are rare.”

Joseph is claiming LEBC provided “false, misleading or incomplete information” to Moore Stephens.

In defence, the documents show LEBC chief executive Jack McVitie gave a witness statement in January 2018 saying the reason LEBC did not classify revenue related to the CHS business as recurring was because of the risk that it would not occur.

He said: “Whilst there is a high probability that a number of CHS policies will be successfully re-brokered, which is reflected in the group’s steady income stream from year to year and our budgeting, it is impossible to predict which policies will be re-brokered and which will not.”

He referred to LEBC internal financial reports which showed in June 2012 the change in the reporting of CHS income from “renewal” to “initial”.