A law firm and its former outsourcing partner are locked in a legal dispute after the parties’ relationship came to an abrupt end.

A judgment in Momenta Holdings (PPI) Ltd v Cheval Legal Ltd & Ors outlines that the dispute arose after the breakdown of an agreement to run hundreds of mis-sold PPI claims.

The court heard that informal discussions began in 2017 between legal outsourcer Momenta Holdings, a funder called Spectra Legal Ltd and a barrister called Stephen McGarry about ways to pursue so-called Plevin cases.

In 2019, the law firm Cheval was incorporated, with McGarry and solicitor Philip Ryan appointed directors. Less than a year later it obtained authorisation from the SRA.

As part of that process, Cheval had to declare to the SRA that it intended to run thousands of Plevin claims; that it was a start-up with no operational staff; and that accordingly it would be relying on Momenta for the provision of staff to run the anticipated claims.

The court heard that Cheval was effectively ‘front of house’ and directed litigation strategy, while Momenta did the ‘leg work’ on claims.

Initially, Cheval gave access to 164 claims which Momenta uploaded and began processing, with funding from Spectra.

But by late 2020, tensions began to appear in the relationship, particularly over the basis on which Momenta was to invoice Cheval.

Later, Cheval would allege that Momenta had mishandled claims and was in breach of a new outsourcing agreement, while Momenta alleged it was not paid sums which were properly due. Momenta also alleged that Cheval had been improperly overpaying a claims management company called DMG Administrative Services, which had been set up by McGarry and Ryan.

In March this year, Cheval blocked Momenta’s access to its systems, apparently without warning, and the outsourcer subsequently brought a claim for recovery of monies against Cheval, McGarry, Ryan and DMG. Cheval’s solicitors have indicated the firm intends to bring proceedings of its own.

Before James Pickering KC, sitting as a deputy high court judge, Cheval applied for the Momenta claim to be struck out, while Momenta asked for an interim injunction pending trial. The judge dismissed the strike out application and allowed a limited interim injunction, meaning the case can now proceed to trial.