Just
over 3 months have elapsed, at the time of writing, since the PI referral fee
ban was introduced courtesy of ss56-60 of LASPO 2012.
It is a matter of great doubt whether anyone
reading this article really thought that referral fees would die away entirely
when April 1st came around. PI lawyers and CMC owners are nothing if
not inventive and it was never in doubt that some forms of referral fees would
continue – albeit that they would be re-branded as ‘recommendation fees’,
‘agency fees’ or some other such title that does not include the word
‘referral’ in it.
Prospective
ABS’s were not, we were told, likely to be granted licenses if it appeared that
they were solely designed to get round the ban. So presumably the SRA are
perfectly happy that those to whom they have granted such licenses are not
acting in a manner which would suggest that they were set up with the sole
purpose of circumnavigating the ban.
For
everyone else, what is the current situation? In the lead up to April 1st
and since then, there have been many pronouncements from CMC’s, in particular,
via social media, publicising the fact that they ‘have found a solution to the
referral fee ban’. Without going into great detail about the ‘solutions’ that
are on offer, what can be said is that some involve quite complex paper trails
between the various parties to the ‘solution’
– a mixture of solicitors, CMC’s,
a client and a form of marketing company or some other party. Other ‘solutions’
involve the referrer passing the prospective personal injury client on to the
solicitor by way of a ‘hot key’ transfer – with no information being passed on
by the referrer to the solicitor directly, presumably in an attempt to avoid
falling foul of s56 (5) (b) of LASPO 2012 (referral of prescribed legal
business). These are but two of the types of ‘solution’, ‘scheme’ or
‘arrangement’ that have come to the writers attention. There are doubtless a
good number of others.
Whether
any of these ‘solutions’ will pass muster with the SRA or the MoJ, remains to
be seen.
What
is apparent is that whilst there was a definite mood of bullishness (‘it will
be business as usual’) among some claimant solicitors and CMC’s alike in the
run up to the ban, that bullishness has been replaced with a much greater
degree of cautiousness . There is a sense that many are waiting to see what the
others do before making their own moves (if any) and with good reason.
The
SRA published a 31 point set of guidance notes on the 25th March on
its website at: http://www.sra.org.uk/solicitors/code-of-conduct/guidance/guidance/Prohibition-of-referral-fees-in-LASPO-56-60.page
The
guidance notes set out some examples of the types of ‘solution’ that may or may
not lead to a breach. In the examples contained within the guidance notes, the
‘may’s outnumber the ‘may not’s’ considerably and throughout the notes the
SRA’s stance is made consistently clear – any payment made in relation to a
personal injury claim will be considered to be a referral fee unless the
solicitor can prove otherwise. In other words, if it looks like a referral fee,
sounds like a referral fee and smells like a referral fee, the SRA will
consider that it is a referral fee and if it comes to the attention of the SRA
it will be for the solicitor to prove to the SRA or perhaps more likely, the
SDT that it is not a referral fee. It will be a brave solicitor who wants to be
one of the test cases to have to argue before the SRA/SDT why he or she
believes that his or her particular ‘solution’ does not breach the ban!
To
an outsider looking in, it must seem insane that any solicitor worth his or her
salt would even consider making a payment for a PI claim under any circumstances,
however the referral and payment were packaged or re-branded given that the
burden of proving that the payment is not a breach of s56 weighs so heavily on
the solicitor’s shoulders via OFR (Outcomes - Focused Regulation).
The
problem for many firms of solicitors is that they have become so wholly reliant
on paying referral fees for all, or most, of their PI work that they are not
used to obtaining work via any other media and have never before undertaken any
other real form of marketing of their own. Perhaps some really did think that,
despite the writing having being on the wall from as long ago as since the
beginning of 2012 at least, that ‘J day’ as April 1st became known
amongst PI lawyers, was never going to happen. For those solicitors, cutting
the umbilical cord of 'paid for' PI referrals from CMC’s and the like was always
going to be extremely difficult and potentially terminal to their businesses.
Hence the reason that a number of solicitors seem prepared to take the risk of attempting
to see if there is a way round the referral fee ban, even if it is a risk that
is fraught with danger.
Those
firms that some time ago decided to do away with the referral fee model,
re-organised their businesses (including where necessary, downsizing their
firms) and started to market for work themselves as opposed to relying on ‘paid
for’ referrals, and indeed those who chose never to go down that route at all,
must be giving themselves a pat on the back. It will only be a relatively small
‘pat’ – there are still plenty of other challenges ahead given the onerous
nature of the other reforms already in place, those due to come in soon and those
still to be decided upon, with, amongst the latter group, the raising of the
small claims personal injury limit to £5000 or more, the one perhaps giving the
most cause for concern for claimant PI lawyers.
