Two personal injury solicitors have been sanctioned by the Solicitors Regulation Authority (SRA) for breaches of the referral fee ban.
Janet Cruise, former sole practitioner of Wirral firm Wolf Law was rebuked and fined £2,000, with £600 costs, while Maneer Ahmed Ghani, a consultant at Blackburn firm KG Solicitors, was rebuked and ordered to pay a contribution to costs.
Ms Cruise received the maximum fine that the SRA could levy without referring her to the Solicitors Disciplinary Tribunal.
She was found to have paid for referrals in contravention of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) and not having an effective system to supervise and monitor the referrals, as well as the actions of a man called Karl Fischer, who worked for her.
In 2012 Ms Cruise was approached by Mr Fischer with an offer to use his intermediate sources to refer potential claimants to her firm in return for a marketing fee calculated at 50% of the recovered costs in any litigation.
Satisfied that the arrangement did not infringe LASPO, she agreed and the agreement took effect in April 2013, when the ban came into force. Mr Fischer worked out of Wolf Law’s offices and exclusively for the firm.
However, by the summer of 2013, Ms Cruise realised that the model was not entirely compliant with LASPO as her firm started to receive communications directly from the intermediate sources that contained the prospective claimants’ details and not through Mr Fischer’s company, Karl Fischer Limited (KFL).
She admitted that she paid around £47,000 for 38 cases acquired this way – around a quarter of the cases brought in through KFL.
The SRA said that it nonetheless took her five months to terminate these arrangements – during which time the regulator issued a warning notice on referrals – a delay which had not been “satisfactorily explained”, and as Mr Fischer took his files with him when he left in December 2013, it was not known how many non-compliant matters were accepted in that time.
The solicitor had put in place a risk assessment process for incoming claims, but then delegated its operation to Mr Fischer, who did not follow it. “Ms Cruise did not spot that,” the SRA said.
“Ms Cruise, without good reason, placed an unjustified and disproportionate amount of trust and reliance in Mr Fischer as both the initial and only point of contact for the referring sources, as well as the self-assessor for the risk assessment process.
“As a sole practitioner with a new (and untested) business model and a new (and untested) trading ‘partner’ in the shapes of KFL and Mr Fischer, she ought not to have done this.
“[We] have seen no evidence either that Ms Cruise had any direct contact with any representatives at the referral sources, or sought to validate whether the arrangement described by Mr Fischer, and which she elected to adopt within her own practice, was being followed.”
The “occasional spot-checks” she carried out on files to ensure compliance were deemed inadequate, “since it missed files which Mr Fischer managed to conceal from view”.
It should have been clear at the time that Ms Cruise should have not delegated decisions about taking on new work, the SRA said.
The SRA concluded that a rebuke and financial penalty were proportionate “because we are satisfied that Ms Cruise knows and understands what has happened, has gained insight into her conduct and has removed Mr Fischer and his company, as well as the defective business model, as the threat to her practice”.
In the other case, like Ms Cruise, Mr Ghani failed to achieve Outcome 9.8 of the SRA Code of Conduct, which says a solicitor must not pay a prohibited referral fee.
He was found to have entered into a referral agreement for personal injury claims on behalf of his firm, and authorised payments for referrals made under that agreement.
The SRA said the company with which the agreement was made was not registered with the Ministry of Justice as required.
Mr Ghani “also made direct contact with clients referred to him contrary to the terms of the referral agreement”.