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Referral fees – the business of access to justice

Published online by Cambridge University Press:  02 January 2018

Andrew Higgins
Andrew Higgins*
Affiliation:
University of Oxford
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Abstract

The paper examines the controversial issue of referral fees for personal injury claims. It looks at the function of referral fees in the civil justice system, their relationship to the guarantees of access to court and the right to seek legal assistance in ECHR Art 6, and the debate about promoting access to justice or a litigious society. It examines the experience of the referral fees market in England and Wales, where the costs of referrals have risen dramatically and there is concern that referrers are auctioning their customers to the highest bidder rather than helping them find competent lawyers. Sir Rupert Jackson recommended banning referral fees in his report on the costs of civil litigation, and the Government has announced it will implement this recommendation. The paper considers the potential effects of a ban on competition in the legal services market and its compatibility with UK and EU competition law. The paper argues that a combination of better regulation of the industry and proper regulation of costs rules is a better and more proportionate way of controlling legal costs and the quality of legal services than an outright ban. While referral fees have not delivered all the benefits one would expect from a for-profit independent referrals service, they can help people obtain information about their legal rights, and competent lawyers to enforce them. This service is particularly valuable given that the state has substantially cut public funding of the civil justice system in recent years.

Type
Research Article
Information
Legal Studies , Volume 32 , Issue 1 , March 2012 , pp. 109 - 131
Copyright
Copyright © Society of Legal Scholars 2012

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References

1. Hereafter referred to as claims management providers (‘CMPs’).

2. R Jackson ‘Review of civil litigation costs: final report’ (December 2009) ch 20 [4.16], [5.1].

3. Ministry of Justice, Curbing Compensation Culture: Government to Ban Referral Fees, Press Release, 9 September 2011.

4. Legal Studies Board (LSB) Referral Fees, Referral Arrangements and Fee Sharing: Decision Document (May 2011) p 6.

5. CPR 1.1.

6. R Jackson ‘Review of civil litigation costs: interim report’ (May 2009) [1.2]–[1.3].

7. Ibid, ch 12 [1.5].

8. Jackson, above n 2, ch 7 [3.1].

9. Sch 2, para 1; s 6.8(b).

10. Courts and Legal Services Act 1990, s 58, which came into force in 1995.

11. Lord Chancellor ‘Access to justice with conditional fees’ Consultation Paper (March 1998).

12. Access to Justice Act 1999, ss 27 and 29.

13. Campbell v MGN Limited[2004] UKHL 22, [2004] 2 AC 457.

14. Courts and Legal Services Act 1990, s 58A(1).

15. According to the Lord Chancellor in a speech on 21 September 2008, quoted in Jackson, above n 6, ch 1 [1.3].

16. There are some means of controlling liability for costs incurred by an opponent, including making a part 36 offer to settle (with cost consequences for the party who rejects but fails to beat the offer at trial), and applying for a costs capping order limiting the amount of future recoverable costs a party must pay in the event they lose: CPR 44.18. There is also scope for judicial assessment of whether costs were reasonably incurred, reasonable in amount, and proportionate. However, judicial assessment has not proved effective in controlling high costs: Zuckerman, A On Civil Procedure (London: Sweet & Maxwell 2006)Google Scholar at [26.88].

17. MGN v UK App no 39401/04 ECJ (18 January 2011) [2011] All ER (D) 143 (Jan).

18. Ibid, at [155]–[156].

19. Ibid, at [192], [217].

20. Jackson, above n 2, Executive Summary [2.2].

21. Ibid, at [3.3].

22. Ibid, at [2.6].

23. Ibid, at [2.5].

24. Ibid, at foreword i.

25. Ministry of Justice Reforming Civil Litigation Funding and Costs in England and Wales – Implementation of Lord Justice Jackson's Recommendations (March 2011), available at http://www.justice.gov.uk/consultations/docs/jackson-report-government-response.pdf.

26. Ibid, Ministerial Foreword pp 3–4.

27. Ministry of Justice, above n 3.

28. Legal Services Act 2007, P 5.

29. Lord Young ‘Common sense, common safety’ (London: Cabinet Office October 2010) p 7.

30. Foreword by David Cameron, ibid, p 4.

31. Peysner, J ‘Referring to justice’ (2008) 19 European Business Law Review 1105 Google Scholar.

32. Legal Services Consumer Panel Referral Arrangements (London: LSCP May 2010)Google ScholarPubMed at [1.4].

33. Jackson, above n 2, ch 20 [1.3], [1.6].

34. Fair Trading Act 1973, s 2.

35. Director General of Fair Trading Competition in Professions (Report No 328, 2001) pp 3, 14.

36. Ministry of Justice Claims Management Regulation: Annual Review 2008-2009 (2009) pp 18, 20.

37. Legal Services Consumer Panel, above n 32, at [2.2].

38. Better Regulation Taskforce Better Routes to Redress (Cabinet Office, 2004)Google Scholar[4.1]; p 23.

39. Ministry of Justice, above n 36, p 12.

40. Compensation Act 2006 P 2, s 4, s 7.

41. Conduct of Authorised Persons Rules 2007 r 2, 6, Client Specific Rule 11.

42. Compensation Act 2006 P 2, s 5.

43. Solicitors' Code of Conduct 2007, r 9.01.

44. Ibid, r 9.02.

45. Claims Standards Council (the trade association for CMPs) quoted in Jackson, above n 2, ch 20 [3.1].

46. See eg Lord Young, above n 29.

47. See eg M Freedman ‘The professional responsibility to chase ambulances’ in Lawyers' Ethics in an Adversary System (Indianapolis: Bobbs-Merrill, 1975) ch 10.

48. Zuckerman, A On Civil Procedure (London: Sweet & Maxwell, 2nd edn, 2006) p 614 Google Scholar.

49. See eg Steel and Morris v UK (App no 6481/01) (2005) 41 EHRR 22.

50. APLA Ltd v Legal Services Commissioner (NSW)[2005] HCA 44 at [8].

51. Ibid, at [30]–[34] (Gleeson CJ and Heydon J).

52. Ibid, at [86].

53. S v Switzerland (App no 12629/87; 13965/88) (1992) 14 EHRR 670.

54. Golder v UK (1979–1980) 1 EHRR 524.

55. APLA Ltd v Legal Services Commissioner above n 50, at [30]–[34].

56. Director-General of Fair Trading Competition in Professions, Report No 328 (March 2001) at [210] (p 14 of report).

57. Submission of the Law Society to Sir Rupert Jackson's Costs Review, Jackson, above n 2, ch 20 [3.14].

58. Legal Services Consumer Panel, above n 32, at [5.3].

59. Ibid, at [2.21].

60. A finding supported by a number of other studies: eg Harris, DJ et al Compensation and Support for Illness and Injury (Oxford: OUP, 1984)Google Scholar.

61. Legal Services Consumer Panel, above n 32, at [5.32].

62. Lewis, R, Morris, A and Oliphant, K ‘Tort personal injury claim statistics: is there a compensation culture in the United Kingdom?’ (2006) 30 Journal of Personal Injury Law 87 Google Scholar at 102; Hand, J ‘the compensation culture: cliché or cause for concern’ (2010) 37 Journal of Law and Society 569 CrossRefGoogle Scholar at 579. Available data come from Compensation Recovery Unit (CRU) of the Department of Work and Pensions, NHS statistics and Insurers' Bodily Award Studies.

63. Constitutional Affairs Committee, Third Report Compensation Culture (London: The Stationery Office 2006) at 754–II.

64. Better Regulation Task Force Better Routes to Redress (London: 2004) p 3.

65. Ministry of Justice, above n 3.

66. J Hand, above n 62, at 572.

67. Better Regulation Task Force, above n 64, pp 14–15.

68. M Boleat ‘Claims management regulation, impact of regulation third year assessment’ (MoJ, 2010) at [4.14].

69. Legal Services Consumer Panel, above n 32, at [6.40]; £543 compared to £687 for properties valued at £200,000.

70. According to interviews with industry participants conducted by Oxera Consulting Ltd Marketing Costs for Personal Injury Claims (ABI Research Paper 15, 2009) p 3.

71. Ibid.

72. Referral fees for claims management services are not recoverable from the losing party as a separate item. An attempt to recover claims management services provided by an insurer as part of an ATE insurance premium were rejected by the Court of Appeal in Re Claims Direct Test Cases[2003] EWCA Civ 136, [2003] 4 All ER 508.

73. Jackson, above n 2, Executive Summary [2.8].

74. Advisory Committee on Civil Costs Report on Guideline Hourly Rates (March 2010) p 3.

75. Jackson, above n 2, ch 20 [2.4].

76. Advisory Committee on Civil Litigation Costs, above n 74, p 7.

77. Jackson, above n 2, ch 20 [4.7].

78. Advisory Committee on Civil Litigation Costs, above n 74, p 5.

79. Author interview with Simpson Millar LLP Solicitors, August 2009.

80. Jackson, above n 2, ch 20 [3.4].

81. Solicitors' Code of Conduct, r 9.

82. Jackson, above n 2, ch 20 [3.12].

83. Legal Services Consumer Panel, above n 32, at [3.7].

84. Jackson, above n 2, ch 20 [4.3].

85. Issacharoff, S and Ortiz, D ‘Governing through intermediaries’ 85 Virginia Law Review (1999) 1627 CrossRefGoogle Scholar at 1649.

86. See The Law Society ‘Find a Solicitor’ available at http://www.lawsociety.org.uk/choosingandusing/findasolicitor.law.

87. Jackson, above n 2, ch 20 [4.2].

88. Council Directive 87/344/EEC of 22 June 1987, Art 4; implemented by the Insurance Companies (Legal Expenses Insurance) Regulations 1990.

89. Case C-199/08 [2010] 1 All ER (Comm) 567.

90. Jackson, above n 2, ch 20 [3.1].

91. Ibid, at [4.8].

92. Under TFEU Art 3 (ex Art 10 TEC); Case C-198/01 Consorzio Industrie Fiammiferi[2003] ECR I-8055 at [16].

93. Case C-309/99 Wouters et al v Algemene Raad van de Nederlandse Orde van Advocaaten[2002] ECR I-1577.

94. Joined Cases C-94/04 and 202/04 Cipolla v Fazari and Macrino[2006] ECR I-11421.

95. Ibid, at [58]–[60].

96. Legal Services Consumer Panel, above n 32, at [1.26].

97. Ibid, at [97].

98. Cipolla, above n 94, at [31].

99. Wouters, above n 93, at [105].

100. Ibid, at [108].

101. Cipolla, above n 94, at [64]–[65], [70].

102. Ibid, at [57].

103. Which sets the guidelines on reasonable hourly fees.

104. Cipolla, above n 94, at [68].

105. Ibid, at [66]–[67].

106. Submission of the Accident Compensation Solicitors Group to Sir Rupert Jackson's Costs Review, Jackson, above n 2, at [3.12].

107. Ehlermann, CD and Atanariu, I (eds) European Competition Law Annual (Oxford/Portland, Oregon: Hart Publishing, 2004) p 271 Google Scholar.

108. Jackson, above n 2, ch 20 [4.15].

109. Peysner, above n 31.

110. Legal Services Act 2007, s 1(1).

111. Jackson, above n 2, at [4.11].

112. Ibid, ch 11 [1.2].

113. Ibid, ch 12 [4.1]–[4.2].

114. Ibid.

115. Ibid, ch 12 [4.10], [5.1]; ch 11 [6.1]; LSB, above n 6, at [1.21].

116. LSB, above n 4, at [1.14], [1.18], [1.21].

117. Jackson, above n 2.

118. Ibid, Executive Summary [2.6].