Practice and Procedure


PUBLISHED January 17, 2003

A payment made to the Claims Direct company was a referral fee and was therefore not recoverable from the paying party.Case concerning, issues 7-10, the second tranche of issues arising out of the Claims Direct Scheme Re Claims Direct Test Cases (2002) in test cases supported by Claims Direct to determine issues of principle relating to payments by each claimant to them. Issues 8-10 relating to counsel's fees; whether the requirement to seek counsel's advice in every case under the terms of the operating manual was reasonable and recoverable; recoverability of insurance premiums and transitional provisions were compromised. The live issues remaining related to issue 7 (referral fees): (i) whether the payment of ?395 plus VAT to Medical Legal Support Services Ltd ('MLSS', a Claims Direct company) was a referral fee; (ii) if so, whether the solicitor's agreement to pay the referral fees breached the Solicitors Introduction and Referral Code 1990; (iii) if so, what were the consequences; (iv) whether these fees (and the payment to Mobile Doctors Ltd) were irrecoverable for any other reason.HELD: (1) The Solicitors Practice Rules 1990 and the 1990 Code took effect as subordinate legislation governing the practice and conduct of solicitors. (2) The MLSS fee should be treated as a disbursement in the solicitor's bill, not as part of the solicitor's profit costs. (3) The MLSS invoice, which was sent as soon as the panel solicitor had accepted the case, could refer only to future work, ie to work done after the solicitor had been retained. In order for a disbursement to be recoverable, it must have been made by the solicitor on the client's behalf or be an out of pocket expense of the client personally. (4) The fee of £395 plus VAT paid to MLSS was the price which the panel solicitor must pay in order to obtain the work. The payment was a referral fee. (5) The payment to MLSS was a direct breach of s.2(3) of the 1990 Code. It was irrecoverable from the client and therefore irrecoverable from the paying party. (6) If it was subsequently held that breach of the 1990 Code did not render the entire referral fee irrecoverable, the cost of two-and-a-half hours' work by the claims manager was an appropriate starting point. (7) The administration element of any fee charged by Mobile Doctors Ltd was not recoverable.Issues answered accordingly.For related proceedings see Re: Claims Direct Test Cases (2002) LTL 19/7/2002, In the Matter of Claims Direct Test Cases (2002) LTL 19/3/2002 and Callery and Gray (No.2) (2001) LTL 31/7/2001.