McNally: clarified situation on solicitor-to-solicitor referrals
The government is to consider tightening up the ban on referral fees in personal injury and also introducing statutory regulation of third-party litigation funding, it confirmed yesterday.
While rejecting calls to exempt charities and trade unions from the ban, justice minister Lord McNally told the House of Lords that the government would scrutinise amendments laid by solicitor Lord Hunt of Wirral, who told peers that “there is quite an industry out there now, which will be thinking of innovative ways of defeating the intention of both the government and Lord Justice Jackson”.
His amendments to the Legal Aid, Sentencing and Punishment of Offenders Bill would catch payments made for cases that do not include an injury – such as a claim for motor repairs or hire charges – and the situation where the referral is made by a regulated person but the payment made back to an unregulated subsidiary.
Speaking on the seventh day of the bill’s committee stage, Lord McNally said: “The government believe that the referral fee clauses as drafted should cover the concerns that the amendments seek to address, although of course we wish to ensure that the ban is as effective as possible… We are sympathetic to the intention behind them and would like to consider them further.”
He also clarified the situation on solicitor-to-solicitor referrals following an amendment laid by Lord Pannick QC to exempt them.
“If for any reason a solicitor decides that a piece of business needs to be transferred… it would be perfectly reasonable to see a transfer. When the transfer is made, the solicitor concerned is able to claim an appropriate amount of money for the work dispersed before the transfer was made. We accept that logic.
“However, the government’s view is that reasonable payments of this type are not captured by the ban as long as they only cover the work undertaken by a firm in respect of the claim prior to it being transferred to a new firm. If there is a referral fee element to the payment, this would be subject to the referral fee prohibition and is a matter best dealt with by the regulator rather than by legislation.”
The amendment on introducing statutory regulation of third-party funding – for which a voluntary code of conduct has only recently been agreed – is believed to have been pushed by intensive lobbying from the American Chamber of Commerce.
Liberal Democrat Lord Thomas, who pressed it, said the problem was in relation to non-commercial matters such as personal injury and divorce cases. “I do not regard this as assisting in access to justice; rather, it takes us back to the old days of maintenance and champerty,” he said. Former Conservative Lord Chancellor Lord Mackay was among those to speak in favour of the amendment.
Lord McNally acknowledged a mood in the chamber that “the concept of legal hedge funds being established and cases being bundled up as investment opportunities… gives rise to rightful concern”, at least in relation to non-commercial claims.
“The code of conduct was drawn up with the specific requirement that the matter would be revisited if and when third-party funding expanded. It is a question of whether it has now expanded to a point where the matter should be revisited… The Lord Chancellor would like further time to reflect on these matters.”
