Compl-i - February 2010

Referral Fees

The SRA have amended their guidance on Rule 9 of the Code of Conduct on referral arrangements.  These amendments include the need for a firm to consider whether an arrangement with an introducer is in the best interests of their client and what to advise their client accordingly.  Follow this link to view the revised guidance and also Weightmans’ e-alert on the issue.

Readers may well have seen comments made by Andrew Hopper QC and Gregory Treverton-Jones QC (Law Society Gazette 19 Nov 09) on the amendments expressing their concern that the change has been made to the guidance, not the Rule itself and the dangers that this poses for practitioners. Antony Townsend, chief Executive of the SRA has responded, (Law Society Gazette 25 November 09) claiming that the additional guidance imposes no new obligations but instead clarifies the existing rule and guidance and was in response to queries from members of the profession. He reminds firms that even if a client has already entered into a scheme with an introducer, the firm must still consider whether the arrangement is in the client’s best interests and advise accordingly. The difficulty of course is that it would be inappropriate for the solicitor to advise the client to break the terms of a legally binding pre-existing contract. Guidance note 1 to Rule 9 indicates that a solicitor should not enter into arrangements with Claims Management Companies which are not in the best interests of clients. By implication, it suggests that solicitors should seek to persuade such companies to change their business model or cease doing business with them.

The amendments will create more headaches for practitioners and readers would be well advised to review their arrangements urgently and seek advice if needed.