Referral Fees June 17, 2009
Posted by Richard Moorhead in : Contingency, Costs, Jackson Review, no win no fee , trackbackLord Justice Jackson is plainly concerned about referral fees, as are a number of the interest groups he spoke too (including APIL, MASS (the Motor Accidents Solicitors Society). The trade in cases is plainly seen as driving up costs and significant doubts are raised over the claim that the associated practices of advertising and claims management ensures that those members of the public with claims can find their way to an appropriate solicitor (or claims handler). Para. 2.15 page 229 clarifies the point:
“In respect of referral fees, there appears to be a general view amongst solicitors on both sides of the fence that these are an unwelcome addition to personal injury costs which bring little benefit either to lawyers or to clients. The majority of solicitors do not accept the “access to justice” argument. They maintain that even if referral fees were banned and there were no claims management companies, injured persons could easily contact solicitors of appropriate expertise. Details of solicitors who are members of APIL are readily available on the internet. I have recently attended two large solicitors’ conferences at which the merits of referral fees were discussed.22 On both occasions a show of hands revealed that the overwhelming majority of solicitors present would favour banning referral fees.”
The clear suggestion is that Jackson would favour banning referral fees. There are two potential drawbacks to this view that I perceive.
- The active marketing of no win no fee agreements does have one access to justice benefit. The public are relatively uninformed about lawyer costs and such advertising may overcome their recognised fear of the meter ticking as soon as they enter the door of a solicitor’s office. This argument is of course more about advertising than it is about referral fees, but advertising has a strong relationship with such fees. Losing this benefit would in my view, be worth the downside risk of fewer people understanding about the availability of no win no fee.
- Referral fees as operated in the United States have one benefit which we do not appear to have in England and Wales. In the US, referral fees can be on a contingency fee basis. Lawyer A may refer client X onto lawyer B for a third of Lawyer B’s normal fee. If Lawyer B charges the client a third of the damages, Lawyer A gets a third of that (or 10% of the damages). The advantage of that is that Lawyer A has an incentive to pass on cases where they are not within his or her competence or cannot be run within the the financial capacities of that firm. In other words, big cases can be passed onto specialist firms. This system is of course far from foolproof but it distributes income across the profession and encourages appropriate specialisation. It also has the benefits of reducing marketing costs for specialist firms.
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