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Lord Young facebooked in bid to ban claims management companies

11 October 2010

Lord Young, whose report on compensation culture is expected on 15 October, has been facebooked by a prominent personal injury lawyer over advertising for personal injury work.

In a letter to the Conservative peer posted on the social media platform, Paul Mulderrig said the former cabinet minister should ban claims management companies and only allow reputable personal injury law firms to advertise their services to the public.

Mulderrig urged Lord Young to “outlaw claims management companies immediately” because “they don’t have any of the requisite professional skills” and are not “regulated with any force”.

If an outright ban is not acceptable, Mulderrig continued, the payment of referral fees by solicitors to claims management companies should be made illegal and “suitably strict sanctions” imposed on law breakers.

Criticising the profession’s trade body, he added: “The Law Society has repeatedly stepped back from addressing this issue; referral fees serve only to add a layer of substantial and pointless expense to the process.”

The letter also called for restrictions to be imposed on advertising for personal injury services. Personal injury advertising, Mulderrig suggested, should only be allowed for “solicitors who can properly demonstrate professional expertise in that field of law”, such as Lexcel accredited firms or firms on the Law Society’s personal injury panel.

Mulderrig acknowledged that his firm would qualify under these criteria but so would a large number of others, he said.

“If advertising is restricted to proven experts,” he concluded, “it can only improve the position for accident victims who have legitimate cases.”

Mulderigg is one of many lawyers adding his voice to the wave of protest building ahead of the publication of Lord Young’s report on health and safety.

His position on referral fees, for instance, is shared by many lawyers. Respondents to last week’s poll on solicitorsjournal.com voted 64 per cent that tougher disclosure requirements, as proposed by the Legal Services Board, would not be sufficient to legitimise referral fees.

Des Collins, senior partner at Collins Solicitors, doesn’t like referral fees. Some years ago his firm took over claims from another practice that had been involved with Claims Direct and The Accident Group (TAG), where referral fees had been paid for claims that, he said, should not have been brought. The contracts were honoured but it has left Collins with an unpleasant aftertaste.

Collins’ firm specialises in large claims and does not rely on referrals for business – he came to public attention for his work representing passengers injured in the Potters Bar and Hatfield rail crashes, and more recently for claimants in the Corby contaminated land case.

Referral fees, he argued, tend to lead to claims which might otherwise not be made. Much as they do in principle provide access to justice, “it can go too far” and they are “in practice, difficult to control in a sensible and pragmatic manner”.

But for firms whose work depends on referrals, there are other problems. Ian Shovlin, managing partner at Higgs and Sons, agrees there are issues with referral fees but that the profession should be “pragmatic about it”.

“One main concern is that if you remove them they will go underground. I don’t like them but it’s a fact of life and it’s better to have them above board,” said Shovlin.

What should be done with advertising, however, received a more united response. “TV advertising can be very persuasive,” Shovlin continued, “and the biggest challenge is whether Lord Young takes action on advertising.”

For Des Collins, the issue has got “wholly out of hand”. “I don’t approve of advertising by claims factories,” he said, “but legitimate and controlled advertising by the legal profession must be allowed.”

But a selective ban could be tricky to police. “I can’t see how it would be possible to legislate to control personal injury advertising specifically, or specifically for solicitors without creating serious competition issues and the fairness of any regulatory environment,” said Fraser Whitehead, partner at Russell Jones and Walker.

“How would it be fair for an employment practice to advertise with impunity and not allow a personal injury practice?” he asked.

Road traffic lawyers have also thrown their hats into the ring. MASS, the Motor Accident Solicitors Society, last week called on Lord Young to address the question of advertising wholesale.

“There should be a single oversight, regulatory and enforcement framework in place regarding advertising and referral fees, thereby preventing unfair competition and ensuring access to justice for the consumer,” said chairman John Spencer.

Spencer also warned against banning the recoverability of success fees and making accident victims pay a percentage of their compensation through conditional fees, saying it could have “unintentional consequences” for the rights of claimants to full redress.

But with the Jackson report already endorsed by the government and the Young report understood to sanction this approach, that particular battle, Des Collins said, may already be lost.

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