IN THE MATTER OF THE SOLICITORS ACT 1974 (as amended)
IN THE MATTER OF
KEITH DAVID HAYWARD
REGULATORY SETTLEMENT AGREEMENT
1. Trevor Baker and Keith David Hayward, being partners in the Firm of Hayward Baker Incorporating Reeds Solicitors ("the Firm") of 18 High Street, Fareham, Hampshire PO16 7AF ("the Partners") agree to the following outcome of the investigation into their professional conduct under reference IB/3142-2008.
2. On 23 March 2008 the Solicitors Regulation Authority ("SRA") commenced an inspection of the Firm resulting in a report dated 19 January 2009 ("the Report"). The Report included the following matters:-
- 2.1 The Firm had accepted referrals of business pursuant to financial arrangements with a number of introducers, and in particular from February 2007 had accepted referrals from a company ("Introducer A ") which referred personal injury claims in respect of which it received a referral fee from the Firm. The Firm had received a total of 45 referrals from this source. The Firm's arrangements with Introducer A were set out originally in an agreement dated 28 January 2007 and subsequently set out in an agreement dated 10 June 2007.
- 2.2 Introducer A's agreement with the client also provided for a fee of £195 plus VAT to be deducted from any compensation received by the client. The SRA Officer noted that this amounted to a Contingency Fee.
3. A subsequent examination of the files and correspondence with the Firm also showed that:
- 3.1 On a small number of files received from a second company, Introducer B, the Firm had in error represented to some clients that they were required to recommend the Insurer's Insurance policies to such clients when this was not in fact the case.
- 3.2 Introducer A was closely linked to an after the event insurance (ATE) broker; the two companies had common ownership and worked in concert. Introducer A's Operations Manual required the Firm to use the 'sign up' service offered by the Introducer's preferred investigation firm and obtain ATE Insurance through Introducer A's associated company.
- 3.3 Introducer A's manual also, erroneously, required the Firm to notify Introducer A of key events during the course of a claim and to obtain Introducer A's consent prior to incurring disbursements in excess of £500. The Firm's clients' contracts with the ATE Insurer imposed the like obligations. The Firm did provide updates of key events to the broker (not to Introducer A despite the terms of the contract with Introducer A) but it is acknowledged without obtaining clients' additional express consent.
- 3.4 In addition, it was a specific requirement of the Firm's agreement with introducer A that the Firm would further Introducer A's interests to the best of its ability.
- 3.5 There was no written evidence of an undertaking by the Introducer to comply with the Solicitors Introduction and Referral Code ("SIRC") prior to the written agreement dated 10 June 2007 but the Partners aver that such undertakings were given.
- 3.6 There was no written evidence that the Firm had satisfied itself that the Introducer had provided all the requisite information to the client pursuant to Section 2A(4)(a) of the SIRC although the partners aver that they did so satisfy themselves. The Firm had also failed to incorporate this obligation into the Firm's written agreement with Introducer A as required by Rule 9.02(e) of the Solictors Code of Conduct 2007 ("The Code").
- 3.7 There was no evidence that the assurances required by Rule 9.02(g)(iv) and (v) of the Code were provided to the client.
4. Proceedings were commenced in the Solicitors Disciplinary Tribunal ("The Tribunal") in May 2010 following a decision of the Adjudicator on 22 June 2009. There have been subsequent negotiations with Mr Hayward and Mr Baker leading to this Agreement.
Submissions to Findings
5. Trevor Baker and Keith David Hayward agree to submit to the following findings being made by the SRA:-
- 5.1 That they:
- 5.1.1 Acted in breach of Rule 3 of the SPR in that they made referrals of business to the insurer and/or the intermediary pursuant to arrangements in breach of Section 1 of the Solicitors Introduction and Referral Code 1990 ("SIRC"), and after July 2007, contrary to Rule 9.01 of the Code in that the agreement with Introducer A had the capacity to impact on the best interests of clients;
- 5.1.2 accepted referrals of business otherwise than in compliance with the provisions of the SIRC and, after 12 July 2007, Rule 9.02 of the Code.
- 5.1.3 entered into an arrangement for the introduction of clients with or acting in association with a person (not being a solicitor) whose business or part of whose business is to make, support or prosecute claims arising as a result of death or personal injury and who in the course of being such business solicits or receives contingency fees, in breach of Rule 9 of the SPR and, after 1 July 2007, Rule 9.01(4) of the Code.
6. The Partners believed in good faith and maintain that they had and have always acted with integrity, independence and in the best interests of all clients, and delivered a very good standard of service to their clients; and also that, so far as relevant to 5.1.1. and 5.1.2 above, in so far as the agreement with Introducer A had the capacity to interfere with the best interests, in fact it did not and the Partners ensured that it did not.
7. The Partners accepted at their meeting with the SRA Officer that the deduction from compensation amounted to a contingeny fee paid to the Introducer, which they had not appreciated before then, and advised Introducer A that no more deductions could be made. The Partners identified six clients in respect of whom deductions had been made, contacted them and reimbursed all six clients. It is also noted that under the SRA's new Handbook, this would not be a breach of any rule as it has been recognised that contingency fees charged by introducers are no longer regarded to be contrary to the public interest.
8. In relation to Clause 3.1 and Introducer B, the Firm utilised (and still does) a sophisticated case management system that creates documentation based on the data that is entered into the system. Due to user error on a small number of cases involving Introducer B the wrong data had been entered into the system resulting in the wrong paragraph being inserted in the paperwork. The Partners have tightened up the procedure to ensure this could not recur.
9. Whilst it would be a matter entirely for the Tribunal, it is unlikely that the Tribunal would restrict the Partners' ability to practice. An outcome that involves the findings as set out in paragraph 5 above, is therefore proportionate to the circumstances. Trevor Baker and Keith David Hayward are therefore individually reprimanded for the breaches identified in Paragrah 3 above.
10. Application will be made by consent for the Tribunal's permission to withdraw the proceedings with no order as to costs. Trevor Baker and Keith David Hayward jointly and severally agree to pay a constribution to the costs of the investigation by the SRA in the sum of £6000 inclusive of VAT and disbursements, such sum to be paid within 6 months of the date of this agreement.
11. The partners agree that they will not act in any way that is inconsistent with this agreement such as, for example, by denying the rule breaches identified in Paragraphs 3 and 5 above.
12. The Partners agree that this outcome may be published by the SRA and that it may also be disclosed to any person upon request or otherwise.
Dated this 12th Day of January 2012
Head of Legal Policy
Solicitors Regulation Authority
Solicitors Regulation Authority
Keith David Hayward