Risk factors in personal injury claims
First issued on 21 March 2016 | Updated December 2017
While this document does not form part of the SRA Handbook, we will have regard to it when exercising our regulatory functions.
Who is this warning notice relevant to?
This warning notice is relevant to solicitors and all regulated persons who take personal injury referrals from third parties, work closely with them or act on their instructions.
We are concerned that firms are:
- failing in their duties to act in accordance with the Principles and Outcomes of the Code by: allowing third parties to cold call potential clients
- entering into referral agreements that are in breach of the Legal Aid Sentencing and Punishment of Offenders Act 2012
- taking and acting on instructions from third parties without ensuring that the instructions originate from the client
- settling claims without a medical report
- paying damages or sending cheques to third parties without accounting properly to the client
- bringing personal injury claims without their clients’ authority
- in some extreme cases, bringing claims without the knowledge of the named client claimant
- not training and supervising their staff adequately
Firms who conduct cases which demonstrate one or more of these features may face regulatory action for breach of our Principles or Code. Further this may give us reason to suspect dishonesty by their principals or staff.
That all firms and individuals regulated by us comply with the Principles and Outcomes of the SRA Handbook 2011. Law firms and solicitors conducting litigation are central to the administration of justice and must be alert to any risk that they are receiving or pursuing fraudulent or questionable cases and take action to remove that risk urgently.
The SRA Principles
You have a duty to:
- Principle 1 - Uphold the rule of law and the proper administration of justice
- Principle 2 - Act with integrity
- Principle 3 - Not allow your independence to be compromised
- Principle 4 - Act in the best interests of each client
- Principle 5 - Provide a proper standard of service to your clients
- Principle 6 - Behave in a way that maintains the trust the public places in you and in the provision of legal services
The SRA mandatory outcomes
You should have regard to the specific outcomes under the SRA Code of Conduct 2011, in particular those highlighted below.
You must ensure that clients do not come to you as a consequence of cold calling by your firm or a third party. Some third parties obtain client details illegally and you may be at risk of infringing the Data Protection Act by the unauthorised use or handling of data. You should ensure the introducer is aware of your duties and you check regularly that their methods of marketing and contact do not put you in breach of your code, for example, by asking clients how they were first contacted. If you fail to make the position clear you are at risk of non-compliance.
You should have particular regard to the following outcomes:
- O(8.1) your publicity in relation to your firm is accurate and not misleading, and is not likely to diminish the trust the public places in you and in the provision of legal services.
- O(8.3) you do not make unsolicited approaches in person or by telephone to members of the public in order to publicise your firm.
Acting in the following way may tend to show you have not achieved the outcome and therefore complied with the principles.IB(8.6) allowing any other person to conduct publicity for your firm in a way that would breach the principles.
In personal injury matters, you should not enter into any arrangements contrary to the Legal Aid Sentencing and Punishment of Offenders Act 2012. In those cases where arrangements are permitted by law you must still comply with the required outcomes in Chapter 9 of the Code of Conduct. You must be satisfied and be able to evidence that the agreement or relationship with the referrer does not affect your ability to take proper and ongoing instructions from your client, or the way you deal with your client’s information or manage your client’s matter.
You have a duty to ensure that contracts or other arrangements between your client and a referrer are fair and to cease dealing with a referrer whose contractual terms or other conduct are adverse to your clients' interests or to the rule of law.
You should have regard to the following outcomes:
- O(9.1) your independence and your professional judgement are not prejudiced by virtue of any arrangement with another person
- O(9.2) your clients’ interests are protected regardless of the interests of an introducer or fee sharer or your interest in receiving referrals
- O(9.3) clients are in a position to make informed decisions about how to pursue their matter.
- O(9.8) you do not pay a prohibited referral fee.
You should use the services of regulated claims management companies and review your referral arrangements regularly ensuring that they are not your sole source of work and that the arrangement or behaviour of the introducer does not put you in breach of your duties.
The nature of personal injury litigation and the role of referral organisations in this sector mean that the risk to clients, defendants and the administration of justice are such that you must exercise extra caution to ensure that you are acting on valid instructions. This is likely to mean taking instructions—or checking them—direct with your client. This is an ongoing duty throughout the life of a case and will apply in particular to significant decisions such as whether to settle a claim and for how much.
The commercial interest of a referrer means that you cannot safely rely, without further scrutiny, on common practices such as instructions being given on behalf of another person by, for example, a trusted family member or one member of a couple or partnership.
The Principles and Outcomes of the Code make clear that you must act in your clients’ interests and with integrity. Your retainer is with your client and you are responsible to your client both under the law and our regulatory requirements. To ensure that you can act in your clients’ interests and deliver the required quality of service you should have clear instructions from your client and an agreed course of action. Your client should have all the necessary information to make informed decisions on how their matter should be dealt with. Unless you have regular contact with your client, you will be at risk of failing to achieve the required outcomes.
Unless instructions are confirmed with the client at each stage of the retainer, throughout proceedings, you will be at risk of committing serious misconduct.
Before issuing proceedings, you must have proper authority to do so. You must be fully satisfied that the terms of the claim properly reflect client instructions. Instructions should be confirmed at each stage of the retainer and authority to make, accept or reject an offer must be separately obtained. Acting without client instructions may leave you open to wasted costs orders and negligence proceedings as well as disciplinary action.
In those cases where your client clearly wishes—and confirms to you directly—that you should act on instructions given by a third party, you will need to satisfy yourself that it is in your client's interests to take instructions in this way. You will need to explain to the client that taking third party instructions will mean the sharing of their confidential information and the implications and risks involved. eg inaccurate information being acted on, misuse of information by the third party.
Only if you are satisfied that the arrangement is in the best interests of the client and that there is no conflict between the interests of the client and the person giving instructions may you act in this way. You should be mindful of any arrangements which may incentivise the referrer to take a particular course of action in the case, for example an early settlement, without regard to the best outcome for the client.
In personal injury matters the best information on the facts and consequences of the injury are highly likely to rest with the client. Blanket forms of authority based on bulk or standard terms present a greater risk to the interests of clients and the administration of justice, and are highly unlikely to satisfy our requirements.
Even where you are satisfied it is in your client's interests to take third party instructions, you must be satisfied that your client has given free and informed consent to you doing so. Once again this is likely to require you to obtain this direct.
Because of the risks involved in bringing false claims, you must properly identify your client by obtaining and verifying proof of identity and address. Unusual or suspicious factors must be investigated fully. If any third party, including your agent, provides copy documentation such as a photocopy of a passport, you must ensure that the client confirms its authenticity directly to you.
Your client should be fully aware of the costs you are charging, the costs information you deliver should be transparent and clear. You have a duty to give clients’ the best possible information both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter; O(1.13).
When giving costs information you should consider the best way to deliver the information to that client. The information may be in writing or discussed with the client first and followed up in writing. Where you have vulnerable clients you should consider the matter very carefully to ensure the action you take delivers the outcomes required. See also IB(1.14) clearly explaining your fees and if and when they are likely to change.
Damages must be paid to the client unless you have a valid reason and valid instructions direct from your client to make payments to a third party. Before making such payments you should familiarise yourself with our guidance on improper use of a client account. You should not make payments where there is any concern that the client may be avoiding liabilities eg bank overdraft, benefits claw back. Cheques made payable to the client must be given or sent to the client at their address. Failure to properly account to a client in this way may lead to regulatory action for failure to account for client money.
You should have regard to the following outcomes and rule:
- O(1.1) You treat your clients fairly
- O(1.2) you provide services to your clients in a manner which protects their interests in their matter, subject to the proper administration of justice
- O(1.4) you have the resources, skills and procedures to carry out your clients' instructions
- O(1.5) the service you provide to clients is competent, delivered in a timely manner and takes account of your clients' needs and circumstances
- O(1.12) clients are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them
Acting in the following way(s) may tend to show that you have not achieved these outcomes and therefore not complied with the Principles:
- IB (1.25) acting for a client when instructions are given by someone else, or by only one client when you act jointly for others unless you are satisfied that the person providing the instructions has the authority to do so on behalf of all of the clients
- IB (1.28) acting for a client when there are reasonable grounds for believing that the instructions are affected by duress or undue influence without satisfying yourself that they represent the client's wishes
SRA Accounts Rules 14.3 (SAR)
Client money must be returned to the client (or other person on whose behalf the money is held) promptly as soon as there is no longer any proper reason to retain those funds. Should you delay in making payment you may find the client has moved on and you will then be required under Rule 20 SAR to make efforts to trace and pay the client. Costs incurred in finding the client are not recoverable and must be borne by you. Efficient and reliable systems of receipt and payment of damages will reduce the need to incur costs and time spent in pursuit of a client.
Misleading the court and other parties
If you fail to take proper steps to minimise risks or deal with issues that arise, you may face action for misleading the court and failing to comply with the SRA Principles and Code.
Your firm will be directly responsible for failures of all people working within it or for it, including partners, directors, members, employees, self-employed consultants and agents. You have a duty to ensure that those who refer cases to you or work on cases are acting properly at all times.
If proceedings are issued on behalf a client who has not given instructions to issue proceedings, you will be at serious risk of misleading the court or taking unfair advantage of other parties (for example, by attempting to negotiate a settlement) and will leave yourself open to accusations of fraud and possible legal action.
You should be aware that claims subject to the pre-action protocol that are submitted through the MoJ Claims Portal require the legal representative to confirm their clients’ instructions to make a claim. Completing the submission when you do not have instructions from the claimant will also leave you at risk of legal and disciplinary action.
There are exceptional circumstances where a solicitor acts on third party instructions (eg when acting for a minor or on behalf of a client who does not have capacity), or on the implied authority of the client to issue proceedings. This may be where the client has given clear instructions to act, but for some justifiable reason may be out of contact just before issuing and you are unable to confirm instructions. This causes particular difficulty where the limitation period is about to expire. In such circumstances you should be able to justify and evidence your action and be aware of the risks inherent in issuing. In any cases of doubt you should seek guidance.
Before accepting a settlement on behalf of your client you should ensure you have all necessary information for an informed decision to be made by the client, this includes obtaining a medical report. Where you settle a matter, without first obtaining medical evidence, you run the risk of failing in your duty to your client. Without medical evidence you cannot be sure of your client’s prognosis and the full extent of their injuries. You leave yourself open to complaints about inadequate compensation and disciplinary action for failing in your duties.
When you receive a medical report you should take care to fully understand the client’s prognosis and be able to assess the information contained within the report.
If you are in any doubt as to the honesty or competence of an expert witness, such as a doctor preparing a medical report, you must cease using the expert, review all cases involving that expert, and check the underlying facts direct with your clients.
You should have regard to the following outcomes:
- O(5.1) you do not attempt to deceive or knowingly or recklessly mislead the court
- (11.1) you do not take unfair advantage of third parties
Staff training and office systems
Before taking on a personal injury matter you should be sure that:
- you have well trained staff who are in a position to offer a proper standard of service to clients.
- systems in place to ensure that matters are triaged effectively by those who have experience in and an understanding of the litigation process.
- systems that allow for the diarising of limitation periods and court timetables.
- staff training that is reviewed regularly to ensure that skills and knowledge are updated.
- full and proper supervision of staff where work is overseen and support and further expertise is available to fee earners and case workers.
O(1.4) you have the resources, skills and procedures to carry out your clients' instructions;
O(1.5) the service you provide to clients is competent, delivered in a timely manner and takes account of your clients' needs and circumstances;
Taking on files from another firm
Before taking on cases from other firms you should carry out due diligence on the files you will be acquiring. Some files may be in a poor state, with imminent time limits, you should ensure you have the necessary time and resources to deal with the matters on an urgent basis.
You should not take on cases where you do not have the necessary skills and experience.
Failure to have proper regard to this warning notice is likely to lead to disciplinary action.
For guidance on conduct issues, contact the Professional Ethics Guidance Team.