On 4 April 2019, judgment of the Solicitors Disciplinary Tribunal was filed with the Law Society, in the case of SRA v Anwar & Aziz (2019).[i]
The Solicitors Regulation Authority (SRA) commenced disciplinary proceedings against claimant personal injury solicitors, Parvez Anwar and Umran Aziz, for paying referral fees to claims management companies (CMC), post-1 April 2013, despite having been prohibited by s.56(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and the SRA's Ethics Guidance on Referral Fees.[ii]
The Authority also argued that there had been breaches of SRA Principles 2011, SRA Accounts Rules, SRA Code of Conduct 2011 and SRA Authorisation Rules 2011.
Both solicitors qualified in 2008 and established claimant personal injury firm, Zen Law Solicitors, in 2013. According to its website, the practice claims to have ‘expertise in all types of injury including road traffic accidents, slips and trips, accidents at work and industrial diseases’.
The tribunal focused on the solicitors’ relationship with 3 CMC’s, which had been paid a minimum value of £7,560 over 4 years. An invoice from 1 of the CMC’s showed that the ‘cost per case was £400 in each instance’.
In an interview with the SRA, Mr Anwar admitted that ‘no genuine services were being provided and that the fees were therefore purely for the recommendation’.
By their own admission, they confessed to the tribunal that ‘they could not do their own marketing’.
Regardless, the respondent solicitors tried to escape culpability by blaming their failings on ‘unhelpful’ SRA Ethics Guidance:
‘... it did not give examples of how firms working within a referral arrangement would have to adapt to be compliant ... other firms felt the same way and that the SRA itself did not appear to have a full understanding of how the industry operated’.
Their submission was unsuccessful, however, constituting a breach of Principle 2 (lacking integrity):
‘The Tribunal noted that both Respondents had been aware of LASPO and both had read the SRA's Ethics Guidance. The onus was on them to ensure that they complied with the legislation and the Ethics Guidance that was issued in relation to it. The Respondents had stated in their evidence that the guidance was unhelpful and unclear. The Tribunal rejected that evidence and found that it had been written in language that was perfectly clear. There was no evidence of the Respondents having written to or telephoned the SRA for clarification or further guidance’.
What is more, Principles 4 and 5 (acting in the best interests of the client) was deemed to have been breached, as the respondents had failed ‘to provide clients with accurate information regarding the financial interest which the CMCs had in referring those clients did not amount to a proper standard of service (Principle 5) The failure to provide that proper standard of service together with the result that clients could not make an informed decision based on that information was not in the best interests of those clients’.
Concluding the seriousness of the solicitors’ misconduct, the Tribunal reached its determination at paragraphs 32 to 35:
‘In assessing culpability, the Tribunal found that the breaches of the SAR were primarily the result of sloppiness. The breaches of LASPO were not done with specific intent and had not involved a breach of trust. The Respondents were directors of the Firm and each had specific regulatory roles of COLP and COFA. They therefore had direct control and responsibility for the circumstances giving rise to these matters. Each of the Respondents was experienced.
In terms of harm caused, there had been no loss to any individual clients. The Tribunal recognised that breaches of the SAR had been rectified and that the amounts involved were not at the upper end of the scale. However there was always the potential for loss when shortages existed on a client account and there had been warning signs in 2015 that there were problems. The reputation of the profession was also undermined by such breaches and this damage was compounded by the breach of the prohibition on referral fees, in which the Respondents had lacked integrity.
The misconduct was aggravated by the fact that it took place over a period of time and was repeated. There were four agreements with CMCs in place and multiple payments. The Respondents ought to have known they were in breach of their obligations. The First Respondent was the COFA and he should have been even more alert to the SAR breaches, while the Second Respondent as COLP was had particular additional responsibility for ensuring compliance with LASPO.
The matters were mitigated by the fact that the Respondents had made good the shortages on the client account and had taken steps, at some expense, to ensure future compliance. They had co-operated with the SRA. They had made some admissions at an early stage but these were followed by subsequent denials of some Allegations. The Tribunal did not find there to be any significant insight on the part of either Respondent’.
As such, both solicitors were fined £10,000 and were also ordered to pay £11,800 in costs on a joint and several basis.[iii]
Full text judgment can be accessed here.
[i] Case No. 11888-2018.
[ii] ‘Ethics Guidance’ (25 March 2013 SRA) <https://www.sra.org.uk/solicitors/code-of-conduct/guidance/guidance/Prohibition-of-referral-fees-in-LASPO-56-60.page> accessed 25 April 2019.
[iii] Nick Hilborne, ‘PI solicitors who breached referral fee ban tried to blame SRA’ (24 April 2019 Legal Futures) <https://www.legalfutures.co.uk/latest-news/pi-solicitors-who-breached-referral-fee-ban-tried-to-blame-sra> accessed 24 April 2019.