Court clamps down on Claims Direct payments

A court has found that payments by solicitors to claims management companies are unlawful – a ruling which undermines the structure on which those companies operate

However, it stopped short of deciding whether this rule applies to barristers because of an ongoing Bar Council investigation into the matter.
Most claims management companies charge solicitors, who in turn charge their clients. The companies now face losing a valuable source of income as a result of last Friday's (3 January) test case before senior costs judge Master Hurst.
The claimant claims management company, Medical Legal Support Services (MLSS), a branch of Claims Direct, received before the ruling £395 plus tax from a solicitors' firm for each referral. Poole & Co, a solicitors' firm formerly owned by Colin Poole, the chief executive of Claims Direct, also charged solicitors £72.50 for each referral.
Master Hurst ruled that this fee was a referral fee and declared it unlawful. “The solicitor cannot charge his client for it and the defendants do not have to pay it,” he concluded.
Andrew Parker, litigation partner at Beachcroft Wansbroughs, which represented the defendant solicitors, said the case demonstrates the layers of costs that claims management companies have built into litigation.