Reed v Marriott (Solicitors Regulation Authority)

Professional rules governing referral fees, fee sharing and solicitor independence are construed by reference to their purpose and commercial reality. Artificial separation between companies within the same corporate group does not avoid those rules where the arrangement achieves the prohibited commercial effect. Payments calculated by reference to damages, or payable irrespective of the work actually performed, may constitute fee sharing. A solicitor may breach the requirement to act independently and in the client's best interests by contractually surrendering professional choice, even without proof of harm in an individual case. Genuine belief in the legality of the arrangement does not answer an objectively established breach.

The claimant, a solicitor, appealed against findings of the Solicitors Disciplinary Tribunal dated 18 July 2008. The Tribunal had found eight of thirteen allegations proved and imposed a composite fine of £10,000. The allegations concerned a scheme involving Norwich Union and two wholly owned subsidiaries, BTE Lawline Limited and Evident Legal Services Limited.

The central issues were whether payments to Evident constituted referral fees or fee sharing, whether the corporate structure could be treated separately, whether the arrangements compromised professional independence and client interests, and whether the Tribunal had correctly applied the relevant Solicitors' Practice Rules and Solicitors' Introduction and Referral Code.

1. Appeal dismissed. The Tribunal was entitled to find allegations 1, 4, 6, 7, 8 and 13 proved, together with allegations 2 and 5 concerning the restriction of professional independence. The composite fine of £10,000 was not disturbed.
2. The court held that the central question was the proper construction and application of the relevant regulatory provisions, rather than whether the corporate veil should formally be lifted. The referral-fee and fee-sharing rules had to be understood in their context and by reference to their objective purpose.
3. Payments to Evident constituted fee sharing. At least some payments were calculated by reference to damages recovered and were structured to be payable irrespective of the actual services provided. The arrangement therefore channelled part of the solicitor's remuneration to Evident and ultimately to Norwich Union.
4. The corporate separation between BTE and Evident did not dispel the vice addressed by the referral-fee prohibition. The true introducer and the true person being rewarded were, in substance, Norwich Union. The arrangement was a device to obscure payment for referrals.
5. The Service Agreement materially impaired the claimant's independent ability to make professional decisions in the best interests of clients. The relevant allegations did not require proof that an individual client had actually suffered harm. The agreement's terms were sufficient to establish the impairment.
6. The findings concerning the referral-fee arrangement also supported the finding under Rule 9, the dependence allegation under Rule 1, and the sweep-up allegation concerning preservation of clients' best interests.

The claimant was ordered to pay the respondent's costs, to be assessed, together with £25,000 on account within 28 days.

• Solicitors Disciplinary Tribunal: On 18 July 2008, found eight of thirteen allegations proved and imposed a composite fine of £10,000.
• High Court (Administrative Court): The appeal was dismissed. The Tribunal's findings and penalty were upheld.