The Solicitors Regulation Authority (SRA) is investigating solicitors firms which have acted for claimants on holiday sickness claims. That follows the disquiet expressed by the government, ABTA and tour operators on false claims. Solicitors should be prepared for a detailed SRA investigation into their work on holiday sickness claims in which their approach to conduct issues is questioned, as well as a general investigation into the work in their practice.
This article contains a summary of the normal course of an SRA investigation, the conduct issues the SRA is likely to raise on an investigation into holiday sickness claims and some practical points on the investigation.
The normal course of an SRA investigation into holiday sickness claims
An investigation into holiday sickness claims is likely to take the following format:
- The investigation commences with a letter from the SRA to the manager of the firm stating that the SRA intends to visit the firm on a specific date in order to carry out an inspection. The inspection date is normally about two weeks after the date of the letter. A brief reason for the inspection may be, but is not always, included in the letter.
- The inspection could last for any period of time from three hours upwards. Some inspections last for months, with investigation officers taking lengthy breaks in between inspection days. Investigations into holiday sickness claims are likely to be carried out quickly because of the adverse publicity.
- The inspection commences with an interview of the manager of the practice, during which the manager is required to provide the SRA with a summary of the structure of the firm, the managers responsible for compliance and supervision issues, the types of work carried out by the firm and the firm’s referral arrangements. That initial interview normally lasts about an hour. It is followed by an inspection of the firm’s accounts, which normally lasts about half a day. The Investigation Officer will then carry out a detailed inspection of client files on holiday sickness claims and the firm’s referral agreements.
- If the SRA considers that everything is in order, the investigation will stop at this stage and the firm may, but will not necessarily, receive a letter stating the investigation is over. The letter could contain advice on future practice. If the SRA considers that it has found evidence of misconduct, it will send a letter or email to the firm’s managers and those responsible for supervising the holiday sickness claims stating that they are required to attend an interview on a specified date.
- The interview is normally carried out by one or two Investigation Officers at the firm’s office. It is taped and the evidence obtained during the interview will be used in any subsequent disciplinary proceedings. During the interview the managers and supervisors are likely to be asked detailed questions on specific client files and referral arrangements.
- The Investigation Officer will prepare a Forensic Investigation Report, known as an FI Report, setting out the evidence of misconduct and the lawyer’s taped comments on that misconduct.
- The FI Report will be passed to a Regulatory Supervisor, who will write to the manager or supervisor under investigation and ask for an explanation. The letter is known as an ‘explanation with warning’ letter (or ‘EWW letter’) as it also contains a warning that there may be disciplinary proceedings. The respondent will normally be given 14 days to respond to the letter, but it is usually possible to obtain an extension.
- After receipt of the respondent’s written explanation, the Regulatory Supervisor may ask for further information. Once sufficient information has been obtained, the SRA’s allegations of misconduct will be referred to an SRA Adjudicator (in the case of minor misconduct) or the Solicitors Disciplinary Tribunal (in the case of serious misconduct). If a case is referred to the Solicitors Disciplinary Tribunal (SDT), there is no right of appeal against the referral.
- Proceedings in the SDT are commenced by the SRA lodging a Rule 5 statement with the Tribunal Clerk. It can often take the SRA six months or more to prepare a Rule 5 statement, but holiday sickness claims are likely to be progressed quickly.
- Once the Rule 5 statement has been lodged in the Tribunal, and a Tribunal Member has certified that the Rule 5 statement discloses a prima facie case, the Rule 5 statement and supporting documents will be served by the Tribunal on the respondent. The Tribunal will then actively case manage the proceedings and the allegations are likely to be tried approximately six months after the commencement of the SDT proceedings.
The conduct issues in holiday sickness claims
The conduct areas which the SRA will concentrate on include the following:
- The content of written agreements with introducers.
- The question whether agreements with introducers breach the provisions of section 56(5) of LASPO relating to the supply of information by the introducer directly to the firm.
- Any known allegations of malpractice relating to the firm’s introducers and the question whether the firm turned a blind eye to them.
- The terms of the retainer documents sent to the clients, including in particular whether those documents contain any misleading or incomplete information.
- The information given by the firm to clients on financial arrangements with introducers under chapter 9 of the Code of Conduct.
- The firm’s procedure for checking the identity of clients.
- The question whether the firm gave advice to clients at the outset of the retainer to preserve evidence.
- The advice given to clients on the merits and risks of claims.
- The amount of the claims for costs.
Some practical points on SRA investigations into holiday sickness claims
In general, solicitors facing investigations on holiday sickness claims may find the following points helpful:
- The SRA’s main evidence will consist of the documents obtained during the inspection, the statements made by the solicitors during the interview and the response to the EWW letter. It is particularly important to ensure that the information given during the interview and in the response to the EWW letter is accurate and presents the firm’s case in the best possible light.
- Any solicitors facing interviews should ensure that they are familiar with the content of the SRA’s warning notice on holiday sickness claims issued on 6 September 2017, the provisions of LASPO relating to referrals, the terms of their agreements with introducers and the terms of their retainers with clients.
- The SRA’s warning notice asserts that ‘there seems to be a serious risk that many holiday sickness claims are not genuine’. It also states that the high risk factors include cases which come from people generating claims in the resort. A solicitor who pursued claims before 6 September 2017 without carrying out investigations of the type contemplated by the SRA for high risk claims, or who did not realise that the SRA would say that the claims were high risk, may well have difficulty relying on the fact that the warning notice had not been published at the time of the work as a defence.
- If the SRA considers that a solicitor has turned a blind eye to unmeritorious claims or to malpractice by introducers which could have led to false claims, there is a serious risk that the SRA will pursue allegations of dishonesty and lack of integrity against the solicitor. If the SRA proves an allegation of dishonesty against a solicitor in SDT proceedings, the solicitor is nearly always struck off.
- The SRA is likely to publicise a referral to the Tribunal once the Rule 5 statement has been lodged at the Tribunal. There will be an opportunity to make representations against publication. That opportunity should not be missed as the SRA publicity could be extensive and could damage the firm’s business and the solicitor’s reputation.