Claims Direct is facing an embarrassing action for libel just as its £18m television advertising campaign gets into its stride.

The libel writ has been served by Peter Carroll, a former Claims Direct franchisee.

He was among a number of franchise holders who sued the company in 1999, over its decision to drop conditional fee agreements in favour of after the event insurance, which affected their level of fees.

The case was settled out of court for an undisclosed sum.

Carroll's latest dispute with Claims Direct is believed to centre on allegedly defamatory material about him on a share trading website. Two of the messages also tipped Claims Direct shares as a “strong buy”.

Carroll has forced Claims Direct to reveal that one of the messages came from one of its own employees, who has since been suspended.

The personal injury claims adviser's share price has still to recover from negative press publicity about the cost of its insurance.