Shine's interest shines a light on a UK market that is ready to talk

I was intrigued by a recent piece in The Lawyer about Australian interest in the UK legal marketplace. You can read the piece here. It explains that newly listed firm Shine Lawyers is looking at moving into the UK market. If it does, it would follow in the footsteps of Slater & Gordon, another heavyweight, and listed, Australian firm.

Shine has an alliance with environmental
advocate Erin Brockovich

Shine is valued at A$155m, after joining the Australian Securities Exchange in May this year. The very well regarded firm - which has a 10-year alliance with high-profile environmental advocate Erin Brockovich (yes, she of the Julia Roberts film) - made clear its ambitions for the UK in its IPO, signalling that its aim to expand globally would meet its first targets on these shores.

Antipodean enthusiasm

The firm's managing director, Simon Morrison, told The Lawyer that Shine was looking at acquiring "damages-based plaintiff litigation firms" here. "We have been looking at the market for the past few years and has done due diligence on a number of firms. But at the moment we don't have a time frame for the entry and haven’t decided on a target yet," Morrison said.

At first blush, it's tempting to wonder if Antipodean enthusiasm for the UK legal market is sensible. Certainly, there must be those who might suggest that Morrison has got it wrong, given the massive changes to civil litigation that have occurred in the wake of the Legal Aid, Sentencing and Punishment of Offenders Act (which became law last April). Moreover, as I wrote earlier this week, legislative change is not confined to LASPO: the Enterprise and Regulatory Reform Act, which recently received royal assent, is also set to introduce seismic eruptions to our legal landscape.

But actually, Morrison is onto something - and not just because of commonalities between Australian and Britain's developed legal systems. These are a great help, so too is something we can all take for granted: English as a common language. But there's another reason for Morrison, and, presumably, well-placed competitor firms in Australia, to be eyeing up the UK.

The UK market is ripe and ready

Post-LASPO, our law firms are facing a considerable challenge. The Act was introduced with the aim of curtailing what were perceived to be out-of-control litigation costs, but whatever its intent the reality has not been properly thought through. Put simply, LASPO's many changes will make it harder and harder for law firms to run cases professionally and commercially. At one end of the scale, high street firms existence may be challenged; at the other, national firms will see plummeting net profit margins, at least in the short term. The extraordinary and ongoing erosion of legal costs seems to pay no regard to the fact that maintenance of professional standards comes at a price.

In the middle, there are a great many firms who conduct and rely on claimant personal injury work, who when it boils down to it face one of two choices, or some combination of the two: to become niche, or to consolidate. The former will have to become lean and efficient if they are to survive (the real risk is that some will not maintain high professional standards) . The latter may conclude that only merging will see them still in business by the end of the present decade.


Morrison and his colleagues at Shine are wise to look to the UK. UK litigation firms, save for the already niche or the already huge, will be in the mood to talk.

Where did all the ethics go?

In September last year the Office of Fair Trading referred the UK's private motor insurance industry to the Competition Commission. The referral followed a study by the OFT in May 2012, which found that there were reasonable grounds to suspect that there are features of the insurance market that prevent, distort or restrict competition.

In other words: there is reason to think the insurance industry is not serving its customers well.

It's a year since the study that, in turn, led to the referral to the Competition Commission. Perhaps, if we look back at the study, we might find that insurers have started to get their house in order, ahead of the report of the Competition Commission in September next year?

Dubious Practices

Sadly, the short answer is 'no, they haven't'. The OFT, in its summary of the referral, put it thus: in focusing on "the provision of replacement vehicles and vehicle repairs", it was thought that "the insurers of drivers responsible for an accident ('at-fault' drivers) appear to have little control over the way repairs and replacement vehicles are provided to the 'not-at-fault' driver." The OFT  added that this "may enable the insurers of not-at-fault drivers, and others such as insurance brokers, credit hire organisations and repairers, to engage in practices which appear to result in the cost of replacement vehicles and vehicle repairs provided to not-at-fault drivers being higher than they might otherwise be."

What is meant by the use of the word "practices"? Let's be clear. This means the payment of referral fees. The Legal Aid, Sentencing  and Punishment of Offenders Act (LASPO) may have banned the flow of these between solicitors, claims management companies (CMCs) and insurers, but they are alive and as insidious as ever when it comes to garages, credit hire companies leasing vehicles to drivers after accidents and recovery companies.

A Conduit for Backhanders

If little, if anything, has really changed, there's worse. An (unintended?) consequence of the Alternative Business Structure (ABS) regime, which came into being in January 2012, is that insurers have a ready-made way of circumventing the referral fee ban: they can now simply buy or merge with law firms. The backhanders keep flowing.

It's not easy to discern in the terms of the OFT referral but there is clearly a huge question mark over the conduct of insurers and their representative body, the Association of British Insurers (ABI). The ABI has proved adept at spinning the yarn that 'compensation culture' fuels hikes in insurance premiums and makes our lives a hostage to unscrupulous bounty hunters who will issue a claim at the drop of a hat - and yet it is the ABI's very members who cause the 'blame and claim' syndrome in the first place.

These thoughts lead inevitably to a consideration of the ethical standards - or absence of them - at play among insurers. Time and again stories of outlandish litigation in the media turn out to be bogus or wildly exaggerated; time and again we encounter insurers blaming the increase in the cost of premiums on everyone but themselves.

In truth, investment income - which is what our premiums are used for - has flattened out because of the global recession and so insurers seek to ramp up their profits through a back door which has become nothing but a conduit for backhanders. It's a vicious cycle: as one insurer ups the ante, passing on costs to another, so does its competitor. And so on, and on - until, hopefully, the Competition Commission will do something about it.

Wishful thinking?

Meantime, as Duncan Minty's excellent blog recounts, insurers continue to fall short when it comes to acting ethically. This post, for example, reveals that a "survey by CSR Europe and KPMG of five European insurers and five European banks found that 80% had no ethical objectives or targets of any kind, while only another 10% had a qualitative target." As Minty notes, while admittedly a small survey it shows "that ethical objectives and targets remain a challenge for insurers."

From a claimant solicitor's perspective, I'm tempted to go further and say that acting ethically seems to resemble a brick wall for insurers. But bricks walls don't stand forever. Even the Berlin Wall came down eventually. Minty has produced a free e-Book on setting ethical objectives and targets for your business. Here's hoping that the CEOs of insurance companies download it, read it and learn from it. Wouldn't it be nice to think that they'll do so, ahead of the Competition Commission's report next year?

Thalidomide victims must not be forgotten

Recently I had the pleasure of meeting up with Michael Napier, who is well-known in the legal profession as the former senior partner of Irwin Mitchell. As well as being at the helm of Irwin Mitchell for 30 years, Michael has served the profession with distinction in a number of roles, including a stint as president of The Law Society. Today he continues to play a large part in the litigation sector, not least in his new appointment as Chairman of Harbour Litigation Funding Ltd.

Michael is as well placed as anyone to comment on the huge changes that the profession is undergoing at present. Our conversation ranged around a great deal of things, including the recent advent of the Jackson reforms as law in the form of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO). And in chatting with Michael, another thorny topic was covered: the public image of personal injury lawyers.

Too often, personal injury lawyers are cast as mercenaries who are only interested in their own profit. This stereotype is trotted out by the media on a regular basis. In the same way, the media - and many politicians - would have us believe, as a society, that we are awash with spurious claims; that vast swaths of the population litigate at the drop of a hat, spurred on by avaricious lawyers.

Duty before profit

The truth is very different. My firm's motto is 'duty before profit'. We believe in our ethical and professional duty to serve our clients to the best of our ability. So, too, do the majority of personal injury lawyers. Frequently, indeed, personal injury lawyers help people to obtain redress in circumstances where corporate indifference or resistance might otherwise see them left uncompensated.

Michael reminded me of a good example of this. Thalidomide was manufactured in the 1950s and was sold from 1957 until 1962. Initially used as a sleeping pill, its use morphed into an apparent panacea for pregnant women suffering from the effects of morning sickness. Tragically, though, it caused many different forms of birth defect.

Thalidomide was withdrawn from sale in 1962 after the link between its use and deformities - including shortened limbs, blindness, brain damage, missing sexual organs and missing internal organs - was conclusively proved. But as if its victims had not suffered enough, the past 50 years have been a different kind of battleground.

As Thalidomide victim Guy Tweedy, from Harrogate, said last year: "Thalidomide was not an act of God. It was a man-made disaster. For seven months leading up to the drug being withdrawn, UK government officials had been given compelling evidence that it was responsible for a large number of babies being born with horrific birth defects ... For the last 50 years we have not only had to live with the devastating effects of Thalidomide, but we have had to fight every step of the way for compensation."

Here, personal injury lawyers have played a role. They have helped maintain pressure on the German manufacturer of the drug, Grünenthal - which only last year managed to issue a public apology to Thalidomide victims. Personal injury lawyers have assisted people in obtaining compensation for this tragedy. They've not thought of their profit but of doing their best to ameliorate the terrible misfortune suffered as a consequence of Thalidomide.

Campaigning must continue

Campaigning for Thalidomide victims must continue. Many remain alive today and they need care, consideration and decent provision for their futures. As such, I applaud the work of campaign groups such as Thalidomide UK and ShowYourHand, to which Michael, who is a trustee of The Thalidomide Trust, directed me. And looking back, by way of countering the clichés that abound about modern journalism as much as in the law, the excellent Sunday Times investigation into Thalidomide should be noted. Not only did it reveal that basic testing had not been properly carried out before the drug went on sale, it also helped increase compensation payable by the UK distributor from £3.25m to £32.5m.

Post-Leveson and the phone hacking scandal, journalism's standing is perhaps at its lowest. But rogue and corrupt journalists are the exception, not the norm. Most journalists want to report the facts of an event and serve the public.

So it is in personal injury law. The overwhelming majority of people in this sector work there because they want to help people.

Here's hoping that Thalidomide victims continue to receive all the help they need and deserve - and that the clichés are replaced by the truth.

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An ethical ABS is to be applauded - but there remain grave reservations about the regime

I've written previously of my reservations about the Alternative Business Structure (ABS) regime, first proposed by Sir David Clementi in 2006 and a fact of legal life for nearly a year and a half now. Because they enable insurers and claims management companies to own and invest in law firms, ABSs are the Trojan horse in the battle against referral fees. It seems that no sooner were referral fees been banned, than we have been confronted with the means to get round the ban and perpetuate the very problem the Ministry of Justice sought to curtail.

But last week, a story on the excellent Legal Futures website gave me cause for cheer. The Community and Law Service (CALS) in Leicester has become the first not-for-profit organisation to set up an ABS. CALS has been authorised by the Solicitors Regulation Authority (SRA) to launch Castle Park Solicitors Community Interest Company. Its profits will be channelled back into continuing the work of the charity.

CALS gets there first

Image by JosephGilbert.org

CALS has beaten the application by Islington Law Centre to establish a not-for-profit ABS, which was made last November. Castle Park and CALS will not be sharing office space; from its premises, Castle Park will provide legal advice on family, immigration and employment law. Its intention is summed up by Glenda Terry, head of finance and administration: "We set it up because we wanted to have the facility to provide good-quality legal advice and representation mainly in the areas going out of scope of legal aid. We have pitched our fees competitively and hope it will be attractive to those on low to medium incomes."

This is a laudable aim, and one which will help to mitigate the effects of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), which, for me, remains one of the most poorly conceived pieces of legislation to have made it onto the statute books in recent years. Legal aid has been decimated by LASPO, so too the ability of solicitors to bring meritorious claims for impecunious clients. The emphasis is on commodification and wholesaling, rather than considering and caring for an individual's needs.

Helen Grant misses the point

It is no use hearing Justice Minister Helen Grant acknowledge that LASPO's reforms to civil justice will bring "some pain initially and uncertainty for a while." The fact is that LASPO's provisions will have a dire effect on those who need legal advice, making it commercially impossible for many solicitors to represent them.

At least, though, CALS and Castle Park have used the ABS regime to counter LASPO. Here, utilising the ABS model ensures that paid-for services are introduced alongside traditional free services. Castle Park will thus generate income for CALS, which offers free housing and debt advice. In time, it is hoped that CALS will become less reliant on government funding and grants.

The ethical underpinning of both CALS and Castle Park is welcome, not least as insurers continue to push for ABS status so that they can, in effect, become law firms themselves. The SRA has already approved the creation of Admiral Law and BDE Law, joint ventures between insurance giant Admiral and law firms Lyons Davidson and Cordner Lewis. Ageas, which jointly underwrites Tesco's car insurance policies, has set up a venture with New Law, the PI firm based in Cardiff. Direct Line has got an application for an ABS in the pipeline, and the SRA says there are 104 similar applications currently being processed.

Not only do such ABSs allow insurers to refer claims to lawyers, but conflicts of interest are surely inevitable in this changing legal landscape. It is only a matter of time before an ABS law firm represents a client who is insured by the parent insurer.  It will be interesting, when this scenario comes to pass, to see what the Justice Minister and the SRA make of it.

Post-LASPO, can there be justice for victims of exposure to asbestos?

The ever-diligent Michael Lees, who tragically lost his wife Gina when she was just 51 from mesothelioma (asbestos-caused cancer of the lung lining), has been in touch to tell me about a report he is preparing. Michael's report probes the development of asbestos legislation and guidance in schools and colleges, and will shortly be published. The report raises a number of serious issues about asbestos, all the more so now that we inhabit the post-LASPO world.

For anyone new to this blog, what I'm referring to is the Legal Aid, Sentencing and Punishment of Offenders Act. The majority of its provisions came into force on 1 April. Despite the Act's title - which might lead the unwary to conclude that its provisions are confined exclusively to the criminal law - it has a direct bearing on civil litigation and the personal injury sphere, not least in the prospects of success for claimants suffering asbestos-related problems.

Sterling work by scientists

Michael's report raises real disquiet about the impact of the Court of Appeal decision in the case of Williams v Birmingham University when set against the new LASPO regime. First, though, and thanks to Michael's excellent research, I should explain the importance of a 1965 paper by Dr Newhouse and Dr Thompson, which was first published in the British Journal of Industrial Medicine.

Newhouse and Thompson revealed that non-industrial, low level exposures to asbestos could cause mesothelioma. Their conclusions were brought to the public's attention when the Sunday Times published an article entitled 'Scientists track down killer dust disease' in October 1965. Thereafter, it was generally accepted by the courts that 1965 was a watershed moment: it marked the date from which a defendant should have reasonably foreseen that low levels of asbestos exposure could cause mesothelioma.

The Williams case

But in 2011, the Court of Appeal's judgment in Williams changed all this. The facts of this case are as follows. In 1974 Michael Williams was an undergraduate at Birmingham University. He was exposed to asbestos while carrying out experiments in a service tunnel beneath the university for between 52 and 78 hours in total. The tunnel contained asbestos-lagged pipes in poor condition and there was a lot of asbestos dust on the floor, which Mr Williams disturbed. The asbestos was identified as crocidolite, amosite and chrysotile.

Mr Williams died aged 54 of mesothelioma in 2006. His widow brought legal proceedings against the university, alleging that it had negligently exposed her husband to asbestos, which in turn caused mesothelioma. At the original trial, at Leeds County Court, it was found that the exposure to asbestos had materially increased the risk of Mr Williams contracting mesothelioma – and that Birmingham University knew, or ought to have known, that the pipe lagging in the tunnel contained asbestos and that low-level exposure could cause mesothelioma. In other words, the university was in breach of its duty of care. The report by Newhouse and Thompson was crucial in the court's decision.

The university appealed. The Court of Appeal ruled that the university was not in a breach of duty as they considered that an organisation such as theirs would not have reasonably foreseen that Mr Williams was being exposed to an unacceptable risk. Instead of using 1965 and the work by Newhouse and Thompson as determining the state of knowledge of the university in 1974, Lord Justice Aitken ruled that their state of knowledge would have been that an "acceptable" level of exposure was the workplace "hygiene" asbestos fibre level stated in Technical Data Note TDN 13 of 1970.

Lord Justice Aiken's judgment concluded: "In my view the best guide to what, in 1974, was an acceptable and what was an unacceptable level of exposure to asbestos generally is that given in the Factory Inspectorate's 'Technical Data Note 13' of March 1970, in particular the guidance given about crocidolite. The university was entitled to rely on recognised and established guidelines such as those in Note 13."

Flaws with the Court of Appeal's reasoning

Michael’s report rightly points out serious flaws with this conclusion. On the one hand, workplace asbestos hygiene and control levels are for people working on asbestos. As such, they were never a threshold for a 'safe' level of exposure. On the other, workplace control levels were never meant to be the threshold for an acceptable or unacceptable level of exposure for occupants of buildings. Beyond this, we have known for many years that a very small exposure to asbestos fibres could potentially cause mesothelioma, and that there is no known threshold exposure below which there is no risk - whether for workers or occupants (a distinction which, to me, seems wholly arbitrary).

How does all this apply to schools and colleges? Since the mid-1960s, they have acted on the basis that they could be in breach of their duty (to pupils and staff) if they failed to take measures to reduce the exposure of any pupil or member of staff to a minimum. But now, post-Williams, this position is in doubt. Defendants, confronted by claims for asbestos-related disease, are now able to contest whether they are in breach of a duty.

Access to justice?

This has huge ramifications. Whereas for many years defendants sought to contest liability on the grounds of a break of the chain of causation (a strategy which now appears to have little mileage thanks to the decision of the Supreme Court in 2011 in Sienkiewicz -v- Grief (UK) Ltd), Williams now enables them to dispute that they are in breach. The goalposts have shifted towards defendants, and post-LASPO, this is even more apparent. As Michael persuasively argues, there is a pressing need to challenge the Williams decision.  But to do so might be commercially unworkable given the punitive changes to claimant lawyers' ability to recover costs introduced by LASPO.

Sadly, LASPO once again comes up short when applied to real victims of injustice.

Look out for more information, and Michael's report, on the Asbestos in Schools website.

LASPO: an insurrectional crossing of a legal Rubicon

The Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) 2012 slunk into formal existence a few days ago. If only the date of its arrival - 1 April - was an April's Fool's joke (granted, of a rather convoluted and unpleasant kind). But LASPO is no joke. It may well be one of the most foolish pieces of legislation ever enacted, but regrettably it is all too serious.

A seismic shift

LASPO's advent as law which is alive and kicking amounts to a seismic shift in the UK litigation landscape. Often enough, legislation arrives, is found to be suspect in its operation, and is later repealed and/or replaced with something sensible. This time round, I am not convinced that we will one day see a reversal of the changes wrought by LASPO. They are simply too profound.

The Act's overarching aim is to save £350 million from the government's legal aid budget. To me, it is informed not just by the desire to save money but by the prejudice which would have us believe that the UK is rife with nothing but meritless personal injury claims. David Cameron himself is on record as castigating what he uncritically believes is a 'blame and claim' mentality, one that has created spiralling litigation borne of specious claims and unscrupulous claimants.

The media perpetuate what those who work at the coalface of personal injury litigation know to be a widespread but unfounded cliché: that ours is a 'compensation culture'. It is not. Ours is a society whose evolved ethical and legal principles make it possible for those who have been wronged to seek redress for the wrongs done to them. There is nothing suspect about this. It should instead be celebrated as a vital facet of what makes our democratic adherence to the rule of law so admirable.

But now, though, with LASPO, claiming redress will become more difficult. And yet more worryingly, its changes cannot but have a negative effect on that which clients should be able to take for granted - the honour and professionalism of their legal advisors.

Contingency fees by another name

A key change brought about by LASPO is in the introduction of Damages-Based Agreements (DBAs). Philosophically, DBAs becoming part of British litigation is the equivalent of crossing the Rubicon. It means that we have adopted the contingency fee model common to the United States. For the first time in contentious matters in the UK, solicitors will be entitled to enter into agreements with clients in which they have a vested interest in the outcome, for under DBAs solicitors can receive up to 25% of the damages obtained.

This is a departure from the previous the regime of Conditional Fee Arrangements (CFAs), introduced by Section 58 of the Courts and Legal Services Act 1990 and the Conditional Fee Agreements Order 1998. Here, solicitors can charge clients the usual charge out rate, plus an uplift (or 'success fee'), if the case is won. Confusingly, LASPO heralds a dual DBA/CFA system - but without recoverability of the success fee in CFAs. On top of this, recoverability of premiums of After the Event Insurance (ATE) is also no longer possible.

Confused? Practitioners are sure to be, as the complexities of DBAs v CFAs are worked out, against the background of their rushed introduction. Lawyers now have a clear personal interest in litigation. The words of Lord Denning, in Re Trepca Mines Ltd (No. 2) (1963) (CA), come to mind, but have arguably been ignored ever since the introduction of CFAs. His Lordship suggested that if legal advisors had a personal interest in the outcome of litigation they might be tempted to "influence the damages, to suppress evidence, or even to suborn witnesses".

Portal changes on the horizon

Worse is on the horizon. LASPO also seeks to reduce the monies recoverable in low value Road Traffic Accident (RTA) cases. Put simply, in RTA claims of up to £10,000 no more than £500 in legal fees will be recoverable. Other changes to the RTA Portal, which introduced fixed costs in the first place, are proposed. The government seeks to extend the Portal vertically, to handle claims up to £25,000. It intends to fix recoverable costs for such claims at £800 - which is a third less than the current recoverable costs on injuries between £1,000 and £10,000. That's not all. The horizontal extension of the Portal is also proposed, so that it will include employers' and public liability (EL/PL) claims up to £25,000. Here the costs recoverable will be £900.

These changes are all in LASPO, subject to a modest stay of execution: they come into being at the end of the month, on 30 April. A core lament is this: how can a solicitor be said to be acting in his or her client's best interests, when the maximum that he or she will recover in costs could be as little as £500? The changes are a charter for a lack of professionalism and an 'accept the first offer that comes along' attitude. It is hard to see how solicitors will be able to conduct cases commercially without such an approach.

I mentioned earlier that LASPO amounts to a crossing of the Rubicon. I've just looked up the term, which, of course, means to pass a point of no return. Its origin lies in Julius Caesar's army's crossing of the river Rubicon in north-eastern Italy in 49 BC. Caesar's crossing of the Rubicon was considered an act of insurrection.

It strikes me that LASPO might just be an act of insurrection against the solicitor's fundamental duty: to put duty before profit, and serve clients before commerce.

The insurers’ lot in life

Since the advent of the 2008 financial crisis, we are reminded on a near daily basis the weaknesses of free-market capitalism. Stories of sky-high pay, greed and commercial practices – which are geared to the benefit of the few and at the expense of the many – habitually occupy the public consciousness.

While the most common focus may be on banking, the personal injury system is just as riddled with the worst excesses of capitalism. No more so is this apparent than in the auctioning of personal injury cases.

Some of you may have read my remarks on this practice in the media this week, to refrain it is the ‘referral fees’ model brought to its logical and most dehumanising conclusion, essentially insurers conduct referral fee auctions amongst solicitors for bundles of cases. The ‘price tag’ of these case bundles is likely to be influenced by the degree of injuries sustained by specific cases, essentially putting people’s misery up for sale to the highest bidder.

I was compelled to speak out on this issue as it has become clear that the referral fee ban contained in the LASPO Act has done nothing to curtail this practice. Insurers, and others, continue to make hay while the sun shines ahead of the ban in April 2013. The Government and public are distracted by talk of ‘whiplash epidemics’ and the need to reign in ‘ambulance-chasing lawyers’. Blame for the ills in the personal industry market is spread far and wide, but little is placed at the door of the insurer. It is my hope that by shedding some light on this practice, the microscope of public scrutiny would focus sharply on the amorality of the insurance industry’s treatment of accident victims.

I don’t believe that the insurance industry is staffed by those lacking in moral conscience. It is not the people within the personal injury system who are found wanting, rather it is the mechanics of the industry itself which are so geared towards commoditisation and profiteering that the human element is all but removed. Like in banking, the rights of the individual and concepts of morality are often lost in a morass of spread-sheets, mathematical formulas and clever business practices all designed to accentuate the bottom line. At the end of the day we are talking about people who have been hurt, sometimes catastrophically. This fundamental misstep is not only a direct threat to access to justice for injured people, it is also a key reason behind the escalation of motor insurance premiums for all.

Make no mistake, I am not advocating reversion to an agrarian economy, nor harking back to some mythical golden-age where insurers were an unbridled force for good. I am simply saying that a conscious needs to be injected into the system – call it conscientious free-market capitalism or whatever you like – where the drive to an ever greater bottom line is tempered by equal thought for the public good. Such a step-change could result in insurers working with, not fighting, solicitors to create a framework where access to justice and the rights of victims of accidents are protected, while the costs in the system are minimised and fair returns are commercially generated.

These aims are of course not mutually exclusive; however the mentality present in the insurance industry, exemplified by these auctions, is not conducive to the construction of a fair and equitable system. I have written repeatedly of the need for personal injury solicitors to recognise the dysfunctions in the system and strive for higher professional standards and the same retrospective and reform needs to be undertaken by the insurance industry. Then and only then will the holistic reform which the personal injury system sorely needs become a reality.

Clarity, at last, for mesothelioma victims – but we need to keep a watch on LASPO

At last, some clarity in the fraught arena of mesothelioma litigation. Today’s judgment by the Supreme Court finally establishes a level playing field and emerges as the single most important judicial decision affecting asbestos liabilities in the UK to date.

I touched upon mesothelioma, a form of cancer caused by exposure to asbestos, last October in the context of the Legal Aid, Sentencing and Punishment of Offenders Bill (LASPO). I made the point that the government’s determination to push LASPO through would, in reducing the recoverability of success fees and after the event insurance (ATE), make it very difficult for mesothelioma victims and their families to bring claims.

This remains a live issue but meanwhile the Supreme Court has been busy. Five justices – Lord Phillips, sitting as President, and Lords Mance, Kerr, Clarke and Dyson – have unravelled a complex skein of law and fact to give judgment on an appeal from a Court of Appeal ruling in 2010. The background is undeniably obscure, for many lawyers as much as laypersons, but today’s judgment concerns the obligations of insurance companies under various contracts of employers’ liability (“EL”) insurance.

In essence, the Supreme Court was tasked with determining the scope of the insurers’ obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos. This was complicated because of the unusually long gestation period for mesothelioma: it can take up to 40 years for between exposure to asbestos and the manifestation of the disease. The insurers’ case was that EL policies only covered mesothelioma which manifested itself as a disease at some point during the relevant policy period. In contrast, the employers argued that the insurance policies covered mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.

Thankfully, the Supreme Court came down on the side of the victims and their families. Its analysis of the factual nexus and preceding judgments led it to conclude that it would be “remarkable if the insurers were not liable under the policies”. Crucially, then, for the purposes of the EL policies, “the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurer’s obligation to indemnify the employer.”

What this means is that there is now certainty and a level playing field for those affected by asbestos-related disease – the biggest killer in the workplace in Britain. Insurers have continually tried to wriggle out of liability for mesothelioma claims but this judgment should, thanks to its clarity, render such attempts futile and, just as crucially, see off the prospect of satellite litigation on similar issues.

Hats off to the Supreme Court justices but let’s not forget that LASPO as it is currently drafted will make it difficult to get claims off the ground in the first place. We need to remain vigilant, and ensure that the government’s easy spin about battling ‘compensation culture’ does not ultimately deny the deserving the right to justice.

Out of focus over Autofocus

The Autofocus story is remarkable – and salutary. For the best part of a decade the motoring consultancy was riding high, retained by insurance companies to challenge the cost of replacement hire cars for accident and crash victims. Then, in 2010, the Autofocus bubble burst. The business collapsed, going into administration in the wake of serious claims about serial wrongdoing.

It was alleged that reports produced by Autofocus were skewed in favour of insurers. The company’s ‘rate surveyors’, whose task it was to compare hire rates to assess whether a specific charge was fair and reasonable, are said to have routinely fabricated and manipulated their reports.

The reports were used successfully in more than 4,000 contested court cases, and also formed the basis for thousands of out-of-court settlements. But now, less than two years after the demise as a going concern of Autofocus, the Attorney-General has reportedly referred the matter to the Crown Prosecution Service. According to a piece in The Times this week, it is now expected that the City of London Police’s fraud unit will be notified of the case – and that fraud charges may well ensue.

A case of contempt?

That’s not all. It transpires that the Attorney General’s office is also considering charges of contempt of court against seven former Autofocus staff. No wonder, then, that Lord Justice Moses announced that he was “flabbergasted” by the allegations, which, if proven, he said represented “industrial-scale perjury” and a “serious conspiracy”.

His Lordship is absolutely right. There are indications that the alleged corruption at Autofocus may have been on an industrial scale and that it involved numerous industry players from nearly every facet of the motor accident system. If true, the case would be indicative of the widespread and systemic moral decay which has been facilitated by the departure from the professional principles articulated by Lord Benson and a perpetual drive towards profit to the detriment of everyone else – including consumers and those involved in accidents.

What, though, can be done? How do we right the wrongs that proliferate in the motor accident system?

LASPO doesn’t go far enough

A glance at the Legal Aid Sentencing and Punishment of Offenders Bill (LASPO), which is currently wending its way to legislative approval, reveals that it offers little in the way of regulation or control of ancillary services in the personal injury sector. Autofocus, of course, was an example of one such ancillary service, and a great many of them have sprung up. The worrying fact is, therefore, that Autofocus represents the tip of the iceberg in relation to unethical and even illegal practices, precisely because it, like all the others, is unregulated. A robust but fair and appropriate regulatory authority which adopts a practical approach, backed by legislation designed to close the various loopholes which are exploited by these companies, is needed to improve the current system. LASPO needs to be rethought with this in mind.

Another example of systemic failure is the unregulated insurer practice of ‘third party capture’ which seeks to settle claims directly with motor accident victims without any mandatory protection for the motorist around their access to independent legal advice. This is another example of the dysfunction in the motor accident system. There is strong circumstantial evidence that this has led to claims being made which would never have been brought had the insurers not made an unsolicited offer.

To return to Autofocus, we should recall that among the insurance companies relying upon its reports are household names. There is no suggestion that they colluded with Autofocus, and we should recall that Autofocus has yet to put its side of the story. But nevertheless, whatever the truth of the Autofocus allegations, the clamour for holistic change rather than a piecemeal approach to the ills of the motor accident system is deafening. We ignore it at our peril. 

The LASPO bill and the insurance industry: too close for comfort

Earlier this week the House of Lords voted on measures in government's Legal Aid, Sentencing and Punishment of Offenders bill (the LASPO bill), that which is intended to implement various reforms to the civil justice system proposed by Lord Justice Jackson. Fortunately, the vote resulted in a decision to delay implementation until April 2013.

As Lord Wallace of Tankerness put it, the drive to make radical and necessary changes has to be balanced against the need for thoroughness: "We believe that these are important measures and we want to implement them as soon as possible in order to control the costs of civil litigation. We wish to make sure that we get the details of these regulations and rules right, and that will inevitably take some time."

There will many observers who will have breathed a sigh of relief at the announcement by the Lords. Rushing through legislation is rarely a good idea. Time and thought are necessary to ensure that changes are fair, sensible and workable. At a time when a holistic approach is needed to resolve the problems in civil litigation and, especially, the personal injury sector, the LASPO bill, in its present form, is none of these things.

But just as I welcome the delay in LASPO's implementation, I cannot but be concerned by revelations of the cosy relationship between the government and the insurance industry. As The Guardian reported on Monday, insurers were given extensive access to the civil servants charged with drafting LASPO. The result is a bill that seems dangerously slanted towards insurers, benefitting the industry to the tune of hundreds of millions of pounds.

Thanks to a request under the Freedom of Information Act, it appears that the head of civil litigation funding and costs at the Ministry of Justice and the official in charge of the Jackson reforms, and his team gave the Association of British Insurers (ABI), the industry lobbying body, a great deal of information on their plans. This seems to have occurred with such regularity and willingness that Desmond Hudson, the Law Society's chief executive, described LASPO as "legislation for the insurance industry, by the insurance industry."

Naturally, the ABI rejects the charge of collusion. A spokesman said: "We have not said anything in private that we have not said in public and we have nothing to hide. We make no apology for providing evidence to policymakers to tackle the compensation culture and help reduce motor insurance premiums. The ABI, unlike the claimant lawyer lobby, has provided the evidence and analysis to support our public policy positions rather than rely on rhetoric and anecdote."

But, as the ever-readable Left Foot Forward blog says, "40 Conservative MPs, including the prime minister, chancellor, and minister of justice, have or had interests in the insurance industry." Chief among them would seem to be Jonathan Djanogly, the Justice Minister, whose shareholding in Aviva PLC amounts to a £97,000 conflict of interest. Evidently he is far from alone: the Central Conservative Party office and constituencies receive financial donations from a range of figures in the insurance industry and business connected to the insurance industry.

This week we have also seen Sir Fred Goodwin stripped of his knighthood. The Forfeiture Committee's decision to pour such ignominy on the man who played so large a role in the near collapse of the Royal Bank of Scotland has been welcomed by David Cameron. It seems to me, however, that the Prime Minister would do well to look closer to home. The government's house, when it comes to the insurance industry, is not in order.

Back to the drawing board, please, with the MoJ’s Referral Fee Impact Assessment

So, the Ministry of Justice (MoJ) has published an Impact Assessment on the Referral Fees ban. Good news, for surely things must be proceeding apace?

Well, yes and no. Yes, ever since September’s announcement by the MoJ that referral fees in personal injury cases are to be banned many people, including me, have been pleased and optimistic that a clearly dysfunctional system is at last going to be reformed. But no, because – and not for the first time – there are grounds for fearing that to embark upon reform in haste is to repent at leisure.

Why do I say this? Not, I assure you, because I just happen to like banging the drum of measured and sensible reform, as opposed to what is increasingly coming to resemble an ill-conceived cacophony of scattergun percussion. I urge caution because of the nature of this particular Impact Assessment.

First, though, a refresher. Impact Assessments are relatively new to the government’s lexicon, arising from a rationale which states that estimates of the costs and benefits of policy options under consideration should normally form an integral part of consultation exercises. As the Legal Aid, Sentencing and Punishment of Offenders Bill (LASPO) is pushed through, with its provision banning the receipt and payment of referral fees, it is therefore government policy that an Impact Assessment be undertaken. Bear in mind that an Impact Assessments is:

• a continuous process to help the policy-maker fully think through and understand the consequences of possible and actual Government interventions in the public, private and third sectors; and
• a tool to enable the Government to weigh and present the relevant evidence on the positive and negative effects of such interventions, including by reviewing the impact of policies after they have been implemented.

That sounds sensible, you will agree. It is shame, then, that this particular Impact Assessment is so scant on detail. Remarkably, it contains nothing on the mechanics of the implementation of the ban, other than that it is planned for autumn 2012. Here is all that there is on the crucial question of just how the ban will be achieved:

•  The reforms will be implemented through primary legislation. A provision in the Legal Aid, Sentencing and Punishment of Offenders Bill will be introduced to prohibit the payment and receipt of referral fees in personal injury cases. It is intended that the relevant regulators (the SRA, FSA, claims management regulator and others) will take the necessary steps to enforce the ban.

Indeed, the Impact Assessment expressly says that there is no data available for a ‘quantitative’ impact assessment. The data required for this is listed, but then described as unobtainable either because it cannot be tracked down, is unknown, commercially sensitive or not readily available. What’s more, a vast amount of the Impact Assessment is couched in conditional terms: look out for the frequency of the words ‘might’ and ‘may’ when it comes to the ramifications of the referral fee ban in practice.

One thing is said with clarity: that claimants could lose out as a result of the proposals.

To me, that alone should be enough to urge a rethink. We need to put the emphasis on helping people pursue genuine claims. Referral fees turn the industry into one in which money trumps merit, but how can it be right if, as a consequence of rushing through legislation, some people who have been seriously injured are unable to bring claims? The Government needs to remember the purpose of an Impact Assessment: to help the policy-maker fully think through and understand the consequences of legislation. Please, then, can we have some thought about how, exactly, to implement the ban?