De minimis

Most lawyers are familiar with the maxim de minimis non curat lex and the principle that courts should not focus on trivia when applying the law.

Our present government, with its many-pronged attack on accessibility to the law, mainly by removing means of funding, has brought a new and sinister significance to the Latin phrase that translates literally as the law does not care about little things.

As law centres close, barristers chambers and solicitors firms go bust, we wait for the next civil litigation costs announcement from the Ministry of Justice following the Prime Minister’s shuffle earlier this week.

Helen Grant has left after thirteen months as Djanogly’s successor, headed for the Department of Culture, Media and Sport  (work that one out) and is replaced by Shailesh Vara who, unlike our esteemed Lord Chancellor, is a lawyer.  Formerly a solicitor with CMS Cameron McKenna, Mr Vara practised in London and Hong Kong.

Is he to face the challenge of presenting the government’s response to what is no doubt perceived as the extremely unhelpful report from the House of Commons Transport Select Committee as part of Grayling’s attack on - sorry enquiry into - the “compensation culture” which as one of its products has us branded “the whiplash capital of Europe”?

Regular readers and avid followers of the debate will recall that the committee chaired by Louise Ellman MP made some thoroughly uppity findings about the unreliability of information promulgated by insurers and the government as well as their unhealthy collusion to the exclusion of claimant representatives.

For a reminder of the select committee’s key findings, and extracts from an revealing roasting of the top boys fielded by the insurance industry, see Hey diddle diddle.

The so called “whiplash epidemic” was confidently regarded by liability insurers and their chums in Whitehall as the cast-iron excuse to crank up the financial limit of the small claims track to at least £5,000.  This is a level at which, everybody within the industry knows, a very substantial number of personal injury claims – the vast majority of them genuine – would become litigation within which recovery of legal representatives’ costs is virtually impossible.

Naturally, this suits liability insurers because they save not only on costs but also on damages where they are dealing with unrepresented, uninformed people.  I considered that landscape in some detail in an article last month – Crash and Capture - reproduced at the link with the kind permission of Solicitors Journal. 

The transport committee report was not well received in the summer.  It’s been left to gather some dust, probably in the hope that people will forget key findings that there isn’t a whiplash crisis and that in fact an increase in the small claims track limit for personal injury cases would probably lead to more fraudulent claims and a resurgence of the claims management companies that the government has been working so hard to stamp out in recent years.

The latest signs are worrying for the claimant lobby. Yesterday we were hearing and reading a lot of publicity about raising the age for learner drivers, all ‘in the interests of saving many lives’.  There is also a mention about savings in insurance premia for society generally.

Undoubtedly what the government is primarily concerned with here is a saving for insurers in operating costs.  Whether or not that leads to any saving in premia is a moot question – the Transport Committee did not seem convinced and we have yet to see any explanation from government of how it will monitor cost reduction.

The truth is the government is not interested as long as the insurance industry can maintain a swell of popular support from those who want the cheapest now, don’t notice the plight of innocent victims and above all fail to recognize that they could be next.

As long as a portion of our largely shamed financial industry continues to generate revenue for the Treasury, and there is no silly talk about ending agreements to fund claims against uninsured drivers or to continue cover to householders in flood risk areas, then this administration seems likely to stand by.

Can we guess what view a former City and Hong Kong lawyer, acknowledged rising star of his party – a former assistant whip indeed - will take of Five grand in the overall scheme of things?

Is he about to show us that the law does still care about little things – and people?

Low Marks

Surprise and disappointment this morning on reading a report that Marks and Spencer is planning to make hundreds of its suppliers wait nearly three months to be paid.

It’s suggested that the change will generate tens of millions of pounds of cashflow benefits for M&S but it justifies the lengthening of its payment terms from 60 to 75 days as bringing it "in line with industry standards”.

M&S has been regarded by many in this country over the years as an example on the high street, consistently delivering decent quality at a reasonable price and doing it ethically. Still the company can point to a CSR policy that demonstrates commitment to making a few quid without treading on heads.

This is a clumsy move at a time when there is much (welcome) talk about “green shoots”.  The survival and growth of small business remains a vital ingredient of that recovery.

Yesterday, I read a cuddly brochure from Lloyds Bank, as it is to become (no TSB), about how it aims to support the future of Britain etc with its new deal for banking customers. All good stuff, but we’re a long way off yet and I don’t see a general enthusiasm from the high street banks to lend to the sort of small businesses that depend on these big names.

Prompt payment to suppliers is vital in current economic conditions and will remain so. My firm committed some time ago to the Prompt Payment Code promoted by the Institute of Credit Management – a step that required evidence of compliant practice, not simply noble promises.

Why not?  With interest rates as low as they have been for so long, there’s little to be earned short-term from holding onto the money.  Longer-term there is far more to be gained from maintaining healthy relationships with suppliers.

Some will say it’s beyond their control because of delays in payment further up the chain. It’s difficult to see that this is relevant to a retailer that receives payment as the goods change hands. Next reportedly pays after 30 days.

In his letter to suppliers the executive marketing director is reported to have professed “We believe that parity and clarity in our terms of trade are important to all our suppliers and will help our businesses in the long term." He also acknowledged that there “may be some questions.”

Here’s one - why this seemingly short-sighted and selfish stunt by a flagship of the UK economy?

It’s out of character and badly-timed. It doesn’t fit.  It’s one for the “returns” desk guys. 

Hey diddle diddle..

I’d just gone on holiday when the report of the House of Commons Transport Committee, “Cost of motor insurance: whiplash” emerged but have now had time to study it. What a cracking good read, especially for those of you who wonder about the integrity of the statistics you hear and see about the cost of the ‘compensation culture’.

For a long time motor insurers have battered us with stats to prove that vast numbers of fraudulent claims are generating unnecessary cost to the motoring public, making fat-cat lawyers fatter and generally wreaking havoc within a system that the insurance industry could otherwise run in a scrupulously fair and efficient manner…

The Committee set itself the question, amongst others:

“Whether it is correct to say that the costs of whiplash claims add £90 to the average premium and, if so, what proportion of this additional cost is due to “exaggerated, misrepresented or fabricated” claims?”

Having looked at various data gathered by government departments the Committee observed:

“It is apparent from the information now provided by the government that the number of whiplash claims has fallen since 2010-11 and is now lower than at any time since at least 2007-08.”

So, what did insurer representatives have to say?  Some of the exchanges between Committee Chair Louise Ellman MP and, first, James Dalton, head of motor insurance at the ABI are highly entertaining:

“Q147 Chair: …We have heard very loudly over a long period of time from the Association of British Insurers that a large proportion of claims are fraudulent or exaggerated. Are you telling me that you can’t give us a figure?

James Dalton: I can give you a figure for fraudulent claims.

Q148 Chair: What is that figure?

James Dalton: The figure for fraudulent claims is around 7%. That doesn’t take into account exaggerated claims. In terms of the issues that we are focusing on in this Ministry of Justice consultation in relation to improving medical evidence—

Q149 Chair: Mr Dalton, you are not talking to the Ministry of Justice; you are talking to the Transport Select Committee. I am putting a question to you because I want more information about statements that the Association of British Insurers, whom you are here to represent, has made.

James Dalton: As I said, 7% is about the number of known fraudulent claims, but we don’t know and it is very difficult to capture how many exaggerated claims there are very difficult to capture how many exaggerated claims there are.”

Perhaps David Fisher, catastrophic and injury claims technical manager at AXA Insurance might be more help:

“Q154 Chair: You are taking your information from your reading of medical reports rather than an examination of claims that have been made to your company.

David Fisher: Obviously all the claims will be examined.

Q155 Chair: Have they been examined?

David Fisher: Yes; well, not all the claims. We do sample claims and that drives the low-speed impact and the phantom passenger figure that I have given of 15%. Exaggeration claims, unless they go to court, are more difficult to identify.

Q156 Chair: But, in your evidence, your company or you talk to us about the compensation culture.

David Fisher: Yes.”

So, no. The Committee reached the conclusion that:

“There is no authoritative data publicly available about the prevalence of fraud or exaggeration and no consensus about what constitutes fraud.  The government has described the UK as the “whiplash capital of the world” but this cannot be conclusively proved or disproved from the information available. 

There is scope for the insurance industry to provide better data about fraudulent or exaggerated claims so that there is a better evidence base for policy decisions.”

It’s nothing new to those of us in the industry that insurers create their own statistics one way or another. Director of Claims at Aviva, Dominic Clayden was questioned by Karen Lumley MP:

“Q182 Karen Lumley: How do they get the information that these people have had accidents? Do they get them from you?

Dominic Clayden: No. Whether it is a claims management company or whatever, a fraud ring doesn’t—

Q183 Karen Lumley: I am not talking about a fraud ring; I am talking about people who get whiplash. How do people get hold of them?

Dominic Clayden: You are probably best to ask the people giving evidence later. My understanding is that it is by advertising.

Q184 Karen Lumley: You don’t sell details on to them?

Dominic Clayden: Not to accident or claims management companies, no.

Q185 Chair: Are you absolutely sure about that?

Dominic Clayden: Do I refer claims to solicitors? Yes.

Q186 Karen Lumley: Do you sell those details on?

Dominic Clayden: Not since the change in the law in that situation. I do not receive a referral fee.

Q187 Chair: But you did before then.

Dominic Clayden: Absolutely. We have been a strong advocate of the ban on referral fees and the reduction of the legal fees that go with it. It is the nature of the system. The reality is that, to remain competitive in a market where something is legal, we referred and took a referral fee. We still refer people to solicitors but we do not take a referral fee.

Q188 Chair: We have had quite a lot of evidence saying that insurers themselves often generate claims. The Government have said that they would like to see you, the insurance companies, address behaviours that encourage excessive and unnecessary claims within their own business models. It appears that the Government think that you are the people who are generating the claims. Are they wrong?

James Dalton: As Dominic has said, the system has changed very recently.

Q189 Chair: But before it changed you were guilty of this, were you?

James Dalton: The industry has long said that there is a dysfunctional compensation culture in the UK and that we are part of the problem.

Q190 Chair: What I am putting to you is that part of that dysfunctional system is the behaviour of the insurance companies. That is what the Government say.

James Dalton: Yes; and we have admitted that the insurance industry has played a part in that dysfunctional system, which is why we made a very strong case for the banning of the payment and receipt of referral fees.”

To put it another way, having been caught with their hands in the cookie jar, as Karl Tonks described it (See Business as usual) insurers have now cleaned up their act?

Er, well…no. The Committee went on to hear about pre-med offers and reported:

“We were surprised to hear that insurers will sometimes make an offer to personal injury claimants even before a medical report has been received.  We also note that our previous recommendation on making the links between insurers and other parties involved with claims more transparent has been ignored.  Insurers must immediately get their house in order and end practices which encourage fraud and exaggeration.  If not, the government should take steps to protect motorists.

Although it may make economic sense for an individual insurance firm to settle a claim without medical evidence or to pay out even if fraud or exaggeration is suspected, the industry as a whole is damaged, and motorists pick up the bill in the form of higher premiums.”

Still market-making, then. Little surprise that the Select Committee was sceptical about insurers’ claims that premia would fall as a result of the costs cuts they had urged upon Government:

“We recommend that the Government explain how it will monitor whether or not motor insurers honour their commitment to ensure that any cost reductions resulting from proposed legal reforms are passed through to consumers in the form of lower premiums.”

Will the ABI respect the view of a cross-party select committee? Apparently not. Dalton insisted in his blog following the report “We don’t need the Government to monitor whether insurers are delivering on our commitments..”

No, they don’t – because they already have ministers prepared to shut out any other views and dance to insurers’ tune. Not only was the Committee surprised at what the Government had been prepared to do without any reliable statistical basis, but it said:

“We were disappointed to hear from witnesses from the legal profession that they had not been invited to the Prime Minister’s summit and nor are we aware of any substantive contact with DFT ministers.  This is particularly surprising given that legal reforms were clearly under discussion.” 

Huddles.

The big agenda here is to raise the small claims limit and get lawyers off the scene so that insurers can take advantage of unrepresented claimants and undersettle their claims (see Whiplash backlash). The Committee recognizes the serious menace here:

“We believe that access to justice is likely to be impaired, particularly for people who do not feel confident to represent themselves in what will seem to some to be a complex and intimidating process.  Insurers will use legal professionals to contest claims, which will add to this problem.

It would be financially difficult for many solicitors to assist litigants fighting personal injury claims using the small claims procedure, given the limited fees available.

…we are concerned that some claims management firms might find a way to enter the process, fuelling another boom in their activities.”

This has so long been the agenda of insurers. Third party capture is another subject in itself but for an overview on the importance of the small claims limit see Five grand.

Anyone who thinks perhaps this may have been a catharsis should take into account the claim by Dalton in his post-roasting blog that the report “reflects how finely balanced views are on whiplash reform”.

And this truly is the problem. Little wonder that the verdict of the parliamentary select committee is:

“Transparency breeds trust and confidence in the market.  Unfortunately, the motor insurance sector remains as opaque as ever.  This needs to change.”

And the cow jumped over the moon.

Zero hour

The media debate over zero hours contracts has finally erupted.

The headlines seem to be that it represents exploitation by unscrupulous employers.  There are sorry tales of vulnerable youngsters kicking their heels at home, or wherever, waiting for a phone call to tell them when, if at all, they will be required to work.

From what I have seen and heard there is an inference at least that the employees are obliged to keep and make themselves available and not to decline any offers of work. This apparent inequality is presumably the perceived evil of the whole concept.

I don’t think that the world is getting a true picture here, or that is it anywhere near as beastly as the media (and those feeding them) would have it. 

I have been involved in these flexible working arrangements for over three years, both within my own business and on behalf of clients.  Last year we litigated to a full tribunal hearing a claim from a ‘consultant’ that he was in fact an employee at the time my client terminated a signed contract that plainly recorded that he wasn’t.

It wasn’t quite so simple as that though at the end of the day he failed.

Employment - and to an extent tax - lawyers have been wrestling for years with the distinction between a contract of service and a contract for services.

Every now and again the senior courts have produced a judgment that considers key factors such as personal service, control and mutuality of obligation.  Most employment lawyers will probably agree that noble efforts have generally resulted in the conclusion that every case turns on its own facts.

Not a great deal more clarification has emerged from a spate of recent  cases that culminated in the highly entertaining, er, position of lap dancer Nadine Quashie who, ultimately, was not employed by 72 year old dad, Peter Stringfellow.

It is perhaps a little simplistic but legal analysis identifies an employment contract at one end of the scale, an independent contractor arrangement at the other and somewhere in between this zero hours concept.

In many situations it is like the proverbial elephant – you will know it when you see it.  If you called a plumber, to fix your pipes, you wouldn’t expect him to claim subsequently that he is entitled to employment rights.

There are definitions of these arrangements that occupy the twilight zone in between but to my mind they are somewhat fickle because of the variety.  One of the difficulties one has in conducting any legal analysis is that the labels used may not be accurate.

What one person thinks is a ZHC may be a consultancy agreement or an employment contract in the eyes of another and vice versa.

But let’s get back to the point of this alleged scandal - the notion that people are being chained to a post or locked in a room until they are needed and then let out and paid (no doubt a pittance) for doing only as much as the gangmaster requires.

First, I doubt that in many if any cases that is actually what is agreed, whether it is verbal or in writing.  Far more likely that there is entirely even-handed mutual lack of obligation.

In other words, whilst there may be no guarantee of work, there is probably also no obligation on the worker to be available. 

Secondly, that may be a choice that the worker makes – because there is nothing better at the present time.  Of course, they would like a full time job that pays even when they are sick, on holiday or sat at work with nothing to do.

The reality is that employers in the current climate can’t afford to run businesses in that traditional manner.  Within many legal practices over the last two or three years there has been a shift to the use of independent consultants who work for two or more firms, neither or none of which is able to offer a full time position or even commit to relatively certain part time employment.

In my experience this works happily enough.  The workers are only too glad of a structure in which they can secure a full week’s work, whether it be at two, three or more locations.

The lack of mutual obligation is on the face of it a weakness, but in reality a strength.  What happens is that both sides build a bond of goodwill and cooperation which is potentially stronger than any written contract.

A worker who turns down assignments on a regular basis can only expect that the employer, who has no duty to offer work, will tire of rejection.  Similarly, a consultant who is not fed regularly will forage elsewhere.

The reality of the young kids waiting for the phone call from Burgerland or wherever is probably that they have no choice but to be at beck and call, because there is nothing else available.  If there is something better on offer then they should go get it.

In my experience there are many plus points to flexible working arrangements that, whatever the precise terms or labels attached, don’t amount to employment contracts.  Aside from the creation of opportunities where none would otherwise exist, there are spin-offs such as the sense of fulfilment and self-respect that individuals enjoy within their micro-businesses.

One suspects that the most enthusiastic contributor to the debate – whether or not the input is visible –will be the Treasury, having felt the impact in cash flow terms of many tax payers switching from Schedule E to Schedule D.

The climate is changing, we are told, and it may be commercial forces rather than political debate that see a swing back towards more familiar master and servant relationships. Ironically this will be at a time when our government has to a large extent destroyed the measure of security that was for employees its most coveted feature.

Never walk alone

The Association of British Insurers ("ABI") is all in a fluster about the Law Society's ("LS") "Don't get mugged by an insurer" campaign, designed to raise awareness of the dangers of dealing direct with insurers to settle injury claims.

ABI Director-General Otto Thoreson has complained that the LS initiative is "little more than public name-calling". Ironic that, given the ABI's record, including such recent references to "ambulance-chasing lawyers" as that of Thoreson's eminent colleague Nick Starling only three months ago - see Better deal for claimants etc

So, they don't like it when the boot's on the other foot. Perhaps it's fitting, in the context of a debate focussed largely on motor insurance, that Mr Otto Thoreson is an anagram of 'tormentors hoot'

But all this fuss distracts from the message, which is hugely important, that accident victims who use a lawyer recover two or three times more money on average than those who handle it themselves.

This isn't particularly surprising. Sure, many of us enjoy a spot of DIY here and there but we can't all be experts. Some folk think they can negotiate the best deal going - and they'll probably live in bliss afterwards. Most recognise that they know nothing about the law or its processes.

Inevitably then it's an uneven contest, injured Joe Public v professional claims handler. If both sides play their best game who's going to win? Who's going to get thrashed?

This is the point at which you have to shut your eyes ever so tightly and believe...

Insurers have explained time and again that it's fine - nobody will get stung - because they will deal fairly with claimants and ensure they get what they are entitled to as a matter of law.

Never mind the (allegedly) rising costs of dealing with claims, overheads, the demands of shareholders in a lean market. The expert claims negotiators will shut those things out of their minds even when faced with the opportunity to pay only a third or less than a case is actually worth because the DIY claimant doesn't know what he or she is doing.

Still have your eyes shut tightly? Can you smell something typically rural?

OK, well open them now. The reality is that insurers will make a buck wherever they possibly can. See for example How it works - car insurance, Above the law, Business as usual.

Last week, Which? reported on the latest sneaky add-ons - Which? warns on car insurance extra fees.

These people will indeed mug you if you're in strange territory and don't know what you're doing but because they have more neck than a bag of giraffes they insist to our gullible government that they will deal fairly with unrepresented accident victims.

I have never had a case yet where I haven't recovered more money than an accident victim has been previously offered in the course of dealing direct with insurers or using one of the panel firms who pay (sorry, I mean used to pay, of course) referral fees to buy the work. Usually, it's a lot more - proving the point of the LS campaign.

The dangers of trusting and dealing with these entirely self-interested people are starkly illustrated in such cases as that featured in Foxes & chickens. "Such a nice man, he was". Mugging an injured teenage girl of over £30,000, he was. Despicable.

Ordinary folk believe the lies and there's nobody able to watch and listen to what goes on in every situation. See Livin' Aviva loca.

Running a DIY injury claim is like taking a night stroll through the rough end of a strange town. If you don't get robbed, it will be a small miracle. Don't go there without a guardian.

Never walk alone.

A bit of how's your father...

Congratulations night club tycoon Peter Stringfellow - a dad again at the age of 72.

 

Kids are the very best thing to have in life, no doubt about it. I also subscribe to the view that by and large you can't get enough of a good thing.

 

But I'm not inclined to have more now - and I'm 20 years younger than the colourful son of Sheffield. It doesn't seem to me a responsible thing to do.

 

A couple of years ago - when my (also younger) wife was toying with ideas of a fourth - I looked at it from the point of view that I'd be eligible for state pension by the time my child was mid-teens and at the height of awareness, fitness etc.

 

I'm giving away no secrets but plainly 'er indoors is not 40 years my junior. At 32 or thereabouts, Bella Stringfellow need have no worries about chasing toddlers in her bathchair.

 

But what about her old man? Will he - at 88 years old - be on any level with his 16 year old daughter?

Court in possession

We had a letter from a London county court this week in response to a routine request.

Anyone who has ever seen a notice of issue within the accelerated possession procedure knows that if the defendant doesn’t file a defence then you can make a simple request for the court to make a possession order. 

It’s right to say that the request should then be referred to a judge to decide whether or not to make an order without a hearing, but the procedure and entitlement is clear enough.

The main component of the letter we received is as follows:-

         ‘I write to advise you that your application was referred to the district judge on the 10 June 2013.  Once the matter has been referred to the judge there is no target time for the judge to process these matters, the judge will review these files as soon as they are able, bearing in mind that they must deal with these matters in addition to their normal court lists.  You will be notified of the outcome of this referral once we have the file back.’

The letter might just as well have read:-

          ‘Your very routine request for an order by default has been referred to one of our judges.  They’re all very busy dealing with cases that have been listed for a hearing so forget all that nonsense in the Civil Procedure Rules about dealing economically and on paper wherever possible.

The judge who will be dealing with this will be doing it in his or her spare time so it will be done when it gets done and don’t bother to pester us to tell you when your client can recover possession of his property from the tenant who isn’t paying him anything.  Just be grateful that anybody is prepared even to think about spending time to look at this.’

“No target time”?  Why not?  Isn’t this an immediate and obvious invitation to a black hole?

So where does this come from?  My bet is that it’s at the instigation of a judge or judges who are already ridiculously overworked.  The cunning observation that there is no target time is just one giveaway.

I have much sympathy and it’s understandable - but it’s not good enough.  The answer as it ever is now is to foist the problem back on the court users and tell them to lump it.

It’s another path to disillusionment with court-based resolution (unless you’re a wealthy enough litigator to afford entry to the Rolls (Royce) building. 

For all but rich litigation tourists, it’s the same policy approach.  We in Government don’t yet have time to remove the law that entitles you to pursue these remedies but we’re going to do it and so in the meantime we’ll just break every piece of the machinery we can.