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Disclosure 17 April 2011 blm-law.com

issn 1475-4711 Contents

Editorial board Editorial 2

Val Jones (guest editor) Key costs reforms move Adequate evidence of Helen Cafferata one step closer adequate procedures Linda Coppell Alistair Kinley 3 Julian Smart 28 Catherine Hawkins Alistair Kinley So far, so good Good faith v fraud Jenny Moates Kerris Dale 5 Simon Hammond 30 Andrew Relton No hiding: New rules for Start of business for the Jim Sherwood uninsured drivers Legal Ombudsman Julian Smart Ashton West 6 Elizabeth Hughes Kathy Széputi Christopher Fitton 32 Uphill climb for drivers You have been sent this material because Gareth Davies Employment update: you have previously registered your interest Alistair Kinley 8 Are you ready? in receiving information from Berrymans Lace Mawer LLP.If you no longer wish to Michael Parr 34 receive the mailing, please unsubscribe. The right balance? Tim Smith 10 Safety first with driver health This document does not present a complete Michael Oliver 36 or comprehensive statement of the law, Costs: Levelling the field? nor does it constitute legal advice. It is intended only to highlight issues that may Victoria Cargill 12 Reform: Step-by-step guide be of interest to clients of Berrymans Lace Malcolm Keen Mawer LLP.Specialist legal advice should Credit-hire update: Boris Cetnik 38 always be sought in any particular case. Clearer now? Sarah Cartlidge 14 Law of diminishing returns? Disclosure is published by the marketing department of Berrymans Lace Mawer Stuart Hardy 40 (Castle Chambers, 43 Castle Street, Expert witness immunity Liverpool L2 9SU) on behalf of Berrymans abolished Caveat e-vendor! Lace Mawer LLP and printed by The Pureprint Paul McGinn Jonathan Edwards Group. Michael Bluthner-Speight 16 Stephanie Bailey 43 Solicitors with offices in Birmingham, Bristol, Cardiff, Leeds, Liverpool, London, Safe as houses? A new age of regulation Manchester, Southampton and Stockton-on- Warren King 18 dawns at the GMC Tees. Berrymans Lace Mawer is a trading Andrew Truby 46 name of Berrymans Lace Mawer LLP,a Disclosure: Watching brief limited liability partnership registered in England under number OC340981, which Boris Cetnik 20 ‘Winds of change’ is regulated by the Solicitors Regulation continue to blow Authority and accredited to quality Mesothelioma liability – strict, Katie Costello 49 standards ISO 9001 and Lexcel. The absolute or inevitable? registered office is at King’s House, 42 King Brussels 1, Rome 2 Street West, Manchester M3 2NU where a Toby Scott 21 list of members is available for inspection. Alistair Kinley 50 ‘Showdown’ for cowboy builders BLM briefing Visit blm-law.com for Richard Clarke 24 Natalie King 52 electronic copies. Information is correct at the time of printing. © Berrymans Lace Crime has no punishment Mawer LLP 2011. David Spencer 26 ISSN 1475-4711. Issue 17.

Berrymans Lace Mawer Disclosure 17 April 2011 1 Editorial

Two overriding thoughts came to my mind when reviewing the articles in this Spring 2011 edition of Disclosure.

First – it has taken 10 years of litigation, spiralling costs and campaigning to reach a point where we hope to see reform resulting in a more proportionate cost of civil justice in this country. I draw the reader’s attention to the current government consultation on implementation of legislation to put in place Lord Jackson’s recommendations on costs in civil cases, alongside an arguably equally momentous proposal to bring other injury claims within a streamlined process akin to the low-value motor claims process via the MoJ portal. I defer to my colleagues’ articles on both topics within this edition.

Second – I had a strong sense of unintended consequences. There are so many examples of this: treating mesothelioma as a special case in tort; enabling success fees to be recoverable from the losing party; not fixing costs in fast-track cases in the first tranche of reform back in the 1990s.

It is easy to criticise with hindsight and perhaps we are better informed now to anticipate the pitfalls that could flow from the current raft of proposed reform. As Seneca commented 2,000 years ago:

A gem cannot be polished without friction nor a man perfected without trial.

There is no doubt that this new age of austerity makes change to our system of justice an imperative. But I also detect caution and a little apprehension as to how this will impact on our system of justice and its cost.

Undoubtedly cost remains king, and several of our articles discuss recent developments that have a direct impact on this issue. In this context, I thank Ashton West, chief executive of the MIB for his article summarising a fundamental change to motor insurance with the introduction of Continuous Insurance Enforcement. The Bureau, under Ashton’s energetic leadership, has worked consistently and effectively to reduce the impact of uninsured motoring.

Our articles span the spectrum of commentary on policy, reform, regulation and significant case law and our objective is both to inform and provoke thought and comment. The editorial board welcomes your input at [email protected]

And, as ever, BLM will continue to keep you closely advised ...

Val Jones Partner

2 Disclosure 17 April 2011 Berrymans Lace Mawer Key costs reforms move one step closer

Since Disclosure 16, November 2010, the Measures and mechanisms pace of fundamental costs reform has Jackson LJ recommended important changes to ‘no accelerated. A full consultation about win, no fee’ litigation. His main proposals were to implementing Lord Justice Jackson’s stop the recoverability of additional liabilities – proposals has been completed. On 29 success-fee uplifts and after-the-event insurance March 2011 the government reconfirmed premiums – from defendants. He balanced these with a 10% increase on general damages so its intention to press ahead with the claimants could pay uplifts themselves and with a implementation of the measures as a change to the ‘loser pays’ costs rule, so as to package. On the same date it began a fresh remove the need for ATE insurance. consultation about major civil justice reforms. Such changes would fundamentally affect all claims This seeks to create a system fit for the 21st conducted under ‘no win, no fee’ arrangements century and includes consideration of and would curb the ATE market. They would, extending the year-old streamlined process however, reduce the costs paid by all defendants for low-value motor injury claims. generally and by repeat defendants in particular (such as insurers, businesses and the NHS). Views about these measures were predictably polarised between defendant and claimant groups and Implementing Jackson representatives. Lord Justice Jackson’s recommendations were The MoJ’s response on 29 March 2011 cuts published in January 2010, hotly debated for a through this debate. Only a week earlier, the month or so and then appeared to fall off Budget 2011 acknowledged the need for change, policymakers’ radars. Hence it may have seemed talking of ‘taking action to constrain no win, no fee that 2010 was a slow year for reform. legal services’. The government’s intention is clear: to introduce Jackson LJ’s recommendations largely In fact, because the report emanated from the unamended and as a package. Primary legislation judiciary it was always going to take a few months will be needed to change recoverability, by altering to flow into the mainstream of government and the Access to Justice Act 1999. Other measures generate a formal response, much as in the case of can be tackled by rule changes and secondary Select Committee or Law Commission reports. That legislation. period coincided with the run-up to the general election, so there was no real prospect of a policy The MoJ is seeking to introduce the necessary Bill announcement on the topic. ‘as soon as Parliamentary time allows’ and is committed to adopting all the measures as far as But just before the summer – after the coalition possible at the same time: government had been formed and after it had dealt … the government agrees that these proposals with its biggest pressing concern, ie, its first budget should be taken forward as a package, and that – ministers committed to consult on Jackson in the the connected constituent parts should be autumn. Consultation duly ran from November to implemented together. February and within 50 days of its closing, the Ministry of Justice had analysed the responses and This is a welcome aim, but making all this work announced – on 29 March 2011 – the way and link together at the same time will not be easy. forward. So the pace of activity is stepping up, It will need stakeholder engagement and support in but what does it all mean? refining the detail of the necessary changes.

Berrymans Lace Mawer Disclosure 17 April 2011 3 Transforming Justice possible reform, the remaining questions – the whens? – The MoJ also published are equally critical. a further consultation on 29 March.  When will the Bill During its to reform ‘no win, development, this no fee’ (success bore the working fees and ATE) title bite? Transforming  When will a Justice. streamlined Unfortunately it process for now bears the general injury much less claims be snappy label introduced? Solving disputes  When will in the county there be courts: creating a changes to the simpler, quicker small-track and and more fast-track limits? proportionate system. The only published The new consultation indication of an answer is includes ideas about altering in Lord Young’s aim of having the financial jurisdictions of the changes made by April 2012. civil courts, about compulsory While that is probably realistic for ‘no mediation, about changing the fast-track and small- win, no fee’ reforms and for much else of Jackson, it track limits and about extending the streamlined is fairly ambitious for the broader reforms set out in process which presently applies only to road-traffic the new consultation. injury claims under £10,000. What is clear is that the first half of 2011 has seen a The last of these not only reflects a clear step change in the pace of fundamental amendments recommendation made in October 2010 by Lord to costs rules and to the broader civil justice system. Young in his report Common Sense, Common It now looks highly likely that the pace will be Safety but also echoes an MoJ consultation back in maintained in the second half of the year and into spring 2007 which had first raised the idea of 2012 as well, when meaningful change should be streamlining the process for all injury claims within delivered. The next few months offer a critical the fast-track limit. opportunity to seek to influence the outcomes of this process That idea was widely supported by insurers and others at that time. With Lord Young’s recommendation and the current MoJ consultation, it must be regarded as being very firmly back on the agenda. It may well be an attractive proposal – with quicker claims notifications and staged fixed costs – but, for example, it would require significant operational changes and necessitate investment in the systems and processes required to make it work effectively in employers’ liability claims. Without doubt, the history of the first year of operation of the streamlined approach to motor claims probably offers both good and poor experiences from which to build any similar solutions for the future.

Target 2012?

If the passages above outline the whats and hows of Alistair Kinley costs reform (Jackson) and of wider civil justice Head of policy development

4 Disclosure 17 April 2011 Berrymans Lace Mawer So far, so good

Has reform for low-value road traffic accidents been a success? One year on, what work still remains to be done?

Approaching one year after the Post Magazine conference such behavioural issues, which must portal went live, the general considered that claimants were surely be good news for insurers. consensus from the insurance making reasonable offers in the industry is that the portal is working, settlement pack. Currently, only It is clear that there is both although insurers would welcome a small number of cases are government and judicial support for more validation proceeding on to stage 3 and the process, when one considers the within the The web portal was therefore it is too early to make endorsements by both Lord Young process. funded by the insurance any meaningful comments on and Lord Justice Jackson. The industry to simplify the this stage of the process. former recommended in his report communication process Readers may between claimant and However, limited judicial on health and safety that recall the well defendant stakeholders. guidance has been provided consideration be given to expanding publicised For more information, to date, raising concerns the remit of the process to include teething problems please visit: www. regarding consistency of fast-track RTA claims up to a value with the portal in rtapiclaimsprocess.org.uk results across the country. of £25,000 and EL/PL claims up to the early stages, £10,000. These recommendations and whilst such problems have The RTA Portal Company has are taken up in the consultation subsequently been addressed, there confirmed that it will paper (Solving disputes in the is still work to be done. One year publish management At the recent Post county courts: creating a on, the portal and the legal process information in the first Magazine Motor simple, quicker and more are not completely aligned. The first quarter of 2011, now Conference (February proportionate system), upgrade was released on 29 March that testing of the MI 2011), 61% of published 29 March 2011 by 2011 (release 1) and aims to bring is complete. The delegates confirmed the Ministry of Justice. these processes into closer insurance industry will that, in their alignment (this may explain why no doubt be very experience, the portal However, Tim Wallace, the was working some 30% of delegates at the Post interested to receive chairman of the RTA Portal Magazine conference were unsure such information to Company, warns against the whether the portal was working). review whether it mirrors their own further expansion of the process experience. without ‘further considered time The RTA Portal Company, which and thought’. is responsible for ongoing The issues of game playing and bad management and development of behaviour were always anticipated, Conclusion the project, has confirmed that any and the RTA Portal Company has future upgrades to improve the confirmed bad behaviours are Whilst there is much to commend functionality of the portal will be emerging on both sides, this new process to insurers there limited to two in any one year. culminating in the launch of a remains, as one would expect, behaviour committee pilot on 1 niggles and concerns which need to BLM’s client research suggests that March 2011 which is scheduled be ironed out. This process may not the new process is working. Insurers until 31 May 2011. After which be the long-awaited panacea, but are able to make an informed time, and subject to the success of the general consensus of opinion is: decision on liability within the 15- the scheme, the initiative may So far, so good. day time limit and are finding that become permanent. The committee the majority of claims started in this is to guide users and mediate where process remain within the process. there is evidence of inappropriate Anecdotal information suggests that behaviour arising out of the use of claimants’ solicitors are engaging in the portal. It is hoped that the work the negotiation process at stage 2 of the committee will discourage Kerris Dale and some 36% of delegates at the any satellite litigation arising from Partner Alistair Kinley Head of policy development

Berrymans Lace Mawer Disclosure 17 April 2011 5 No hiding: New rules for uninsured drivers

This article explains why that motorists are sufficiently aware of Continuous Insurance the changes in law and the second is that all involved are operationally ready Enforcement (CIE) is one of the to distribute letters and handle enquiries most significant changes to motor from the public. insurance since the law first required at least third party The Bureau and the DVLA, with support insurance of all drivers in 1930. from insurers, the ABI and the British Insurance Brokers Association (BIBA), As the MIB anticipated, Road have taken steps to start reminding Safety Minister drivers that the new law will be rolled out Mike Penning in late spring, and information is being gave his distributed with all V11 tax renewal support and forms from March onwards. Guidance approval in as well as a video has been made January 2011 available on: to the CIE www.direct.gov.uk/stayinsured scheme. The scheme Insurers are distributing information to operates on the customers through renewals notices and systematic on their websites. checking of the As part of this increased focus the MIB registered will continue to support its members with keeper regular information – such as our details from regular CIE industry e-newsletter*, which DVLA with the provides subscribers with information insurance about improving the policy data loaded records on the onto the MID and latest guidance and Motor Insurance checklists to prepare staff and customers Database (MID). about the changes. The scheme is scheduled to Our MID account managers work closely come into with insurers to maintain and improve force in late the industry’s efforts to load the correct spring 2011. policy data in good time to the MID and thereby prevent unnecessary errors This and complaints that may arise from significant customers who receive a letter under the step means CIE scheme or are stopped by the police an increased because they appear to be uninsured. focus for the MIB on two key The industry is firmly behind the efforts to areas of work: make motorists aware of these changes the first is in the law for registered keepers to have working with the insurance in place at all times, and this DVLA on the PR and was recently highlighted in the Transport TV campaign to ensure Select Committee’s report about the cost of motor insurance. It underlined the

6 Disclosure 17 April 2011 Berrymans Lace Mawer importance of making motorists, prosecution – will be constantly The industry is particularly young drivers, aware of applied, particularly for repeated firmly behind the new Continuous Insurance offences. the efforts to Enforcement (CIE) scheme and called make motorists for a promotional campaign, aimed at We also know that one of the most young drivers, to alert them to the effective means is to remove the aware of these requirement to have valid motor uninsured vehicle from the driver. changes in insurance. It also proposes a review of Since police were granted these the law the penalties for the offences relating powers in 2005 they have removed to uninsured driving to be carried out almost three quarters of a million next year. uninsured vehicles from our roads. However, we are also supportive of the The MIB is developing a TV campaign proposed review of the penalties. that will be endorsed by the DVLA to Ultimately the costs for claims arising raise awareness about the recent from accidents with uninsured drivers changes in motor-insurance law. It is are transferred to every responsible the fairest way to help all motorists motorist – this is neither acceptable understand that insurance is required nor sustainable. by law before letters are issued under the CIE scheme. Starting in late spring, The consequences of driving without anyone who keeps a vehicle without insurance are: insurance will receive a letter telling them that their vehicle appears to be  Vehicle seized by police. uninsured and warning them that they  £200 fixed penalty. will be fined unless they take action.  £150 plus £20/day to recover the vehicle. The consequences of keeping a  Six penalty points and/or vehicle without insurance will be set disqualification. out in the letter:  PLUS proof of insurance before the vehicle can be returned.  The keeper will be given a £100 fine each time they fail to insure The stepping up of enforcement their vehicle. activity means that it will no longer be  PLUS if the vehicle remains necessary to catch vehicles being uninsured – regardless of whether actually driven without insurance – the the fine is paid – it could then be insurance obligation will be enforced seized and destroyed. from the record. This is long overdue  Vehicles with a valid Statutory Off despite the 20% reduction in recent Road Notice (SORN) will not be years because uninsured drivers required to be insured. remain a menace on our roads and add around £30 to every honest The Transport Select Committee report motorist’s premiums. It is a simple recognises that uninsured driving is message. Stay insured. Stay legal. decreasing due to better enforcement action by the authorities supported by better intelligence, technology and more effective solutions such as seizure of the vehicle. The new CIE scheme, together with the police using ANPR cameras on the road, is expected to have a significant impact on the overall Ashton West levels of uninsured drivers. Chief Executive, Motor Insurers’ Bureau (MIB) The drivers and keepers of uninsured vehicles can no longer hide. The *A sample of the leaflet, about Continuous systematic checking of records and the Insurance Enforcement (CIE), inserted with range of penalties – including vehicle V11 tax renewal forms is available on seizure and the escalation to court request.

Berrymans Lace Mawer Disclosure 17 April 2011 7 8 Disclosure 17 April 2011 Berrymans Lace Mawer Premiums Uphill climb for drivers are sharply increasing

MPs are becoming increasingly concerned about the cost of motor insurance

On March 1 the House of Commons’ legitimate ‘marketing costs’. Transport Committee published its report into the cost of motor insurance. The committee recommended limited It acknowledged a fact of which action to reform this system. Insurers anyone paying the premiums for their should make full disclosure of any car is already aware: premiums are referral fee arrangements on their sharply increasing. The AA’s British websites, and should make clear to Insurance Premium index shows that claimants that they do not have to use average quoted premiums for the solicitors, vehicle repairers or comprehensive cover have increased credit-hire firms that they recommend. by over 40% between October 2009 Legislative enforcement would follow if and January 2010. insurers do not comply voluntarily. While the intention is admirable, there It was accepted that the motor are doubts as to whether such insurance market is competitive. disclosures will really encourage However, the committee believes there consumers to shop around. This action is a case for government action to also seems lopsided given the tackle the factors which are applying compelling evidence heard by the upward pressure on premiums. The committee that claims management committee’s recommendations are companies, rather than insurers, were wide-ranging and include the creation responsible for encouraging a great of a specialist anti-fraud squad proportion of claims. sponsored by the insurance industry, greater information sharing between Listening to the witnesses, MPs must insurers and the DVLA, tougher driving have been shocked to realise the wide- tests, and further investigation into how ranging social harms which rapidly the legal and regulatory framework rising insurance premiums can have may encourage a reduction in costs. beyond their financial impact on The Department of Transport has households. Young drivers and people already indicated that it supports those living in rural areas are at risk of being recommendations which are within its priced out of the job market if they competence. cannot drive a vehicle to work. Higher premiums incentivise some to drive Legal and regulatory reform is within without insurance, and others to the ambit of the Ministry of Justice, commit motor fraud. The problems are which has its own challenging reform “out of control and getting worse” to agenda at the moment. It was clear quote what Mike Penning, Junior hearing the committee’s fact-finding Transport Secretary, told the committee. sessions in November and January that Strong action is needed, towards which increased personal injury claims and this report is only a tentative first step. payouts are the main drivers of increased costs. Many of the witnesses described a carousel whereby accident Gareth Davies victims are bombarded with offers of Professional support paralegal legal representation, often on a ‘no win, no fee’ basis. Underlying this is a with contribution from referral fee system, which the representatives of claimant solicitors Alistair Kinley were eager to characterise as Head of policy development

Berrymans Lace Mawer Disclosure 17 April 2011 9 The right balance?

In a judgment dated 18 January 2011 in MGN Ltd v The key findings were that: The United Kingdom 29 BHRC 686, the European Court of Human Rights considered an application by 1 The requirement to pay success fees constituted Mirror Group Newspapers (MGN) for a ruling that an interference with the newspaper’s right to the findings by the House of Lords that it breached freedom of expression as guaranteed by Article 10 the confidence of Naomi Campbell (and the order of the European Convention on Human Rights. that MGN pay her costs) breached Article 10 of the 2 The introduction of CFAs with success fees was an European Convention on Human Rights. attempt to achieve the legitimate aim of the widest public access to legal services for civil litigation The underlying claim related to a front page article funded by the private sector (which fell within the (followed up with a double-page spread in the middle protection of the rights of others within the of the newspaper) about Ms Campbell’s attendance meaning of Article 10(2)). The court considered at Narcotics Anonymous meetings. The article was the proportionality of requiring an unsuccessful accompanied by photographs. defendant to pay not only the reasonable and proportionate costs of the claimant but also to The claim was successful in the High Court, contribute to the funding of other litigation and unsuccessful in the Court of Appeal and successful general access to justice. (by a majority) in the House of Lords. Ms Campbell’s 3 Balancing the two values guaranteed by the solicitors served three bills of costs. The costs of the Convention (freedom of expression and access to HC proceedings amounted to approximately the courts) attracted a broad margin of £400,000, the CA approximately £115,000 and the appreciation. However, where the measures HL approximately £600,000 (of which approximately concerned produced an individual and excessive 50% was made up of a success fee of 95% for the burden, the balance would not be found. solicitors and 100% for counsel).

10 Disclosure 17 April 2011 Berrymans Lace Mawer 4 One of the ‘particularities’ of the case was that noted the MGN decision but also noted that Sousa the general scheme and its objectives had been was not a case in which Article 10 was engaged (it the subject of detailed and lengthy public being a dispute over the costs incurred by the consultations. These included a House of claimant’s household insurers who had paid out in Commons Constitutional Affairs Select relation to remedial work caused by tree roots and Committee consultation in March 2006, a had sought to recover compensation and costs further MoJ consultation in February 2009 and under a collective conditional fee agreement). the Jackson review. A further review took place in 2010. The CA took the view that it was bound by the HL 5 The depth and nature of the flaws in the system decision in Campbell (which relied, in turn, on the (as highlighted by the public consultation decision in Kaye v Lambeth LBC [2006] UKHL10). It process and accepted in important respects by did not allow the defendant to raise an argument the Ministry of Justice) were such that the court (which had not previously been raised) that success could conclude that the scheme exceeded even fees had a chilling effect which amounted to a the broad margin of appreciation to be denial of justice and therefore impacted on the accorded to the State in respect of general freedom of access to the court in breach of Article measures pursuing social and economic 6. In an obiter statement the court indicated that it interests. was far from convinced that such an argument was 6 In the circumstances, the requirement that the well founded. It may therefore be necessary for newspaper pay a success fee to the claimant other claimants to pursue these cases to the was disproportionate having regard to legitimate Supreme Court (which is more likely to consider the aims sought to be achieved and exceeded even impact of the MGN result) or onwards to the ECHR the broad margin of appreciation accorded to (which is plainly sympathetic to arguments that the government in such matters. payment of success fees are disproportionate and in violation of pension rights where these are Comments engaged).

Th ere has been a fierce debate over the level of In the meantime the government itself is continuing costs in defamation claims. The fact that there have with its most recent consultation on the issue of been a number of consultations highlights the fact costs (issued on 29 March 2011) which confirms that there are strong arguments on both sides. that legislation is to be introduced to remove the However, the fact that there have been a number of recoverability of success fee uplifts and associated consultations has come back to haunt the ATE premiums. However, in relation to these government. In addition, the way in which the proposals there is no clear indication as yet as to consultations by the MoJ have been worded has when the changes will take effect although the given the clear impression to the European Court MoJ’s business plan indicates that legislation may that the government concedes that there are be introduced in the spring of 2011. A realistic fundamental flaws with the system, particularly in prospect for overall implementation may be in April the context of defamation actions. This appears to 2012. In the meantime, therefore, disputes as to the have been a decisive factor in the case even though effect of the MGN decision on current proceedings it does not appear to have been addressed in the are likely to continue. government’s submissions.

The case will be of enormous significance in defamation claims where claimant firms have utilised conditional fee agreements (often with substantial success fees) with very considerable success. It is also possible that the case will have wider ramifications. However, the key trigger for the case to come before the ECHR was the fact that, for media defendants, the Article 10 right to freedom of expression is engaged. For defendants in other fields to be able to raise similar arguments, they would need to identify convention rights which had been infringed. A recent attempt to run such arguments took place in the Sousa v London Borough of Waltham Forest Council (see page 12). Tim Smith In a CA judgment on 3 March 2011, the court Partner

Berrymans Lace Mawer Disclosure 17 April 2011 11 Costs: Levelling the field?

It is easy to feel Now we have the government’s response costs up to the date of the defendant’s that the next to its consultation on Lord Justice offer. The claimant was awarded year will be a Jackson’s recommendations for civil costs enhanced interest on general damages fallow period reform it is easy to feel that the next year only but appealed stating that he should might be a fallow period for costs. This have been awarded interest on future is understandable, but Lord Justice losses and on costs as well. Jackson’s opinions carry a lot of weight and this already can be seen in two The appeal was heard by Lord Justice recent cases relating to how funding can Jackson. The claimant’s stance was impact on access to justice. Pankhurst v simple. The benefit the claimant derived White [2010] EWCA Civ 1445, which is by making a good Part 36 offer was far referred to in the response, and Sousa v outstripped by the reward for the Waltham Forest London Borough Council defendant. The defendant was awarded [2011] EWCA Civ 194 deal with very costs for the relevant period, which the different issues but highlight how claimant estimated would be a six-figure complicated reform will be. sum. In contrast the claimant would have to pay the defendant’s costs and was Pankhurst awarded enhanced interest of only £17,000. On the surface this appeared Mr Pankhurst was catastrophically injured to be unfair. by an uninsured driver. He commenced proceedings and obtained summary Lord Justice Jackson took a closer look at judgment. The MIB raised issues of the claimant’s funding arrangements. contributory negligence. A liability trial The claimant had taken out an insurance took place and the claimant was policy to protect himself against any successful. The matter proceeded to a adverse costs orders. This meant he quantum trial where both parties’ offers would not pay the defendant’s costs were successful. The claimant recovered himself. It was then noted that the more than he had offered to accept, but premium for this policy had been the defendant paid less than the offer. included within the claimant’s costs that The defendant was awarded costs from had been paid by the defendant. So in the date of the offer to the case’s reality the defendant had funded the conclusion. The claimant recovered his insurance that would pay its own costs.

12 Disclosure 17 April 2011 Berrymans Lace Mawer Attention then turned to the claimant’s use of conditional fee agreements in conditional fee agreement. It had been this type of case. entered into after summary judgment but the claimant’s solicitors had still The Court of Appeal allowed the assessed the success fee at 100% if the claimant to recover a success fee. It matter concluded at trial and had was reasonable for his insurance included a 10% postponement element company to enter into the agreement. for which the claimant was responsible. Insurers could not be precluded from This meant that despite the claimant using CFAs. The fact that the insurers recovering costs and a success fee were bound to indemnify their insured from the defendant, and his insurance did not provide the paying party with a paying the defendant’s costs, he was way to avoid paying additional faced with a bill from his solicitors for liabilities. To allow it to benefit from the unsuccessful quantum trial and the relationship would be wrong. the 10% success fee on the costs recovered from his opponent. He Reforming civil costs will not be easy, would be paying £100,000 to his and the problems highlighted by these solicitors. Jackson LJ and his judicial cases may be lessened but will not be colleagues criticised the system that cured; stopping additional liabilities allowed this to happen. being recovered between the parties is a start. As success fees will still be Sousa recoverable from the client, claimants will have an interest in the costs of their The case looked at a different aspect claim and defendants can still benefit of the debate about success fees. Mr from agreements that encourage a Sousa’s property suffered tree root successful outcome. This shift in damage, and after dealing with the emphasis will change the nature of claim his insurance company instructed costs arguments away from technical solicitors to issue a subrogated claim challenges regarding funding to recover their outlay. The solicitors arrangements back to what is acted under a collective conditional fee reasonable and proportionate for the agreement with a 100% success fee. case. Experience shows that this will When it came to paying the costs the still be a battle but hopefully one that defendant argued that it should not be takes place on a much more level field. responsible for the success fee. The defendant agreed that anyone could enter into a conditional fee agreement; it was unreasonable to recover the success fee when the claimant was at no risk as his insurers were indemnifying him. The defendants referred to Lord Justice Jackson’s report Victoria Cargill where he criticised – as ‘absurd’ – the Head of costs

This shift in emphasis will change the nature of costs arguments

Berrymans Lace Mawer Disclosure 17 April 2011 13 Credit-hire update: Clearer now?

Despite being the daily diet of deputy and district Mrs Justice Swift confirmed that the claimant’s claim judges up and down the land, credit-hire litigation had was in essence a claim for loss of use with him seeking lost its appeal for the higher courts with no significant the hire charges as the measure of that loss. HHJ case law being handed down after Clark v Tull (T/A O’Rorke at the initial trial had not assessed the claim Ardington Electrical Services) [2002] EWCA Civ 510 on the basis of the claimant’s contractual obligations and Lagden v O’Connor [2003] UKHL 64. However, to Swift Rent-a-Car as the claimant was pecunious. recent times have seen the Court of Appeal (CA) Instead he assessed the loss of use by virtue of the spot considering contentious points relating to hire in the market rate for the hire of a vehicle. She further matters of Copley v Lawn [2009] EWCA Civ 580 and considered the reality of the contract between the Bent v Highways & Utilities [2010] EWCA Civ 292. parties and particularly the lack of any evidence of With technical issues regarding contractual interest and payment or demand. As there was no evidence before the Cancellation of Contracts Regulations 2008 due to the court that the claimant had or would have to pay be heard during the course of this year, credit-hire case interest under the contract, HHJ O’Rorke was entitled law is likely to continue as a prominent feature. to exercise his discretion as he did. The appeal was therefore dismissed. Contractual interest: Pattn i v First Leicester Buses Limited [2010] All ER (D) 201 (Nov) The claimant, Mr Pattni, has been granted permission to appeal the decision of Mrs Justice Swift regarding Mr Pattni pursued a claim for hire charges incurred in the issue of recoverability of contractual interest on hiring a Porsche 911 Carerra for a period of 40 days credit hire. from Swift Rent-a-Car Limited. In addition to claiming for the hire, he also sought contractual interest from Cancellation of Contracts Made in the Consumer’s the end of the hire period on the unpaid hire charges. Home or Place of Work etc Regulations 2008: At first instance the claimant’s claim for interest was Che n Wei v Cambridge Power & Light Ltd (Cambridge dismissed in its entirety. The claimant therefore County Court, 10 September 2010) appealed the judge’s finding. Increased awareness of the above regulations has The matter came before The Hon. Mrs Justice Swift at resulted in the courts being faced with significantly the High Court. She found that there was no evidence more enforceability arguments during the course of before her that the claimant had or would have to pay 2010. The regulations came into effect from 1 interest under the contract. After the first instance trial, October 2008 and apply to any contract between a the claimant had recovered part of the hire charges consumer and a trader for the supply of goods or claimed and no interest. However, there was no services, which is made during a visit by the trader to evidence before the court that: the consumer’s home or place of work, or to the home of another individual, during an excursion  either the claimant or his insurers had paid the organised by the trader away from his business shortfall in hire charges or any interest since that premises, or after an offer made by the consumer time during such an excursion. The regulations provide that  a demand for payment had been made or was the contract must give the consumer written notice of intended to be made in relation to the shortfall or his right to cancel the contract at the time the contract the interest was made and that the notice must be in accordance  the hire had been paid or a demand for payment with a prescribed form (contained in schedule 4). was or would be made (the trial took place after Failure to do so results in the contract being the period of credit had expired). unenforceable.

Mrs Justice Swift also noted that the claimant would On 10 September 2010 HJ Moloney QC heard an never be liable for the shortfall in hire as he had appeal relating to the decision of a district judge obtained an after-the-event insurance policy from sitting at Cambridge County Court where Angel Assistance to cover this. consideration was given to the application of the

14 Disclosure 17 April 2011 Berrymans Lace Mawer regulations to credit-hire agreements. In Chen Wei, the claimant had been provided with a credit-hire vehicle and had signed the rental agreement when the vehicle was delivered to the claimant’s home. Arguments raised that the contract was not ‘made’ at the time of the signing of the rental agreement were not accepted by the court. The judge considered that the visit had the purpose of both delivering the hire vehicle and ensuring the signing of the contract. He dismissed the submission that the contract had already been formed, with the visit merely the performance of the contract. The fact that the agreement contained an ‘entire contract clause’ strengthened the judge’s finding. Once it was found that the regulations significantly lower than that charged by the credit-hire applied, the agreement did not comply with them and company, Accident Exchange. therefore the agreement was unenforceable. As a result, the claimant had no loss which could be It was contended by the hire company that their credit recovered from the at-fault driver and the hire claim rate was reasonable and fell within the bracket was dismissed. charged on the open market. This submission was rejected by the court with HHJ Plumbstead finding Although Chen Wei has provided some guidance in that Mr Bent hiring on a credit basis from Accident relation to one of the counter arguments submitted by Exchange without making any other enquiries was an representatives of the credit-hire organisations, automatic failure to mitigate. She found that in the litigation surrounding the regulations has seen absence of any reasonable attempts to mitigate the numerous attempts to persuade the court that the court would award a sensible figure based on regulations do not comply or have been complied market rates. with. Arguments which the judiciary is having to consider include whether: Taking a broad brush approach as ordered by the CA, HHJ Plumbstead assessed the spot-hire rate for a  the regulations still result in the hire being reasonably equivalent car to be £396.00 + VAT per irrecoverable where the hire has in fact been paid day – a 31% reduction on the rate claimed. In doing at the end of the credit period by a legal expenses so she found that where there is a complete failure to policy obtained by the claimant mitigate, the claimant will recover the middle of the  an agreement drafted to comply with the distance bracket of market rates for the time of hire. marketing regulations goes sufficiently far to satisfy the requirements of these regulations The court further made no deduction to the rates  the written notice as provided in certain produced (which were obtained two years after hire) to agreements is incorporated within the document reflect any change in the market. Evidence from (as required by the regulations); and Accident Exchange as to a significant fall in the rates  the regulations are ultra vires. within the hire market was rejected by the court.

Whilst Chen Wei has provided some assistance, with The court found that the sum claimed by Mr Bent was arguments and cross-arguments it is probable that almost £20,000 more than what it would have cost 2011 will see one or more of these arguments being him had he acted reasonably. The rate sought was addressed by the CA. over 30% above the amount which he could have hired a car for had he taken any steps to make Spot-rate evidence: Darren Bent v Highways & Utilities appropriate enquiries. Construction Ltd and Allianz Insurance Plc (Cambridge County Court, 9 February 2011) At the time of writing, permission to appeal has been sought by the claimant’s representatives but has yet to Following the CA’s decision in March 2010 – which be granted. decided that a hirer with means is not entitled to recover credit-hire rates – the matter returned to Cambridge County Court to assess the appropriate spot rate.

The court found that a reasonable person, spending Sarah Cartlidge his or her own money, should have hired for a rate Associate

Berrymans Lace Mawer Disclosure 17 April 2011 15 Expert witness immunity abolished

Public policy The Supreme Court recently delivered its importance, so referred the matter could no longer decision in Jones v Kaney [2011] UKSC straight to the Supreme Court. justify the 13, effectively abolishing the immunity continued previously afforded to expert witnesses Decision of the Supreme Court from claims for negligence arising out of blanket evidence prepared for the purposes of, The 7 Supreme Justices held, by a immunity of and in connection with, legal majority of 5:2 (Lord Hope and Lady Hale expert proceedings. dissenting), that public policy could no witnesses longer justify the continued blanket Facts immunity of expert witnesses and allowed Mr Jones’s appeal. Th e appellant, Mr Jones, was the claimant in a personal injury accident. Dr Lord Phillips, delivering the lead judgment Kaney was instructed to examine Mr of the majority, set out a number of Jones and prepare a report, which stated arguments in favour of removing that Mr Jones was suffering from post- immunity for expert witnesses (whilst traumatic stress disorder (PTSD). keeping it for witnesses of fact), including Proceedings were subsequently issued. A that expert witnesses have chosen to second report followed stating that Mr provide their services for reward and that Jones did not have all the symptoms of the vast majority carry professional PTSD, but was still suffering some PTSD indemnity insurance. symptoms and depression. The ‘floodgate’ argument was seen as The defendant’s expert, Dr El-Assra, flawed, as the wave of claims against alleged in his report that Mr Jones was barristers did not follow after removal of exaggerating his symptoms. A joint their immunity in Arthur JS Hall & Co v meeting was held and Dr El-Assra Simons [2002] 1 AC 615. It was said that prepared a draft joint statement, which expert witnesses had more in common Dr Kaney allegedly signed without with barristers than witnesses of fact, and reading it or making any amendments. as immunity had been removed for barristers there was little/no justification The joint statement was very damaging, for keeping it in place for experts. as there was agreement between the two experts that he was not suffering from It was further felt that justice would not be PTSD and that Dr El-Assra had found Mr impeded by expert witnesses becoming Jones deceptive and deceitful. Both experts agreed that his behaviour raised doubts as to whether his symptoms were genuine. Permission to change Dr Kaney as expert was refused, leading to settlement of Mr Jones’s claim at a lower level than would have been achieved.

At first instance, Blake J struck out the claim on the basis that expert witnesses are immune from civil suit (Court of Appeal’s decision in Stanton v Callaghan [2000] QB 75). However, Blake J viewed this as a point of law of general public

16 Disclosure 17 April 2011 Berrymans Lace Mawer reluctant to give evidence and that What does this mean? Insurers will removal of the immunity may actually need to have a positive effect of deterring Whilst the Supreme Court considered consider experts from being overly optimistic that the removal of the immunity for carefully the and leading to an increase in the early barristers had not opened the resolution of disputes. ‘floodgates’ for claims, such claims are potential now quite commonplace so it appears ramifications of Lord Kerr commented that an expert inevitable that claimant solicitors will this decision expressing an honestly held view, even seize upon this new area of litigation. if it differs from his original view, had Whether an expert would normally be nothing to fear from a disgruntled party able to defend such a claim as set out and the supposed longevity of by Lord Kerr, remains to be seen. immunity: Was in no sense an adequate Insurers will need to consider carefully justification for … denying the potential ramifications of this deserving claimants of an otherwise decision. In particular, they may now due remedy … wish to consider whether to exclude expert witness work from standard Lord Dyson commented that: professional indemnity policies and/or There is no conflict between the to create specific endorsements to duty owed by an expert to his client cover such work. and his overriding duty to the court. BLM anticipates claims against medical Lord Hope, in his dissenting judgment, professionals are likely to be the argued for the continuation of the majority of claims advanced, due to status quo and that: the number of personal injury claims … An incautious removal of the that are issued but, unless and until this immunity from one class of witness decision is modified by further risks destabilising the protection that decisions, it appears that no expert is given to witnesses generally … witnesses are safe from claims for negligence. Lord Hope considered that the majority had failed to set out a secure At first sight this is an unfortunate result principled basis for removing the for professional indemnity insurers as it immunity from expert witnesses. Lady opens the possibility of claims against Hale concluded: professionals that could not be brought To my mind it is irresponsible to before, although only time will tell make such a change on an whether there will actually be many of experimental basis ... more suitable these claims. However, in the wider for consideration by the Law context and longer term, the decision Commission and reform … by may actually operate in insurers’ favour Parliament rather than by this court. if it serves to encourage claimants’ experts to be more cautious in their support of doubtful claims.

Paul McGinn Trainee solicitor

with contribution from

Michael Bluthner-Speight Associate

Berrymans Lace Mawer Disclosure 17 April 2011 17 Safe as houses?

Robinson v PE Jones (Contractors) Ltd [2011] EWCA Civ 9

This is an important caused – the flue was decision for anyone simply defective and always had been. involved in building defect claims The proceedings particularly when those defects are only The contractual claim was discovered many time barred and Mr Robinson claimed in years after the negligence so that he construction took could avail himself of the place. In such more generous time limits circumstances when a for bringing a claim as contractual claim has provided for by s14A of the Limitation Act 1980. At become time barred first instance Judge Davies claimants have held that in principle a previously sought to builder can owe a duty of rely upon the more care in tort to his client, generous time concurrent with his duty in contract, in relation to the periods afforded to economic loss ie, the cost claims in negligence. of rectifying the defective house. However, on the As a result, a frequent point of contention in building facts of this case the contract excluded any tortious cases is whether a contractor owes its client a duty of care and that exclusion satisfied the test of concurrent duty of care in tort to carry out its work reasonableness under the Unfair Contract Terms Act with reasonable skill and care so as to avoid causing 1977, and the claim was dismissed. a purely economic loss ie, costs incurred in rectifying a defect within the building works as distinct from The appeal causing injury or damage to ‘other property’. The issue has been the subject of conflicting decisions in The claimant’s appeal failed and HHJ Davies’ decision the Technology & Construction Court (TCC) which the that the contractual exclusion of liability precluded any Court of Appeal (CA) has now sought, perhaps tortious duties arising was upheld. However, Jackson LJ unsuccessfully, to resolve. went on to address in detail the conflicting judgments of the TCC as to whether a builder owes a duty of care The facts in tort, concurrent with a contractual duty, to avoid causing purely economic losses. In December 1991 the defendant building contractor agreed to sell and the claimant agreed to purchase a Since the House of Lords decision in Murphy v house which was then under construction. The contract Brentwood [1991] 1 AC 398, it has become trite law restricted the builder’s liabilities in both extent and that a duty of care in negligence to avoid causing duration to those provided for by the NHBC damage to the building itself does not generally arise – agreement. Twelve years after the completion the that is an irrecoverable pure economic loss being claimant discovered that a chimney flue was defective merely the cost required to correct the defective ‘thing’ and had not been constructed in accordance with supplied. However, in relation to professional services good building practice with the result that combustion (including design) the law took a different path and products were not being properly drawn into the cases such as Hedley Byrne v Heller & Partners [1964] chimney flue. No personal injury or other damage was AC 465 as developed in Henderson v Merrett

18 Disclosure 17 April 2011 Berrymans Lace Mawer Syndicates [1995] 2 AC 145, established that a duty unlikely that a concurrent duty of care will be found of care could be owed in respect of pure economic to be owed in relation to economic losses – at least losses where there had been an assumption of in relation to the traditional form of building responsibility by the party providing the service and contracts. thus a dichotomy in the field of construction law opened between errors of design on the one hand Interestingly, the earlier Court of Appeal judgment and errors of workmanship on the other. of Barclays Bank v Fairclough (1995) 76 BLR 1 does not appear to have been considered by the appeal The question of whether the mere existence of a court. In this case the CA held that a sub-sub- contractual relationship gives rise to the necessary contractor did owe a sub-contractor a concurrent ‘assumption of responsibility’ to impose a duty of duty of care in tort to avoid causing economic loss. care to avoid causing a purely economic loss in Beldam LJ noted: building cases has been a matter of differing A skilled contractor undertaking maintenance judgments in the TCC. Finding in favour of such a work to a building assumes a responsibility duty of care were Judge Hicks QC in Storey v which invites reliance no less than the Charles Church Developments Plc (1995) 73 Con financial or other professional adviser does LR 1 and Judge Seymour QC in Tesco Stores Ltd v in undertaking his work. The nature of the Costain Construction Ltd [2003] EWHC 148 7 responsibility is the same though it will differ (TCC). Finding against such a duty arising were in extent. Judge Humphrey Lloyd QC in Payne v John Setchell Ltd [2002] BLR 489 and Judge Toulmin CMG QC It is not easy to reconcile the difference between in Mirant-Asia Pacific Ltd v OAPIL [2004] EWHC professionals on the one hand (who owe a 1750 (TCC). concurrent duty of care) and skilled contractors who, following Robinson, do not. Both involve skilled work Jackson LJ sought to provide a resolution to these and both know their clients will rely upon them to conflicting judgments and held that in the absence carry out such work with reasonable skill and care of an assumption of responsibility (which would and that if they do not economic loss is likely to require something more than the simple presence of result. The Robinson decision further leaves it a contractual relationship) no such duty of care in uncertain as to the position of a design and build tort is owed by a builder to the purchaser in relation contractor and whether a duty of care would be to economic losses because otherwise ‘such an owed in relation to design errors analogous to a approach would involve the wholesale professional’s duty. Although Jackson LJ has subordination of the law of tort to the law of attempted to resolve the often debated issue as to contract’. Of course what additional circumstances whether concurrent duties of care are ordinarily owed may now be required to establish an ‘assumption of by contracting parties in building cases, the issue responsibility’ is likely to be fertile ground for future remains uncertain. Given conflicting CA guidance, argument. Burnton LJ agreed with Jackson LJ, and the issue will at some stage need to be determined indeed went further, stating: by the Supreme Court. It must now be regarded as settled law that the builder/vendor of a building does not by reason of his contract to construct or to complete the building assume any liability in the tort of negligence in relation to defects in the building giving rise to purely economic loss.

Is this an end to arguments of concurrent duties?

Pr obably not. Strictly speaking the finding as to whether a concurrent duty was owed is obiter (and therefore not binding) because the decision was based on the fact that the contractual terms reasonably excluded any liability arising beyond that provided for by the NHBC agreement. However, in light of this decision, and given Jackson LJ’s indication that but for previous authority he would have erred against any tortious duty arising save for Warren King physical damage to other property or injury, it is now Partner

Berrymans Lace Mawer Disclosure 17 April 2011 19 Disclosure: Watching brief

Legal updates and key changes

New Ogden Tables Noise-induced hearing loss

Updated editions of the tables are planned for 2011 In Baker v Quantum Clothing Ltd & Others [2011] and beyond. UKSC 17, the first NIHL claim to be heard by the Supreme Court, the appellant employers succeeded The current edition of the tables, the sixth, dates from in restoring NIHL practice to the position prior to the 2007. The multipliers it provides for calculating Court of Appeal’s controversial 2009 judgment. lump-sum awards for future losses in personal injury Baker provides guidance for handling of all future cases are based on population and life-expectancy NIHL claims: data from the Office of National Statistics which dates back to 2004. This is quite obviously now out 1 Ordinary/average employers will not be in breach of date, and the Government Actuary’s Department is of duty at common law or under section 29 of the keen to issue a corrected set of tables based on Factories Act 1961 in respect of noise exposure current data. below 90dB(A) LEP,d prior to 1 January 1990. 2 Employers with greater than average or special This is very likely to happen some time in the knowledge can be in breach of duty with respect second half of the year. Because of continuing to such exposure before 1990. However, these improvements in life expectancy, it must be expected employers will be allowed a further two years from that the new multipliers in this proposed seventh such knowledge within which to implement a edition of the tables will be higher than previously hearing protection policy: ‘actual knowledge’ (at identical rates of discount). The increases for any does not immediately become ‘guilty knowledge’. given age will vary greatly, but they appear likely on average to be around at least an extra half year (and possibly higher in certain cases).

It appears unlikely that the proposed seventh edition will feature other changes of any significance. Matters Boris Cetnik of that nature would appear to be likely to be Partner reserved to an eighth edition, which could possibly be scheduled for 2012 or 2013. BLM acted for one of the defendants

20 Disclosure 17 April 2011 Berrymans Lace Mawer Mesothelioma liability – strict, absolute or inevitable?

Sienkiewicz and Willmore school pupil from the presence of Mesothelioma ceiling tiles stored temporarily in a is possibly The unanimous decision of a seven- corridor and in the girls’ lavatory. (legally) unique judge tribunal in the Sienkiewicz and These exposures again could at best be in being said to increase but not double the risk Willmore appeals to the Supreme medically Court in March surprised many, not in a case where the claimant had only as to its content but also as to presented various alternative factual unprovable its scope. scenarios throughout the claim.

The facts of the two related appeals The facts are straightforward: Mesothe lioma is possibly (legally) Sienkiewicz v Greif (UK) Ltd (Liverpool unique in being medically unprovable County Court, 25 November 2008) – in the sense that the nature of the ‘very light’ occupational exposure disease process and the exact role of increasing the claimant’s background asbestos as a carcinogen is unknown. environmental risk by 18% from 24 to Whilst a claimant can easily prove that 28.39 cases per million. The asbestos is the sole likely carcinogen, occupational exposures therefore he cannot prove whether all or any increased the risks of mesothelioma exposures (innocent or guilty, but failed to cause the mesothelioma occupational or environmental, on the basis of either the traditional but concurrent or consecutive) actually for test or a doubling of the risk from contributed to the development of non-tortious environmental exposures. the condition.

Willmore v Knowsley MBC [2009] Following Fairchild v Glenhaven EWHC 1831 – inferred exposure as a Funeral Services Ltd [2002] UKHL 22,

Berrymans Lace Mawer Disclosure 17 April 2011 21 the abandonment of the conventional but So where does this leave us? for test in mesothelioma claims to secure justice for victims negligently exposed to 1 Evidence – the claimant is still obliged asbestos has created, as with so many to produce evidence of actual asbestos decisions, unintended exposure to asbestos. Trial judges consequences. Lady Hale recognises that have shown themselves willing to help in mesothelioma claims a defendant who claimants on shaky evidential ground may well not have caused the disease by using judicial inferences often and in many cases probably did not do supported by technical liability expert so is left fully responsible for its evidence (see Cox v Rolls Royce consequences. She sees this as an Industrial Power (India) Ltd [2007] inevitable consequence of the decision in EWCA Civ 1189). In Willmore the Fairchild, and the decisions in these two trial judge’s efforts in this regard were appeals are a direct consequence of this referred to as “heroic” (Lady Hale) inevitability and, without any mitigating and the factual findings of exposure effect of apportioning the damages, as made “on a slender and owing to the Compensation Act 2006. speculative” basis (Lord Mance). The surprise expressed by the Supreme The Supreme Court has clearly Court will not be shared by case- recognised the unsatisfactory nature of hardened asbestos litigators, and the the current legal reality. Lord Brown, court’s manifest reluctance to allow describing the journey from Fairchild to the appeal on this basis alone is Sienkiewicz as a “quixotic path”, disappointing and will give obvious deconstructed the “rough justice” of the encouragement to sympathetic judges current position. He described and ambitious claimants. That said, it mesothelioma as a “lost cause” from the can still be maintained that no defendants’ point of view, but is he right amount of expert evidence or judicial in this? There are inevitable inference can overcome the absence inconsistencies between the individual of direct witness evidence of the judgments, but the rules of recovery in victim’s vicinity to asbestos and its mesothelioma claims were summarised disturbance. clearly by Lord Brown: 2 De minimis (ie, insignificant) exposure – the decisions in this series of cases Any person who negligently or in are peppered with apparent control breach of duty exposes another mechanisms that are unexplained and more than minimally to the unclarified and in reality illusory. The inhalation of asbestos fibres will Compensation Act 2006 requires the be liable to make full increase in risk to be ‘material’, and compensation if that other the courts have still not clearly develops mesothelioma more than articulated what exposure would be five years later (explained) ... That regarded as sufficient – it is hardly statement of the position holds helpful to be told that it must escape true irrespective of whether the the de minimis principle. The victim was exposed by others to generosity of the rules on evidence even longer and more intensive and causation will inevitably inhalation (and indeed inhalation encourage litigation, and the case for of more noxious fibres), whether more clarity in this area is greater negligently or not, and irrespective than ever. Truly minimal cases will too of any environmental or other need to be tested on this basis alone exposure (again, however unless insurers conclude that Lord Lord Brown: intensive). It requires qualification Brown is correct and that all The journey only if and to the extent that the mesothelioma cases are for payment victim negligently exposed himself when any exposure is established, from Fairchild to the inhalation of asbestos fibres irrespective of its materiality (or to Sienkiewicz (when there may be a finding of otherwise) and even of the statutory ... a “quixotic contributory fault). materiality requirement. path

22 Disclosure 17 April 2011 Berrymans Lace Mawer Employers ... may now find themselves increasingly involved in litigation

3 Litigation trends – the scope for exposure was extremely slight. available targets has inevitably Regrettably the court failed to rein in broadened as a result of these the draconian effect these provisions decisions. Varying estimates have have on defendants. It felt unable to been given but the estimated two interfere with the trial judge’s findings, thirds of mesothelioma victims even though his decision was actually presenting civil claims is criticised. Disappointingly it also failed now likely to increase significantly to grapple with the difficulty of defining and the increased instance of ‘material’. This remains an issue left to employer and insurer insolvency the discretion of the trial judge, and is means that occupiers and bound to lead to unpredictability and employers who may previously inconsistency. The Supreme Court have regarded themselves as free could have both curtailed the spectre from threat or, at worst, peripheral of speculative claims against targets for asbestos claims may employers and public authorities and now find themselves increasingly brought clarity to the law. Its failure to involved in litigation. The do so was a lost opportunity which justification for a pay-and-be-paid stores up yet further problems for the approach to these claims is likely to future. This disappointing decision increase as some insurers interpret represents a lost opportunity for the this case as the writing on the wall courts to clarify this very sensitive and seek to secure appropriate subject. costs savings as rather inadequate consolation for this imposed liability.

Ever since 2006, when section 3 of the Compensation Act was hastily enacted to ensure that mesothelioma victims rarely remained uncompensated in full, defendants have been at ‘ground zero’ facing sizeable claims often in Toby Scott circumstances where the asbestos Partner

Berrymans Lace Mawer Disclosure 17 April 2011 23 ‘Showdown’ for cowboy builders

Regulations In these dark days of austerity there was repair of her garage flat roof. It could apply to a a welcome glimmer of light for hard subsequently transpired that the householder pressed homeowners with the Court of contractor was a ‘cowboy’ builder who who had Appeal’s recent endorsement of the trial did not hold any employers’ liability judge’s decisions in Kmiecic v Isaacs insurance cover so the claimant, who assumed (Court of Appeal, 22 February 2011). was injured while on the job, decided to control of work pursue a claim against the householder. performed at The circumstances of the case were his property largely commonplace. A householder The immediate cause of the accident was engaged a contractor to undertake the that the claimant, who was working for repair work at her property, including the the contractor as a casual labourer, fell from the defendant householder’s ladder, which was too short and which was not resting on a level surface, as he was trying to gain access to the roof to carry out the repairs. Previously the defendant had allowed the workmen to gain access to the flat roof through a bedroom window so that they could inspect the condition of the roof and decide upon the work that was required. However, she expressly told them that they could not use this as access to carry out the work because she did not want the disruption it would cause and she did not want the white carpets throughout her house to become dirty. Moreover, she had not directed the men to use the ladder, which they had found in her garage, to get onto the roof.

It was the claimant’s case that by her actions the defendant had exercised de facto control over the way in which the work was done – particularly as the contractor was not on site at this time and he had effectively surrendered control of the work to the defendant.

The claim was brought in negligence and breaches of statutory duty were alleged under the Work at Height Regulations 2005; the Construction (Health, Safety and Welfare) Regulations 1996 and the Provision and Use of Work Equipment Regulations 1998.

Insofar as the 2005 Regulations were concerned, reliance was placed on

24 Disclosure 17 April 2011 Berrymans Lace Mawer Regulation 3(3)(b) which places the The decision was appealed and the This decision is employer’s obligation on ‘any person Court of Appeal was required to a victory for other than a self-employed person, in determine whether any duty was common sense relation to work by a person under his imposed on the defendant by the 2005 control to the extent of his control’. and 1996 Regulations. It was held that Similarly reliance was placed on the regulations were enacted to give Regulation 4(2) of the 1996 Regulations effect to EU obligations. The principle which provides ‘It shall be the duty of laid down in Marleasing SA v La every person (other than a person Comercial Internacional de having a duty under paragraph (1) or Alimentacion SA [1990] ECR I-4135 (3)) who controls the way in which any provides that when applying national construction work is carried out by a law the national court should interpret person at work to comply with the the provisions as far as possible to provisions of these regulations insofar achieve the result pursued by the as they relate to matters which are relevant directive. However, there was within his control’. Finally the claimant nothing in Directive 89/391 or the alleged breach of Regulation 3(4) of the implementing Directive 92/57 that 1998 Regulations which again places required member states to impose an obligation on ‘any person who has obligations on occupiers who did not control to any extent of: control the way in which work was carried out. In the present case the  work equipment claimant did not come under the  a person at work who uses or claimant’s control simply because she supervises or manages the use of had previously allowed him to gain work equipment; or access through the bedroom window.  the way in which work equipment is EU legislation did not undermine the used at work.’ essential principle that an occupier of premises who sought to limit access to However, Regulation 3(4) clarifies that or egress from there did not incur an the foregoing obligation is restricted to obligation. a person having control in connection with him carrying on a trade, business In relation to the issue of safety on or other undertaking which clearly was construction sites it was better to look not the case here which led the court at employers instead. to say that the defendant could owe no duty under the 1998 Regulations. This decision is a victory for common sense, and it would have been a cause The case was therefore considered in for serious concern if the court had the light of common law negligence ruled otherwise. However, it should be and the allegations under the 2005 borne in mind that the outcome of each and the 1996 Regulations with the case is fact-dependent and if the claimant arguing that the absence of householder had played an unusually the wording in Regulation 3(4) set out large role in planning, management above meant that the 2005 and the and/or execution of the relevant work 1996 Regulations could apply to a then the outcome might have been householder who had assumed control different. of work performed at his property. That is correct but in the circumstances of this case the court was satisfied that the defendant did not assume control of the claimant, in the sense of being able to direct how he carried out his work. The defendant would not have had the necessary knowledge or expertise to devise and direct the claimant and simply placing limits on where the claimant could go was not controlling Richard Clarke how the claimant carried out his work. Partner

Berrymans Lace Mawer Disclosure 17 April 2011 25 Crime has no punishment

Does the law favour liars and fraudsters?

There has been an increasing problem with, and awareness of, fraud in the motor arena. Whether staged accidents or ‘crash for cash’, a good deal of money has been spent defending such claims and publicising the results. The experience of dealing with motor claims has brought a keener focus upon other claims areas.

Accidents at work and on the highway are as commonplace as road traffic accidents, and it is hardly a quantum leap to expect that those engaged in motor fraud will use the same methods to pursue what is, in the main, seen as a victimless crime.

There has been a significant impact from the global financial crisis upon private business and local government. For the fraudster, heartening news of well- publicised closures, redundancies and reductions in budgets offers openings due to reduced maintenance, health and safety, and highway repair and lax document retention. motor-fraud rings, concluding with custodial sentences, is evidence of that. There is a real and recognised risk that the casualty claims arena will achieve the same levels of fraud that A recent, and growing, trend is to pursue the lying have been publicised in motor circles; claims can be claimant in a separate action for contempt. concocted at the connivance and contrivance of a group who recognise the financial potential. All that is The matter of Walton v Kirk [2009] EWHC 703 (QB) needed is a ‘victim’ and possibly a willing witness. has been well publicised. As Coulson J commented, ‘exaggeration of a claim is not, without more, We are all aware of the steps that are taken when automatic proof of contempt of court’, and so to suspicions are aroused, but the state of the law succeed in a contempt action the defendant insurer continues to support the fraudulent and exaggerating must go the extra mile, and at extra cost, to achieve claimant and, in doing so, continues to penalise any measure of success. To an extent they did so with the insurer. Mrs Kirk; she was ordered to pay a fine of £2,500 and 50% of the insurer’s costs of the contempt action. The decisions in Shah v Ul-Haq & others [2009] EWCA Civ 542 and Widlake v BAA Ltd [2009] EWCA Civ Success in a contempt claim is, though, something of a 1256 touch on different aspects of fraud in personal pyrrhic victory, as perhaps the result in Kirk shows. The injury claims but come to the same conclusion: the additional layer of costs may be seen as throwing good claimant who is prepared to lie still receives a reward – money after bad. he cannot be deprived of the ‘genuine’ part of his claim if he tells gross lies about the rest of it, and he cannot Even if there had been a custodial sentence for Mrs Kirk be deprived of his damages if he falsely claims that his (apparently her health was such that prison was friends were victims too. inappropriate), yet another layer of cost would have been added to the equation. This is illustrated by the It seems to be accepted that ‘true’ fraud should not and most recent example of contempt proceedings will not be permitted to succeed, on those occasions following a personal injury claim; Shikel & Others v The when it is discovered. The success of Operation Motor Insurers’ Bureau [2011] EWHC 527(QB). Mr Genarch, for example, in publicising the pursuit of Shikel lied in an attempt to recover almost £1.3 million

26 Disclosure 17 April 2011 Berrymans Lace Mawer in damages from the MIB. He failed, spectacularly, Summers, the unnecessary surgical procedure wasted and recovered only £30,000. The Bureau then the time of surgeons and hospital staff, and delayed – pursued contempt proceedings against Mr Shikel and or denied – the opportunity for deserving patients to his accomplices, who included members of his family. receive treatment. Following two weeks of trial evidence, Mr Shikel and his father were imprisoned for 12 months each. A Cost is the panacea as far as the case law is conservative estimate of the costs involved in this concerned. Award the claimant damages ‘success’ would be in excess of £150,000, and that is commensurate with the ‘genuine’ aspect of his claim, before factoring in court time and expense and the but punish him with an order to pay the insurer’s costs cost of incarceration. associated with detecting that lie and exposing it in court. If the claimant receives his costs of the The current state of the law is weighted heavily in the ‘genuine’ part of the claim, and the insurer its costs of favour of the liar. Where is the disincentive for the the fraudulent part, the outcome can be a ‘no score fraudulent claimant? draw’, ie, the costs net themselves out.

It is said that Mrs Kirk, Miss Widlake and Mr Ul-Haq Even where an order that balances in the insurer’s did not see any of the damages they were awarded, favour is made, the legal expense insurer (whether but the fact remains that they recovered an award in engaged before or after the event) that backed the principle, and this perpetuates the idea in popular claimant will, almost invariably, have avoided the opinion that there is, generally, no risk in bringing an policy for reason of the claimant’s fraud. The exaggerated or wholly fraudulent claim. defendant insurer is left with an order for costs that is most likely of no further value, since pursuit of it will But why is fraud by gross and deliberate exaggeration incur further cost in a fruitless attempt to enforce the permitted? Is fraud not fraud in all its guises? order against the fraudster.

A fraudulent claimant has a win-win situation; if he The claimant’s solicitor, for whom one may have maintains his lie, and is not found out, his reward is sympathy if he has been as much misled as the rest of grossly inflated. If the lie is discovered, then he the protagonists, cannot recover significant receives the ‘fair’ award that he would have received disbursements that have been paid together with his had he not lied. own costs.

The most recent case of this sort to reach the Costs then do not appear to be the answer. appellate courts is Summers v Fairclough Homes [2010] EWCA Civ 1300. We are left pursuing an appeal to overturn the Shah and Widlake findings. Smith LJ, in her judgment on Mr Summers was employed by the defendant and Shah, commented that if there is to be a change in whilst at work he slipped from the step of a fork lift the law, it should be made by Parliament and then truck, fracturing his ankle and wrist. Proceedings were repeated the same observation in the brief Court of issued at limitation, and a signed schedule of loss was Appeal hearing in Summers. pleaded in excess of £838,000 plus general damages. It could be argued that parliamentary process need not be engaged, particularly when the power to deal At trial, six years after the accident, there were properly with liars already exists under the Civil findings that the claimant had committed fraud to the Procedure Rules. The point of the Summers appeal is civil and criminal level. There were findings too that precisely that: the court should have the power to he had undergone an unnecessary surgical procedure strike out even the ‘genuine’ part of the liar’s claim. to support his claim; he had told the same lies to his treating consultant as he told the medico-legal Permission has been given to appeal to the Supreme experts. He was, as Ward LJ commented in the Court Court in Summers, where it is hoped that the truth, of Appeal, ‘an out-and-out liar who exaggerated his and truthful litigants, will win out. claim to a vast extent’. Yet at first instance Mr Summers was still awarded in excess of £88,000.

Permission for contempt was refused; the trial judge considered that it was not in the public interest. The CPS subsequently refused to pursue a complaint of insurance fraud, again for reasons of public policy. It David Spencer seems to have been ignored that, in the case of Mr Partner

Berrymans Lace Mawer Disclosure 17 April 2011 27 Adequate evidence of adequate procedures

Bribery Act 2010: Clarity arrives in time for July implementation

The Justice Secretary, Kenneth Clarke, Associated person announced on 30 March 2011 that The Bribery Act 2010 will come Of particular note for corporate into force on 1 July 2011. That organisations is they can be found guilty announcement was accompanied by if an ‘associated person’ carries out an the publication of the long-awaited act of bribery on its behalf. An guidance for businesses on adequate ‘associated person’ is defined as procedures to prevent bribery. To someone who performs services on coincide with this behalf of the principal – a deliberately announcement, the Director vague definition intended to embrace of Public Prosecutions (DPP) the full range of people connected to an and the Director of the Serious organisation who might be capable of Fraud Office (SFO) issued joint committing bribery on its behalf. guidance on what will influence their decision to prosecute. Businesses will need to make sure that they have stringent risk assessments in The new framework place for all subsidiaries, joint ventures, partners and members of their supply By way of reminder, the Bribery chains in order to avoid criminal liability Act 2010 introduces a new set for their acts. It is expected that there of criminal offences which are will be heavy emphasis on due diligence considerably wider than those under when entering new markets which may existing UK law and the US Foreign have a significant impact for businesses Corrupt Practices Act. looking at acquisitions and new business opportunities, and those The Act sets out four offences: entering into partnerships and joint ventures.  Offering, promising or giving a bribe.  Requesting, agreeing to receive or Guidance on the Corporate Offence accepting a bribe.  Bribing a foreign public official. Th e guidance recognises that no  Failure of a commercial bribery-prevention regime will be organisation to prevent bribery completely watertight. To assist (the Corporate Offence). businesses there is a defence of having ‘adequate’ procedures in place to The Corporate Offence protect themselves from committing the Corporate Offence. The guidance It is this new offence which suggests that businesses should adopt a commercial organisations have proportionate and risk-based approach. been particularly concerned about. It promotes six fundamental principles It is a strict liability offence and the that organisations should follow to prosecution will not have to prove that protect themselves from prosecution: the business knew anything about the bribery – just that it had failed to prevent 1 Proportionate procedures – it. There is a broad jurisdictional reach proportionate to the bribery risks covering the failure to prevent bribery by that the organisation faces. anyone associated with the company 2 Top-level commitment – a anywhere in the world. commitment to compliance from the highest level.

28 Disclosure 17 April 2011 Berrymans Lace Mawer 3 Risk assessment – the risks of based upon the public interest and bribery in your organisation and if reasonable steps were taken to its ‘associates’. try to avoid facilitation payments a 4 Due diligence – vetting those prosecution is less likely to be in organisations you do business the public interest. The guidance with. does recognise the problems that 5 Communication – so that bribery businesses face in some parts of prevention policies and procedures the world and in certain sectors are embedded and understood and the intention to eradicate throughout the organisation. them through international 6 Monitoring and review – having co-operation. a system to ensure that the procedures are reviewed and Clarity or uncertainty? amended to catch new risks as they arise. The guidelines bring greater clarity on a number of issues, including what Reaction from businesses constitutes ‘acceptable hospitality’. However, some will take the view that The guidance does not provide a further clarity is still required. Larger ‘one-size-fits-all’ approach. Instead, businesses in particular may need businesses should apply the principles further guidance of what procedures to their own circumstances with the are deemed ‘adequate’ for them. underlying theme of proportionality to the risks faced by the business. Small Questions remain about how the businesses will be relieved to hear legislation will be enforced and, in that they can avoid implementing particular, how prosecutorial unnecessary controls, and the discretion will be exercised by the resultant costs, if they do not foresee SFO and CPS. The current UK public a risk of bribery in their company. spending cuts may also restrict their ability to fully investigate suspected Corporate hospitality bribery, particularly ones which are primarily based abroad.  There is helpful guidance that reasonable and proportionate The waiting period is now over, and corporate hospitality is viewed as businesses have until July to revise part of business, where it seeks to their anti-bribery policies ready for cement relationships or showcase the Act’s implementation. products or services. For example, taking a client to a sporting event, or paying for a foreign public official to travel abroad for a site visit and then providing a meal and entertainment, would not breach the Act if that were reasonable and proportionate for the business.

Facilitation payments

 The guidelines make it clear that payments to government officials to perform their normal responsibilities, remain unlawful The guidance with very limited grounds for defence in the event of breach. does not However, the prosecuting provide a authorities retain the discretion as Julian Smart ‘one-size-fits-all’ to whether or not to prosecute Partner approach

Berrymans Lace Mawer Disclosure 17 April 2011 29 Good faith v fraud

In a modern era where fraudulent claims are becoming so prevalent, it is extraordinary that the principles of good faith in insurance contracts that existed in 1906 are still in force over a century later.

The modern day insurance contract is a far cry from the days when mercantile insurance was first provided for ship owners and operators, with most households in the UK now having at least one if not multiple insurance contracts in place.

In July 2010 the Law Commission published issue paper 7 seeking to clarify views on whether the law should provide greater clarity when policyholders act fraudulently.

Legislation v The judicial approach

The Marine Act 1906 provides a remedy of complete avoidance of the policy. The judiciary over time has limited the rights of insurers to avoid policies from inception following the making of a fraudulent claim. The judicial view (following such cases as Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep practitioners if the courts interpreted the statute in a IR 209) considers a fair outcome to be forfeiture of clear and concise manner, to avoid challenges by the policyholder’s entire fraudulent claim, but not to policyholders and confusion as to what remedies are the extent of repayment of genuine losses incurred in available to an insurer faced with a post-contractual the policy period. breach of duty.

The consultation asked: if in view of the contradictory Clarification by statute may also remove the need for position between statute and common law was insurers to attempt to extend their remedies by clarification required? The overwhelming reply to the contract in the policy wording, therefore avoiding the consultation was that clarification would be beneficial challenging aspect of drafting the terms in a fair and as the present position was overcomplex and did not unambiguous manner. act as a deterrent. The ABI identified how the courts have interpreted the same legal issue in at least three Genuine claims different ways. How far should any reform go in respect of the The respondents were divided as to whether the law insurers’ obligations to meet genuine claims made was sufficiently clear as it stands. Some practitioners before or after the fraudulent act? It was widely argued it was not for statute to interpret the law with accepted (all but one reply to the consultation agreed) others submitting that statute and common law are that the policyholder should not forfeit previously co-existing neatly together. In view of the lack of made genuine claims. The position of claims made challenges by the insurance industry to the leading after the fraudulent act is unclear. This brings to the cases it would seem apparent the judicial view is forefront of the discussion the question of termination accepted as reasonable. or avoidance.

However, with many of the major insurers operating This is a difficult area to legislate as until the contract across multiple jurisdictions it would be beneficial for

30 Disclosure 17 April 2011 Berrymans Lace Mawer carefully balanced with the insurer’s ability to protect itself. Taking Direct Line Insurance Plc v Khan [2001] EWCA Civ 1794 as a starting point, should the wife realise that the husband’s attempt at committing fraud has been discovered, she could distance herself from him and seek to recover part of the losses. How in this case would an insurer be able to prove she was a part of the fraud if required to do so? In addition how would the value of the claim be divided between the parties? If the parties own the property jointly then how will the court distinguish the value of one party’s loss?

A large percentage of the responses to the consultation also recognised these practical problems in attempting to legislate for joint policyholders. The respondents did largely agree it would be more equitable to establish a rebuttable presumption of involvement, so that the innocent co-insured could prove their innocence. The practical ways in which this could be balanced against the risk of a guilty co-insured benefiting is a very difficult question to answer.

Summary

It is clear from the responses to the paper that the industry recognises that fraud is a problem area that must be addressed, and the law must continue to provide a clear and concise deterrent to anyone who commits fraud. However, there is a clear division as to how this would be best approached by either amendment to statute or allowing the judiciary to is avoided/terminated the policyholder technically continue to interpret the law. The main advantage of has the right to make claims against it. Under the putting the principle of utmost good faith and the current legislation, if the policy is avoided due to consequences of a fraudulent action on the statute fraud, then no future claims can be made but this book would simply be clarification for the judiciary does not sit comfortably with the judiciary. The as to the remedies available. As to what those response to the consultation was divided on the remedies should be it is not clear whether it should issue of avoidance with many wanting the remedy be forfeiture of the claim, or the more harsh penalty kept for the most serious of fraudulent claims. of avoidance of the policy. However, this may just create further uncertainty for the judiciary as to which case warrants avoidance. One final additional comment by some of the respondents to the consultation was the growing The response to the point of termination also caused concern of the position of good faith when a third division as most felt that as the duty of good faith party makes a claim against an insurance policy, had been breached at the moment of the fraudulent which at present remains completely at odds with the act then termination must be from this point, rather general duty of good faith. This may form the basis than allow further genuine claims to be paid. The for further consultation prior to any proposal to Financial Ombudsman Service agreed that normally legislate on the area in general. the termination would be from the date of the fraud.

Joint policyholders

The position of joint policyholders is an area which requires careful thought. Whilst it would appear harsh to penalise an innocent policyholder for the Simon Hammond actions of a co-insured, this will have to be very Partner

Berrymans Lace Mawer Disclosure 17 April 2011 31 Start of business for the Legal Ombudsman

On 23 December 2010, the Legal Ombudsman (LO), which formally opened for business in October 2010, issued its first final decision.

The chief ombudsman, Adam Sampson, announced on his blog that the first case had gone through the resolved LO’s system to a final decision by an in favour of the lawyer ombudsman, marking the start of and the LO is satisfied that the lawyer ‘business proper’ for this much- took all reasonable steps to try to anticipated organisation. resolve the complaint themselves. This is an important milestone for Publishing decisions professional indemnity insurers as well as the legal profession, as although it marks Al though the Legal Services Act gave the the beginning of what may become a LO the power to publish reports of its new body of decided cases, telling those investigations and outcomes, the first final who provide legal services in England decision was not published. The chief and Wales what the system expects of ombudsman’s blog simply stated that: them when it comes to complaints about The decision we have just poor service from their clients, the LO made doesn’t give the awards could make a significant portion complainant everything she of professional indemnity claim spend, wants, but it does give her which would be something of concern to more than the lawyer thinks the whole profession. is reasonable. The new approach He gave no further details about the complaint or the final decision. Th e LO’s aim is to provide a new approach to handling complaints about However, on 24 February 2011, legal services and resolving complaints following a discussion paper and about lawyers in a more streamlined, research completed by the Legal efficient and effective way. Services Consumer Panel, the LO announced that it would now publish When a complaint is referred to the new statistics and anonymised case service, the first step in every case will be summaries on its website. This will be the preparation of a ‘recommendation extended further, from June 2011, to report’, which will be sent to both parties include ombudsman summaries with for their comments. The complaint will This is an details on the area of law, the type of be passed to an ombudsman to make a lawyer, the outcome of the case and the important decision. It remains to be seen whether it remedy. The LO is also considering, with milestone for will be mired in administration like its the help of a consultation workshop with professional predecessor organisations, the Legal representatives from the legal profession Complaints Service and the Bar indemnity and consumer bodies, whether to Standards Board. insurers as well publish the name of the law firm. A decision on this is expected by the end as the legal The LO will charge a case fee (currently of 2011. profession £400) to lawyers, unless a complaint is

32 Disclosure 17 April 2011 Berrymans Lace Mawer Complaints concerning allegations of alleged and compensatory damages negligence awarded, then any such finding would constitute a ‘civil liability’ under the The LO’s primary purpose is to Solicitors’ Indemnity Insurance Rules. consider complaints about service, Consistency is also a concern. rather than cases involving Although the scheme rules say the professional negligence, or legal ombudsman will apply a ‘fair and wrongs such as a breach of trust. Like reasonable’ test in deciding cases, the Legal Complaints Service and Bar how that is interpreted is very largely Standards Board before it, the LO can at the discretion of the individual require the lawyer to apologise and ombudsman deciding the case. The pay a penalty to a former client for first published final decisions will be distress and inconvenience arising examined with interest by lawyers and from some aspect of poor service. their professional indemnity insurers However, unlike its predecessors, the alike, for indications of how the new LO does have statutory jurisdiction to service is likely to exercise that make an award for compensation, discretion and the potential impact of capped at a limit of £30,000 (which that on the profession as a whole. will be binding on the lawyer) in cases where a complaint also involves an element of negligence. Complaints Elizabeth Hughes wholly concerning misconduct will be Solicitor referred to the relevant regulator. with contribution from This is likely to be of concern to professional indemnity insurers as Christopher Fitton there is little doubt that if negligence is Partner

The LO does have statutory jurisdiction to make an award for compensation

Berrymans Lace Mawer Disclosure 17 April 2011 33 Employment update: Are you ready? The enhanced rights of agency workers

The development of rights for individuals in the workplace was to the advantage of those who provided their labour directly to the ‘employer’. They were defined as employees or workers, the technical differences being beyond the scope of this article. However, the common factor was the bipartite nature of the employment relationship, individual and employer. This article explores those relationships that developed where individuals were treated as human resources. Although it would be cynical to describe individuals as being bought and sold, they were a resource that was often provided by one entity to another on what were agency arrangements. Whilst a fleet manager might hire 30 wagons, the HR manager might similarly hire 30 seasonal labourers.

The law had become muddled when the Court of Appeal (CA) had moved down what turned out to be a cul-de-sac, by 2008/104/EC, and following seeking to treat certain types of agency consultation with the TUC and CBI the workers as employees. In Dacas v Brook former Labour administration put forward Street Bureau [2004] EWCA Civ 217, the the Agency Workers Regulations 2010 CA suggested that perhaps an agency (the Regulations) with a commencement worker could transform into an employee date of 1 October 2011. if enough time had elapsed. This attempt to provide judge-made Glossary Notwithstanding the new protection for agency administration’s intentions For the purposes of this workers was quashed by a to cut out red-tape, the article, these terms apply: robust judgment of Mr regulations have been left Justice Elias in the EAT in  Worker: The person who untouched, and guidance James v London Borough provides his or her from the relevant of Greenwich [2008] labour under an agency government department is EWCA Civ 35. In James, arrangement. expected in August 2011. Elias J made it clear that  End-user: The The guidance to the The law had the agency worker could organisation to which regulations does provide not become an employee become the labour is supplied. the detail from which the simply by the effluxion of  Agency: The muddled when devil must be teased out; time and there had to be a intermediary which this article represents an the CA had change to the contractual introduces the worker to overview. moved down arrangements agreed the end-user. what turned between the parties. Given that the out to be a discrimination rights, now found in the The UK’s treaty obligations are contained Equality Act 2010, already protect cul-de-sac in the Agency Workers Directive

34 Disclosure 17 April 2011 Berrymans Lace Mawer agency workers from discrimination,  Employment tribunal jurisdiction: Experts have the protection relates to terms and The usual three-month limitation questioned conditions of employment and period applies, and the the definition victimisation. employment tribunal has exclusive used for jurisdiction under the regulations. Already some experts have questioned ‘Injury to feelings’ are excluded agency the definition used for agency workers from the provisions, although some workers who may benefit from the regulations. commentators have questioned It appears to be a somewhat whether this can be the case for convoluted definition that may require victimisation claims. Clarity from judicial interpretation to deal with the the guidance will assist. various types of arrangements entered  Liability: Primary liability will fall into in the tripartite relationships of upon the agency, but in provisions agency work. similar to those in TUPE claims apply to apportionment between Workers falling within the definition for end-users and agencies. protection have certain further hurdles  Contracting out: As usual to surmount before they can insist on contracting out is forbidden and as their rights. with complex regulations like TUPE the tribunals are expected to apply Qualifying period a purposive approach to interpretation. For much of the new rights, the worker must have been engaged for 12 weeks The regulations fall short of the Dacas in the same role for the end-user. There type of protection by reclassifying are provisions for suspension of the agency workers as employees of the relationship for up to six weeks where end-user, and the robust position in the qualifying period will not be ended. James remains good law. However, these are complicated provisions that Comparator require careful assessment by agencies and end-users. The former are likely to The right to equal treatment central to be well prepared for the regulations the regulations’ protection necessarily whilst the latter may remain requires the worker to identify an concentrated on surviving the actual comparator (the concept of economic downturn. The use of human hypothetical comparator being resources just got a bit trickier, and for applicable is debatable). If the the proprietor of an SME, the best comparator is doing broadly similar investment might be in the services of a work and is directly recruited by the HR manager, permanently employed, end-user, then provided the worker is of course. paid the same and receives the same benefits, the regulations will be deemed to be complied with.

Having established eligibility under the regulations, the protected workers enjoy the following:

 Benefits protected are: Pay, duration of working time, rest periods, rest breaks, length of night working and annual leave.  Victimisation: If the worker is an employee of the agency and is dismissed for asserting his or her rights under the regulations, the Michael Parr dismissal will be unfair. Partner

Berrymans Lace Mawer Disclosure 17 April 2011 35 Safety first with driver health

The importance of the health and safety of drivers cannot be underestimated

Michael Oliver became a BLM consultant in November 2010. He has over 35 years of litigation experience, the last 20 of these principally in the road transport sector, first forming transport teams, then as a transport consultant and lawyer. He has worked closely with trade organisations in both the passenger and goods sectors, as well as with insurers and brokers. He has managed a number of leading cases particularly in drivers’ hours, but also in accident, injury and negligence (claimant/defendant) actions, currently still undertaking recovery claims for many road-transport operators across the country. Michael advises and works closely with BLM’s national transport team.

The roadworthiness of commercial vehicles, goods or and any shortcomings, once a concern is raised. passenger, is always of paramount concern. Ensuring safe operation requires documented procedures for Consequently, if there was no evidence of an effective defect checks, safety inspections and test preparation. defect reporting system or safety inspections being Traffic commissioners, responsible for regulating the completed at required intervals, the likely conclusion is licensing of large vehicles, place safety at the top of that licence undertakings are not being met. In turn, their agenda. The importance of effective risk- this may lead to prosecution and a licensing inquiry. management and safety procedures cannot be Adherence to such procedures (and others) should underestimated when it comes to accident prevention. highlight any significant issue concerning the vehicles and their safe, compliant operation. The process However, if safety is key to compliant vehicle operation Wh en applying for an operator licence, goods or and adherence to licence undertakings, should equal passenger, the application contains a list of attention not be given to the health of those driving undertakings given by the applicant. These must be vehicles? The profile of driver health has been raised adhered to if a licence is granted. They include recently, on the premise that driver health is at least as compliance with laws relating to driving, operation and significant as proper maintenance and servicing of maintenance of vehicles, as well as with drivers’ hours vehicles. Even a vehicle in perfect condition becomes a requirements. Document trails verifying procedures to potentially lethal weapon if a driver is unwell and comply with these undertakings are vital. Enforcement unable, even momentarily, to properly control it. investigations frequently focus upon such documents Recent events have underlined the importance of paying no less attention to the health and fitness of drivers than to the condition of vehicles they control.

Some contend that, provided a valid licence is held for the vehicle driven, no further enquiry is necessary. This, however, begs a number of questions and, viewed objectively, represents something of a ‘head in the sand’ approach. Whilst, previously, symptoms and effects of particular conditions were little known and less understood, that is no longer the case. The profile of conditions from sleep disorders to diabetes, amongst others, along with their general symptoms, has been raised to a level where they cannot be ignored. Such awareness must bring with it an obligation to ensure, within reasonable limits, that a driver’s state of health is not affecting safe vehicle operation.

At a recent inquest, where a bus had collided with a

36 Disclosure 17 April 2011 Berrymans Lace Mawer cherry picker, evidence showed the bus driver had and operator to arrange appropriate treatment or previous sight problems. How often, in most support, with a view to ensuring the driver’s operations, is a driver’s eyesight checked and any continued fitness and ability to drive and work. That deterioration detected – unless actually declared by is in everyone’s interest whilst also addressing the the driver? Studies indicate potential links between wider safety concerns. obesity and sleep disorders. Other indicators may exist for such conditions as diabetes or heart Regular eye checks should also form part of this problems. Periodic safety checks of vehicles are process. In general, eye tests are recommended, at accepted as standard practice, so what about such least every two years as is standard for those working checks also being made upon drivers’ general health with computer and similar screens. Eye checks could and well-being? be dealt with at the same time as the health checks already discussed. Such checks must be of at least Addressing such concerns is as important for drivers equal importance for those controlling the potentially as for operators (and, indeed, other road users). If a lethal weapon a large commercial vehicle becomes, condition is diagnosed, treatment may deal with or where the driver is unwell or vision is impaired. control it so that the risk of some dangerous occurrence is averted and the driver is able to The health of drivers is as crucial, perhaps more so, continue working. Alcohol and drugs policies have as the safe condition of the vehicles themselves. been established by many operators. These generally Raising awareness amongst drivers and management provide for regular and random checks with is an important first step towards tackling this appropriate follow-up provisions. Periodic checks of concern. Observation is an important element of this driver licences are made with the DVLA as a matter process. If a driver experiences an unusual number of routine. These alone, however, are unlikely to of moving incidents over a short time period, or a identify developing conditions or deterioration in sudden increase in weight or unusual change in fitness due to existing or potential health problems. behaviour is noticed, these may be warning signs of If reasonable precautions would bring a particular health issues requiring investigation. It follows that health problem to light, then having no such any driver health procedure should allow for further arrangements in place seems bound to adversely checks and investigation. affect not only the operator’s licensing position, but also insurers considering indemnity issues as well as Some argue that compliance with drivers’ hours rules questions of civil and criminal liability. and checks upon licence validity are enough. But if conditions are not known or not declared to DVLA, Steps to be taken such checks may reveal little. Rigid adherence to drivers’ hours rules is unlikely, of itself, to prevent the Tr affic commissioners have already expressed danger arising from, for example, a developing sleep concern about driver health. At a recent gathering of disorder or onset of a condition causing temporary operators, the North Western Traffic Commissioner inattention. raised two specific issues. One was ‘compliance’ itself, the other was the health of drivers. So what Conclusion steps should be taken? Procedures implemented must be both practical and effective. Drivers need to If this issue already concerns traffic commissioners, it be consulted and reassured. When first employed, a must concern operators, transport managers, drivers declaration should be signed confirming their fitness and insurers. The consequences of failing to act in to drive, then renewed regularly (perhaps annually). both insurance and licensing terms, could be The scope of authorities signed declarations catastrophic. There are also wider implications in permitting DVLA checks could be widened to cover terms of not just civil, but also potentially criminal fitness to drive. Health declarations should confirm obligations, were a driver to be allowed behind the that no medical conditions or treatment have been wheel when unfit or potentially unfit and proper diagnosed or undertaken (or medication prescribed) checks may have revealed this. Devising and which might impair the ability to drive. implementing procedures to check and safeguard drivers’ health will assist with fulfilling the obligation All this may mean revision of recruitment processes to ensure safe vehicle operation. They may also and driver employment contracts. Consideration mitigate or avoid the potential civil and criminal should be given to an initial medical check (or liability of transport managers, operators and their possibly a GP’s certificate) confirming fitness to drive directors in the event of serious or fatal incidents. and details of any relevant prescribed medication. Such checks should be repeated on a regular, Michael Oliver perhaps two-yearly, basis. These would enable driver Trans-law, and BLM consultant

Berrymans Lace Mawer Disclosure 17 April 2011 37 Reform: Step-by-step guide

What are the government’s plans for reforming Britain’s health and safety system?

On 21 March 2011, the government inappropriate health and safety announced a package of changes to recommendations. Britain’s health and safety system in a report, Good Health and Safety, Good for The government intends to achieve this by Everyone. The report follows Lord Young’s launching the OSHCR for health and review of health and safety laws and the safety practitioners who are properly compensation culture, Common Sense, accredited to one of the professional Common Safety, which was commissioned bodies in the industry. The register opened by the Prime Minister and published in on 21 March 2011 (though it began October 2010. taking registrations on 31 January 2011).

The main changes set out in Good Health The register is designed to provide and Safety, Good for Everyone are: businesses with easy access to health and safety advice from 1 The opening of a consultants qualified to a voluntary professional standard Occupational recognised by the Safety and participating bodies in the Health registration scheme. Consultants Employers will be able to Register. locate a consultant using 2 A new health keywords such as industry, and safety topic or geographical framework. location. The register can be 3 New ‘Health and accessed at: www.oshcr.org Safety Made Simple’ guidance Health and safety framework for lower risk small and The government has set out medium-sized a new pattern of businesses. enforcement and assistance to industry: 4 A review of health and safety regulation.  In major hazard industries, such as those in the chemical and offshore Occupational Safety and Health sectors, the government does not plan Consultants Register (OSHCR) to reduce the level of oversight but states that there will be a continuing The government notes that there are no programme of modernisation of minimum standards for health and safety regulatory approaches. consultants, standards are variable, and  Non-major hazard industries. Some there is no way for employers to ensure workplaces – such as construction, that the advice they receive is accurate agriculture, some manufacturing, and proportionate. The Department for waste and recycling – have a The Work and Pensions (DWP) press release comparatively high rate of injury and government put the government’s intention succinctly: occupational disease. Others – such notes that ... Ministers are taking steps to eliminate as council office premises and ‘cowboy’ health and safety consultants university campuses – have a relatively standards are who are unqualified but are low rate of injury and ill health. In variable responsible for many of Britain’s most relation to these workplaces, the

38 Disclosure 17 April 2011 Berrymans Lace Mawer government has proposed significant with the law ‘will not be liable for The government changes: any kind of charge as a result of states that it an HSE inspection and there will will set up an a The HSE will increase its joint be no recovery in relation to independent working initiatives with industry to purely technical breaches’. promote better health and safety. d The government intends that the review of health b Targeting and reducing above principles should be and safety inspections. The government applied to local authority health regulation identified three categories of and safety inspections. The non-major hazard industries: government ‘will look to see a reduction of at least a third 1 Comparatively high-risk sectors (65,000 pa) of [local authority] such as construction, waste and inspections and greater targeting recycling, and certain where proactive inspection manufacturing. Proactive continues’. inspection remains necessary in these sectors. Health and safety made simple 2 Comparatively high-risk sectors where proactive inspection is The government has launched Health unlikely to be effective and is not and safety made simple: The basics for considered a useful component your business, a guide aimed at small of future interventions. For and medium-sized employers in low-risk example, agriculture, quarries, businesses to assist them in complying and health and social care. with health and safety law. The guide 3 Lower risk areas where proactive includes advice on appointing a inspection will no longer take competent health and safety adviser, place – such as low-risk writing a health and safety policy, manufacturing (eg, textiles, completing risk assessments, consulting footwear, light engineering), employees and providing training and transport, and postal and courier information. The guide is available at: services. www.hse.gov.uk/simple-health-safety/

The government states that it intends to Review of health and safety regulation reduce proactive inspections by one third (around 11,000 inspections per The government declared that it will set year) through ‘better targeting based on up an independent review of health and hard evidence of effectiveness based on safety regulation. The review will these categorisations’ and in relation to consider domestic legislation and categories 1 and 2 above, the HSE ‘will regulations based on European law. The continue to undertake inspections for government also mentioned that it will enforcement purposes or to follow up ‘ask the review to recommend changes complaints when such intervention that will clarify the legal position of appears to be necessary. The basis on employers in cases where employees act which the HSE follows up complaints in a grossly irresponsible manner’. The from workers and the public about review is chaired by Professor Ragnar health and safety and investigates Löfsted of the King’s Centre for Risk incidents will be unchanged’. Management at King’s College London. The review is expected to make its c Costs recovery for recommendations by autumn 2011. breaches of health and safety law. It is proposed that the HSE will recover the cost of an inspection or investigation at Malcolm Keen which a serious, material breach Solicitor in standards is found and a with contribution from requirement to rectify is formally made. The government states Boris Cetnik that businesses in compliance Partner

Berrymans Lace Mawer Disclosure 17 April 2011 39 Law of diminishing returns?

An update on discount rate

No one likes to see claimants unable to decline in yields on ILGS since 2001, work or care for themselves. When it coupled with the prevailing economic does happen, the law needs to find a downturn, it was no longer realistic to mechanism whereby the level of expect a 2.5% annual gain on damages received today adequately compensates for losses sustained for life.

The law assumes that a claimant will invest his or her damages. As a result, a lump sum award needs to be discounted to allow for future investment returns (often known as accounting for accelerated receipt). So the discount rate is an arithmetical approach to calculating the net present value of future losses.

The Damages Act 1996 gives the Lord Chancellor the discretionary power to prescribe the discount rate to be used in lump sum claims. The 1998 case of Wells v Wells [1999] 1 AC 345 set the rate at 3%, based on a three-year average yield on Index-Linked Government Stock (ILGS), which are a low-risk class of investment. In 2001 the (then) Lord Chancellor reduced the rate to 2.5%, in part to reflect the yield on ILGS. The present debate, which has resurfaced from time to time over the last decade, is whether it should be reduced further?

One needs to look over the English Channel to the 2010 decision of the Guernsey Court of Appeal in Helmot v Simon 2009-10 GLR 465 to appreciate fully the impact of changes in the investments. The Guernsey Court of discount rate. Mr Helmot sustained Appeal agreed, setting the discount rate serious brain damage in a road traffic at -1.5% for loss of earnings and the accident. It was common ground that cost of employing carers, and at 0.5% Many his damages needed to be awarded on for non-earnings related items. As a commentators a lump-sum basis, as Guernsey law consequence, the damages award rose believe the rate does not allow for periodical payments. from around £9.3 million (using a is likely to go Because the 2.5% discount rate had not single discount rate of 2.5%) to £13.75 been adopted in Guernsey it was for the million, an increase of well over £4 down rather court to decide the appropriate rate. Mr million. than up Helmot argued that because of the

40 Disclosure 17 April 2011 Berrymans Lace Mawer Although this decision is not directly this judicial review might be taken and An increase in applicable to English law, it is still what its eventual outcome might be. financial noteworthy. Shortly after Helmot, All that can be said with certainty is exposure will significant pressure from the claimant that there are likely to be significant mean insurers lobby – APIL in particular – including developments in the second half of the threat of judicial review, led to the 2011. So what does this all mean? reassessing Lord Chancellor (LC) agreeing, in their reserves November 2010, to review the The most obvious impact is on the discount rate once more. Many level of damages. By way of example, commentators believe the rate would a reduction in the discount rate to 1% be more likely to go down rather than would increase the lifetime multiplier up as a consequence of the LC’s for a 10-year-old male from 33.72 to review, although by how much is a 52.69. Assuming losses of say matter of conjecture. £100,000 per year, the resultant lump-sum award would increase by over half from £3,372,000 (at 2.5% discount) to £5,269,000. The financial ramifications for defendants are clear. Among many commentators there is scant sympathy. After all, why should a seriously injured claimant be undercompensated? But is this debate really that straightforward?

An increase in financial exposure will mean insurers reassessing their reserves, which at some point will undoubtedly be passed on to the public via increased premiums. Many might feel this is the last thing the public needs, particularly on the back of the recent ECJ ruling banning gender differentiation in insurance policies.

What also about non-insured compensation bodies, for example the NHS? Coming at a time of national austerity and budget cuts, is such a significant rise in damages really sustainable? How would the NHS fund this?

Under English law the court has the power to make an award for periodical payments, which insulates the claimant against the potential Come early April 2011, some six uncertainty in the rate of return on months on, nothing had yet resulted investments. However, if damages from the LC’s promised review and were to rise significantly on a lump- patience was clearly wearing thin in sum basis, what incentive would there some quarters. Consequently, APIL be for a claimant to agree to a formally commenced judicial review Payment Protection Order (PPO)? proceedings against the Lord Chancellor for his failure to review Then there are the Ogden Tables. the rate. New mortality data released by the Office of National Statistics are At this early stage it is unclear how far expected to be incorporated into the

Berrymans Lace Mawer Disclosure 17 April 2011 41 revised edition which is If the discount rate here was based on due later this year. These the yield on ILGS, it seems that the changes will of themselves overall extra cost to the public purse lead to increases in might be in the order of £15 billion to multipliers and hence £20 billion annually. In times of cuts increased awards. Is it then and economic hardship, it is difficult to one step too far to have the see how this would be realistically double impact of a reduction affordable. There is also the in the discount rate? philosophical question of whether it is justifiable that injured people are put in There is also debate over a more favourable economic position the approach in Roberts by using a lower discount rate than the v Johnstone [1989] majority of public sector workers QB 878 to calculating contributing to pensions. This is accommodation awards. certainly food for thought. The method approved in this case may produce an So perhaps now is the time for reflection award for accommodation and careful consideration. Whilst there which is less than the extra is no doubt the current yield on ILGS is capital required by the less than the 2.5% discount rate set by claimant to purchase a the (then) Lord Chancellor in 2001, now new property. If the might not be the time for knee-jerk discount rate was to be action, even with the added pressure of reduced, then the Roberts judicial review proceedings having been award could well fall commenced against the present further below the extra incumbent. capital needed. The ramifications of even a small There are also reduction in the discount rate are likely ramifications in other to be significant and far reaching, with areas far removed impacts beyond the narrow confines of from personal injury the insurance sector. compensation. For example, in March 2011 Lord Hutton As history shows, hindsight often favours published his recommendations for a more measured and cautious the future of public sector pensions. approach. Part of his review examined the discount rate to be used to set unfunded public sector pension contributions. This is presently at 3.5% net of inflation, and is set to be reduced. As the Treasury consultation paper observes, every half per cent reduction in the present rate, which in this context is 3.5%, could see an annual increase of £3 billion to £4 billion in contributions required to fund public sector Stuart Hardy pensions. Partner

42 Disclosure 17 April 2011 Berrymans Lace Mawer Caveat e-vendor! (Buyer beware)

The legal framework surrounding e-commerce

The rise of e-commerce has been one of the most Transparency of the website provider significant business trends of the last decade. According to the British Retail Consortium, online Any commercial website, whether or not it allows for sales account for 6% of the UK’s retail sales, which the direct sale of goods or services, is regulated to increased in September and October 2010 by ensure transparency of the status of its provider. The 19.1% and 12.8% respectively over the equivalent website must display, in a way which is ‘easily, monthly figures for 2009. Whilst businesses, directly and permanently accessible’ the name of its therefore, continue to be optimistic about future provider, their geographic address and email growth potential through the web, vendors should address, the details of any applicable trade be aware of the special risks which are associated registration, supervisory authorities or professional with this business operating model. regulatory body, as well as its VAT identification number. In particular, if the website includes The separate legal regime for e-commerce means reference to any prices, these must be indicated that special considerations apply to online selling clearly and unambiguously, and must state whether as opposed to traditional over-the-counter retail they are inclusive of tax and delivery costs. transactions. This article is a pragmatic guide to e-commerce law and highlights some of the key It is standard practice for this information to be requirements and best practice in this emergent provided, along with the website’s terms of use, retail medium. at the bottom of every web page. If the website provider fails to ensure the transparency Applicability of existing consumer law requirements are met, it could be liable to pay damages to a consumer, even in circumstances It is important to recognise that on issues of where the goods or services were provided by a contractual interpretation and consumer protection, separate company. broadly the same contract law principles apply. Including, but not limited to, the consumer Transparency of the contractual process protection afforded by the Sale of Goods Act 1979 and the prohibition of ‘unfair’ contractual terms Under the Electronic Commerce (EC Directive) and commercial practices. Regulations 2002, websites that allow consumers to purchase goods or services directly, will need to Essentially, goods sold over the internet must provide consumers with additional information prior correspond to their description, be of satisfactory to the commencement of the contractual process, quality and fit for purpose. Equally, services must including: be completed within a reasonable time, for a reasonable charge and provided with reasonable  the steps that must be followed to conclude the care and skill. The list of potentially unfair practices contract is ever-growing, and problems may arise, for  whether the service provider will file/store the instance, if the terms and conditions are not written contract, and whether it will be accessible to the in plain and intelligible language, or irrevocably consumer bind the consumer to terms with which he had no  how the consumer may identify and correct any real opportunity of becoming acquainted before input errors prior to placing an order the conclusion of the contract. This is likely to  which languages are available for conclusion of capture terms and conditions presented in an the contract. unreadable font size. E-vendors should be aware that where there is doubt as to what a term means, Failure to provide this information exposes e-vendors the meaning most favourable to the consumer to unnecessary risk. will apply. Additionally, the consumer must be able to store and reproduce any applicable terms and

Berrymans Lace Mawer Disclosure April 2011 43 conditions. Best practice is to direct consumers to e-commerce demonstrates that these consumer- the relevant terms of purchase early on in the friendly regulatory requirements are unlikely to transaction lifecycle, usually by way of a mandatory hamper growth as businesses become more and check box consent indicator. An important step in more astute at ‘packaging’ up the requirements into the e-contractual process will be the vendor’s clear and comprehensive contractual terms in order electronic acknowledgment of placement of the to limit their future risks exposure as far as possible. order, which should promptly follow. In another respect the regulations are distinctly Further rules governing e-commerce can be found in ‘light-touch’. They do not prescribe the steps behind the Consumer Protection (Distance Selling) binding e-contract formation, instead leaving this for Regulations 2000, which require e-vendors to online retailers to determine, on the proviso that the provide details of the main characteristics of the information pertaining to contract formation has goods or services, the identity of the vendor, and been provided early on in the transaction lifecycle. notification of the consumers right of cancellation created under the regulations. When a consumer places an online order this can constitute an ‘offer’, which is open for the vendor to In the case of goods sold online, the right of accept or reject. However, to strengthen their cancellation is that the purchaser generally has contractual position, e-vendors should make it clear seven clear working days (the ‘cooling off period’) in their terms and conditions that neither the placing after delivery in which to inform the vendor that they of an order, nor the receipt of money, creates a wish to return the goods. The European Court of binding contract. Unless the vendor specifies Justice recently determined that it was unlawful for otherwise, it is generally thought that the online vendors to charge purchasers for the cost of acknowledgement screen or email, when received, delivery, when the right to cancellation had been constitutes acceptance. As such, vendors should exercised, although the cost of returning the goods instead confirm that the order has been received could be borne by the consumer. and that the order is being ‘processed’. This distinction allows vendors to refuse an order and E-contract formation return funds received without further obligations.

Wi th all this information required, the design of a Therefore in order to protect against the potential streamlined sales interface that encapsulates all the risk of being legally required to supply goods which legal requirements without deterring consumers is are no longer obtainable or mistakenly advertised at challenging. Nevertheless, the trend towards below cost price, vendors should specify that

44 Disclosure 17 April 2011 Berrymans Lace Mawer ‘acceptance’, and therefore binding contract formation, occurs upon dispatch of the purchased goods.

E-commerce within the EU

The E-Commerce Directive and Regulations promote online sales between member states of the EU by providing that a vendor need only comply with the laws of the country within which the vendor is located. There are, however, important exceptions to this rule, and most significant is the applicability of the consumer contract law of other member states to which online sales are made. Therefore, e-vendors must check that their own online terms and conditions comply with the consumer contract laws of every EU member state to which they sell their goods.

Other hazards

Brea ches of privacy, data protection and libel laws are further potential pitfalls against which e-vendors will need to protect themselves. Unsolicited commercial messages (or ‘spam’) must not be sent to individual consumers or other members of the public without their consent. Online vendors should therefore give users of their websites an option to opt in or out of e-marketing communications and update their preferences at their discretion. In terms a degree of caution when developing their of data protection, an exemption exists for the e-commerce operating model. Ensuring benefit of commercial websites, but only for very transparency of the contracting parties and the point limited purposes. Businesses wishing to trade online at which a binding contract is formed are just some should undertake periodic legal checks of their of the key requirements where compliance is websites data protection policy, including its caching mandatory. of information. In order to lever the inherent flexibility within the If a website provides an interactive medium where regulations, e-vendors should limit their risks of users can publish their own messages and materials, exposure by considering the legal position at each there is a risk that this privilege might be abused. stage of the transaction lifecycle, as well as testing The regulations protect e-businesses by excluding the robustness and enforceability of any existing liability for damages to a third party for defamation, terms and conditions. or religious or racially aggravated hate speech, where the web provider has no knowledge of any With consumers becoming increasingly reliant on the unlawful material hosted on their site, or where they internet as their preferred sales medium, additional can demonstrate they acted promptly to remove or legal and commercial risks look set to emerge, disable access to such material as soon as particularly as consumer protection continues to becoming aware of it. Where, for example, a remain at the forefront of legislators’ minds. customer review function exists on a commercial website, it is essential that an equivalent function is in place that allows other users to report inappropriate material, and policies are in place for the swift removal of unlawful material. Jonathan Edwards Partner Leveraging your position in the e-market Stephanie Bailey E-comme rce represents an exciting growth Trainee solicitor opportunity. Nevertheless, vendors should exercise This article was first published in Business Matters

Berrymans Lace Mawer Disclosure 17 April 2011 45 A new age of regulation dawns at the GMC

With surprisingly little fanfare, the General Medical Dickson, the Chief Executive of the GMC, said of the Council (GMC) has announced that it intends to proposals: embark on a major programme to reform the way it ... We are here to protect patients and that means deals with fitness-to-practise concerns about doctors. making sure that only doctors who are fit to It is not an understatement to say that these proposals practise are allowed to do so. However, it is not for reform are radical, as they include automatic our role to punish doctors or even to provide suspension from the medical register for those (few) redress to patients – there are other ways to doctors who refuse to engage with GMC achieve that. Our view is that attending a hearing investigations, and automatic erasure from the can be a stressful experience for everyone involved register (without a hearing) in the case of those and there is no need to do this if the doctor is doctors convicted of serious criminal offences. willing to accept sanctions that protect patients.

At present the majority of fitness to practise concerns about doctors which are referred to the GMC eventually end up being aired at a hearing, which is governed by rules and procedures which most closely resemble a criminal trial. If we accept that a relationship exhibiting trust and openness between regulator and regulated is the basis for good regulation, we see that this quasi-criminal process, adversarial in nature, does not lend itself to that.

At the heart of the GMC’s proposals is that in future a public hearing will be the exception rather than the norm. If these changes go ahead, the GMC will instead invite doctors to agree to a sanction which they consider would be appropriate to protect patients and the public. The GMC calls this ‘consensual disposal’ and the stated aim is to deliver a quicker and fairer system of regulation, on the basis that the current system of hearings (including those cases at the lower end of the spectrum, where the doctor has admitted the majority of the facts before the hearing has even begun) is stressful for all parties concerned and increasingly expensive in a time when value for money is a priority (even where public protection is concerned). The GMC’s realisation is consequently that its own processes are no longer fit for purpose.

Under the proposed new system the only cases which would be referred for a hearing would be those It is an important step in the right direction for the where the doctor did not accept the sanction GMC to acknowledge its role is not to punish doctors, proposed by the GMC; where there was a significant so any proposal which seeks to move away from that dispute about the facts; or where the doctor had been should not be dismissed out of hand. However, the convicted of certain serious criminal offences (eg, practical application of these proposed changes does murder, blackmail or sexual assault). The GMC has merit further consideration as there are some ‘bear issued a consultation paper setting out the proposals traps’ which will need to be avoided if the proposals in detail, which sought responses by 11 April. Niall are to be a success.

46 Disclosure 17 April 2011 Berrymans Lace Mawer The proposals in outline jurisdiction where the GMC has a statutory duty to investigate all concerns brought to its attention. The GMC proposes that, in order to significantly Further, historically, those representing doctors have turn the tide of cases being referred for a hearing, advised caution in relation to early disclosure of a once a complaint has been investigated it will doctor’s position; without prejudice disclosure will engage with the doctor to discuss what it considers be a significant cultural change, which will require a to be the appropriate sanction, and encourage the leap of faith before confidence in the value of an doctor to accept it. This would happen in almost all open approach is established. cases and it would be open to the GMC to offer a doctor the full range of sanctions currently available The consultation document asks whether certain (from undertakings, warnings, conditions and cases should be referred for a public hearing on suspension through to erasure from the register). It is public-interest grounds, even where the doctor is proposed that all of this would be achieved through willing to accept the GMC’s proposed sanction. The discussion and agreement between the parties, GMC concludes that there are no cases which need possibly in the form of a round-table meeting to be referred to a hearing on public-interest chaired by a facilitator. grounds alone. It will be interesting to see if patient interest groups take the same view. The consultation raises a number of interesting questions about how this process would work in The consultation invites comments about how to practice. For instance, whether or not a doctor maintain ‘transparency of decision-making’ if the majority of cases are not referred for a public hearing, and discusses appropriate wording to include on the medical register to inform the public as to how a case has been disposed. For instance, where a doctor agrees to be erased from the register, the entry against that doctor’s name might read ‘erased by mutual agreement’. The issue of course is, as the consultation document points out, one of maintaining public confidence in the profession, and also the need to ‘guard against the perception that agreements which may compromise patient safety are being reached behind closed doors’.

It is not clear from the consultation document what the GMC intends to do if a doctor decides that he or she does not wish to engage with the consensual disposal process, and would rather his or her case be heard before a panel of lay people and medical peers (some of whom may be from their own specialism) in much the same way that somebody charged with a criminal offence ‘triable either way’ may prefer to elect to have their trial heard in the Crown Court before a judge and jury rather than before the magistrates. Will there be penalties for non-compliance and, if so, how will these be imposed? These are only some of the issues which are likely to inspire debate as the proposals take shape.

The need for change should be able to disclose information to the GMC at the discussion stage on a ‘without prejudice’ A move towards disposing of cases by agreement, or basis. The GMC concludes this would be ‘consensual disposal’, has been on the GMC’s acceptable, however adding the caveat that it would policy agenda for some time. It has long been still be able to investigate such information later if possible for the GMC to agree with doctors where discussions about agreeing a sanction subsequently there are concerns about health or performance to broke down. One wonders how genuine without dispose of their cases by means of undertakings, prejudice disclosure can be in a protective avoiding the need for a hearing. Similarly, there are

Berrymans Lace Mawer Disclosure 17 April 2011 47 cases where a doctor opts to take voluntary erasure It is now well-established law that the purpose of from the register, rather than have his or her case regulatory sanctions is not to punish the registrant but determined at a public hearing. However, according to protect the public and assist in rehabilitation of his to the consultation document, undertakings or or her practice. The general shift towards a voluntary erasure are currently only considered as a presumption that, where possible, cases should be means of possible disposal in about 2% of cases each disposed of consensually is therefore to be welcomed. year, so the GMC will clearly have some way to go if it Certainly other jurisdictions deal with medical wishes to reverse this trend. regulation in a more administrative fashion seemingly to no ill effect. The theory behind the idea of consensual disposal is ‘proportionality of punishment to regulatory breach’. The consultation document proposes that once In simple terms this means taking the minimum action agreement has been reached, the doctor will sign an necessary to ensure the public is protected. The ‘agreed statement of facts’. There are and will be pragmatic benefits of this approach are obvious: many cases where the facts can be agreed, but equally there will be many more where the facts are 1 For the doctor, early resolution of a complaint in hot dispute. Given what is at stake in terms of a without the need to endure a lengthy public doctor’s reputation and future career prospects, it will hearing. take a careful balancing exercise to achieve a 2 Value for money for the GMC, which, although it negotiated outcome which all parties are happy to is at pains to make clear that cost will never be a buy into. factor in determining how a case should be disposed of, is clearly concerned by the ever- The proposals in relation to without-prejudice escalating expense of its fitness-to-practise disclosure will also need thought. Without-prejudice function. This has risen from just under negotiations work in the civil arena where the £15,000,000 in 2000 to just under £44,000,000 considerations relate to costs. Very different in 2010; a desire to save money must therefore considerations apply when you are dealing with surely be part of the impetus for change. patient protection, and the GMC will have to think carefully about how this particular aspect of its Assuming these changes will not impede the fair proposals will work in practice. It may be harder than disposal of a case, it would be hard to criticise the it anticipates to get the profession on board in relation GMC for this, not least when the majority of its to this change, yet unless they do, the proposals will funding comes from registration fees. surely fail as doctors continue to elect to have their case determined at a hearing. Why change now? Finally, the GMC says that these proposals do not The GMC says that it is aware of the often-made amount to plea-bargaining, and that it will not criticism that its current processes are protracted, ‘negotiate a lesser sanction to encourage a doctor to overly punitive and unnecessarily stressful for all accept a settlement’. However, it is hard to see how parties involved. This and the ever escalating costs are an element of ‘bargaining’ cannot enter into the persuasive factors in support of the argument for process, especially given that it is presently proposed change. Another reason is the shift in the approach that doctors will be invited to a facilitated meeting. the courts have taken to medical regulation in recent The real issue is whether the negotiations/discussions years, particularly in relation to whether a doctor’s lead to a result which both protects the public and is fitness to practise is ‘impaired’. The focus must now fair to the doctor. be on any deficiency in the doctor’s fitness to practise at the time of the hearing and on moving forward rather than looking back. Given the time it can sometimes take for a case to be listed for a hearing, a doctor has often remedied any deficiencies in his or her practice by the time the allegations are read, leading to an increasing number of hearings being concluded with a finding of no impairment. These developments in the law have also surely contributed O:\PUBLICATIONS\1 PUBLICATIONS IN PROGRESS\4_D17\TYPESETTING\BMJ - to the GMC’s recognition of the need for change. Andrew Truby GMC ARTICLE - BLM - FINAL TRUBYA TSET.DOC Solicitor A step in the right direction? This article was first published in the There are appealing aspects to the GMC’s proposals. British Medical Journal

48 Disclosure 17 April 2011 Berrymans Lace Mawer ‘Winds of change’ continue to blow Update from Disclosure 16, November 2010

The previous edition of Disclosure dealt with the David Nicholson, the newly appointed chief executive government’s White Paper: Liberating the NHS. The of the Commissioning Board, who made a rather passing months have provided much comment on this unconvincing attempt to reassure Parliament that all is flagship policy, with a rather heavy weighting towards under control. One of the issues about which he was the negative. questioned was whether GP Consortia will be floated on the stock market, and, although Sir David Amongst other things, the White Paper provides a plan Nicholson denied that he has specifically discussed to abolish all 152 Primary Care Trusts and 10 strategic that with any particular company, he has not denied health authorities and instead to allow GP Consortia the principle. to have access to £80 billion per annum (80% of the NHS budget), and to opt for treatment from ‘any The BMA has continued to raise its concerns. One of willing provider’. The Department of Health has been the practical difficulties that the previous article at pains to stress that this is not privatisation of the highlighted was the potential conflict of interest for a NHS. Nonetheless the changes would amount to a GP in balancing the need to give the best possible significant extension of free-market principles into the care to an individual patient with the need to improve NHS. care and finances for their practice area as a whole. The chairman of the BMA’s GP Committee has since As expected, the shadow government has identified expressed that the ‘quality premium’ (the government the following flaws: has said that it would like a GP’s income to be linked 1 The plans drive a wedge between primary and to the financial outcomes achieved) would be secondary care. ‘disgracefully unethical’. 2 The relationship of trust between a patient and David Cameron has called this policy one of their GP is damaged. ‘evolution’. The Health Secretary calls it ‘revolution’. 3 GPs will still have one hand tied behind their The plans do have their supporters outside the backs. The NHS Commission Board and Monitor government. Long-term reductions in bureaucracy will be directing GP Consortia to promote could allow Trusts to link with other local organisations competition which in some circumstances might to provide care, but if the devolution of power and prevent a GP from referring to a tried-and-tested budget to GP Consortia is managed well, it has the local hospital. potential to bring benefits to all parties. 4 There is a risk that decisions made by GP Consortia will not always be open to public In the meantime, as lawyers advising healthcare scrutiny, if it can be argued that they are defence organisations, BLM will be keeping an eye on confidential due to commercial sensitivity. the level of claims and complaints. It is certainly 5 Competition on price will reduce patient care. On possible that these will increase, whether as a result of that last point, the Royal College of physicians has the overall reduced NHS budget, or the view that noted, ‘there is evidence that competition based competition based on price harms rather than on price harms, rather than enhances, quality’. enhances the quality of clinical care, or as a result of claims against GP commissioners in connection with What about the Liberal Democrats? As Deputy Prime allocation of funding decisions. Minister, Nick Clegg has already signed up to the reforms but is now facing a revolt at the hands of his No one can deny that once the dust has settled, and own party following an overwhelming vote against the against the background of more or less constant coalition plans. Lib Dem activists have insisted that upheaval since it began, the NHS is now going to Nick Clegg should make demands of the Health require a long period of stability. Secretary Andrew Lansley to change the NHS bill in certain areas. Parliament is already scrutinising the White Paper. Indeed most recently the government has announced a further period of consultation. Evidence has been heard at the Health Select Committee, and in Katie Costello particular on 8 March evidence was heard from Sir Partner

Berrymans Lace Mawer Disclosure 17 April 2011 49 50 Disclosure 17 April 2011 Berrymans Lace Mawer Brussels 1, Rome 2

Late last year the Ministry of Justice began a In theory, and as a consequence of the ‘Rome II’ consultation on technical proposals from the Regulation – Regulation (EC) No 864/2007 of the European Commission about reforming the Brussels European Parliament and of the Council of 11 July I Regulation, which deals with jurisdiction and the 2007 on the law applicable to non-contractual recognition of judgments in international claims. obligations – the law which applies to these sorts of international claims will generally be that of the Brussels I – or more formally, Council Regulation country where the damage occurred. Consequently, (EC) No 44/2001 on jurisdiction and the the French pedestrian’s claim should, even if he recognition and enforcement of judgments in civil sued in France, be subject to English law. and commercial matters – provides a general basis of jurisdiction, which is that a defendant may be So far, so clear; but the reach or scope of the sued in his or her (or its) country of domicile. This is applicable law is not quite as straightforward. While regardless of the nationality of the proposed Rome II provides that the applicable law should defendant. An alternative basis of jurisdiction in govern the assessment of damages, it also torts – such as accidents resulting in personal stipulates that points of evidence and procedure are injuries – is that the claim may be pursued in the for the local law of the court involved. That raises country where the harmful act occurred. There are further questions, such as whether guidelines about special rules for matters relating to insurance, which general damages or the use of actuarial tables and provide that an insurer may be sued in the Member the like are to be regarded as procedural or State of its domicile, or where the policyholder substantive matters? If the latter, our French plaintiff (sic) is domiciled, or in the Member State of claimant suing in France might have his damages the lead insurer (in the case of co-insurance). assessed using the well-known JSB Guidelines and the Ogden Tables used by English courts. If the Neither the general principles nor the insurance former, then the French court might apply its own rules are being revisited by the MoJ’s consultation, usual basis of assessment of damages despite the which concerns far more obscure matters, for fact that English law is the applicable law example the abolition of exequatur (the formal designated by Rome II. The awards assessed in procedure for recognition and enforcement of a these alternative scenarios could differ significantly. judgment rendered in another Member State). So why is this relevant now? These points will probably only be resolved after test litigation and may ultimately require a decision from The answer is that in international tort claims – such the European Court of Justice. Until that happens, as road accidents in Europe involving UK residents, insurers dealing with international tort claims of any or visiting motorists in the UK, or matters type should carefully consider their tactical concerning the cross-border supply of goods and approach to points of jurisdiction and applicable services – questions of jurisdiction and of applicable law in those claims with a foreign element. law are often confused and/or confusing. Although the two issues are not conceptually linked, the former may have some bearing on the latter. Moreover, Brussels I provides that where there is a direct right of action (in tort) against an insurer then the insurer may be sued in the Member State where the claimant is domiciled. Since 2003, UK motor insurance law has permitted this sort of direct action. Hence a British motor insurer could be sued in France for a claim arising from an accident in England resulting in harm, say, to a French Alistair Kinley pedestrian. Head of policy development

Berrymans Lace Mawer Disclosure 17 April 2011 51 BLM briefing

BLM backs Barnardo’s Fraud, personal injury and Val Jones an d Jason Nash – professional negligence are solicitors’ regulation. In January, BLM staff voted to significant and growing areas support the children’s charity for BLM and the promotions in As Law Society Representative of Barnado’s for the next two years. five of our offices ensures that FOIL, BLM partner Michelle Penn’s BLM continues to deliver a truly presence at the centre of the action The firm is compiling a national national presence. We have provides a valuable insight and programme of fundraising events also promoted a number of opportunity to influence change. including our annual quiz, solicitors to associates within triathlons, marathons, fun runs, additional teams such as Dates for your diary raffles and more. Together we healthcare as a reflection of the hope to build on the fundraising budding talent in other key success of the past four years teams at BLM and our working with The Prince’s Trust, commitment to the long-term during which BLM raised more development of our staff. than £200,000. Partner wins coveted personal New appointments at BLM injury award

Si nce Disclosure 16, BLM has BLM Cardiff and Bristol senior Imminent appointed new partner Mark Shaw partner, Matthew Harrington, was 5 May – construction seminar, wh o has more than 20 years’ awarded Defendant Personal Injury London experience in healthcare law. Lawyer of the Year at the Personal 10 May – occupational disease Injury Awards 2010 in November. conference, London (22 In April BLM also welcomed eight Matthew won the award for September conference, associates to the partnership. ‘demonstrating a good Manchester) The new partners are: understanding of clients’ needs, 26 May – catastrophic injury Birmingham – Simon sensitivity to diverse needs and conference, London Hammond (fraud) backgrounds, as well as good Leeds – Roy Woollard communication with other parties Claims review – future diary dates (public sector) to claims’. He overcame strong 9 November, Manchester Liverpool – Barry Jones competition from shortlisted 16 November, London (personal injury) candidates at Nabarro, Morgan London – Michael Harvey Cole, Hugh James Solicitors and In addition a broad range of (professional negligence) Greenwoods Solicitors. events are scheduled for 2011, Manchester – John Collins, Mark including: Fraud, public sector, Flavell, Sally Hancock, Paul Tarne FOIL launches focus group product liability, transport, (personal injury). environmental, health and safety, Se ven lawyers at BLM have joined employment, police and National senior partner Terry FOIL’s recently launched focus emergency services. Renouf commented: groups to facilitate and lead I am delighted to welcome discussion around future policy For full details, please visit the these eight talented associates development. These are: events pages of blm-law.com. to the partnership. Each of Iain Fraser – ADR and mediation, them has provided a valued Sarah Woodwark – clinical contribution to BLM and each negligence, Sarah Cartlidge – brings a range of skills, credit hire, Nick Pargeter – BLM briefing is prepared by experience and expertise to the disease, Kerris Dale – motor, Sarah Natalie King service that BLM provides. Elderton – professional indemnity, Business communications executive

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Disclosure 17 April 2011 blm-law.com

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