BLM 11 A… · Web viewMichael Salau 23. Compensation Act and desirable activities. Brian Goodwin...

Content

Editorial 2

Pleural plaques and beyondJohn Mackenzie 3Liability for psychiatric loss: a patchwork quilt?Val Jones 5Mesothelioma and breach of duty: a moribund defence?Matthew Harrington 7CA costs spotlightAdam Burrell 9Access to justice – three current issuesAlistair Kinley and Christopher Coughlin 10Third party motor fraud: a shift in judicial attitude?Raymond Southern 13Insurance law: some recent developmentsCatherine Hawkins 15Corporate manslaughter: grip tightens on company failureRodney Wilson 17Limitation – some clarity at lastGeneviève Rich 29Data protection – too much data, not enough protection?Tim Smith 21Construction sub-contractors: ‘Play by the rules!’Michael Salau 23Compensation Act and desirable activitiesBrian Goodwin 24Liability issues for property insurersWarren King 26Migrant workers – breaking down barriers, reducing riskMichael Parr 28The new value of catastrophic injury claimsAndrew Kerr 30BLM reports – Catastrophic Injury Forum 32Rome II: producing certainty?Jim Sherwood 33BLM reports – EU developments 35BLM briefing – CSR 37

Editorial board

Catherine Hawkins (guest editor), Val Jones, Jenny Moates, Jim Sherwood, Andrew Relton, Alistair Kinley, Helen Cafferata, Linda Coppell, Kathy Széputi

D i s c l o s u r e • April 2008 1

EditorialOne of today’s big issues is the extent of personal responsibility for one’s actions and the question of whether the state should intervene and tell us how to act. Once the popular media got round to criticising the ‘compensation culture’, it was not surprising that legislation would not be far behind in the form of the Compensation Act with its supposed ‘desirable activity’ defence since the government always thinks legislation is the answer, without giving much thought to the question of whether it will work or just give the impression that something has been done about the problem.

Perhaps the real problem is the cost of dealing with claims and the tension between the objective of cost-saving on the one hand and on the other the industry putting up a fight for a common sense approach about the extent to which insurers should have to indemnify individuals whose sufferings might be seen by many of us as simple bad luck or at least the sort of hardship for which others should not be liable.

In this edition, Brian Goodwin looks at the subject of the Compensation Act and it might be said that there is an invisible thread through many of the issues in terms of what the law’s reaction should be to undesirable situations; how far should landlords be liable to tenants in respect of defects when there is no express provision in the lease; in what circumstances should people who cause accidents or even death be criminalised (see Rodney Wilson’s article on corporate manslaughter); should fear of mesothelioma give rise to a claim (Matthew Harrington’s and Val Jones’s articles).

In addition to that, we have articles on costs, catastrophic injury and the important developments concerning access to justice and the management of claims, of great importance to insurers, covered in Alistair Kinley’s article, since this brings us back to the issue of insurers’ opportunity to insist on a common sense view of liability in the framework of an efficient system for responding to claimants.

Finally, we include our usual diet of construction, fraud, risk management (this time issues we face in relation to migrant workers) plus a trip to Europe to look at the new ‘Choice of Law’ regime.

Catherine HawkinsPartner, BLM London


In terms of disease claims there appears to be no long or short term cure in sight and no sooner are cases decided upon than legal mutations occur. The following three articles highlight various complex levels and stages of specific cases associated with disease and why it is crucial to be fully informed.

Pleural plaques and beyond

The recent House of Lords decision in Johnston (HL 17.10.2007) confirmed that pleural plaques were not actionable. Pleural plaques are only evidence of asbestos exposure and do not in themselves progress to another condition.

Per LJ Longmore in the Court of Appeal:

The fact that negligence has produced physiological change that is neither visible nor symptomatic and in which no way impairs the bodily functions should not attract legal liability.

The HL found that pleural plaques are not a significant injury or de minimis and rejected the ‘aggregation theory’, that is, that physiological change which is not compensatable, aggregated with risk and anxiety (neither of which give rise to a cause of action) could combine to create a cause of action.

Although resolving one major area of dispute in asbestos litigation, the judgment above on pleural plaques did highlight the position with regards to other asymptomatic or arguably de minimis asbestos-related conditions. In Johnston, the Law Lords declined to comment in detail on other asymptomatic conditions caused by asbestos exposure, such as asymptomatic asbestosis and asymptomatic pleural thickening.

The HL left open another potential avenue to bring a claim for pleural plaques: that an employer would owe a duty in contract to its employee not to expose them to injurious asbestos. Since arguably these claims are not claims for personal injury following the Johnston decision, there would be a strict six year limitation period, which would prove fatal to most of the claims. Even if the claimants were able to bring the claims there may be no insurance cover and damages may be very limited. In seven test cases in the Newcastle County Court permission has, however, been given to amend Particulars of Claim to include breach of contract.

A further important element of the reasoning in Johnston was that the pleural plaques would very rarely (apart from in approximately 1% of cases) result in any symptoms.

That can be distinguished from other conditions of pleural thickening and asbestosis which are progressive. Pleural thickening tends to reduce lung capacity. Diffuse pleural thickening is widespread uniform fibrosis (scarring) of the pleura and tends to cause disability and may cause breathlessness on exertion as well as reduced lung capacity. Asbestosis is fibrosis of the lung caused by asbestos exposure.

These conditions may result only in a reduction in reserve lung capacity. Reduced lung capacity does not necessarily mean that there is a current disability or symptoms. However, it may mean that there is a potential for future disability or reduced lung capacity.

The details above raise a number of questions. What will the court regard as minimal symptoms? Would the claimant be able to recover if he has no current symptoms and only a risk of future symptoms? Would the claimant be able to recover if the claimant has reduced lung capacity but no symptoms?

In terms of political intervention, a draft bill to reverse the HL decision is being put to the Scottish Parliament. Westminster had said that it did not intend to legislate and would reserve its position depending on the draft proposals in the Scottish Parliament. However, Gordon Brown has now indicated that the government is seeking a deal with insurers to pay up to £5,000 to victims of pleural plaques. A consultation document is due to be published shortly. There have been a number of decisions in the lower courts in the past year which have decidedsome of the issues.

The courts have previously found that it is not necessary for a claimant to perceive an injury in order


for it to be significant. In Johnston the CA cited with approval the case of Cartledge v Jopling (CA 1963). They considered the issue as to when an injury passes from becoming sufficiently serious to found a cause of action. In Cartledge it was found that damage occurs at the point when the accumulated scarring is sufficient to diminish appreciably the elasticity of the lungs and deprive them of much of their reserve capacity. In this case there were no symptoms at that stage. This may suggest that loss of reserve capacity alone may be recoverable.

In Owen v Esso Exploration & Production UK Ltd and Hopol Ltd (Liverpool County Court 16.11.2006) the claimant suffered from pleural thickening and asymptomatic asbestosis. The claimant had no functional impairment; there was only a risk that claimant may develop a symptomatic condition. In that case the court found that the claimant could not recover damages. The threshold for actionability had not been passed. It was significant that there was no evidence before the court on loss of residual lung capacity. However, Judge Stewart in Owen makes a distinction between the chance progression of symptoms (such as asymptomatic pleural thickening) and an asymptomatic condition which is merely preparatory to the causation of symptoms, which is compensatable (such as a virus).

In Hirst v William Proctor and Sons Ltd and Proctor Roofing Services Ltd (Sheffield County Court 27.4.2007) the claimant suffered from asbestosis. The argument advanced by the defendant that the claimant would not require his full lung capacity was rejected by the court. The claimant was able to recover damages where there was only 1% disability due to asbestosis and due to loss of residual lung capacity. The court did not state whether it would have made an award if there was asymptomatic asbestosis.

In Cox v Swan Hunter (Newcastle CC 15.11.2007) the claimant suffered from asbestosis and an asbestos-related disability of at least 5% but that was held not to be minimal. It appears that asbestosis with very minor symptoms is recoverable.

It is significant that even where lung function tests are within the ‘normal’ range and there could still be a reduction in actual lung capacity. These tests are subjective. A practitioner should obtain medical evidence on loss of reserve capacity. Following these cases, it is not clear what will be regarded as minimal injury. The position is even less clear in relation to loss of residual lung capacity on its own without any other symptoms. The basis for actionability appears to rest on the effect on respiratory reserve and current symptoms and potential for progression of those symptoms.

It appears that claims for pleural thickening may only be recoverable with symptoms and it is apparent that asbestosis is recoverable with demonstrated loss of lung function even with minimal symptoms.

Of course, Cox, Hirst and Owen are all first instance decisions and should be treated with caution. The position may become clearer over the course of the next year pending test litigation in the Newcastle County Court. The Newcastle test litigation relates to cases which lie between asymptomatic conditions and 5% disability. There are 33 scheduled cases included in the Newcastle test cases. At the moment the pleadings are limited. No lead cases have been selected as yet. The cases were listed before Judge Walton for a case management conference on 28.02.08.

The cases have been set down for trial in September/October 2008. In the interim, legal developments may be overtaken by political intervention. Clarity from the courts and from the government would be welcome on these issues.

John MackenzieSolicitor, BLM Manchester


Liability for psychiatric loss: a patchwork quilt?

Those of us who practice in personal injury law have been blessed with the wisdom of the House of Lords (HL) in its consideration of some basic principles of compensation in the combined appeals of Johnston, Rothwell & others [2007] UKHL 39 – otherwise known as the ‘pleural plaques’ test litigation – in which a comprehensive judgment was handed down on 17 October 2007.

Practitioners and students alike will no doubt make much use of the narrative on the history and development of the common law as to what amounts to an actionable injury – acknowledged as the main thrust of that judgment.

There is, however, an equally interesting issue that arose in the case of one of the appellants, Mr Grieves (Grieves v F T Everard & Sons and Others), in the context of liability for psychiatric loss. It is worth repeating the facts upon which Mr Grieves claimed he should have recovered damages.

Mr Grieves sued two defendants who employed him consecutively between 1961 and 1969. Both employers admitted that they negligently exposed him to asbestos dust. He went onto develop a psychiatric illness as a result of an x-ray examination in 2000, over 30 years later and long after he was employed by either defendant. Those x-rays showed that he had developed pleural plaques, which, as we know, their Lordships concluded was not an actionable injury for which he could claim compensation.

Liability for psychiatric injury and nervous shock has occupied the appellate courts for well over a century and the many judgments are noted for the control measures and exceptions to the general principle of recovery for injury. Since Bourhill v Young [1943] AC 92, when an unsuccessful claimant merely heard a collision and witnessed its aftermath, the law has gone onto recognize that psychiatric injury should be compensated where that injury is foreseeable, though it has seen the need to limit the category of victim able to claim. It does so for policy reasons, treating claims for physical and psychiatric injury differently because:

1 Whereas claims for the former are directly connected tothe wrongdoer’s act, those who suffer psychiatric injurymay be removed in time and place from it.

2 Psychiatric injury can be difficult to diagnose.

So, for a claimant to recover, he should not only bring himself within the category of those entitled to sue, whether as a primary or secondary victim, but also demonstrate that he has a recognised psychiatric condition.

Mr Grieves thought he was doing just that, relying in particular on their Lordships’ earlier judgment in Page v Smith [1996] AC 155. Mr Page was a teacher who suffered from chronic fatigue syndrome for many years. He suffered a road traffic accident as a result of which he did not suffer any physical injury at all, but went onto suffer an exacerbation of his chronic fatigue syndrome which resulted in his condition becoming permanent. The HL, by a majority of three to two, held that in the case of a primary victim as Mr Page clearly was, the relevant test is whether the defendant could reasonably foresee that his conduct would expose the claimant to a risk of personal injury, whether physical or psychiatric; if so, the duty of care exists even if the claimant does not go onto to suffer from any physical injury.

Mr Grieves contended that he was a primary victim within the meaning of Page as he was at risk of physical injury following the defendant’s negligent exposure of him to asbestos fibres and that he should be compensated for his depressive condition even though his employers could not have foreseen that he would go on to suffer with this some years later.

Page has attracted much criticism by some academic writers and practitioners in its application (eg Lord Goff in Frost v CC South Yorkshire Police [1999] 2 AC 455) and many saw this as an opportunity for the HL to overrule their earlier decision. Indeed, Mr Donachie, a policeman, recovered damages from the Chief Constable of Greater Manchester ([2004] EWCA Civ 405) for the extreme stress he suffered in having to re-visit a suspect’s car nine times in his attempt to attach a defective tracker device; it was accepted that his stress reaction led to hypertension and then to a stroke. Mr Donachie claimed he was a primary victim within the meaning of Page, as he was in danger of physical harm if he had been discovered by the criminals, thus circumventing the control


mechanisms put in place by Lady Justice Hale in Barber (one of the appeals in Sutherland [2002] EWCA Civ 76).

In Mr Grieves’s case, emphasis was placed on the time at which the claimant was exposed to a risk of injury, that is in the 1960s, compared with the point at which he then suffered a psychiatric injury, in 2000, after he had a x-ray. As Lord Hoffman pointed out, the question in Mr Grieves’s case is a different one, not whether he suffered damage, but whether the defendants owed him a duty of care in respect of psychiatric illness caused by his anxiety at the risk of a future illness. It was the creation of a risk of an asbestos-related disease that caused the mental illness of which Mr Grieves suffered, and it is already accepted dicta by the HL that there cannot be compensation for the creation of a risk. (See Gregg v Scott HL.)

So, rather than overrule Page, as invited to by the defendants, Lord Hoffman has attempted to kick it into the long grass by declaring that the HL in Page must have only meant it to be:

Confined to the kind of situation which the majority had in mind … a foreseeable event (a collision) which, viewed in prospect, was such as might cause physical injury or psychiatric injury or both … In the present case, the foreseeable event was that the claimant would contract an asbestos-related disease. If that event occurred, it could no doubt cause psychiatric as well as physical injury. But the event has not occurred. The psychiatric illness has been caused by apprehension that the event may occur … I think it would be an unwarranted extension of the principle in Page v Smith to apply it to psychiatric illness caused by apprehension of the possibility of an unfavourable event which had not actually happened.

The reader might be forgiven for thinking that Lord Hoffman has a long memory and was perhaps also motivated by the majority decision overturning the Court of Appeal (CA) in Page at that time!

Lord Hope of Craighead agreed on the basis that the causal chain between inhalation of asbestos dust and the psychiatric injury stretched far beyond that which was envisaged in Page, and that Mr Grieves’s reaction almost 30 years later was not the kind of injury that was reasonably foreseeable. As Lord Hope put it:

The category of primary victims should be confined to persons who suffer psychiatric injury caused by fear, or distress resulting from involvement in an accident caused by the defendant’s negligence, or its immediate aftermath. A person like Mr Grieves who suffered psychiatric injury because of something which he may experience in the future as a result of the defendant’s past negligence is an entirely different category. The immediacy which is characteristic of the situation that applies to primary victims as contemplated in Page v Smith … is lacking in his case.

And so their Lordships did everything but overrule Page, preferring to distinguish it in Mr Grieve’s case, and confining it to a special category of limited cases in which the tort which results in subsequent psychiatric injury occurs proximately.

It is to be hoped that Lord Hoffman’s optimism that Page ‘does not appear to have caused any practical difficulties’ and limiting its scope in terms of proximity to the tort is warranted. It will certainly be useful in stress litigation. To put it another way, no doubt Mr Donachie will consider himself fortunate to have recovered compensation at the hands of the CA in 2004 as there must be some doubt that he would now do so.

The patchwork quilt grows ever larger and more intricate.

Val JonesPartner, BLM Manchester


Mesothelioma and breach of duty: a moribund defence?

If, in the aftermath of the Compensation Act, practitioners on both sides thought that a more settled landscape would see a downturn in activity in mesothelioma claims, the reality has been somewhat different. Whilst defences to breach of duty have traditionally been pleaded with regularity, they have seldom been pursued. This is usually because the nature of evidential difficulties facing defendants in trying to address periods of enquiry extending back many years, or because the available evidence has pointed towards undoubted exposure. However, a number of recent cases suggest that defendants and their insurers may be beginning to focus their attention on breach of duty in an attempt to contain substantial long tail liabilities presented by mesothelioma claims.

Jones v Metalbox Ltd LTL 15.10.2007: Mrs Jones was employed by the defendants from the mid 1950s until 1968, working in close proximity to ovens containing chrysotile asbestos belts. According to engineering evidence, the belts released invisible dust into the deceased’s work space as a consequence of which she contracted mesothelioma. The judge found that following the publication of the seminal research paper by Newhouse and Thompson in October 1965 (which recognised that mesothelioma could develop following minimal and familial exposures) the defendant ought to have been aware that there was not safe level of asbestos exposure. In his judgment, from the end of 1965, the defendants were under a duty to identify and eliminate potential sources of minimal exposure from their manufacturing processes.

Maggs v Anstey (2007) EWHC 515 (QB): When he initially developed symptoms, Mr Maggs denied that he had ever been exposed to asbestos. However, once diagnosed with mesothelioma, he recalled a single instance of exposure occurring either side of a Bank Holiday week end in the later 1960s or early 1970s, when he loaded and unloaded asbestos bags from Avonmouth Docks and delivered them to a factory in Watford (the company name for which included the word ‘Asbestos’). When presented with the claim, the defendants located old diaries for several years in the late 1960s and early 1970s in which work-related matters, including job details, were recorded. That entry from July 1967 recorded a delivery of copper by Mr Maggs from Avonmouth Docks to an address in Worcester. The diaries contained no other entries connecting Mr Maggs with Avonmouth Docks or detailing the collection and delivery of bags that could have conceivably contained asbestos.In delivering judgment in the claimant’s favour, the judge stated that Mr Maggs did not have to prove precise dates upon which exposure occurred; that his initial denials of exposure were understandable; his recollection though not entirely correct, was fundamentally accurate and that the defendants’ documentation could not be regarded as complete and wholly accurate. Specifically, it was noted that the diaries did not exclude the possibility that asbestos bags were handled after May 1970.

Brett v Reading University (2007) EWCA CIV 88: This Court of Appeal (CA) judgment followed a decision at first instance in the defendants’ favour. Mr Brett was employed by the defendants between 1983 and 1988. For two years, he supervised the dismantling of a library which, according to the expert evidence, probably contained asbestos. Prior to his death, Mr Brett told his wife that he had come into contact with asbestos during the two years in question. There were also indications that during his working history, Mr Brett had been exposed to asbestos in at least two additional jobs that formed no part of his widow’s claim.On appeal from the first instance decision in the defendants’ favour, the CA accepted that Mr Brett would have sometimes been present when asbestos based materials were removed from the library. However, the court was not prepared to infer that the defendants had failed to take sufficient precautions to ensure Mr Brett did not inhale asbestos fibres. The absence of documentation showing that adequate precautions had been taken was as consistent with the exercise of requisite care in the course of the demolition work as with neglect of it.

Rolls Royce Industrial Power (India) v Cox (2007) CIV 1189: Mr Cox worked for the defendants in 1966/67. It was his widow’s case that during this employment he was deployed at power stations where he was exposed to asbestos. Prior to death, Mr Cox made an application for Industrial Benefits and identified four other periods of employment in which he had been exposed to asbestos but made no mention of the defendants. Neither did his


widow when she first supplied her solicitors with a list of potential tortfeasors all of whom had since gone out of business. Mr Cox did not provide a witness statement and there was an absence of primary evidence dealing with the precise period of employment and his duties with the defendants. The claimant’s engineer described how employees like Mr Cox, who carried out short term contract work, would have been heavily exposed to asbestos.

The defendants submitted that in the absence of more concrete evidence, the only fact that could be established was that Mr Cox had worked for the defendants during the tax year in question. In deciding liability in the claimant’s favour, the judge had in first instance rejected this argument concluding that Mr Cox had been exposed to asbestos during his employment with the defendants when stripping down large boilers. On the defendants’ appeal, the CA found that on the evidence, particularly that of the engineer, the trial judge had entitled to make these findings and dismissed the appeal.

Although the judgments in each of these cases were essentially based on fact, they demonstrate how difficult it is for a defendant to successfully defend breach of duty in mesothelioma claims. They also indicate how difficult it is to overturn first instance decisions on appeal.

One can imagine that the defendants in Jones, Maggs and Cox were perplexed by the court’s determination of important issues in each claimant’s favour. In Jones for example, there is an impression that the defendants’ knowledge and culpability were not judged against truly contemporaneous standards. In McGuire v Harland and Wolff Plc (2005) EWCA CIV 01, Lord Justice Judge made certain obiter comments suggesting that there was no question of all prudent employers prescribing to the notion that minimal exposure after 1965, carried a risk of mesothelioma. Whilst cognisant of Judge LJ’s dictum, the trial judge in Jones considered that because the defendants were a large company with substantial resources, they should have assessed the impact of asbestos applications after 1965 and taken appropriate steps to reduce and eradicate exposure even at truly minimal levels.

In taking the decision to contest the case, the defendants in Maggs were no doubt buoyed by seemingly cogent contemporaneous documentation that not merely challenged but contradicted key elements of the claimant’s factual case, but the absence of evidence of exposure in any other employment appears to have weighed heavily in the judge’s reasoning in determining fundamental conflicts and concluding that the material exposure occurred after May 1970 when the Asbestos Regulations came into effect.

In Cox, evidential gaps in the claimant’s case were effectively filled by an engineering expert who possessed general knowledge of the type of conditions to which the deceased could have been exposed whilst employed by the defendants. Ironically, whilst the clear evidence of exposure in several other employments may have influenced the defendants in adopting their approach, it may have ultimately counted against them in circumstances where each of the other employers had long since gone out of business.

Although Brett is an example of a successful defence on breach of duty, there is more than a hint in the CA’s judgment that the outcome might have been different had it not been for strong circumstantial evidence of unprotected exposure in non pleaded employments.

Viewing Brett now and, in particular, the claimant’s evidence on exposure, it is perhaps surprising that the case was ever brought; but for those of us practising in the field of occupational disease, there is a growing sense that some claimant practitioners believe that proof of diagnosis and employment are sufficient to establish liability in claims involving mesothelioma.

With the number of mesothelioma claims predicted to peak in another seven to eight years the above cases could signal an important shift in the way in which defendants, their insurers and advisors approach them. In Cox the CA specifically referred to the evidential difficulties arising from investigating events occurring several decades ago. However, as time passes, improved record keeping and the availability of contemporaneous witnesses should present defendants with more opportunities to defend mesothelioma claims arising from more recent exposure periods. What remains to be seen is whether the courts will be prepared to accept evidence which might otherwise be rejected in cases involving less emotive injuries.

Matthew HarringtonPartner, BLM Cardiff


CA costs spotlight

Over the last year, a number of costs issues have bubbled to the surface with the Court of Appeal (CA) considering such things as ‘discounted Conditional Fee Agreements (CFAs)’ and ‘CFA-Lites’.

An attractive funding arrangement for paying parties, a ‘discounted CFA’ provides for a ‘discounted’ hourly rate whatever the outcome. In the event of a ‘win’, which could be defined as achieving a favourable costs order, a higher hourly rate and a success fee can be claimed. In Gloucestershire County Council v Evans [2008] EWCA Civ 21, such CFAs were endorsed as lawful. To the client requiring bulk legal services, such an agreement achieves certainty as to the costs of those services, enabling accurate budgeting. It also creates an incentive to both the client and the provider to achieve the win as it maximizes the costs recovery from the losing party.

In contrast, the decision of Crane v Cannons Leisure [2007] EWCA Civ 1352, is not good news for paying parties as it provides for the recoverability of excessive success fees on work not undertaken by solicitors themselves. Firstly, work done by costs consultants was a profit cost and not a disbursement, as it was the type of work that the solicitors were retained to do and they had not relinquished control or responsibility for it. This entitled the solicitor to charge a success fee on the work undertaken by the costs consultants. Dissenting, Lord Justice Kay considered the allowance of a success fee on work that the solicitor had not undertaken to be simply unjust. Secondly, the success fee on such work was the same as the success fee for the substantive action despite the clearly reduced ‘risk’. Lord Justice May commented that the claim for costs was for ten times the damages, due in part, to the inadequate scope of the small claims track. The decision highlights the importance of skilful handling of detailed assessment proceedings to provide protection against the increased potential liability of such proceedings to paying parties, but perhaps more significantly, Crane will provide further impetus for claims reform generally.

Technical challenges to CFAs dated before the revocation of the CFA Regulations, referred to as ‘old-style’ CFAs continue to provide an opportunity for reducing costs liability. If successful, such challenges wipe out entitlement to any costs that depend upon the enforceability of such a CFA. One example was Barlow v Perks (2007) before Master Rogers in the SCCO which delivered a significantly reduced liability for costs and also obtained a significant costs order in favour of the defendant. Not surprising the CA acknowledged that in Jones v Wrexham Borough Council [2007] EWCA Civ 1356, receiving parties, when faced with a technical challenge to their CFA, might seek to argue that it is in fact a ‘CFA-Lite’, even if it was clear that this was not the intention when the CFA was originally set-up. Such a CFA was made possible by amendments to the regulations by trading a promise not to enforce a shortfall in costs recovery by not having to satisfy the bulk of the regulations. Significantly, a written advice concerning the CFA was considered to form part of the CFA. Furthermore, it was construed that a potential shortfall could legitimately be protected by insurance to be captured by the amended regulations. There is no doubt that more and more receiving parties when faced with a potentially catastrophic challenge to their entitlement to costs will consider their plight afresh to see whether it can be construed to be a ‘CFA-Lite’.

As a final sobering note to paying parties, it was made clear that any industry agreements need to be carefully finalized before converting into CPR, as it would not be possible to try and iron out any gaps by the judicial process. The fixed success fee regime set-out in CPR 45 came under scrutiny in Lamont v Burton [2007] EWCA Civ 429. Whilst it is accepted that a 100% success fee applies where a fixed recoverable costs regime case proceeds to trial, where a claimant fails to beat a defendant’s Part 36 offer at trial, the losing claimant still gets a 100% success fee on his awarded costs! As far as the CA was concerned, its hands were tied and it was a matter for the Rule Committee to sort out any necessary amendments to deal with the Part 36 point.

Overall, the CA has dished out its fair share of challenges to paying parties’ attempts to reduce their costs liabilities, but have presented a welcome opportunity to maximise their costs recoveries.

Adam BurrellCosts team leader, BLM Birmingham


Access to justice – three current issues

Disclosure 10, September 2007, reported on expected developments from the Ministry ofJustice (MoJ) regarding changes to the processing of personal injury claims, and on moves within the UK and EU towards collective procedures or class actions. This article briefly reports on both, and also on another aspect which has emerged in the last few months – the funding of litigation by third party investors.

Claims process reformFeedback from the MoJ on its April 2007 consultation is long overdue. The key proposals, it will be recalled, are to cut liability admission periods significantly and to adopt widespread fixed recoverable costs throughout a new fast track of up to £25,000.

Most recently, in responding to a Parliamentary question in late January, the MoJ stated that the proposals represented ‘… a significant reform of the claims process for personal injury claims and [that] it has been important to give careful consideration to the numerous and diverse range of views that we have received’.

So it appears that the number and range of views are the reasons why change is taking a long time. It might reasonably be argued that that ought to have been foreseeable when the consultation paper was launched last April by Lord Falconer, who said that ‘… we need real reform. Reform which initiates a culture change’. Be this as it may, all eyes now turn towards the period after Easter in expectation that the detail of the new regime will emerge, given that the government has stated its ‘aim to publish by the end of March.’

Progress with any new costs regime runs at a similar pace, it appears. The ad hoc Advisory Committee has begun to collect some data that might inform the new levels for fixed recoverable costs. However, actual figures, models, proposals or schemes still appear to be some way off.

Collective or class actionsChristopher Coughlin set out general background on so-called class actions in the last edition. The term comes with negative associations related to perceived abuses in the United States. In Europe and the UK however, the debate that is emerging is largely around empowering numbers of consumers who have suffered harm (a) with access to justice and (b) an efficient process for resolving their claims.

Indeed, as European Consumer Commissioner Kuneva stated clearly at a conference held in Lisbon last November on the topic:

To those who have come all the way to Lisbon to hear the words ‘class action’, let me be clear from the start: there will not be any. Not in Europe, not under my watch.

The Commission favours instead the term collective consumer redress. It has since published a series of benchmarks against which to measure any future proposals. The main elements are set out below.

The mechanism should enable consumers to obtain satisfactory redress in cases which they could not otherwise adequately pursue on an individual basis.

It should be possible to finance the actions in a way that allows either the consumers themselves to proceed with a collective action, or to be effectively represented by a third party.

Plaintiffs’ (sic) costs for bringing an action should not be disproportionate to the amount in dispute. The costs of proceedings for defendants should not be disproportionate to the amount in dispute.

These principles themselves should not be controversial – indeed they are almost identical to those formulated by Lord Woolf some 12 years ago in his final report (chapter 17), which led to the current group litigation order (GLO) provisions in England and Wales.

Although some 64 GLOs have been certified since 2000, an influential body of opinion is emerging challenging the effectiveness of the mechanism and pointing out its limitations. For example, in a report issued in November 2007, the Office of Fair Trading called for new procedures to facilitate collective action by consumers following anti-competitive conduct by traders. In February 2008, the


Civil Justice Council (CJC) published research examining the ‘unmet need’ for collective redress which is not presently served by the GLO mechanism.

Recent cases further underline the toe-hold that collective redress has gained in the UK litigation landscape. First, the favourable resolution of the representative claim brought by Which on behalf of consumers against JJB Sports, for losses suffered due to price-rigging of football shirts. Second, the obvious process inefficiency in the thousands of individual bank charges test cases. Third, the collective settlement secured by a US specialist class action firm for air passengers who suffered losses arising from collusion by BA and Virgin in setting fuel surcharge levels. Finally, there is much speculation about possible mass shareholder action following fractures in the financial markets as typified by the Northern Rock saga.

The overall policy direction will evolve with CJC expected to publish a policy paper on the topic in the spring and with the Department for Business & Enterprise (BERR) due to set out further proposals of ‘representative’ actions in a similar time frame.

Third party litigation fundingReform of litigation processes, as outlined above, is universally linked to changes in the claims funding mechanisms. Changes to conditional fee procedures and the protracted litigation that followed (often characterised as the ‘costs war’) offer a salutary example of this close linkage – which generated over 180,000 pieces of litigation. The link is again all too evident with the emergence of third party litigation funding as a mechanism to further the aim of enhancing ‘access to justice’.

Third party funding is rapidly eroding the historic doctrines of champerty and maintenance, which prevented external investment for reward in litigation. In the lead case of Arkin v Borchard Lines, the Court of Appeal (CA) in 2005 approved a third party funding arrangement and set out an approach:

… designed to cater for the commercial funder who is financing … the litigation in a manner which facilitates access to justice and which is not otherwise objectionable.

The court was clearly aware that commercial litigation funders will require a share of the proceeds of the litigation (which may be of the order of 30%), by definition leaving the successful claimant with less than a full recovery. The need to recover out of the proceeds is a very practical reason why the third party funding market is presently limited to claimants pursuing monetary remedies.

The CA did not find that recovery from the proceeds of the claim was objectionable as a matter of policy. It was aware that:

… the funder will require, as the price of the funding, a greater share of the recovery should the claim succeed. In the individual case, the net recovery of a successful claimant will be diminished. While this is unfortunate, it seems to us that it is a cost that the impecunious claimant can reasonably be expected to bear. Overall justice will be better served …

Consequently, Arkin acted as a catalyst to the commercial litigation funding market. In the two years since the case, investors and funders from the Commonwealth and the EU have entered the UK market, notably IMLF from Australia and Allianz Process Finance from Germany. In addition, a number of UK capital providers and hedge funds are widely reported to be considering the opportunities in the UK litigation funding market.

With rapid market expansion comes the inevitable prospect of regulation. This had already been identified by the CJC, which recommended in June 2007 that:

Properly regulated Third Party Funding should be recognised as an acceptable option for mainstream litigation. Rules of Court should also be developed to ensure effective controls over the conduct of litigation where third parties provide the funding.

Any emerging regulation will need to strike a balance between improving market confidence and transparency whilst not stifling product development. It seems likely to address areas such as:

ensuring that third party funding is in the interest of access to justice, and developing benchmarks to assess this.

requiring that the funding arrangements are fair for both the claimant and defendant. providing that there is appropriate security for the successful defendant’s costs. whether or not the terms of the funding arrangement should be disclosed to the court or the

defendant, and whether or not they are subject to court control.


Medium term developments?By the year end, the shape and direction of the three topics covered here should have become much clearer. By then, process for resolving personal injury claims will either be on the cusp of radical reform, or a compromise solution acting as a sticking plaster over the current excessive costs and delays will have emerged. And the combination of effective collective redress procedures and available and regulated third party funding in the UK is likely to act as a powerful catalyst for the bringing of consumer claims and mass tort actions, with ‘access to justice’ as its guiding principle, coupled with a recognition of the need for efficient and balanced processes.

Despite the experience with conditional fee agreements, the hope must be that satellite litigation about the ‘costs of costs’ in a new personal injury process and in collective and third party funded claims does not hamper the development of these innovative and potentially highly efficient approaches to civil dispute resolution.

Alistair KinleyHead of policy development, BLM London

Christopher CoughlinPartner, BLM Leeds


Third party motor fraud: a shift in judicial attitude?

Khan & Others v Hussain & Others 2007

As industry concentrates its fight against motor fraud the courts are grappling with morecomplex arguments on the appropriate legal sanction that should be imposed for dishonest third party claims. The recent case of Khan & Others v Hussain & Others [2007] represents a significant shift in judicial reasoning

BackgroundThere is a long line of authority, in insurance contract law, that partially false claims submitted by policyholders (first party claims) will be forfeited in their entirety (Axa v Gotlieb [2005]). However, there is no comparative principle in claims founded in tort (third party claims).

Insurers will be only too familiar with partially dishonest third party claims which include doctored invoices, inconsistent damage, medical reports founded on untruths, exaggerated claims, phantom passengers, false witnesses and fictitious care. Dishonest elements of a claim being ‘tagged’ onto what appear genuine incidents. If partially dishonest first party claims forfeit the whole claim why should third party claims be any different?

Courts have adhered to a line of reasoning of:The fact that a claimant dishonestly puts forward unjustified heads of loss should not disentitle him in law from recovering such head or heads of loss as are indisputably made out: Churchill Insurance v Kelly [2007].

However, in order to impose some level of justice the dishonest activity did not go wholly unpunished the courts, in the appropriate cases, having the power to:

a refer the matter to the DPP to consider criminal sanctions for perjured evidence; and/orb make an adverse costs order (Painting v Oxford University [2005]).

For those experienced in the arena of fraud litigation it will come as no surprise that in those cases where fraud is detected the well-intended judicial sanctions rarely bear fruit. Criminal prosecutions are rarely followed through, legal expenses insurers often pick up any adverse costs order and pursuing dishonest claimants directly for costs if difficult and expensive. Yet dishonest claimants walk away with money for those genuine aspects of their claim.

The foundationsIn light of this perceived injustice, between first and third party dishonest claims, there has been a drive for harsher legal penalties. Arguments based on ex turpi causa non oritur actio (from a dishonorable cause an action does not arise) doctrine, public policy arguments, tainting defences (attacking credibility) and Civil Procedure Rule sanctions have sought to redress this imbalance. There has been some historic support that when:

Faced with the manipulation of the civil justice system … the court should once it knows all the facts entertain a case at all save to make a dishonest claimant pay the defendant’s cost. (Laws LJ: Molloy v Shell UK Ltd [2001].

A shift in judicial attitude?Zahid Khan & Others v Hussain & Others 2007

Matters came to a head in this recent case the facts of which are straightforward. In a genuine motor accident the compensator (the MIB) received injury claims from three alleged passengers of a vehicle. The driver and all three claimants supported each other’s claim. On the evidence the court held one of the claimants was not an occupant at all. Whilst the false claim was struck out the MIB sought to have the other two genuine claims struck out also. Despite giving dishonest evidence to support a false claim the judge concluded he had no power to dismiss those genuine claims.

AppealThis decision was appealed on the basis that the judge failed to grasp the seriousness of the fraud and was wrong in holding he had no power to dismiss the genuine claims. It was submitted that discretionary powers have always existed under the Civil Procedure Rules and this power should have been exercised in the interest of justice. The appellate court supported this position and having reconsidered matters struck out the two genuine claims also stating:


a The CPR rules require the parties to help further, and the court must seek to give effect to, the overriding objective (CPR 1).

b The court had powers of case management to strike out a claim if it appears to the court there has been a failure to comply with a rule, practice direction or court order (CPR 3.4(2)).

CommentsThis is a very strong decision. The court considered a long line of authorities that have sought to balance the rights of an individual claimant and that of the wider public interest, reviewing whether the existence of criminal sanctions for perjured evidence and adverse costs orders were sufficient to protect the public interest. However, in these circumstances it took a more pro active stance refocusing on the courts interest in administering justice. Utilising the CPR rules cases of flagrant dishonest conduct may no longer be tolerated as being purely collateral to genuine claims. This judicial shift is a welcome addition to the arsenal in the fight against fraud. Whilst the winds of change are upon us it remains to be seen whether developing jurisprudence stems the flow of dishonest claims.

Raymond SouthernPartner, BLM Manchester


Insurance law: some recent developments

This article comments on two decisions for insurers to take on board. The first concerns the nature of public liability insurance. The second, of rather wider application, concerns the dangers of accidentally waiving the right to take a policy point.

Tesco Stores v Constable 16.04.2008(Court of Appeal)

The first instance decision in this case came just too late for Disclosure 10 but the Court of Appeal (CA) decision has come just in time for this edition. The claim relates to the well known incident in Gerrards Cross in 2005 when a section of tunnel over a railway line where Chiltern Railway Company operated a service collapsed. The collapse happened during the course of works carried out for Tesco.

Prior to carrying out the works, Tesco had entered into a deed of covenant with Chiltern to indemnify the latter if the works interfered with its railway passenger business. A crucial point is that Chiltern did not own the railway line – that was the property of Network Rail, which Chiltern and other train operator companies are licensed to use.

Tesco took out a public liability policy on terms that were broadly similar to all such products:The Insurers will indemnify The Insured against all sums for which The Insured shall be liable at law for damages in respect of …b) loss or damage to material property … happening or consequent upon a cause occurring during the construction period …

There was an exception in respect of ‘fines’ and ‘liquidated damages’ and other like arrangements but an extension in respect of contractual liability which stated that:

… liability assumed by The Insured under contract or agreement and which would not have attached in the absence of such contract or agreement shall be the subject of indemnity under this section only if the conduct and control of any claim so relating is vested in The Insurers …

Tesco argued that the public liability insurers were liable to pay the significant compensation it had had to pay to Chiltern, under the deed of covenant. The CA has confirmed that insurers were not so liable and, along the way, set out clearly the essence of public liability cover:

Public liability is insurance primarily aimed at indemnifying the policy holder in respect of claims made against it in tort. It is necessary to take an overall view of the policy wording to reach that conclusion but, in particular, the phrase ‘liable at law for damages’ envisages a tort claim, not a contractual claim.

The words in the operative clause ‘in respect of’ are a ‘controlling mechanism’ and cannot be interpreted as meaning damages that arise as a consequence of, say, damage to someone else’s property but must mean damages for damage to property. This was fatal to Tesco’s right to claim because a claim cannot normally succeed in tort for pure economic loss – which was the legal position when Chiltern’s property had not been damaged.

The contractual extension could not give the insured extra rights because the wording makes it clear that it relates to the cover under that section of the policy which is for tort claims.

It is always worth being reminded of this fundamental point about public liability insurance ie that it is primarily designed for tort actions and, on the basis of most operative clauses, where there has been physical injury or damage to property.

However, care perhaps needs to be taken about following this decision too slavishly in other policies. It is always necessary to consider the wording of the specific policy. Some species of public liability policies, eg product liability policies, are probably drafted with contractual claims specifically in mind.

And what of the position of a main contractor who is sued and claims under a public liability policy but the claim against it is contractual in respect of its sub-contractor’s work? In such a case, the main contractor may not be liable in tort. One cannot help but suspect that brokers are increasingly looking for public liability cover that does extend to cover at least some contractual claims.


Kosmar Villa Holidays v Trustees of Syndicate 1243,23.02.2008 (Court of Appeal)

This concerns the issue of waiver and how an insurer can potentially lose its rights by handling a claim without reserving its rights carefully. As it happens, the CA reversed the first instance decision that the insurer had waived its rights to rely on breach of a condition precedent requiring immediate notification of a claim. The first instance judge had, seemingly, held that the insurer dealing with a personal injury claim brought by the insured tour operator for a relatively short period of time amounted to an election to cover the claim.

The first instance decision struck some terror into the hearts of claims managers because, although there had been a long background to the submission of the claim, some tentative dealing with the claim seemingly years after the very serious accident that gave rise to the claim, meant that the insurer had waived its right by election. It seems that the insurers probably did not do much more than write to the claimant’s solicitors, with a copy to the insured, asking the claimant’s solicitors to note insurer’s interest as Kosmar’s insurers and to ensure that all future correspondence was sent to it, as well as asking questions about the claimant. In the meantime, the insurers had been asking the insured some questions about how it had taken so long to notify the claim, when rapid notification was required in a clause which was a condition precedent.

The CA appears to have taken a common sense view. Lord Justice Rix has pointed out that it would not be good practice for insurers to rush to repudiate a claim for late notification or to de-stabilise their relationship with the insured by immediately reserving their position – which they might have to do to protect themselves if a limited amount of equivocal conduct towards the claim could be taken as electing to waive rights. However, in reversing the decision of the first instance judge, he did point out that insurers should not equivocate for long when giving the plain impression that they are treating a claim as covered by the policy. So insurers must still be very careful to take great care about the manner in which they handle a claim, especially if they suspect a breach of a policy term, sufficient to give insurers the rights to avoid or repudiate.

This decision represents commonsense and an understanding that insurers do need some time to evaluate their position and act responsibly in their decision making if a reason to refuse to pay a claim is suspected. It does highlight the practical problems of dealing with claims, in the context of the requirement by the courts (and desire by insurers) to deal with them quickly and efficiently. It is always commonsense to reserve rights if there is any reason to suppose that there are grounds for not covering. Such cases need to be investigated rapidly and, if the question of policy liability is to be examined at all, it should be done early on.

Catherine HawkinsPartner, BLM London


Corporate manslaughter: grip tightens on company failure

On 4 February 2008 the Daily Telegraph reported that a leading motor manufacturer had been convicted of manslaughter in the French courts. This followed a fatal accident attributable to brake failure. It was said that the motor manufacturer was aware of the defect but had failed to recall its vehicles for immediate repair. What would the position be if this had happened in the UK?

The Corporate Manslaughter and Corporate Homicide Act 2007 came into force on 6 April 2008.

Prior to the law changing in April, a corporation could not be convicted of corporate manslaughter unless the person who was the controlling, or directing, mind of that corporation was also guilty of gross negligence manslaughter. In the circumstances described above, the prosecution would need to prove gross negligence of an individual at the very highest level within the company. Unless the chief executive or someone of equivalent status was party to, or made the decision not to recall the vehicles concerned, the chances of a successful corporate manslaughter conviction on these facts would be very low in the UK.

Section 1 of the Corporate Manslaughter and Corporate Homicide Act 2007 states that the new statutory offence is committed if the manner in which an organization manages or organises its activities causes a person’s death, and amounts to a gross breach of a relevant duty of care owed by the organisation to the deceased. The way in which senior management manage the organisation has to be a substantial element in the breach of the duty of care. Senior management means either those who play a significant role in making decisions about (or are responsible for actual management or organisation of) the whole or a substantial part of the organisation’s activities.

Section 1 of the Act disposes of the need to identify a single person as directing or being the controlling mind of an organisation, who is also guilty of the offence of gross negligence manslaughter. It enables the prosecution to aggregate serious failures involving more than one individual within the company at senior management level. The bar has been lowered and, if the event above was to occur in the UK, there is an increased likelihood of prosecution and conviction of the motor manufacturer after 6 April 2008.

It is open to any court convicting of corporate manslaughter to make a remedial order, requiring the organisation to take specified steps to remedy the following:

The breach. Any matters which contributed to the cause of death. Any deficiency in the organisation’s policy, systems or practices relating to health and

safety.

So the motor manufacturer would almost certainly be required to recall all vehicles for immediate repair in the event that it had not done this already. The court might also conduct a much wider enquiry into systems and practices and require the defendant to introduce new procedures for vehicle recall programmes to avoid another incident of the same kind.

The revised Act will give the court power to seek a publicity order which may require an organisation to publish the fact that it has been convicted of the offence, to specify the particulars of the offence, the amount of any fine imposed, and the terms of any remedial order made.

Draft sentencing guidelines issued by the Sentencing Advisory Panel propose that the court should normally make a publicity order on every offender convicted of corporate manslaughter. This is seen as an effective deterrent as any such conviction is likely to result in considerable reputational damage. In the French case mentioned previously, the company would probably be ordered to publicise the conviction in the national press which is likely to attract an unwanted reaction. Would this prompt members of the public to switch to another manufacturer? Would resale values suffer as a result? Vehicle manufacturers have powerful public relations skills. However, any company issuing a publicity order might well face an uphill struggle to restore consumer confidence in its products as a result of the adverse publicity flowing from a conviction under the 2007 Act.

Last but not least, the court has the power to fine the company. The draft sentencing guidelines referred to above indicate that, subject to any aggravating or mitigating factors, the court should


impose a fine equivalent to 5% of the defendant’s average turnover over the three years prior to sentencing. This would be a very substantial sum in the case of a major player in the motor manufacturing field.

In the French case above, the fine imposed was in the region of £150,000. The case is subject to appeal as the motor manufacturer denies negligence. If, however, the facts were to be repeated in the UK after 6 April 2008 and the company was to be convicted under the 2007 Act, then the ramifications for the company would be extremely serious. The warnings are there for all to see.

Rodney WilsonPartner, BLM Liverpool


Limitation – some clarity at last

The House of Lords (HL) has provided a judicial solution to the ‘needlessly complex, outdated, incoherent and sometimes unfair’ state of limitation law in the context of historical abuse: claims for assault now fall under the same regime as other personal injury claims, but the full impact on claims for historical abuse will need further judicial interpretation.

Most cases of historical abuse involve children in institutional settings such as private care homes, local authority children’s homes, approved schools or borstals. It is therefore surprising that the title case of the recent House of Lords’ decision on such claims, known as the ‘Lotto rapist’ case, involved neither. In A v Hoare and five other appeals (2008), the Law Lords considered when claims for personal injuries arising from past sexual, physical or emotional abuse should be brought. In the title case Mrs A sued the man who had attempted to rape her more than six years after the event, after learning he had won £7M on the national lottery. In all other cases, victims of childhood sexual abuse sought compensation many years later from the employers of those who had abused them.

The Law Lords have now accepted that claims for intentional assault should fall under the same regime as all other personal injury claims. They provided further clarification on how ‘knowledge’ should be ascertained, and how judges should exercise their discretion to extend time further. Their decision will significantly change the way such claims are framed and defended.

Claims for assaultUnder the previous regime, claims for personal injuries arising from intentional assault had to be brought under section 2 of the Limitation Act 1980: within six years of the assault or the claimant’s majority if later, and there was no discretion to extend time. Historically, the six-year period had been more generous than the period applicable to personal injury claims. But since 1975, personal injury claims could be brought within three years of ‘knowledge’, or even later if the court agreed. This differential regime was confirmed in Stubbings v Webb [1993]. This meant that many claimants could not recover from their abuser or those vicariously liable for the abuser’s actions (provided there was a sufficiently close connection between the abuse and the abuser’s work, as stated in Lister v Hesley Hall [2002]). This led claimants to frame their claims in negligence, under increasingly artificial concepts such as a duty not to groom, or a duty on the abuser to self-report the abuse.

The HL has now decided that the Stubbings case was wrongly decided and that claims for intentional assault are claims for ‘breach of duty’: as such they fall under section 11 and must be brought within three years of injury, majority or date of knowledge.

Date of knowledgePersonal injury claims can be brought within three years of date of knowledge. Under section 14(1), this is the date upon which the claimant first had actual or constructive knowledge of various facts including that the injury was significant. The test applied to ‘significant’ had become increasingly subjective. This culminated with KR v Bryn Alyn Community (Holdings) Ltd [2003] where the CA held that time would only start to run from the date on which the particular claimant could be expected to institute proceedings. This grated with the objective test for constructive knowledge as applied by the House of Lords in Adams v Bracknell Forest Borough Council [2005], after which the CA was veering towards a more objective approach.]

The HL has now confirmed its preference for the objective test: the claimant’s intelligence or propensity to issue proceedings must be disregarded. One must look at what the claimant knew (actual knowledge) and what he ought to have known (constructive knowledge), and whether a reasonable person (not the claimant) with that knowledge would have issued proceedings. More claims will be deemed statue-barred as often the abuse was such that the claimants knew they had suffered a significant injury. But claimants will be able to avail themselves of the wider judicial discretion to allow claims to proceed under section 33.

Guidance on discretionThe HL confirmed that judicial discretion to extend time is broad and unfettered. More cases will now turn on the exercise of such discretion and Lord Brown provided the following guidance in cases of historical abuse:

In many cases it will be easier to have a fair trial, because claims for systemic negligence will fall and issues in dispute will be fewer.


The date when the complaint was first made will be relevant. Whether the abuser was accused or convicted of similar abuse will be relevant. It would be wrong to expect claimants to issue proceedings against impecunious defendants

(this guidance was obviously made with Mrs A’s plight in mind).

ConclusionHarmonisation of historical abuse claims is a positive development: this will reduce the difference of treatment between claimants, and the need to frame claims in artificial ways.

Clearly more claims against schools, local authorities private care home owners and charities can be expected, as under the combined effect of A v Hoare and Lister claimants will only need to prove injury and abuse, provided their claim is brought in time. Claimants can no longer rely on the full six years to issue claims for assault and defendants will see their limitation defence succeed more often. It will then be for claimants to persuade the courts that it is equitable for their action to continue. Until the guidance has filtered down, it is difficult to predict how such discretion will operate. This could be more about taking decision-making away from psychiatric experts, and less about preventing stale claims from reaching the courts. Expect more trials of limitation as a preliminary issue!

Geneviève RichSolicitor, BLM London


Data protection – too much data, not enough protection?

When, in November 2007, the government admitted losing two CDs containing the details of 25 million child benefit records many observers felt that the issue of data protection had finally reached a watershed. The loss was the subject of such intense media scrutiny that it was felt that the issue of data protection must have appeared on the radar of all organizations that held data.

Following the furore the Information Commissioner’s Office issued guidance recommending that all information be encrypted before being physically moved by disc or memory stick.

The issue has, though, clearly not gone away. On 7 April 2008, one of the UK’s biggest banks, was forced to apologise to customers after losing the personal details of 370,000 people.

It emerged that, despite the criticism aimed at the government over the loss of the CDs in November and the new guidance a computer disc was sent by Royal Mail from the bank’s offices in Southampton to its reinsurers in Folkestone. The disc contained the names of insurance customers including details of date of birth and health information such as whether or not the individual concerned was a smoker. The disc was password protected but was not encrypted.

A failure to heed the wake-up call from November 2007 could, potentially, have far reaching implications:

1 Reputational issuesIt is clear that significant harm can be done to an organisation’s reputation through the bad publicity accompanying any loss of any data. That is particularly of concern to organisations such as financial institutions and insurers where competition is fierce and customer ‘churn’ is significant.

2 FinesWhilst the Information Commissioner has relatively weak powers, at present the FSA has used its powers to impose fines on organisations which have mislaid data. In 2007 a leading insurer was fined £1.26 million for failing to have effective controls in place to prevent fraudsters getting hold of customer details and one of the top high street building societies was fined £980,000 for lapses in information security procedures when a laptop containing sensitive information was stolen from the home of an employee.

3 The cost of remedying breachesAccording to The Financial Times, research carried out by an US based institute estimated that data loss cost British companies £47 for each record with the average cost per case being £1.4 million. In the case of financial service organisations the cost was even higher at £55 for each record compromised. In the circumstances it can be seen that whilst the cost of prevention is relatively modest, remedying a breach in terms of taking action to prevent the information being misused, contacting customers (the above case involved the bank contacting 370,000 people) and investigating the breach can be very significant indeed.

4 ClaimsThere is also the possibility not only of regulatory action but of claims from individuals whose data has been lost in the event that they suffered damage as a result of the loss. Such claims can be made under section 13 of the Data Protection Act and could, for example, be made where the loss has enabled a third party to access bank accounts or to commit identity theft. In addition to the above, the Information Commissioner is continuing to press for enhanced powers to deal with breaches of the Data Protection Act. The Commissioner currently has the power to serve an enforcement notice which would require steps to be taken to prevent a further breach occurring. The breach of such a notice would constitute a criminal offence. However, the Commissioner is keen to secure wider powers to deal with lapses.

Risk managementTechnology is available to encrypt data through encryption keys which allow authorised users to read and process data across a company. In addition software solutions are available for encrypting laptops and other removal media as well as securing email communications. Such steps, in conjunction with a comprehensive data protection policy, are miniscule compared with the ‘mop-up’ costs following a breach.


November 2007 the government admits losingtwo CDs containing details of 25 million child benefit records.

June 2007 a leading bank apologises to 60,000 mortgage customers after private information about them was lost in the post.

December 2007 two unencrypted discs containing details of more than 7,000 drivers in Northern Ireland lost in the post.

December 2007 details of 3 million UK learner drivers lost from the US processing centre. February 2008 Home Office disc with encrypted information found in a laptop sold on Ebay. Information about nearly 600,000 people went missing when a Royal Navy Officer had his

laptop stolen. Documents from the Department of Work & Pensions containing sensitive personal data

found dumped on a roundabout in Devon. Nine NHS Trusts in England admitted losing patient records covering hundreds of thousands

of adults. A building society lost details of 14,000 customer records.

Tim SmithPartner, BLM London


Construction sub-contractors: ‘Play by the rules!’

The Pre action Protocol for Construction and Engineering Disputes is part of the staple diet of construction lawyers. Following a revision in April 2006, cases concerning the protocol continue to be put before the court. As applications for the protocol evolve, lawyers have been concerned that the protocol has the potential to be misused in an oppressive manner to obtain detailed information in order to assert or deflect a claim. Ideally, the protocol, if successful and correctly used should allow parties to either resolve disputes (including fee claims) prior to the issue of proceedings, or at least narrow the issues in dispute, so that the court is faced with a ‘streamlined’ action.

Last year Charles Church Limited v Stent Foundations Limited (QBD) [2007] brought pre action conduct to the fore. The original claim made by Church related to various losses allegedly caused by sub-contractors. As Church had left matters for sometime and they were nearing the end of the limitation period, there was not enough time remaining to comply with the pre action protocol prior to issuing proceedings. Mr Justice Jackson found that a party would have difficulty in relying on the pre action protocol matters if they had delayed matters until the end of the limitation period without good cause. As a result, in this instance, because of Church’s conduct he ordered Church to compensate the defendants (by way of costs) for a failure to comply with the pre action protocol; additionally, they were unable to recover a substantial six figure sum incurred in respect of pre action costs from the defendants.

Of further interest to clients pursuing fee claims is Cundall Johnston and Partners LLP v Whipps Cross University Hospital NHS Trust [2007] EWHC 217A (2CC), as it confirms that a claim for professional fees is subject to the Pre action Protocol for Construction and Engineering Disputes. This case makes interesting reading because the defendant complained that it was unable to understand the case put before it, due to the lack of particularization in the purported letter of claim. Whilst a letter of claim was accompanied by an experts report, the court did not consider that this in itself was sufficient to satisfy the protocol. Accordingly, the court reaffirmed the view that parties are obliged to set out their position in a clear and concise manner, and if there is a failure by a party to provide such information, the court will exercise a discretion to ‘stay’ proceedings and prevent the claimant from pursuing its claim unless it complied with the protocol.

Finally, this year, the TCC once more looked at the protocol in the matter of Orange Personal Communications Services Limited v Hoare Lea [2008] EWHC 223 involving a number of parties. Orange had issued proceedings against two parties, and the defendants, Kier and Haden Young, had responded by saying that the loss and damage arose as a result of Orange’s failings or the failings of its design team. The main dispute related to Orange, Kier and Haden Young, and Orange only sought to involve Hoare Lea (a member of the design team), if Kier and Haden Young’s defence proved successful. Orange issued proceedings, and Hoare Lea quite rightly issued an application that the claim be stayed because Orange had failed to follow the protocol. Mr Justice took the opportunity to review a number of authorities and reiterated that the protocol was concerned with ‘saving expense, proportionality, expedition and fairness’. As such: … the court should avoid the slavish application of individual rules, practice directions or protocols …

Accordingly, he dismissed the application put forward by Hoare Lea that the claim be stayed because Orange had failed to follow the protocol. He gave a number of reasons for this decision but primarily, his view was that the protocol procedure in this case would not be sufficiently productive to justify a stay. However, the judge was concerned about Orange’s failings, and therefore whilst not allowing the stay because of Orange’s delay in relation to various procedural elements, he ordered that Orange should pay their own costs and one third of Hoare Lea’s costs. Presumably, such a decision was to reflect Hoare Lea’s increased costs which arose as a result of Orange’s failings.

ConclusionIn many ways the judge’s decision in Orange is refreshing as it reflects a more pragmatic approach to the pre action protocol, given that the judge considered the conduct of all parties in order to determine whether or not the protocol would have been useful. However, it once more confirms that compliance of the protocol is an important element of pursuing or defending any construction claim, and any misconduct in relation to the protocol will be viewed seriously by the court.

Michael SalauPartner, BLM London


Compensation Act and desirable activities

The Better Regulation Task Force report of May 2004, Better Routes to Redress, identified a common misconception – that an injured claimant is entitled to a remedy against whoever caused the injury – and this was leading to risk-averse behaviour through fear of litigation. Section 1 of the Compensation Act 2006 was enacted to redress this misconception, and its stated purpose was not so much to change the law, as to improve awareness and to provide reassurance that those wishing to engage in socially-useful activities should not be discouraged from doing so through fear of litigation.

As a result of such celebrated cases as the first instance decision in Chittock v Woodbridge School in July 2001 (QBD 31.08.2001 unreported) and the Court of Appeal (CA) decision in Tomlinson v Congleton Borough Council in March 2002, (The Times, 23.03.2002) it is quite understandable how the public perception of a compensation culture developed. However, even before the 2006 Act was enacted, the worrying trend for courts to find for claimants who had acted with obvious disregard for their own safety had been stopped in its tracks by the House of Lords (HL) in Tomlinson [2007] EWCA Civ 1003. This was a long overdue decision which drew attention to the adverse effect on the public at large of finding for the claimant – to guarantee the safety of a valuable public amenity would be to close it to the public.

Section 1 of the Compensation Act 2006 now enables defendants to show that if they are required to meet a particular standard of care, this cannot be achieved without curtailing a desirable activity. Perhaps this provision applies in respect of strategic, but not necessarily operational, activities. For instance, a local authority could not argue that if a teacher driving a minibus was held liable for negligent driving, there would be no more school trips. However, it would be an entirely different matter if the local authority were in jeopardy if on a school trip a pupil wandered off and had an accident. It might be a good defence to say that if teachers are to be held liable for incidents such as this, there will be no more such trips, but it would be completely unrealistic to expect the court to accept that the future of school trips would be put in doubt if the organiser were held liable for a road accident en route.

As things have turned out, irrespective of the Act, recently reported public liability decisions have exhibited a welcome underlying thread of common sense, and generally in the cases where the courts have found for the claimant it is not difficult to understand why. The increasing reluctance of the courts to compensate voluntary risk-takers or to impose ridiculously high burdens on defendants flows not from the codification of a ‘desirable activity’ defence, but from the strongly-worded HL judgment in Tomlinson. (Lord Hoffman made a scathing comment that he found his disagreement with the CA ‘difficult to express with appropriate moderation’). Irrespective of the Compensation Act 2006, there have been several further recent examples demonstrating consistent judicial recognition that it is simply not possible to provide a risk-free environment:

MacClancy v Carenza [2007] EWHC 479 (QB): the claimant suffered serious head injuries after falling off a horse whilst attempting a ‘drop down’ from level ground to another level as part of a cross country exercise. The court was satisfied that the defendant was an experienced and competent instructor who had been carefully monitoring the claimant’s progress and assessing her ability, and any risk had been reduced to what was reasonable. It would not have been possible to remove all risks facing the claimant otherwise she might not have been permitted to ride her horse on a cross country route – or indeed by logical extension – to ride a horse at all.

Shirley-Parker v Levy (QBD 20.07.2007 unreported): the claimant caught her foot in a small hole near the end of a pontoon and suffered a frightening injury. The holes were an integral part of the design of this type of narrow, mobile pontoon and inevitably there would be some risk facing anyone perched on the end. The court thought that the existence of a hole added little to the overall danger.

Cole v Davis-Gilbert and others [2007] EWCA Civ 396: the claimant broke her leg after catching her foot in a hole on a village green which had accommodated a maypole. It had been alleged that the hole had not been properly capped off. The court took the view that it would be inappropriate to impose formal legal relationships on traditional celebrations which bring local communities together up and down the country, characterised by individuals working together voluntarily and on an informal basis. If the law were to impose a higher


standard of care there would be no traditional British activities for fear of what might conceivably go wrong, and the litigation that may follow.

In each case above, the claimant was entirely free from blame and still failed to establish liability, despite the fact that more could have been done by the defendant to have minimised the risk.

There have, of course, been some claimant successes. Piccolo v Larkstock Ltd (QBD 17.07.2007 unreported) involved a claimant who slipped on petals which had fallen from a display outside a flower shop; Poppleton v Portsmouth Youth Activity Centre [2007] EWHC 1567 (QB), where the claimant was injured when he jumped down onto the crash mat from a climbing wall; Evans v Kosmar Villa Holidays [2007] EWCA Civ 1003 in which the claimant was at first instance awarded damages when he broke his neck having dived into the shallow end of a swimming pool (in circumstances where the signage was poor and the defendants knew that inebriated residents were wont to dive into the pool), was recently overturned by the CA. The latter interestingly relied heavily on Tomlinson and the Compensation Act did not receive a single mention.

It would be unwise to conclude from this that the desirable activity provisions in the Act have proved to be superfluous. They are exerting a discernable covert effect. The dearth of reported decisions citing the Act should not by any means deter defendants from pleading section 1 as an additional cautionary reminder that the preservation of desirable activities undertaken reasonably has, as a matter of principle, the statutory seal of approval.

Brian GoodwinPartner, BLM Liverpool


Liability issues for property insurers

Liability issues arising in claims against property owners

The potential liabilities arising between a landlord and tenant for defects within property are complex and manifold and many of the principles derive from case law dating back to the turn of the last century. Insurers sometimes have to navigate this minefield to decide whether their insured can recover its losses for being successfully sued. The fundamental principle of the relationship is that the law will respect parties’ rights to contract as they see fit and will be reluctant to impose obligations beyond those agreed. The principle of caveat emptor (let the buyer beware) remains good law although Parliament has intervened in some circumstances to ameliorate what can prove to be very harsh consequences to unwitting tenants. Property owner’s liability insurers will be encouraged by the recent affirmation of this long standing traditional position.

A frequent problem in subrogation is whether a landlord is liable to a tenant for damage caused by a defect within retained parts of a building pre-existing the grant of the lease. At first blush, it might be thought that the answer ought to be ‘yes’. However, the current position in English law is, absent an express covenant to the contrary, ‘no’ and this primarily dates back to a 1906 House of Lords decision in Cavalier v Pope [1906] AC 428 that still presents an obstacle to claimant tenants. In this case their Lordships held that a bare landlord owed no duty of care to a tenant concerning premises let to it. By granting a lease, a landlord is not warranting the building’s ‘fitness for purpose’. Except in cases where a landlord covenants to put a building into repair, a landlord will not be liable (under a standard repairing covenant) because there has been no change in the physical characteristics of the retained parts – ie there is no disrepair requiring the landlord to undertake works to remove the defect. The building always was and remains defective and no obligation requires the landlord to improve the condition.

A tenant’s reliance upon the covenant for quiet enjoyment will also not avail themselves of a remedy because such covenants generally protect legal title and possession and do not warrant the fitness of the premises let or the adequacy of the facilities.

This rather far reaching defence for landlords has been criticised over the years and some statutory provisions have been enacted to reduce the apparent harshness of the common law. Low rent tenancies must be ‘fit for human habitation’ and repairing covenants are implied into short tenancies (sections 8 & 11 Landlord & Tenant Act 1985). Of more general application the Defective Premises Act 1972 provides some restricted protection to ensure dwellings are ‘fit for human habitation’ and imposes a duty of care upon landlords who have repairing obligations. In 1996 the Law Commission made a number of recommendations to extend protection to tenants. One of the Commission’s recommendations is that Parliament should enact a provision implying into [nearly] every lease that, where a landlord lets part of a building and retains some other part of that building, then the landlord should be under a duty to keep such parts in repair to such standard as may be appropriate having regard to such factors as age, character and prospective life of the premises and its locality.

A good example of the unsatisfactory state of the law was provided in the recent decision of Nicholas Jackson v J H Watson Property Investment Ltd [2008] EWHC 14 (Ch). Mr Jackson, a barrister, purchased a new 125 year lease in a flat in Liverpool. Over a five year period the flat suffered from water ingress caused by a defect in the concrete of a lightwell adjoining Mr Jackson’s flat. The lightwell was outside Mr Jackson’s demised premises and remained in the control of the landlord. Importantly (and unfortunately for Mr Jackson), the defect in the concrete pre-dated the grant of the lease. Mr Jackson never contended any breach of a repairing covenant nor did Watson deny the cause of the ingress. The sole issue at trial was whether the landlord remained liable in tort for the remedial costs and other losses sustained by the claimant from the ingress. Mr Justice Behrens thought not. After reviewing the authorities the judge, while sympathetic to the claimant’s plight, concluded that Cavalier v Pope was still good law. The claimant’s argument that Cavalier did not apply to landlords where the defect complained of was located in the retained parts was rejected such that:

… in the absence of an effective covenant to repair in the lease I do not think Mr Jackson can rely on the law of nuisance to impose what is, in effect, an obligation to put right faulty construction work by Watson …

Mr Jackson’s claim was accordingly dismissed and he was left without a remedy.


The future of the wide scope of protection afforded to a landlord by the common law must be considered as doubtful although it will take a case of significant value before the House is invited to re-visit its judgment to meet the demands of the 21st Century. The Court of Appeal has already limited the ambit of the Cavalier decision in Rimmer v Liverpool City Council [1985] QB 1, when it was held that a local authority landlord that had designed and built a dwelling via its own direct works department did owe a duty of care to persons who might reasonably be expected to be affected by the condition of the premises although it should be noted that such liability arises from its duty owed as builder rather than landlord. Notably the present edition of Clerk & Lindsell on Tort (19th Edition at paragraph [8-38]) opines that the immunity for the bare landlord that subsists from Cavalier ‘should be overruled at the next opportunity’. Cavalier’s days may be numbered.

In considering a claim against a landlord there are a number of factors to consider:1 Is the causative defect within the landlord’s scope of control? If so, what is the ambit of the repairing covenant – is the landlord obliged simply to maintain and keep in repair? Is this a new defect (and therefore disrepair) or does it pre-date the grant of the lease? If so, is there a wider obligation to put into repair?

2 If the repairing covenant does not ‘bite’ is there a wider tortious duty of care upon the landlord to take reasonable care to avoid causing physical damage to others? Can the facts be brought within the Rimmer exception to Cavalier?3 If the defect is within a landlord’s adjoining retained premises has the defect occurred after the date of the grant of the lease?4 Are there any statutory provisions that may assist? If the property is a dwelling is it ‘unfit for human habitation’?

The full scope of a landlord’s potential liability for damage is far too great for an article of this nature but the current lacuna is one well worth watching out for and will certainly provide a strong defence to claims that would, but for Cavalier, otherwise be meritorious. Of course the courts are reluctant to involve themselves in the bargains reached by contracting parties but dealings in land cannot be considered in the same terms as purchasing other ‘goods’, as evident from the voluminous legislation concerning such transactions and we shall have to wait and see whether or not Parliament elects to legislate away a landlord’s Cavalier defence.

In short, the landlord’s liability insurers can often breathe a sign of relief after considering the merits of a liability claim against the insured.

Warren KingAssociate, BLM London


Migrant workers – breaking down barriers, reducing risk

There are many media stories dealing with migrant workers with a great deal of speculation as to numbers and impacts on the community. This article looks at migrant workers who are legally entitled to work in the UK, their possible impact on workplace safety, and the liabilities of employers.

Regulations made under the Health & Safety at Work etc Act 1974 impose numerous obligations on employers in respect of all of their employees, including duties to carry out risk assessments of workplaces, supply protective and safety equipment and take safety measures in relation to construction sites. As breaches of statutory duties can, in the majority of cases, give rise to civil liability, falling foul of the regulations can open an employer up to claims for personal injury as well as prosecutions by the Health and Safety Executive.

There is a tendency in this area to generalise and to assume that migrant workers equate automatically to health and safety risks. Clearly this is not the case with large numbers of migrant workers who are often over qualified for the jobs they undertake, and who have a good working knowledge of the English language. Below are issues which may arise in relation to the treatment of less well qualified or inexperienced migrant workers where language is a barrier to their understanding of health and safety matters. The duties of an employer include the provision of a safe working environment for all employees. If that safe working environment is jeopardized by employees not understanding health and safety issues, then the employer may be liable for any offences that are caused and will incur vicarious civil liability for the actions of his migrant workers.

The number of claims for injuries caused in the workplace may be set to rise as migrant workers become increasingly aware of their rights and the fact that not only can they bring claims for personal injury in the UK, but also that workers returning overseas can claim for previous accidents in the UK and families of workers killed in accidents can bring a claim.

To follow are particular situations where an employer may incur liability and the steps to be taken to balance the costs of seemingly cheap labour with the risks of liability in law with consequent fines, awards and increased employers’ and public liability insurance premiums.

Language in itself may not be the only issue – cultural differences and poor communication can increase risk to make workers and their employers vulnerable to a number of health and safety problems.

Low skills in catering, hospitality and food handlingThe HSE conducted a survey of 200 migrant workers which revealed that most had little or no job specific food hygiene training or health and safety training. The finding raises concerns given that a significant percentage of migrant workers are employed in hotels or restaurants, or in food processing or packaging. Worryingly for an industry involved in food handling and contact with the public, workers tended to under report illness and work when they were sick for fear of being dismissed as a result. Fear of dismissal is a recurring theme in reasons why migrant workers put up with poor treatment. The HSE recorded that one in four workers had either had an accident themselves or witnessed a migrant co-worker having an accident, a figure which is higher than that experienced by UK nationals.

As with most of the problems identified, a good employer will pay for full training, even for what may be considered to be relatively basic tasks as the workers may not have encountered the type of equipment or tools previously. Consideration should be given to potential differences in what are considered to be basic health and safety requirements between the UK and the migrant workers’ countries of origin.

Manufacturing, construction and engineeringIn this sector remain the inherent problems of under-skilled or under-trained workers. However, even for situations where there is a skills match, there may be differentials in the culture of health and safety between the country of origin and the UK. In these industries there is often a more dynamic and noisier workplace. Poor language skills may mean that dangers that evolve during the working day are not adequately communicated and subsequently understood by migrant workers.


Language is often the first barrier to health and safety. Employers should make sure that all employees can understand basic English health and safety information or instruction and if there are concerns about a language barrier, translations should be made available. Employees may hide their language problems, so the employer needs to be proactive and make sure that the individual employee has understood. In the HSE research, it was found that use of visual aids to explain safety issues was well received. Training and tool-box talks will assist in identifying the risks as will universal danger logos on signage which may need to be in different languages.

PPEThe HSE found that migrant workers who were often asked to provide their own protective clothing failed to or could not afford to do so. Employers need to ensure that all workers (not just migrant workers) are issued with and properly trained in the use of protective clothing or equipment. Where there is a conflict between traditional or religious dress and protective clothing, the HSE does give guidance and employers will need to find ways of resolving this issue to ensure that their employees are safe.

Accident reportingThe employment of migrant workers tends to lead to considerable underreporting of accidents as they are unlikely to record near misses or advise their employer if they are concerned about a potential accident for fear of dismissal. This is notwithstanding the fact that they are protected by whistle blowing legislation and protection from dismissal in the Employment Rights Act 1996. As part of the health and safety training it should be emphasised that all accidents or near misses must be reported and made clear that the employee will not be subjected to a detriment if they do so.

A lack of access to company sick pay also means that migrant workers are less likely to report an injury or will continue to work whilst injured. Migrant workers may also be unaware of the requirement to report incidents unless they received specific training to do so which subsequently increases risk of accident and further claims.

Working hoursACAS funded research highlights that there are risks of accidents where employees are unaware of their rights under the Working Time Regulations (WTR) relating to maximum weekly work, holiday or rest break entitlements. If a migrant worker's hours are in excess of the WTR and the worker has not signed a waiver (or understood what the waiver means and what their rights are), this can lead to an employment claim against the employer; although the breach of the WTR is not tortious in itself, it is a relevant factor in assessing liability for health and safety prosecutions and civil liability.

Working excessive hours can result in fatigue and an increase in the likelihood of an incident resulting in an employer being liable if an accident occurs to either the migrant worker or a third party. Regardless of whether a migrant worker is keen to work long hours to earn more money, a responsible employer should ensure that those hours comply with the WTR.

DiscriminationMigrant workers have the protection of the Race Relations Act 1976 from discrimination, victimisation and harassment. Higher levels of bullying and abuse reported by migrant workers can give rise to increased levels of sickness absence and potential claims for discrimination. Employers must explain and enforce equal opportunity policies, while encouraging workers to report any incidents, to help reduce the risk of claims.

ConclusionFor risk managers in companies employing migrant workers, protection for the company requires that health and safety information is passed on and understood by all workers. Extra effort is needed in the case of migrant workers, where clear explanations must be given. The need for reporting problems without fear of recrimination must be emphasised. Failure to make allowances for language and cultural differences will almost inevitably lead to increased claims and premiums. While language is a potential barrier to a safe workplace, it can be overcome if there is a will to do so.

Michael ParrPartner, BLM Manchester


The new value of catastrophic injury claims

In January 2008 the Court of Appeal (CA) released the long anticipated decision in Thompstone v Tameside and Glossop Acute NHS Trust which is likely to have serious ramifications for claimants and defendants alike when valuing and reserving catastrophic injury claims. The CA reaffirmed the decision in Flora that a court may depart from the retail prices index (RPI) and instead use an earnings-related index when attempting to protect against inflation on a periodical payments order (PPO). Why is this so significant? The response is several-fold.

Periodical payments are a complementary method of settling future loss claims, the principle and most common method being the lump sum which capitalises past and future losses into a single payment. The onus is then on the claimant (or their advisors) to invest that sum so it will not run out during the claimant’s lifetime; the main weakness of this method is accurately predicting the amount required.

The Damages Act 1996 enables PPOs to be made in respect of part of the future loss element. The court is empowered to authorise PPOs in personal injury claims and indeed impose them even where the parties object – provided it concludes pursuant to the CPR 41 that PPOs meet the claimant’s best interests. Consequently the court has greater interventionist powers even where a claimant has the requisite capacity.

For PPOs to meet the claimant’s best interests they have to be inflation-proof to avoid a shortfall which would result in the claimant being undercompensated. This underpins the Thompstone decision.

The court’s approach to the indexation issue is the100% principle:… the aim is to award such a sum of money as will amount to more and at the same time no less than the net loss … (Hope LJ in Wells v Wells.)

The claimants’ submission in Thompstone was that there is a fundamental flaw in the Damages Act 1996 because s2(8) cites the RPI as the measure by which an annual sum is to be indexed each year. However, it is almost always the case that the vast majority of future losses comprised within the PPO relate to future care; furthermore, future care itself almost entirely comprises of the carers’ wages. The claimants argued that wages rises have outstripped RPI perennially and therefore a more accurate – and fairer – index was the Annual Survey of Hours and Earnings (ASHE). The claimants further argued that s2(9) empowered the court to modify this s2(8) so as not to refer to the RPI. This argument succeeded at first instance and was unanimously upheld in the CA’s robust judgment.

The most obvious consequence of this decision is that it will increase the value of PPO awards made by alternative reference to the RPI, and where that reference suggests the greater annual increase than the RPI. However, will this result in a consequence in rush for PPOs – either at the request of the claimant or ordered by the court. It is early days, although fairly unscientific anecdotal evidence (particularly from the financial sector) suggests that claimant’s advisors are no more enthusiastic about PPOs post-Thompstone than before. Whilst this may be partly due to custom and practice, another factor is likely to be loss of control and lack of flexibility of PPOs. Whilst the investment risk is transferred to the defendant in providing the PPO, the claimant loses the flexibility of being able to choose how to use and invest the money. A claimant who invests adventurously may achieve a better return than that promised by either RPI or ASHE. For example, the Barclays Gilts Survey which measures performance of Gilt Stocks over the last century gave an average return of 6.9% per annum whilst ASHE – admittedly only covering a shorter period – showed an annual increase of 3.6%.

Where court approval is not required, claimants may well continue to opt for the traditional lump sum route. Parties should be aware that if it was ever considered a rubber stamp exercise in such cases it can no longer be taken for granted that courts will approve such orders without close scrutiny. The CPR 41 requires settlement to best meet the claimant’s needs. The Damages Act already empowers an interventionist approach including imposing the PPOs even where not sought. Given the interventionist approach is also endorsed in the Mental Capacity Act 2007, it is not being alarmist to expect courts to require little or no persuasion that a lump sum is in a claimant’s best interests.


The CA in Thompstone held that the claimants’ wishes would take precedence over those of the defendants, with the former wishes not being paramount. One can expect to see considerable use of Independent Financial Advisors (IFAs) providing expert reports on behalf of the claimant endorsing one settlement method over the other. Disappointingly, but perhaps not surprisingly, the court did not envisage that defendants would be submitting IFAs of their own.

Anecdotal evidence records claimants requesting PPOs but being ‘bought off’ with an enhanced lump sum. Questions arise as to how seriously the desire was for a PPO and whether this practice is likely to continue. On both points, ‘yes’ is the likely response. However, what price the brass-necked insurer who is only prepared to offer settlement by PPO to buy in the alternative and seek a discount for a lump sum award? Less likely, what price the claimant’s solicitor advising acceptance?

The judgment also raises ‘market’ issues for insurers assuming there is not a rush to self fund. Conversely it may result in a fairly level playing field as inevitably most insurers at some stage will face claims where PPOs are ordered and they can then decide whether to purchase a specific product and how to pass on the costs to consumers.

The decision will make it more difficult for defendants to make effective Part 36 Offers. The claimant is often late in deciding whether to plump for a PPO and which heads of damage to be included making it difficult for defendant to present an effective Part 36 Offer.

The court stated that it would be rarely appropriate for the defendant to argue that its proposals better meet the claimants needs than the claimants own proposals and preferences. It is imperative that the defendant knows the claimants preferences and financial proposals before an effective Part 36 Offer can be made. Consequently the defendant must seek to obtain this information from the claimant at the earliest opportunity and to even require a claimant to address this issue with an IFA. Certainly the longer the claim persists, the more pressure should be brought on the claimant to state its intention.

Other issues remain; where a request is made for a substantial interim payment will Thompstone give defendants leverage in arguing against a substantial interim award as it may tie the judges hands with regards to potential PPOs at settlement. Clearly the answer will depend on the level of the interim payment within the context of the claim’s overall value. This argument is unlikely to be attractive and at most may only result in a modest reduction of the payment requested. Additionally, Roberts v Johnston raised the issue that its underlying premise does not fit with periodical payments and arguments remain as to which portions of ASHE should be used and whether other indices, beyond the RPI, are appropriate of in relation to other heads of damage. Nevertheless, Flora and Thompstone establish the principle that the RPI can be disregarded, in the latter case leave to appeal being denied. The defendants have petitioned the HL directly and a decision is awaited. However, on the issue of using ASHE in place of RPI, Waller LJ bluntly stated the court’s opinion:

All of the appellants’ objections to ASHE 6115 failed in the court below and failed before us. We hope that as a result of these proceedings … defendants … will now accept the appropriateness of indexation on the basis of ASHE 6115 has been established after exhaustive review of all possible objections. It will not be appropriate to re-open that issue in future proceedings unless the defendant can produce evidence and arguments significantly different from and more persuasive, than that which has been deployed in the present cases. Judges should not hesitate to strike out any defences that do not meet that requirement.

In terms of the current value of claims, we are going to have to learn to live with it.

Andrew KerrPartner, BLM Manchester


BLM reports

Catastrophic Injury Forum January 2008 BLM’s National Catastrophic Injury Unit is comprised of senior lawyers with wide experience in this complex and often over-adversarial area of law. Regular forums are organised for senior insurer clients to exchange knowledge and to provide a platform for debate. Previous events explored some of the most pertinent issues in catastrophic claims. The first forum considered the care element of claims, with a particular emphasis on PCT and Local Authority Funding. The second examined the question of costs in high value litigation, resulting in BLM facilitating a working group on the matter. The third covered aspects relating to life expectancy, and involved Government Actuary’s Department and a live video feed from California with expert statistician Professor David Strauss.

‘What Could Defendants Do Better?’The most recent forum was held on 11 January 2008, entitled ‘What Could Defendants Do Better?’. This event looked at case handling practice, behaviours and approaches rather than a specific area of the law. Three experts drawn from different areas and known for their work with claimants, were all asked to answer this key question based on their own experience. The presenters were: Maggie Sargeant, a leading care expert; Jackie Parker, a case management and rehabilitation provider and Elizabeth Ann Gumbel QC, a leading silk in clinical negligence and personal injury cases.

The starting point for the discussion was placing modern-day care claims in context. Claimants nowadays have greater expectations of mobility and quality of life. Their legitimate expectations, coupled with the raft of health, safety and employment legislation applying to domicillary care will often drive a need for two carers rather than one. Evidently, there will be cost implications for insurers funding such care.

At present, defendant’s care experts are instructed much later than the claimants’, who observe the claimant undertaking daily tasks early on. This inevitably causes tension between the parties as they have differing views on the extent of care needed. Earlier involvement of the defendant’s team was thought to be vital. This could take the form of early access to the claimant and facilitating joint visits by both parties’ experts. Alongside this, the claimant and defendant legal teams should be seeking to agree an early settlement meeting to move away from the adversarial management of claims. The claimant should recognise the benefit of this in that it may persuade the defendant to offer interim payments, thus ensuring that funding does not run dry. Such meetings could include the setting of a care regime and budget from the outset. While it would be difficult to achieve a ‘one size fits all’ formula for such budgets, the involvement of both parties will be invaluable in managing expectations and providing a foundation on which to build.

To enable these positive changes on the part of the legal teams to work, the quality of the instructed care experts is essential. Best Practice Guidelines have been published by the British Association of Brain Injury Case Managers (BABICM). It is hoped that defendants will use these guidelines as benchmark when instructing care experts to ensure they are properly accredited and suitable. In turn, this will reduce the scope for disagreement and tension between the parties when both insist their expert’s recommendations are to be followed.

ConclusionThrough discussing the problems encountered in this area with leading experts and insurer clients, BLM has recognised that change is needed. The very strong theme of the recent forum was the emphasis on collaboration between the parties.

Claimants with catastrophic injuries – and their families – have had their lives changed irrevocably by the incident. They are often faced with large numbers of people, with different interests and expectations, who are involved in resolving their claim. Added to this is the adversarial nature of litigation, with its tangled web of competing lawyers and experts.

Catastrophic injury claims are highly emotive and necessitate a highly sensitive approach. Earlier communication and collaboration between the parties will go far towards achieving the best result for everyone concerned. As a firm, BLM is pioneering a new spirit of co-operation and is committed to putting this into practice. It is hoped that others will follow our example and help secure a new face for the future of catastrophic injury claims.

Andrew HibbertPartner, BLM Southampton


Rome II: producing certainty?

As travel becomes easier and goods cross borders before reaching their final destination, we must increasingly look at how any associated liabilities will be decided where there may be conflict as to what laws should apply. After years of deliberation, the EU has finally approved choice of law rules in respect of non-contractual obligations. The new regulation, 864/2007 of 11 July 2007 and more commonly known as Rome II, is intended to be applicable across all member states from January 2009.

General rulesRome II will apply to all events happening after implementation in January next year. In brief, where a cross-border dispute occurs in a member state involving a conflict of laws (which may relate to a country outside the EU), the general rule set down in the new provisions is that the law applicable to the non-contractual or tort claims will be that of the country where the damage occurs, irrespective of the country where the event giving rise to the damage occurred. Inevitably there may be alternative approaches depending upon circumstances. For example, where the parties both reside in the same country when the damage occurs, that country’s law will apply. Other provisions may apply if particular circumstances are relevant which indicate the tort is more closely connected with the law of another country.

In general, Rome II designates the substantive law that governs the claim. It will also govern the possibility of direct claims against insurers and subrogated claims, as well as the basis, extent and division of liability. It is not concerned with evidential and procedural issues. This distinction itself may cause further problems since what is procedural may vary between states. For example, in English law, procedure includes quantification of damage while under Article 15 of Rome II the ‘applicable law’ is intended to govern ‘the existence, nature and assessment of damage or the remedy claimed’.

Claims affectedSo what particular types of claim will be affected? Attention has focused on product liability claims (where, not surprisingly given the expanding trace across borders, special rules apply), and injuries in road traffic accidents.

Other fields of liability will also be subject to the new rules and commercial parties will increasingly need to consider whether to enter choice of law agreements (which remains permissible under Rome II), for example governing quantification of damages.

As to road traffic accidents, the general rule above applies with no subject specific exceptions. Inevitably the country where the damage occurs is also likely to be the country where the accident took place. However, lawyers had hoped there would be greater clarity in the determination of the law applicable to accidents involving residents from more than one EU member state. Some had hoped that there would be a special provision allowing the use of the law of the country where the injured person was resident, but this was not adopted. There are also concerns that Rome II may not provide the expected improvements because of lack of uniformity. In several member states, it is expected that the Hague Convention on the Law Applicable to Traffic Accidents (1971) will take precedence and until this co-existence is clarified it is unclear which law will apply.

As to product liability cases, Article 5 sets out a cascading set of specific rules reflecting the competing issues which may prevail where a product has travelled between countries and causes damage to an individual away from their usual country of residence. First, the applicable law will be that of the country in which the person sustaining the damage habitually lived, provided the product was actually marketed in that country. Note that the use of habitual residence here, in contrast with the road traffic case (above).

If that test is not satisfied, the applicable law will be that of the country in which the product was acquired if the product was also marketed there. The third possibility is the law of the country in which the damage occurred, if the product was also marketed in that country. However, if the manufacturer or supplier could not reasonably have foreseen the marketing of the product in any of the countries designated by these three tests, then the applicable law would be that of the country in which the central administration of the liable party resides.

Finally, and as a catchall, the court may decide that all the circumstances of a particular case indicate that the tort is more closely connected with any country other than the four possibilities


above, and hence that country’s law should therefore apply.

Inevitably such an approach may have some remarkable outcomes when considering how a product liability claim should be adjudicated. The drafters of Rome II have clearly intended that manufacturers should consider where they market their products when looking at the potential consequences of litigation. Given the fifth catchall provision, it will always be open to courts to apply common sense to a particular circumstance although the manner in which the test will be applied will be keenly anticipated.

Unfortunately, as with motor claims, product liability cases may also be subject to existing legislation. The Hague Convention on the Law Applicable to Products Liability, which dates back to October 1973, is currently applicable in six EU member states: Finland, France, Luxembourg, the Netherlands, Slovenia and Spain. Since both Rome II and the Hague Convention contain provisions as to choice of law, some co-ordination issues will arise between the two texts.

ConclusionWhile those who drafted Rome II were aware of the potential co-ordination issues, and indeed initially drafted the provisions of Rome II to state that the new regulation would take precedence over the Hague Conventions on Traffic Accidents and Product Liability, the final draft allows more room for interpretation in the application of international conventions to which member states are parties. Thus, at present it is uncertain whether those member states who are signatories to the Hague Conventions will apply Rome II. Although the new rules will have widespread impact across many fields of liability and claims, Rome II particularly reflects increasing international marketing and cross-border sale of goods. We await developments over the summer as to whether certain EU countries will opt out of the regulation and to how pre existing conventions will apply. Underwriters and manufacturers alike will need to consider in detail how the new rules will impact on potential risks and their, or their customers’,marketing strategies.

Jim SherwoodPartner, BLM London


BLM reports

EU developments in cross-border civil litigation

Joanna Shaw began the second year of her training contract at BLM with a European view, having secured a six month secondment to the Law Societies’ Joint Brussels Office. Situated in the heart of the EU district, the Brussels office is well placed to represent the interests and views of the legal profession to key decision makers and legislators. The roles of the Brussels office are to:

raise awareness of EU law and of opportunities in Europe amongst solicitors. monitor developments in EU law and to ensure that they are compatible with the UK legal

system. promote UK law and to open new markets for solicitors. protect solicitors’ practice rights in the EU.

Being seconded to the Brussels office from a litigation firm, Joanna was involved in monitoring EU developments in civil justice and litigation. Here, two new pieces of legislation of particular relevance to cross border civil claims will soon apply throughout the EU, including in the UK.

From the end of 2008, claimants will be able to take advantage of both the European Payment Order (EPO) and the European Small Claims Procedure (ESCP) to bring claims across borders. At present, although certain existing domestic and EU measures allow for the recovery of debts or small claims in other member states, the complexity, expense and duration of cross-border proceedings can often be prohibitive. Any domestic remedy – a judgment for instance – requires further intermediate measures at EU level before it may be enforced in another member state. The EPO and the ESCP seek to address these difficulties by introducing uniform procedures across the EU, removing the need for intermediate measures and allowing remedies to be automatically enforced in another member state.

European Payment OrderThe EPO applies to all uncontested pecuniary claims in civil and commercial matters – regardless of amount. It comes into force in the UK from 12 December 2008. Naturally, it applies to cross-border claims only. The procedure is straightforward and involves the claimant filling in a standard form, setting out the details of the claim and a description of the supporting evidence. Assuming the form is completed correctly, and the claim is admissible, then the domestic court issues the EPO. This is then served on the defendant and, provided that he does not oppose it, it becomes automatically enforceable in each EU country.

European Small Claims ProcedureThe ESCP will apply to cross border civil and commercial claims of less than €2,000. Unlike the EPO, it is not limited to pecuniary claims. It will, therefore, cover situations where an EU citizen seeks to recover damages for personal injury suffered in another member state or against a defendant who resides abroad. The €2,000 limit contrasts with current small claims limits of £1,000 and £5,000 in England and Wales for personal injury and property damage respectively, and of £3,000 in Scotland for all claims.

The procedure enters into force on 1 January 2009 and introduces a further optional method of bringing a small claim in another member state. The process starts with the claimant submitting a claim form to the relevant court. The defendant then has 30 days to respond – if he does not, the court must give a default judgment. If the matter is defended, ‘hearings’ may take place by phone, video conference or e-mail, with judgment to follow within 30 days. A judgment certified as delivered via the European Small Claims Procedure may be enforced throughout the EU without further formality.

Defendants and their insurers should pay particular attention to the time-limits imposed and note that there is only one opportunity to answer a European small claim before the court is required to grant an effective default judgment.

The benefits of such EU-wide standardised procedures are clear, as they provide efficient and cost-effective methods of bringing claims across borders, without the need for cumbersome intermediate measures. The new simplified measures should have the effect of cutting the length and costs of cross border litigation, perhaps opening up new claims that might not otherwise have been pursued. Just how many claimants elect to use the EU methods of recovering cross-border debts (of various types) and how the procedures will be applied and enforced in practice remains to be seen.


Joanna ShawTrainee solicitor, BLM Manchester

Joanna was selected from hundreds of applicants to undertake a six-month secondment at the Law Societies’ Joint Brussels Office in September 2007.


Corporate Social Responsibility

CSR at BLM is about behaving responsibly in the workplace, community, marketplace and environment. Each office has a CSR representative whose task is to promote, facilitate and encourage CSR, whether it be staff personal development, recycling or working with charities in our local communities. Below is a snapshot of the last 12 months.

Legal projectsIn BLM London, 12 solicitors volunteered as honorary legal advisers at the Royal Court of Justice Citizen’s Advice Bureau, covering 33 three hour sessions. BLM Liverpool solicitors help run a weekly legal advice clinic at Liverpool University, BLM Southampton participates in community mediations and BLM Leeds advise a homeless charity, Emmaus. To broaden the scope of and encourage wider participation in activities, BLM’s CSR includes non-legal events.

The Prince’s Trust and non-legal projectsBLM supports The Prince’s Trust in its work with disadvantaged people. The initial year of the firm’s support as Patrons has seen our trainees taking part in an Enterprise Project (see Disclosure 9, March 2007 at www.blm-law.com) where they were tasked with raising £20,000 from an initial outlay of £3,000.

National events included ‘dress red’ days, email bingo and an email auction. Several offices held quiz nights and the money raised from the annual charity walk in September was added to the total. Lucy Dennison (BLM Manchester), who chaired the trainees’ committee, was delighted to raise over £22,000 saying ‘this was a great learning experience for all involved and a fantastic opportunity to meet trainees across all the offices.’

In addition to strong national support, each BLM office has different needs, and individual members of staff have different interests. In response, BLM’s community focus is flexible with each office supporting charities involved at a local level in education, homelessness and health. At the time of printing, a BLM team is taking part in the Trust’s Namibia Desert Challenge, trekking, running, jogging, cycling and abseiling over 140kms amid of one of the world’s harshest habitats. For information visit www.blm-law.com

Marketplace and environmentThe firm’s office managers are responsible for ensuring that BLM complies with it’s ethical trading and environment policies including recycling and minimising it’s carbon footprint, supply chain management and ethical business conduct.

Getting involvedBLM is delighted to have had the opportunity to work alongside clients on some of the above projects. If you have additional ideas, would like to become involved, or to find out more about BLM’s CSR policies, contact [email protected]

Christopher NewtonPartner, BLM London, andChair, BLM’s CSR Committee


mailto:[email protected]

http://www.blm-law.com/

Disclosure is published by the marketing department of Berrymans Lace Mawer (Castle Chambers, 43 Castle Street, Liverpool L2 9SU) on behalf of the partnership. Printed in England by Paterson Print. ISSN 1475–4711. Issue 11. Copyright © Berrymans Lace Mawer 2008

Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of Berrymans Lace Mawer. Specialist legal advice should always be sought in any particular case. Information is correct at the time of printing.

Berrymans Lace Mawer is regulated by the Solicitors Regulation Authority. This e-bulletin Is designed to keep readers abreast of current developments, but is not intended to be a comprehensive statement of law and no liability for errors of fact or opinions contained herein is accepted. Please take professional advice before you apply this e-bulletin content to your particular circumstances.

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