"We’re getting a bit like America now, aren’t we?" This fairly typical dinner party question arises from a perception that the country is in the grip of a ‘compensation culture’ where damages can be claimed regardless of blame. But this is not a true reflection of the legal position.
Most of us engage in activities where we have a duty to take reasonable care to avoid injuring others. ‘Reasonable’ care – not excessive care. There is no need to avoid the activity altogether if reasonable care can be taken.
This perception has arisen since the Government’s Access to Justice reforms in 2000. The resultant rise in ‘no win, no fee’ cases has made personal injury big business. Unregulated claims management companies with big budgets advertised widely. There was a rise in frivolous claims. The famous collapses of Claims Direct and The Accident Group gave the sector a bad reputation and encouraged the view that we were overrun by ambulance chasers.
In 2003, the House of Lords in Tomlinson v Congleton Borough Council expressed concern that people were claiming when they had been injured by obvious risks. Potential defendants were banning activities rather than take the risk of being sued. The Government commissioned a report, which concluded that there is no compensation culture – in fact it found that the number of claims had been reducing. But it also found that more people thought they had a claim, even in situations where no one else was to blame. This, along with sensationalist press reporting, tended to fuel the perception that compensation was freely available.
Out of this came the Compensation Act 2006. The Act introduces regulation for claims management organisations, whose attempts at self-regulation have failed. All such organisations must now obtain authorisation to offer these services. A regulator (Lord Falconer) is created, who in turn has appointed a Head of Claims Management Regulation. He is now writing the regulations that will apply and has stated: "Regulation will clean up the market and remove the rogue traders."
The Act also introduces a specific piece of retrospective legislation for people with mesothelioma caused by asbestos exposure, which is beyond the scope of this article.
In many respects, the Act is to be welcomed, introducing as it does sensible reform aimed at restoring credibility to this area of law.
Where the Act is less useful is in section 1, which in essence permits courts to take into account a possible effect on ‘desirable activity’ when deciding whether a defendant is liable. Desirable activity is not defined, but the gist of this section is that courts should take into account the possibility of a risk-averse approach developing if they find too readily that defendants are liable for accidents. Section 2 states: "An apology…shall not of itself amount to an admission of negligence…." In both of these respects, the Act does no more than state the obvious and repeat the existing law. Section 1 has been criticised as ‘well-meaning’ but ‘unnecessary’ and ‘a strongly media-driven phoney solution to a phoney problem’ – a sop, in other words, to those who believe there is a compensation culture, but without addressing the problem of that perception.
As claimant personal injury and clinical negligence solicitors we have always believed in pursuing only meritorious claims. There is no point in encouraging our clients to pursue spurious claims with no prospect of success. We welcome regulation of the ‘claims farmer’ market, but we have concerns as to the effect of these first sections of the Act. They do not clarify the law and may indeed give rise to misleading defences of desirable activity by defendants seeking to use the Act to avoid their responsibilities when they have not taken reasonable care.
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