Examination of Witnesses (Questions 20-39)
DEPARTMENT FOR
BUSINESS, ENTERPRISE
AND REGULATORY
REFORM
22 OCTOBER 2007
Q20 Mr Touhig: I got some money—£11,000—for
two of my constituents back from lawyers, but this has been going
on for years. The solicitors worked in partnership with claims
farmers. Do you know what a claims farmer is?
Sir Brian Bender: Yes indeed:
someone who farms the system in order to make sure that they get
more claims.
Q21 Mr Touhig: Well I would describe
a claims farmer in one word. A claims farmer is a parasite. One
firm of solicitors in Leeds has on its website: "`Claims
Farmer' is the shorthand phrase for those `claims companies',
who, through advertising, sign up injured victims to pursue their
claims and when they have a big enough `crop' of claims, sell
them on to solicitors." You know that a number of these solicitors
have been working with claims farmers, and yet you have allowed
that to continue.
Sir Brian Bender: In 2001,
which was the first time that we raised it with the Law Society,
it took the line that such charges—that is, charges deducting
fees from compensation—were proper, provided that the amounts
concerned were not unreasonable.
Q22 Mr Touhig: But you were meeting
all the costs, Sir Brian.
Sir Brian Bender: It was
only in 2003, when the scale of this became more apparent, that
we took action. Over £3 million has now been refunded and
the Legal Complaints Service is pursuing further complaints, but
it is completely unsatisfactory. Indeed Ministers, both Malcolm
Wicks from my Department and Bridget Prentice from the Ministry
of Justice, wrote earlier this year to all solicitors in England
and Wales asking them to repay all deductions. 4[4]
Q23 Mr Touhig: I appreciate and value
that fact, but the justice is lacking here. A number of claims
farmers—these parasites—were getting old and vulnerable
people to sign agreements, which they then passed on to a solicitor
of the claims farmer's choice, which required the solicitor, if
the claim was successful, to deduct a sum of money to be paid
back to the claims farmer. Solicitors knew that that was happening.
I do not know what you call it; I call that fraud.
Ian McKenzie: Certainly the
behaviour that we have seen involving some solicitors has given
us a lot of cause for concern, hence the actions that Sir Brian
has already outlined. Obviously, there is action being taken within
the Solicitors Regulation Authority around some of those cases
as well. On the broader issue of claims farmers, some of the experience
that we have seen from the coal health schemes has been influential
in broader Government action on claims farmers, which came forward
within the Compensation Act 2006. The appointment of a new regulator
under the aegis of the Ministry of Justice has taken action in
that particular area.
Q24 Mr Touhig: One of my local newspapers
ran an advert for a claims farm. My father was a miner—he
is now dead—but I rang and said that my father might have
a claim and asked how it would be progressed. "You simply
register with us," they said, "and pay a fee of £32,
and if we are successful in getting the money, although we may
never actually call in the solicitors, you then pay us an amount
of compensation back." They are only middlemen who try to
get money out of people.
Mr McKenzie, in the newsletter that your
Department published on 13 May, you say, "The Vibration White
Finger scheme now has under 5,000 claims left to settle out of
a total of 170,000". Sir Brian, in a letter to the Committee
on 12 July, you note that the forecast now is that we will be
down to 5,000 claims for the first time by the end of October.
Which one of you is right?
Ian McKenzie: The figures
that we have provided to the Committee are our current best view
of where we will get to by the end of the month.
Q25 Mr Touhig: So, it was not down
to 5,000 in May as your letter says.
Ian McKenzie: I cannot recall.
We believe that by the end of October there will be 5,500 claims
that will not have had a first-time offer—that is what we
regard as the key issue—and we are aiming continually to
press down on that number. That is the figure that we have at
the moment. [5]
Q26 Mr Touhig: I am running out of
time, but there is one final point I would like to pursue. On
10 July 2000, you submitted a Minute to Parliament accepting liability
to compensate surface workers. Why did you renege on that?
Ian McKenzie: You are very
familiar with the history of the position on surface workers.
The Department's position at that time in that minute was to say
that certain aspects of the position around surface worker cases
would need to be reviewed and more substantively discussed. [6]
Q27 Mr Touhig: I am sorry, we are
running out of time, but the Minute is quite clear: "The
DTI proposes to accept that British Coal did not fully meet its
responsibilities towards certain categories of workers in dusty
jobs on the surface. In accepting that liability"—this
is your Minute, not mine—"the DTI would propose to
miners' solicitors that compensation for surface dust exposure
be handled within the current agreement."
You then go on to say: "Acceptance
of this additional liability"—again, this is another
acceptance on your part that you are accepting liability—"will
mean that current claimants can extend their claim to cover time
spent in dusty jobs on the surface and men who have only worked
on the surface will be able to put in a claim". You could
not be clearer than that in a Minute could you?
Ian McKenzie: The Minute
accepted liability for surface work in principle. However, it
clearly states that accession to the claims handling agreement,
which is the vehicle through which compensation is paid, would
need to be negotiated in detail, and Parliament would be kept
informed of the extent of the new liability as it became clearer.
Subsequent to that minute, as I think you are familiar with some
of the history that we have discussed before, new medical advice
came before the Department—
Q28 Mr Touhig: You asked for medical
advice, but that was three weeks before you submitted the Minute
to Parliament. So, you submitted a Minute, accepting responsibility
of not having the medical advice.
Ian McKenzie: There were
certain pressures at that time in terms of the parliamentary calendar.
I recognise where you are coming from, and the strong views that
you have about it.
Mr Touhig: I am sure that we will
return to it. My time is up, but I want to say one final thing.
I think that this is a good scheme, and a lot of people in your
Department have done a fantastic job in trying to ensure that
it works. However, I think that you have done a great deal of
damage to the public image through the way that some aspects of
the scheme have been delivered. I agree that people will have
benefited from it, but I regret the way that it has all come about
and the way that you started handling it in a way that has cost
so much more and meant that so many people who should have been
compensated are not alive today to see that compensation.
Q29 Mr Bacon: Sir Brian, can I ask
you to turn to page 47? You will see that paragraph 15 of the
summary of the Boys Smith Report refers to information about the
schemes being publicly available, and additional information being
provided to the parties. It goes on, "Partly because of the
degree of the suspicion that surrounds some discussion of the
schemes, more material could be put into the public domain and
it is important to be as proactive as possible in making information
available." What is that suspicion that surrounds discussion
of the schemes?
Ian McKenzie: I think that
it probably related to some aspects of the relationship that was
of particular public interest at the time when the Boys Smith
Report was commissioned. It was in relation to the relationship
between the Department and the Union of Democratic Mineworkers
(UDM), with regard to the claims-handling agreement that we had
with it.
Q30 Mr Bacon: Sorry, could you expand?
What were the suspicions?
Ian McKenzie: Allegations
were being made at that stage with regard to certain aspects of
transparency between the Department and the UDM.
Q31 Mr Bacon: Allegations about transparency?
Can you be more specific and describe what people said was occurring?
Whether it was or not happening is a separate issue, but you can
say here what was being said.
Ian McKenzie: The newspaper
comments at that stage were about certain aspects of UDM activity
relating to claims handling arrangements, as Mr Touhig referred
to.
Q32 Mr Bacon: You pointed to Mr Touhig.
Do you means claims farming?
Ian McKenzie: The UDM works
through an organisation called Vendside, which is regarded as
being, effectively, a claims farmer.
Q33 Mr Bacon: What about the relationship
between the Department and the UDM? You said that there was a
lack of transparency in relation to that.
Ian McKenzie: That was before
my time and I do not have detailed knowledge as such, but my understanding
of the situation at that stage was that there perhaps was not
as much visibility and that there had been a separate claims handling
agreement with the UDM alongside the main claims handling agreement
that we had with the co-ordinating group of solicitors.
Q34 Mr Bacon: Do you generally think
that transparency in this sort of thing is a good idea?
Ian McKenzie: Yes.
Q35 Mr Bacon: I ask you to turn to
page 17 of the Report. Paragraph 3.9 states that, "In September
2001 the Department brought in a senior secondee from Shell UK
Limited with programme management experience to strengthen its
review of internal procedures to improve performance." The
table on page 18 is described as a "report by the Secondee
from Shell UK Limited".
Sir Brian Bender: His name
was Mark Pyman and he was brought in by the Department as an experienced
senior programme manager to look at what we should do with regard
to bringing in skills and resources to deal with the situation.
That was one of the responses to the issues, such as under-resourcing
and skills, that the Chairman and Mr Touhig have referred to.
Q36 Mr Bacon: Why is his name not
referred to in the Report? Did you object to it during the clearance
process?
Ian McKenzie: No.
Q37 Mr Bacon: Then, why was he not
referred to?
Ian McKenzie: I am not sure
whether that is the convention; I do not think that anyone is
referred to.
Q38 Mr Bacon: On the contrary, Mr
Boys Smith is referred to as a former senior civil servant. Lots
of people are referred to, so I am curious. It looks so odd.
Sir Brian Bender: Well, we
are not ashamed of it, Mr Bacon.
Q39 Mr Bacon: Can you explain, Mr
Gray?
Peter Gray: We did not consider
that matter. The Boys Smith Report is a published report and this
was an internal Departmental paper.
4 Information provided, not printed. Back
5
Clarification by witness: It should be clarified that information
provided in the May 2007 Newsletter referred to there being under
5,000 VWF claims left to settle at that time. This referred to
those claims in the General Damages category. The information
provided to the PAC in October included both VWF General Damages
and Services claims. Back
6
Clarification by witness: Mr Touhig asked why the Department
reneged on the Minute to Parliament accepting liability for Surface
Workers. For clarification, the Committee should be made aware
that subsequent to the Minute to Parliament, the Department did
negotiate a settlement with the Solicitors Group that allowed
those who had been exposed both below ground and on the surface
in certain occupations to proceed through the CHA and receive
compensation. The Department also made a proposal for the settlement
of claims from those who were employed only on the surface in
certain occupations. However, this proposal was rejected by the
CG. The wider position on the Surface Workers cohort of claimants
was addressed in the letter to the PAC of 8 October 2007. Back
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