Select Committee on Public Accounts Minutes of Evidence

Supplementary memorandum submitted by the Department for Business, Enterprise and Regulatory Reform

Question 90 (Mr Austin Mitchell):   Indications of fraud in the case of Mrs Ann Elizabeth Evans

  The Committee requested a note explaining the case of Mrs Evans. The Department has reviewed the history of the issues raised by Mrs Evans.

Complaints made by Mrs Evans

  In 2001 Mrs Evans made multiple complaints to the Law Society against the solicitors (Hugh James in Merther Tydfil) who handled her compensation claim for respiratory disease in respect of her late father William John Thomas. The various documents attached to Mrs Evans' letter outline the complaints made. In particular Mrs Evans alleged that her solicitors had:

    —  delayed in "registering" Mrs Thomas' claim until May 1998;

    —  failed to make a timely application for an interim payment;

    —  failed to respond to individual letters and telephone calls;

    —  delayed in providing costs and client care information;

    —  provided advice and information that was confusing;

    —  failed to apply appropriate supervision to junior staff; and

    —  altered the claims form (claim questionnaire) without her knowledge or consent, in a way that artificially inflated the value of the claim.

Appeal to Law Society

  Mrs Evans appealed the Law Society's original decision and this was reviewed by the Adjudication Panel and their ruling was handed down on 22 June 2005. The upshot being that Mrs Evans' appeal was upheld and two partners at Hugh James each received a severe personal reprimand from the Law Society in respect of their failure to properly supervise their staff. Additionally, it is clear from the Law Society's findings that the only reason a finding of misconduct had not been made is that (by reason of the poor supervision) it was not possible to identify the individual at Hugh James guilty of the misconduct. The Adjudication Panel raised Mrs Evans' compensation from £1,250-£5,000. Hugh James challenged the decision by way of Judicial Review.

  Throughout the dispute Mrs Evans kept the Department (through its external lawyers Nabarro) appraised of her case and she also sent copies of the Law Society's report and findings to Sir Michael Turner, the Judge then overseeing the COPD scheme.

Department's consideration of the position

  The Department carefully considered the issues raised, especially in terms of potential impact on the wider administration of the schemes. The main issue being the Law Society's finding that Hugh James Solicitors had altered Mrs Evans' claim questionnaire form. Furthermore, the nature of the supervisory failures by Hugh James Solicitors ("...monitoring individual files by computer screen and monitoring DTI statistics...") raised concern that these failures were not limited to Mrs Evans' case alone. It was also apparent that the two partners were two out of five members of the Co-ordinating Group (CG) of solicitors representing the claimants under the scheme.

  A range of actions were undertaken:

    —  Nabarro (the Department's legal advisers) held a full meeting with Mrs Evans on 29 June 2004;

    —  a request was put to Capita's Security Investigation Department (SID) to filter out similar type cases intimated via Hugh James Solicitors for analysis;

    —  a letter dated 7 September 2005 was sent to the Senior Partner at Hugh James Solicitors requesting a full written explanation and detailing the organisational failures which have led to the findings against them, together with details of what changes have been made, in light of those findings; and

    —  a copy of the letter to Hugh James Solicitors was copied to a member of the Claimant's Group, suggesting that the CG should raise the issue at the next Review Hearing and address the issue in its written report to the Court.

Current position

  As far as the Department is aware the case remains subject to ongoing review by the Solicitors Regulation Authority (SRA). In these circumstances the Department is not currently in a position to take further action.

Question 94 (Mr Alan Williams):   10 organisations who have been paid the lowest coal health fee

  The table below lists the 10 claimant representatives who have received the lowest fee income as at the end of March 2007.
SolicitorNo. of COPD Claims COPD Solicitors Costs (exc Litigation) £'s No. of VWF ClaimsVWF Solicitors Costs (exc Litigation) £'s COPD & VWF Solicitor Costs (exc. Litigation) £'s
Barry F Cosier Associates4 30.000- 30.00
Trueman130.00 0-30.00
Walker Smith & Way2 559.300- 559.30
Frank Howard6- 2587.50587.50
Anderson Eden Solicitors2 -2587.50 587.50
Moore & Blatch Solicitors1 -2587.50 587.50
Huitson & Wittrick Solicitors1 -4764.02 764.02
Pawson & Murray Solicitors1 -2766.10 766.10
Richards & Lewis Solicitors1 -1787.25 787.25
Tierney & Co Solicitors1 -1949.40 949.40

Question 98 (Mr Richard Bacon):   How much the Department expects to recover from each of the 10 organisations in Appendix 7, and how much each of them has paid so far

  The table below sets out the total amount that the Department is seeking to recover from the top 10 claimants' representatives[24] and the amounts recouped as at 2 November 2007. As at 2 November 2007, the Department has received £18.9 million and has a further £31.8 million to recover.

RankingSolicitor Total Debt (including interest) Total Debt Recovered (incl. off set and write off) Total Outstanding Debt
1Thompsons£5,171,007.97 £3,449,270.05£1,721,737.92
2Beresford£13,816,568.20 £2,374,269.16£11,442,299.04
3Hugh James£5,780,597.30 £0.00£5,780,597.30
4Raleys£5,442,336.63 £5,442,336.63£0.00
5Browell Smith & Co £4,210,965.91£4,210,965.90 £0.01
6Mark Gilbert Morse £1,168,813.14£1,168,813.14 £0.00
7Avalon£8,537,854.68 £311,261.49£8,226,593.19
8UDM£2,342,039.83 £52,405.46£2,289,634.37
9Watson Burton LLP£2,447,613.47 £87,737.64£2,359,875.83
10Graysons Solicitors £1,796,473.44£1,796,473.44 £0.00
£50,714,270.57 £18,893,532.91£31,820,737.66

  Avalon, ranked 7 in the table above, is contesting the Department's entitlement to recoup any money. As they are not members of the Claimant Group (CG), Avalon argues that the Court Order[25] is not binding on them. A Court Hearing to resolve this issue has been scheduled for w/c 26 November 2007. In the meantime the Department is beginning to recover the debt via a set-off arrangement of fees for claims due to the firm.

Question 104 (Mr Richard Bacon):   Fast Track Scheme Solicitor Costs

  The Committee requested a note explaining why the Department did not negotiate reduced solicitor fees when the Fast Track Scheme was introduced, as it knew it was a simpler process which required less legal input. At the end of February 2005, the Department introduced a fast track scheme, known as the Optional Risk Offer Scheme (OROS) aimed at cases likely to attract smaller amounts of compensation. The aim of this process was not only to speed up COPD compensation payments but also to cut down on medical and administration costs. An initial assessment of these savings estimated that OROS would reduce the life of the COPD Scheme by two years and could save the Department over £170 million.

  The Department did seek to negotiate lower fees for the Fast Track scheme with the Claimants Group but a sensible compromise could not be reached. It was therefore left to the Judge to decide the figures. The Department thought that the figures awarded by the Judge were too high and successfully appealed to the Court of Appeal who set aside the Judge's figures and remitted the matter back to the Judge for re-hearing. Ultimately (and following a change of Judge) revised figures were awarded in April 2007 which were substantially lower than the awards of the original Judge.

Question 107 (Mr Don Touhig):   Solicitor partnerships with claims handlers

  The Committee asked the Department to investigate whether it had seen copies of the agreements the claimants had signed with solicitors. As these agreements are between the claimant and their representatives the Department would not expect to see copies. However, by chance the Department has seen some examples of such agreements, the first one being in 2000, which prompted it to act. Since the Department became of aware of this issue, it has taken a number of actions to encourage solicitors to stop this practice. If a claimant wishes to enter into a separate agreement with their claimant representatives, the Department has no right to intervene to stop solicitors deducting fees. The Department remain of the view that the deduction of fees from the compensation without the knowledge of the claimant is unacceptable.

  In 2001, the Law Society took the line that the charges were proper provided the amounts concerned were not unreasonable and that the client has been properly informed as to the charging arrangements (as stated in the report). In December 2003, the Department wrote to all solicitors requesting an assurance that they would not impose additional fees. Those solicitors who did not respond, were removed from the list of solicitors provided to all potential claimants, although this did not preclude claimants using these solicitors should they wish to do so. In the July 2005 review hearing Sir Michael Turner looked at the issue and urged that the practice of working with claims farmers stop and deductions cease. In June 2007, Malcolm Wicks and Bridget Prentice wrote a joint letter to all solicitors in England and Wales asking them to repay all deductions taken from compensation without the full understanding and agreement of the claimant.[26]

  Whilst complaints about solicitors are a matter for the Legal Complaints Service to deal with, both this Department and the Ministry of Justice are continuing to monitor the position.

24   By coal health fee income as at 31 March 2007 as set out in Appendix 7 of the NAO Report. Back

25   On 3 April 2007 the Court ruled in favour of the Department and solicitors were ordered to repay the difference between the original tariff paid by the Department and the new tariffs set by the judge. In a subsequent order, the Judge ruled that the solicitors were also liable to repay the interest incurred on the principal sum (at a commercial rate of 1% above the Bank of England base rate) and the overpaid VAT in respect of the principal amount. Back

26   Information provided, not printed. Back

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