Jeff Zindani fears the Compensation Bill will lead to satellite litigation and calls for an independent body to regulate claims management companies

The clarion call to regulate compensation claims through a legislative framework has now finally found its way into draft legislation, with the inappropriate short title of the Compensation Bill.


From concerns about risks with hanging baskets and the banning of school trips, the central theme of the government was that our tort system was somehow out of control and needed regulating or 'rolling back'. In the words of a ministerial spokesman, the Bill will 'reassure those concerned about possible litigation that the law of negligence takes the social value of activities into account'.


However, if we look at the detailed provisions of the Bill, which are set out in section 1 of part 1, a court when 'considering a claim for negligence may, in determining whether the defendant should have taken particular steps to meet the standard of care' have regard to the desirable activities being undertaken and whether these will discourage persons from undertaking those activities. It might be worth reminding those in the Department for Constitutional Affairs that much of the so-called 'burdensome' regulation arises through statutory and not common law regulation.


Even where negligence is the sole cause of action, it is risible to think that the judiciary takes no account of social and economic factors. The incremental developments with the law of negligence that have followed since Donoghue v Stevenson was decided in 1932 are a testimony to the pragmatism of British judges, but also evidence of the public policy role that they have played in adjudicating between individuals, defendant employers and government agencies.


Paradoxically, the Bill could result in greater uncertainty than we currently have, with a plethora of test cases flooding the courts so as to obtain guidance on the scope of what constitutes 'desirable activities'. We may simply have yet more forms of satellite litigation at greater cost as defendants develop, with predictable ingenuity, the desirable-activity defence. This glorious triumph of form over substance may create even more turbulence in the already troubled world of personal injury litigation, leading to greater pressure on claimant personal injury practices.


The second part of the Bill deals with the regulation of claims management services. While there is only one section dealing with the law of negligence, there are 12 sections and a set of further regulations aimed at tackling some of the abuses that have taken place over the past few years.


What is astonishing about this Bill is the way in which the government proposes to license the activities of claims management companies. Given the fact this is a multi-billion pound industry, one would have expected an independent and accountable public body.


Instead, the Bill talks of appointing a regulator from an existing body. This could effectively be a private industry-type body, authorising and regulating its own members.


There can be no doubt that in some sectors this can work, but if we look at the appalling history of this market, with consumers being short-changed, one lesson to be learned is that self-regulation will not work. Why not allow local trading standards agencies and a claims supremo to be given the task of cleaning up the industry for the benefit of consumers and the industry as a whole?


The government should be given credit for attempting to improve the rights of consumers who make compensation claims, but the proposed Bill is likely to have little impact because of the manner in which this is to be achieved.


A sick industry needs more potent medicine; what is on offer is a poor and inappropriate palliative.


Jeff Zindani is a solicitor and managing director of Solihull-based Forum Law