Lord Sugar has backed Lord Young’s plans to reduce aggressive no-win no-fee advertising in the UK.
During a debate on Lord Young of Graffham’s review of health and safety legislation in the House of Lords last week, Lord Sugar stuck the sword into “claims management companies” when discussing the compensation culture.
He said: “They advertise on TV implying that they can get consumers substantial amounts of money for injuries that they have sustained. To add insult to injury, some of them are simply brokers who sell their inquiries on to solicitors; they are not solicitors themselves. I point out here that National Accident Helpline is not one of those organisations.
“The legal system in this country was one that we could be proud of compared to the ambulance-chasing activities of our cousins in the United States. However, since, I believe, 1999, it has been possible for lawyers here to work on a contingency basis offering a no-win no-fee basis to their clients. While this change had some genuine and positive merit in assisting deserved causes, like all things it has been exploited in most cases to bring derisory claims against companies.”
“The issue concerns claims from a certain breed of people, some of whom have had the seed of an idea to make a claim planted in their minds from those terrible adverts that they see on TV. The mechanism, as I am sure your Lordships will know, is that the client becomes somewhat irrelevant in the overall scheme of things. The client is simply a catalyst among the solicitors, the claim management companies and the new breed of litigation insurers. It is the client from whom these people make their money. Once equipped with a client, these people become a massive thorn in the side of companies that have substantial assets or their own indemnity insurance. I do not wish to get into too much detail on what contingency lawyers charge, but it is near to outrageous that they can in some cases get double their normal fee.”
He continued: “However, most claims end up being settled by negotiation. Despite knowing that the claim is derisory, companies recognise that to defend it fully will cost a lot and those costs are not recoverable on victory, as the plaintiff usually has no assets. Commercial decisions are made by defending companies that have learnt that fighting on principle is simply bad for the balance sheet.
“The new breed of these-I am sorry to call them this-vulture-type lawyers knows this only too well, as do some insurers. It is almost a licence to print money if you can convince a member of the public to make a claim. I have even heard of members of the public being paid a modest fee of, say, Â£500 up front if they agree to become a plaintiff.
“Something has to be done about these rogues. The Government should, first, examine what the Advertising Standards Authority can do. I am sure that, if they so desire, they can tighten up the regulations as to what promises can be made and make advertisers issue warnings in the advert to the effect that they are not lawyers and that bringing false claims is an offence. Perhaps, more importantly, there needs to be reform in the law.
“The Law Society needs to clamp down on some of these unethical lawyers and set some examples. Dare I suggest that, if it was ever possible to make those lawyers responsible themselves to pay for abortive costs when they lose a derisory claim, it would, I can assure your Lordships, kill off this industry in one fell swoop?”
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