Personal Injury: A Cultural Myth

A recent report published by the Better Regulation Taskforce has dispelled the myth that a compensation culture exists in the UK. Good news for personal injury lawyers, write Neil Block and Bernard Doherty.

The Better Regulation Taskforce, in its report Better Routes to Redress, has come to the support of the much-maligned personal injury lawyer. We are not, it seems, vultures picking over the carrion of the nation’s public services, nor vampires sucking the blood from the helpless and turning the nation’s young into self-pitying handout junkies. Rather, we are servants of a modern, self-confident citizenry, who, when injured, seek no more than their legal rights. There is no out-of-control compensation culture. That is all a figment of the imagination of certain sections of the press (you can no doubt guess which sections). The number of personal injury claims went down last year, not up. Even the lady who spilled McDonald’s coffee on herself deserved her payout: just what we have been saying for a long time.

The taskforce points to several factors tending to restrain the number of compensation claims and the level of damages in the English system, most of them well recognised. Conservative judges set awards, not exuberant juries. Punitive, exemplary and aggravated damages are rarely available. The prospect of an adverse costs order has a sobering effect on those thinking of embarking on speculative litigation. And while the taskforce has criticisms of some of the methods of the claims management companies, it suggests that these concerns could be met by light-touch regulation and some self restraint rather than anything more drastic.

Conditional fee agreements (CFAs) are treated as the inevitable way forward, rather than an open door to spurious claims, a charge much repeated in the press. For those who practise in the area, a conclusion that CFAs do not by their very nature bring about an inflation in the number or value of claims is hardly surprising. It has never been clear why lawyers or anyone else dependent on being paid on the success of a claim should be inclined to back doubtful cases.

The problem might rather be the reverse; that lawyers faced with funding disbursements themselves, delays in payment and the possibility of no payment at all will be inclined to be over-cautious. The result may be that cases of reasonable but not overwhelmingly strong merits do not get brought, or that once a case is brought it will be settled at an undervalue in order to secure a costs order. It might fairly be regarded as a weakness in the taskforce’s report that it does not consider the conflicts that CFAs raise between claimants and their own lawyers, the difficulties of attempting to run complex product liability claims on a CFA, or whether the replacement of legal aid by CFAs has really been a good thing for access to justice or merely a good thing for public finances.

Indeed, even the effect on public finances of abolishing legal aid from personal injury claims was very limited. As costs orders against the defendant were achieved in the vast majority of cases, the scheme was virtually self-funding.

It is right that the early years of CFAs coincided with an increase in the number of personal injury claims made. But the reasons relate to the claims industry that developed with the CFA rather than the nature of the funding arrangement itself. Representatives of the new and aggressive claims management companies certainly engaged in dubious practice in drumming up claims.

Another reason is that the claims management companies actually went out to find people with good claims who would not otherwise have pursued them. This practice is often frowned upon, and certainly some of the adverts found in hospitals are not in the best possible taste, but it is hard to see what is wrong in principle with alerting people to their legal rights. It might actually be regarded as a public service. Those who benefit from having their legal rights brought to their attention are likely to be the poorer and less well educated, who may well be those in most need of compensation.

There are certain other parts of the report that are largely the repetition of current fashionable mantras rather than a serious analysis of the good and bad things about personal injury litigation. We cannot see, for example, how raising the small claims limit to £5,000 from the current £1,000 would improve access to justice for claimants, as the taskforce suggests. Currently, claimants with good but small claims will be able to find lawyers to represent them on a CFA, since the lawyers will be able to recover their costs from the defendant. The claimant will thus not risk financial ruin.

Bringing such cases into the small claims track would largely abolish the recoverability costs from the other side, and so make legal representation practically unavailable.

The taskforce’s suggestion also makes light of the legal technicalities inherent in much personal injury litigation. The difficulty in a case is often unrelated to its value. No doubt lawyers tend to overstate those difficulties, but it is not unrealistic to think, for example, that an unrepresented claimant injured by the failure of a piece of work equipment may form the view that, as he cannot show how the equipment failed, he has no claim. He will not know of the Provision and Use of Work Equipment Regulations 1998, nor of Stark v Post Office [2000], telling him that his employer is strictly liable. Even if he trusts to luck and issues his claim form, he will only succeed if he is lucky enough to appear in front of a district judge who has kept up to date with developments in the relevant area of law.

To raise the small claims limit might benefit defendants and their insurance companies, and thus might or might not be a good thing, but that is a different point. Insurers would no doubt welcome the protection from adverse costs orders. Further, they invariably make very low first offers, and would have a much better chance of having these accepted if the claimant is unrepresented.

Similarly, the report presses for a greater role for mediation. Most agree that mediation has a major role to play in commercial and family litigation, and some role to play in personal injury cases. However, mediation itself can be time consuming and expensive. Why should a defendant who believes that the claim is a tryon and is subsequently proved right have to justify a refusal to mediate to get his costs? Why should a claimant who believes that a defendant has no intention of making an attractive offer have to submit to a stay of his claim for mediation, the costs of which may well be irrecoverable? In personal injury litigation, the Civil Procedure Rules part 36 often provide the best form of alternative dispute resolution.

These criticisms aside, the central proposition of the report is correct. Compensation culture in the sense used by the taskforce is a purely pejorative term. It is a blaming, self-pitying culture that is encouraged and underpinned by the law of compensation. Whether or not people tend increasingly to blame others when things go wrong; whether or not people are too inclined to talk about their rights and insufficiently inclined to talk about their responsibilities, the UK is not in the grip of a compensation culture. People may think they deserve compensation whenever they are injured, but that does not mean they will get it.

A handy test is what is called tort costs, which expresses the combined value of tort awards or settlements in a country with the country’s gross domestic product (GDP). In 2000, the last year for which clear figures are available, UK tort costs stood at 0.6% of GDP. That is lower than almost all comparable European countries and less than a third of those in the US where they hover around 2%.

As well as the matters recognised by the Task-force as helping to keep a UK compensation culture at bay, the law itself plays a part. There still survive in English law traditions strongly inimical to compensation for all. For example, unlike most systems not based on the common law, the English law has never recognised a general obligation to make or keep others safe. As has often been said, the priest and the Levite would have incurred no liability at common law to the wounded man whom they passed, and nor would the Samaritan have been entitled to reward: Stovin v Wise [1996].

Further, there exists a protective attitude towards public authorities, in damages claims at least, if not in the administrative court. Awarding damages against public bodies would often be to make them liable for what was essentially an act of nature (so no common law liability for failing to remove ice from the road: Sandhar v Department of Transport [2004]), or the fault of another (so no liability for failing adequately to inspect poorly built foundations: Murphy v Brentwood DC [1991]). Again, this protective attitude is not shared by many continental systems, for which some criticise the English law.

Tomlinson v Congleton UDC [2004] was a resounding reiteration of this tradition. Tomlinson ignored signs forbidding swimming in a flooded quarry, surrounded by a beach. He misjudged his dive and broke his neck. He sued the occupiers. The Court of Appeal held that the occupiers should have done more than put up signs. They should have barred access to the water, or destroyed the beaches.

The House of Lords allowed the defendants’ appeal. Lord Hoffman said: "I think it will be extremely rare for an occupier of land to be under a duty to prevent people from taking risks which are inherent in the activities they freely choose to undertake upon the land. If people want to climb mountains, go hang gliding or swim or dive in ponds or lakes, that is their affair… there is an important question of freedom at stake. It is unjust that the harmless recreation of responsible parents and children with buckets and spades on the beaches should be prohibited in order to comply with what is thought to be a legal duty to safeguard irresponsible visitors against dangers which are perfectly obvious."

On the other hand, when the boundaries of tort law are extended, the English courts tend to take a minimalist, incremental approach, going as far as is necessary to do justice but no further. Fairchild v Glenhaven [2003] is the classic recent example. The issue raised was as follows: if a claimant suffers tortious exposure to asbestos with two employers, and as a result contracted mesothelioma, but cannot say whether the particular fibre responsible for the disease was inhaled while working for the first or second employer, can he recover damages?

Faced with these facts, the Court of Appeal held that the claimant could not overcome the ‘but for’ test, a necessary condition to establishing liability in tort, so neither employer was liable. Not surprisingly, it found the result lamentable, but could find no way around it.

The House of Lords was more robust. It reasoned that causation in law is not a branch of philosophy but of practical justice, concerned with when consequences should be laid at the door of a defendant. Here, there was no injustice in saying that each negligent employer should be responsible. The House took considerable care, however, to keep in narrow bounds this suspension of the ‘but for’ rule. The case caused concern in the insurance industry. Even such sober professionals as the actuaries reporting for the General Insurance Research Organisation considered that the case had moved us closer to a general system of no fault compensation (‘The Compensation Culture’ at part 6.5), a view difficult to reconcile with the carefully delimited ratio of the case. Needless to say, sub-sequent events have given little hint of a head-long rush to no fault compensation for all.

The more recent decision of the House of Lords in Chester v Afshar [2004] poses more serious difficulties for those who would defend the judges against charges of failing to control the compensation culture. Mrs Chester was not properly warned of the 1% risk that the spinal surgery she was to undergo would make her back worse. She could not show that if the warning had been given she would not have had the surgery, or would have had it done by another more competent surgeon. The operation was carried out without negligence, but the bad result happened. By a majority of three to two, the House of Lords held that she was entitled to recover damages for all the adverse consequences of the surgery.

The decision has, to put it politely, caused raised eyebrows among practitioners, although it seems to be more widely supported in academia. It is a further departure from the ‘but for’ requirement, but without any of the pressing justifications present in Fairchild. The right to give properly informed consent looms large in the speeches of the majority. But there is no satisfactory explanation of why this right should be elevated above the other rights of a patient, nor why its vindication has to be in the law of compensation, rather than in a professional disciplinary tribunal. Practical concerns that claimants may find it difficult to establish that the warning would have caused them to avoid the surgery seem a feeble basis for such a striking decision, particularly when many examples exist of cases in which claimants have succeeded in persuading the courts of just that. The result of the decision seems to be that a patient not warned about a 1% risk will be entitled to full compensation if the risk eventuates with no negligence.

On the other hand, a patient who loses a leg through negligent surgery will be entitled to nothing if there was only a 49% chance that the leg would have been saved by good practice (in a rule just affirmed by the House of Lords in Gregg v Scott [2002]). Which particular rights deserve these higher levels of protection will no doubt be a question that will run and run. The Court of Appeal has already been faced with and rejected an argument that a litigant’s right to take an informed decision in litigation was such a super-right, so that a failure by a solicitor to advise of a possible course of action merited compensation, even if the litigant could not show that he would have followed the course: see White v Taylor [2004].

There are, of course, blips. At a low level, we all have our favourite (or least favourite) example of judges going to the very limits of the permissible, and sometimes a good way beyond, to ensure that a claimant does not go away empty handed. And there are larger and longer term problems. No-one could pretend that the English courts have found a satisfactory or permanent solution to the difficulties of setting the limits of compensation for psychiatric injury. But on the whole things are not out of control. The judges are still working on it. And, usually not expressly, and sometimes no doubt only half-consciously, they have their eye on the cost of compensation.

Insurance companies too can play a role in avoiding the development of a compensation culture. They must not be so focused on saving legal costs that they settle unmeritorious claims and over-settle meritorious claims. It is our perception that in the longer term this is one of the most influential factors in the number of claims brought. If claimants’ advisers know that even the weakest claims have a nuisance value then they will be encouraged to advise their clients to act accordingly.

But whether or not there is really a compensation culture is, as the taskforce sees it, only half the question. If the people reporting and commenting on incomplete litigation assume that every improbable allegation by a claimant will be accepted, and those reporting decided cases do so without properly understanding the basis for what may on the face of things be a surprising attribution of liability, then the impression of a compensation culture can bring many of the same problems as actually having one. A widespread perception may result in a tendency to be over-cautious. When a school is sued because a pupil dies on a school trip, other schools become more reluctant to offer school trips. They may not wait to find out that the claim failed, or perhaps succeeded, but only because the death was caused by an egregious piece of negligence on the part of a supervisor.

So what can lawyers do to help dispel the compensation culture myth? Not much, probably. A few people might listen when you point out that we manage to combine a reasonably liberal liability regime and reasonable levels of access to justice for claimants with relatively low tort costs. But most people hear only those pieces of information which fit their prejudices. Readers of some papers tend to believe the world is going to hell in a handbasket, and the compensation culture is all of a piece with the change and decay in all around they see. Readers of other papers may tend to believe that the country is full of unjustly uncompensated people grievously injured by large corporations and the state (whether by vaccination programmes or mobile phone masts). There is not much a few personal injury lawyers can do about human nature.

Neil Block QC and Bernard Doherty are barristers at 39 Essex Street.

source: Legal Week (Last Updated: Thursday 3 Feb, 2005)

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