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Jonathan Djanogly was forced to admit this week that his two children had owned shares in a claims management firm despite his department’s responsibility for regulating the notoriously controversial industry. The Daily Telegraph reported that his children owned shares in Going Legal and Legal Link Introductory Services ‘but were understood to have sold them over the weekend after being contacted’ by the paper. Going Legal boasts that it has recovered £20million for unfair dismissal claims since 1999 on its web site.
Andy Slaughter, the shadow justice minister, told the paper that the Djanogly family’s shareholding meant that the minister was left in a position that meant he was ‘uniquely inappropriate to deal with his ministerial responsibilities’. Djanogoly recently revealed that ministers were planning on banning the referral fees. Claims companies sell on accident claims often for around £700.
The former home secretary Jack Straw recently called the practice of referral fees ‘a lucrative and self-serving merry-go-round’ and was promoting a 10-minute rule bill to ban the practice. Straw dismissed whiplash injuries as a ‘profitable invention of the human imagination’. His bill proposed making it a criminal offence to solicit or pay referral fees for road traffic accidents. He also wanted to limit such claims to where there was evidence of injury and halve claimant lawyers’ fees for cases going through the RTA portal.
Straw’s called the payment of referral fees the ‘insurance industry’s dirty secret’ on BBC 4’s Today programme in June. Hardly a secret. It was Jack Straw’s government that was responsible for the regulatory free-for-all that created conditions for referral fees because of its flagship Access to Justice Act 1999 which scrapped legal aid for personal injury cases. New Labour heavily relied upon – some would say encouraged - a new generation of claims companies to fill a freshly-created justice gap (caused by scrapping legal aid for PI claims) including discredited claims companies like the old Claims Direct and TAG (The Accidents Group). Both companies went bust and left genuine accident victims penniless and generated a deluge of bogus claims. It was the Law Society in 2004 (under pressure from the Office for Fair Trading) that allowed its members to pay referral fees – previously they were banned. Jack Straw, a lawyer, was justice secretary when claims management companies became licensed under the Compensation Act 2006. He is also MP for Blackburn – which has it fair share of claims companies.