Lynch: Investigation needs to be faster
The Solicitors Regulation Authority (SRA) needs to speed up its investigation into the collapse of Sheffield law firm SSB Law, MPs said this week.
A Labour energy spokesman accused law firms handling cavity wall insulation (CVI) claims of “parasiting on the distress of homeowners”.
Dr Alan Whitehead added: “Overwhelmingly the responsibility [for the scandal] lies with the dodgy law firms that have pursued this kind of practice and given false guarantees and false promises to householders.”
The Westminster Hall debate in Parliament on Tuesday came amidst people who were represented by SSB in bringing CVI claims seeing their after-the-event (ATE) insurance being repudiated, leading to successful defendants and their insurers seeking to enforce substantial costs awards against them personally.
Nearly 200 staff at SSB were made redundant after it formally went into administration in January, owing six litigation funders £200m. The SRA is investigating what happened and also the implications for the ATE market. Its report is due in the autumn.
The debate was secured by Holly Lynch, Labour MP for Halifax, who said “more and more MPs are taking to the chamber and writing to government ministers with their concerns and their local cases”.
She detailed the stories of constituents facing costs bills for up to £32,000 and being threatened with bailiffs.
“Bearing in mind that people were usually eligible for the government-funded schemes on the basis that they were in receipt of some form of welfare support, these bills have devastated people who simply have no means of paying them. It is hard to overstate the impact that this has had on people’s lives.”
She asked the government to liaise with the SRA to provide any support it could “so that if there is any way to accelerate the investigation, that is made a reality”.
Ms Lynch said ministers should also “see what else can be done to hold the insurers and law firms involved to account”.
Another question was how the people who knocked on the doors of those with CVI knew to do so.
She said the Cavity Insulation Guarantee Agency (CIGA) “suggests that the claims solicitor model relied on farming a large number of potential claims using data accessed either through freedom of information requests from Ofgem, or under the guise of the Data Protection Act, in an attempt to access their own guarantee records”.
She went on: “Having gained information on properties where insulation had been installed, unqualified assessors were sent out to encourage the homeowner to pursue a claim.
“In most cases, they inflated any potential damage or indeed alleged damage that simply did not exist, with the subsequent report signed off by unscrupulous chartered surveyors registered with the Royal Institution of Chartered Surveyors. The minister can see just how much all of this stinks.”
The CIGA said the claim was then handed to a solicitor, who would make a claim for around £60,000 and then drop the figure just before trial to a little over the small claims limit of £10,000 to encourage settlement. Costs were typically around £70,000 at this point.
Imran Hussain, Labour MP for Bradford East, said that, with many of his constituents “growing more and more desperate”, it was clear that “no one in the current system has any inclination to deliver them justice. It is therefore equally clear that the government need to step in and intervene”.
He questioned too why the SRA did not act earlier: “A complaint went in about SSB Law way before many of these cases had advanced to the stage where people are now being asked to repay.”
Mr Hussain urged the government to have the legal proceedings against claimants dropped and to conduct “a full review of all government-funded insulation schemes to identify the total number of homes affected by defective cavity wall insulation, as well as a full investigation into the collapse of SSB Law and the role of regulators in guarding against risks”.
He called as well for the government to convene a meeting between all those involved to agree steps “toward a compensation fund such as the one developed for the Fishwick insulation scandal”.
He explained: “That involved insulation of a different type, but there was compensation there. It set a precedent where defective cavity wall insulation was removed from the homes, the structural damage was addressed, and good quality suitable insulation was retrofitted with a 25-year warranty.”
Dr Whitehead noted that SSB took over a number of CWI claims from Pure Legal after it went out of business. “One might say, therefore, that it is a scandal, upon a scandal, upon a scandal.”
He described the claim model as “scandalous”, adding: “Solicitors’ companies are supposed to be protecting the interests of their clients and not just trying to make a living parasiting on the distress of homeowners dealing with cavity wall insulation problems.
“The Solicitors Regulation Authority has a substantial job to do in not just investigating this particular company, but hopefully broadening this out to investigate how solicitors are able to get away with this kind of arrangement, in this kind of way.
“As we have heard this afternoon, when that arrangement does not work out very well, they go bust and leave all those householders facing those huge bills.”
Energy minister Amanda Solloway said the government would ask the SRA to consider how SSB was able to identify those with potential claims and guaranteed that she would ask the Ministry of Justice to encourage the SRA to accelerate its investigation.
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