Month: April 2011

Damages for misleading commercial practices

The Consumer Protection Act 2007 was a significant piece of reform legislation which has largely gone unnoticed and under utilised.National Consumer Agency

The National Consumer Agency uses the Act as part of its enforcement function and it has been reported that the NCA has initiated proceedings under the Act against Associated Newspapers (Ireland) Limited arising out the infamous Sunday Tribune wrap-around published by the Irish Mail on Sunday. In 2009, Tesco unsuccessfully sought an injunction against Dunnes Stores to prevent allegedly misleading advertising, partly under the provisions of the Act (more here).

However, there are a number of aspects of the 2007 Act that consumers can rely on. I recently obtained exemplary damages under the Act on behalf of a client in a District Court action where the client had been misled. The case concerned a contract with a tradesman for goods and related installation works where the goods had been delivered but the works not completed, despite having been paid for in full. The plaintiff was forced to engage a third party to complete the works and obtained judgment against the tradesman for the cost of doing so.

Prior to being hired by the plaintiff, the tradesman represented that he was an agent of a manufacturer (which happened to be the third party later engaged by the plaintiff to complete the works). The plaintiff assumed that he could call on the manufacturer to step in if the agent failed to complete the works. The tradesman was not an agent of the manufacturer; hence the manufacturer had no liability to the plaintiff and had to be paid for completing the works.

The 2007 Act lists four categories of commercial practice:

  1. unfair commercial practices;
  2. misleading commercial practices;
  3. aggressive commercial practices; and
  4. prohibited commercial practices.

The latter two categories are more serious and engaging in them is a criminal offence. A wide range of behaviour can constitute a misleading commercial practice and, if it would encourage a consumer to enter into a contract, the 2007 Act provides remedies. Engaging in a misleading commercial practice is not an offence (unless it relates to consumer information regulations) but does give rise to a right of a consumer to seek damages, including exemplary damages.

In this instance, the trader’s representation that he was an agent of the manufacturer was a factor which influenced the plaintiff’s decision to contract with him and exemplary damages of €500 were awarded against the trader as a result, adding 18% to the total award.

The Act makes for interesting reading and covers a wide range of commercial practices. It is likely that the extent to which the Act affects everyday marketing and sales is not widely appreciated, though the NCA has published a guide.

Here are some interesting examples: it is prohibited to

  • represent that a product is able to cure an illness, dysfunction or malformation, if it cannot;
  • use advertising to encourage children to purchase a product or to persuade a parent or adult to purchase it for them;
  • persistently fail to comply with a customer’s request to cease unjustified contact.

A number of other prohibitions might be particularly relevant in light of current economic conditions:

  • a representation that the trader is about to cease trading or move premises, if the trader is not;
  • a representation that describes a product as “gratis”, “free”, “without charge” or anything similar, if a consumer has to pay anything other than necessary and reasonable costs;
  • operating, running or promoting a competition or prize promotion without awarding the prizes described or reasonable equivalents;
  • explicitly informing a consumer that if the consumer does not purchase a product, the trader’s job or livelihood will be in jeopardy.

The maximum penalties for breaching these prohibitions, on a first summary conviction, are a fine of €3,000 or imprisonment for up to 6 months (or both). Subsequent convictions for offences under the Act carry maximum penalties of €5,000 or 12 months’ imprisonment (or both).

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Ceci n’est pas une publicité

There are a number of forms of State-funded legal aid in Ireland but, in summary, they will be of no use to you unless charged with a reasonably serious crime or involved in family law proceedings. The Legal Aid Board is not provided with anything close to the resources needed to actually provide a system of civil legal aid. The Free Legal Advice Centres (which are not part of the State-funded legal aid system) pointed out in a 2005 report on access to justice that:

[T]he Legal Aid Board employs 89 solicitors to deliver the entire civil legal aid scheme in 30 Law Centres throughout Ireland. This is less than the number employed in some large legal firms in Dublin. Small wonder then that waiting lists for civil legal aid in many centres have been extremely lengthy, leaving people without any legal assistance for as long as two years in some locations.

It is almost unheard of for legal aid to be obtained to initiate a civil, non-family law case. In addition, many people who would not qualify for legal aid would still find it prohibitively expensive to fund many cases (particularly those relating to serious personal injury or medical negligence). Conditional fee arrangements, commonly known as no foal/no fee, fill the void. Despite this fact, cases which usually involve such arrangements are often characterised as being somehow of questionable merit or a feature of ambulance chasing.

It is, presumably, fear of the profession being tarnished by such characterisation that led the Law Society to severely restrict how solicitors can advertise their services. I wrote about this topic before, mentioning that solicitors can’t advertise the fact that cases might be taken on a conditional fee basis. John McCarthy recently highlighted the ludicrous nature of the advertising restriction.

… I as a solicitor cannot take out an ad offering my services to you on a no win, no fee basis. It does not mean that I cannot provide services to you on this basis, because that is exactly what I do for clients every day. It does not mean that we cannot have a discussion about it, such as what we are doing here. It’s a pretty silly regulation when you think about it.

Such advertising is considered so serious that to engage in it is a matter of professional misconduct and can result in such a finding by the Solicitors’ Disciplinary Tribunal. Despite this, the Citizens Information Board tells citizens that many solicitors do take cases on a no foal/no fee basis. The Board, a statutory authority, essentially does what solicitors are prohibited from doing.

Fee arrangements are currently the subject of debate in the UK, where reform proposals are under consideration that could seriously impact on access to justice. Ironically, the current UK system of allowing success fees to be recovered from the losing side was designed to avoid footing a legal aid bill for personal injury claims: the same motivation explains why the Irish Citizens Information Board tells people that many solicitors work on a no foal/no fee basis.

Andrew Dismore suggests on the Guardian website that the UK reforms might only reduce legal costs by scaring potential claimants off.

They are playing on claimants’ worst fears: the threat of uncertain and unlimited legal bills. If the government wanted to reduce legal costs fairly, they should start by giving insurance companies incentives to accept liability and make sensible offers earlier, not by making it harder for the public to enforce their rights to get justice.

Lest people dismiss the access to justice argument on the basis that no foal/no fee arises only in relation to inflated claims arising out of minor soft-tissues injuries, Dismore gives a particularly good example of the type of injustice that could result from the reforms.

Martyn and Christine Harrison’s daughter Sophie was appallingly injured in a road accident in April 2009. She died two days later, when Martyn and Christine made the hardest decision anyone could make by agreeing that her life support machines should be switched off … The Harrisons borrowed the funeral expenses from Sophie’s grandparents because they couldn’t afford them. Their predicament became worse when they sought legal advice. They had problems finding a lawyer because Sophie had been 18 years and one month old when she died. Because she was over 18, her parents were not entitled to bereavement damages. No one wanted to help until they found a solicitor in Sittingbourne, who took their case on a conditional (“no- win-no-fee”) basis to try to reclaim the funeral costs and compensation for Sophie’s pain and suffering for the two days she survived after the accident. As a result of his efforts, Martyn and Christine recovered the funeral costs of £3,151 and £1,599 for Sophie’s pain and suffering.

Dismore’s charge that the UK Government’s proposals are unfair because they favour insurance companies have some resonance here. Solicitors have long complained that the Personal Injuries Assessment Board (now styling itself InjuriesBoard.ie, with television ads in recent years reminiscent of those seen in the UK on the part of claims agencies) is a creation of the insurance industry which favours that industry over citizens.

McGarr Solicitors wrote, before the election, that the new government should abolish PIAB on the grounds that it is unfair to injured parties. Unfortunately, as I regularly complain, the views of solicitors are routinely discounted on the basis that solicitors are a vested interest concerned only with securing huge fees and rarely with justice. It is essentially with that argument that the insurance industry convinced the Irish government to create a system of claim handling that attempted to remove solicitors from the equation and provide the industry with extra options when defending claims. The Board appears to see solicitors as providing an entirely unnecessary, luxury service and go to great lengths to give the impression that solicitors have no role in personal injury claims. Note their FAQs:

you may choose to engage an agent (e.g. a solicitor) who will submit the application on your behalf. You may, however, be liable for some or all of the cost in respect of engaging the agent.

John McCarthy outlines the reality.

The way the insurance industry works is that if you have suffered a genuine loss you have to bring a claim to recover it. However, it pays the insurance industry to drive down the cost of claims by portraying the very act of bringing a claim in an unfavourable light.

The average claimant who has suffered an injury will hope that his/her claim is a one-off and will enter the system with little or no experience of it. Their opposing party, an insurance company, defends claims on a daily basis and has teams of claims handlers and solicitors managing claims. Of course, many solicitors make some of their profits from personal injury claims. But the argument for involving solicitors in such claims is not about increasing profits, rather it is about equality of arms.

Endnote: here’s some great lawyer advertising from the US. But: is it appropriate? It would certainly raise a few questions under the Irish regulations.