News focus: Another firm failure highlights pitfalls of cavity wall claims

The explosion in cavity wall claims could well be put down to a survey in 2015 showing that of 250,000 properties with this insulation, around half were found to have problems.

The eyes of solicitors, claims management companies and litigation funders lit up. With around six million homes in the UK fitted with cavity wall insulation since the government-funded installation scheme was introduced in the 1990s, this was a potential goldmine.

But much like the properties themselves, the cracks started to show fairly quickly. Insurers mounted more robust defences than expected, costs began to mount up and – perhaps most importantly – there was a paucity of actual successes.

Liverpool firm Pilkington Shaw was one of the few firms publicly trumpeting its court victories in these claims. The firm pushed out a press release in 2019 noting its fifth successful trial that year. Director Mike Pilkington said at the time: ‘We believe there are thousands of householders across the UK who wrongly had cavity wall insulation fitted and this is just the tip of the iceberg.’

Pilkington Shaw went into administration in 2021 and entered into an agreement transferring cavity wall clients to Sheffield firm SSB Group Limited.

A similar arrangement was made following the collapse later in 2021 of Pure Legal – perhaps the biggest handler of these claims. Clients of Pure later reported that they faced massive legal bills after agreeing to bring no win, no fee claims relating to cavity wall insulation. These clients were met at the door by bailiffs and warned they faced bankruptcy if they did not cover costs that had been accrued by defendants.

Around 13,500 of Pure’s cavity wall insulation cases were acquired by SSB but they have been no more likely to boost the fortunes of the firm.

'We believe there are thousands of householders across the UK who wrongly had cavity wall insulation fitted and this is just the tip of the iceberg'

Mike Pilkington, Pilkington Shaw, speaking in 2019

SSB Group, trading as SSB Law, announced this week its intention to appoint administrators, burdened by the weight of trying to turn a profit from these cases.

SSB directors said they are currently working with the proposed administrators to facilitate an acceptable outcome for clients and are in contact with the Solicitors Regulation Authority to ensure standards and regulations are met.

The business, they admitted, had suffered ‘ongoing financial challenges and has been marketed for sale in order to secure fresh investment’.

The scale of expansion to accommodate the incoming claims was eye-catching to say the least. Annual accounts for the year ended 30 April 2022 show the amounts owed to creditors within one year leapt from £2.46m to more than £48m. The business had taken on £30m of loans in the previous year and increased the amount owed to trade creditors from a five-figure sum to around £15.3m.

Clues as to SSB’s difficulty in running these cases have appeared in recent judgments from the county court. One expert witness wrote to the court in August 2022 to say they would no longer take on this work as they had not been paid (the firm later blamed its claims management intermediary).

A judgment from Leeds County Court from July this year heard allegations from the defendant that an expert instructed to support cavity wall claims was actually director of a company connected with a claims management company. Defendant solicitors said SSB had acted in a way that was ‘improper, unreasonable or negligent’ in instructing this expert.

District Judge Dawson said it was an abuse of the court’s process to issue claims from an expert when the firm knew of concerns about his independence.

The trouble may be that there were not many experts left to instruct: SSB admitted that by the end of 2021 three experts who had been instructed on most of its cases had withdrawn from any further involvement.

Certainly, funding had become a major issue. Novitas Loans, which financed much of Pure’s work, pulled out of the legal market, while legal finance provider VFS Legal went into administration earlier this year. VFS Legal was owed almost £50m by law firms after increasing its funding for consumer claims such as cavity wall.

The lingering feeling remains that this was always a mini-industry built on foundations of sand. No matter how many millions were thrown at the thousands of people signed up for claims, there was never any gold at the end of the rainbow. Did anyone make money from this line of work? Possibly. But precious few clients saw any compensation, and hundreds of jobs were lost along the way. As these were regulated and authorised entities, one might also ask how this managed to go on for so long unchecked.

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