A furious group of MPs has accused Freshfields of "deplorable" behaviour and suported a call for a Serious Fraud Office investigation.
In the 1990s, energy company ScottishPower set up a warranty scheme under which customers who purchased its 'PowerPlan' insurance for white goods could eventually reclaim the cost of the scheme as 'cashback' if they didn't call on the warranty. In 2003 ScottishPower sold the PowerPlan scheme to another business, Powerhouse, which subsequently collapsed when customers started requesting their cashback in unexpectedly large numbers. The result was that 625,000 people were left with perfectly working fridges but out of pocket.
Powerhouse's liquidators accused ScottishPower of reneging on an indemnity covering the cashback, and under pressure from a group of complainants the Department of Trade and Industry and the Office of Fair Trading examined the scheme's failure. They found no evidence of wrongdoing, and neither did the Solicitors Regulation Authority when it investigated Freshfields' role. However, 28 MPs formed the 'All-Party Parliamentary Group on ScottishPower’s Cashback Mis-selling' and after studyinghow to be popular with voters the facts, they have concluded that the whole thing stinks. They are particularly critical of Freshfields, claiming to have been "shocked" that a "prominent law firm could act in such a way".
But their report, released this week, appears to criticise the Magic Circle firm for simply doing its job. The MPs concede that the indemnity which ScottishPower gave to Powerhouse "omitted the crucial words 'and cashback'", but they call the omission "a simple clerical error" which "could have apparently been rectified very easily". Freshfields' decision to obey its client's instructions and not agree new wording which would have cost ScottishPower tens of millions of pounds is branded "deplorable" and "very concerning". The MPs bluster that Freshfields was wrong "regardless of technical aspects around the liability", and they claim that the firm employed "strong arm tactics" and used the terms of the contract as "a tactic to foster misinformation".
The SRA also comes under fire. Responding to a pressure group's demand for sanctions against the Magic Circle firm, it determined that "until a court has ruled on the case, Freshfields cannot be said to have lied". The MPs have called that response a "demonstration of the bizarre legal reality in which this conflict takes place", and conclude that although the SRA’s reasoning "may be technically correct", its stance is not "morally justifiable".
An SRA spokesman said it was reviewing the detail of the report, noting that it hadn't been asked to meet the MPs or contribute to their enquiry, but is "always happy to provide information on how we work". A Freshfields spokesman said, “The SRA concluded after careful consideration of the evidence that there was no misconduct on the part of Freshfields”.
Tip Off ROF
In the 1990s, energy company ScottishPower set up a warranty scheme under which customers who purchased its 'PowerPlan' insurance for white goods could eventually reclaim the cost of the scheme as 'cashback' if they didn't call on the warranty. In 2003 ScottishPower sold the PowerPlan scheme to another business, Powerhouse, which subsequently collapsed when customers started requesting their cashback in unexpectedly large numbers. The result was that 625,000 people were left with perfectly working fridges but out of pocket.
Powerhouse's liquidators accused ScottishPower of reneging on an indemnity covering the cashback, and under pressure from a group of complainants the Department of Trade and Industry and the Office of Fair Trading examined the scheme's failure. They found no evidence of wrongdoing, and neither did the Solicitors Regulation Authority when it investigated Freshfields' role. However, 28 MPs formed the 'All-Party Parliamentary Group on ScottishPower’s Cashback Mis-selling' and after studying
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An MP clutches her pearls, yesterday |
But their report, released this week, appears to criticise the Magic Circle firm for simply doing its job. The MPs concede that the indemnity which ScottishPower gave to Powerhouse "omitted the crucial words 'and cashback'", but they call the omission "a simple clerical error" which "could have apparently been rectified very easily". Freshfields' decision to obey its client's instructions and not agree new wording which would have cost ScottishPower tens of millions of pounds is branded "deplorable" and "very concerning". The MPs bluster that Freshfields was wrong "regardless of technical aspects around the liability", and they claim that the firm employed "strong arm tactics" and used the terms of the contract as "a tactic to foster misinformation".
The SRA also comes under fire. Responding to a pressure group's demand for sanctions against the Magic Circle firm, it determined that "until a court has ruled on the case, Freshfields cannot be said to have lied". The MPs have called that response a "demonstration of the bizarre legal reality in which this conflict takes place", and conclude that although the SRA’s reasoning "may be technically correct", its stance is not "morally justifiable".
An SRA spokesman said it was reviewing the detail of the report, noting that it hadn't been asked to meet the MPs or contribute to their enquiry, but is "always happy to provide information on how we work". A Freshfields spokesman said, “The SRA concluded after careful consideration of the evidence that there was no misconduct on the part of Freshfields”.
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Actually, though - ScottishPower had an obligation to its customers - how did it pass that off onto Powerhouse without its customers' consent? I refer the honourable gentlefolk of the Houses of Parliament to The Unfair Terms in Consumer Contracts Regulations 1999 No. 2083 Schedule 2, Regulation 1(p) - indicative naughty clauses to include "giving the seller or supplier the possibility of transferring his rights and obligations under the contract, where this may serve to reduce the guarantees for the consumer, without the latter’s agreement." BOOM!
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Seeing MPs "on the scent" in these committee sessions just serves to demonstrate their complete ignorance of the real world. So many MPs have a knee-jerk populist anti-business stance. There may well be some lessons to be learnt from this Scottish Power episode (and valid legal points such as 8:53), but if there is it will get lost in all the B******* spouted by these clowns.
I find their craven showboating pretty "deplorable". When do MPs actually do any good?
The Mogg is about the only decent MP in the House.
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Loving the new equitable stance of morality that we clearly must now apply impliedly into all contracts - how does that work with my employment contract?? Pretty certain I could find at least 5 immoral/unequal bargaining style clauses in it...the fact I don't get Monday mornings off to get over late night GoT watching being foremost on my mind
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No-one comes out of this with glory:
If Freshfields glossed over the fact that a contract with a consumer is not the same thing as large corporations (a common mistake among law firms which don't act for human beings) and potentially exposed their client to an unexpected loss, that doesn't look good.
The ConDem coalition Government deserves a slap for abolishing the OFT - the OFT could have intervened and ruled the clause unlawful, but "fair" has never been a Conservative forte...
Any firm acting for the consumers should have had a good go at kicking the arse of ScottishPower and not just whined like a caffeined-up teenager.
And that's without any input from the nationalistic Scottish regime - who knows if action being taken against a Scottish company will be subject to yet another anti-English rule (after this: http://www.rollonfriday.com/Blogs/ReadBlog/tabid/144/id/32858/Default.aspx anything is possible)
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The more interesting aspect is whether there could have been an action against Scottish Power.
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How do these two statements sit together?
In any case, we know the SRA would not have got around to reviewing this case yet, it only took place in the "mid-nineties" ....