Civil Recovery (England and Wales)

Simon Hughes Excerpts

Tuesday 22nd March 2011 Westminster Hall

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I am grateful for the opportunity given by Mr Speaker to have this debate and to the Minister for doing a back-to-back session by responding to two successive debates.

Colleagues who have looked at the Order Paper and seen that this debate is about civil recovery in England and Wales may not have realised immediately what the subject of the debate is. “Civil recovery” is not a phrase that people regularly use. I want to introduce the debate by giving two examples of incidents that came to my attention as an MP in Southwark and that precipitated my interest in the subject.

A constituent of mine came to me after her 15-year-old daughter was accused of stealing £6 worth of goods from a London store. The daughter was then sent a demand on behalf of the store from which she was alleged to have stolen those items asking for £137.50. The explanation given was that she was being asked to compensate the store for the £6 worth of items and to pay the rest of the costs of the administration, the store security and so on. Another constituent then approached me on behalf of one of her daughters, who had been with two friends at Primark. One of the three girls—not my constituent’s daughter—was accused of stealing, but demands for £87.50 were sent to all three girls on behalf of Primark. These two incidents alerted me to what I have since discovered is a very widespread practice.

[Tom Brake (Carshalton and Wallington) (LD)]

My right hon. Friend is right that this is a widespread practice. I want to draw to his attention to a very similar case involving a constituent of mine. She was stopped and accused of shoplifting. Nothing was found, and she was released by the police, but subsequently she received a letter from a civil recovery company saying that she needed to pay £70.

[Simon Hughes]

Like my hon. Friend, all Members of this House who are MPs for any length of time will discover, if they go through their casework files, that this practice is being brought to their attention. At the beginning of this debate, I unambiguously want to pay credit to the citizens advice bureaux and in particular to Richard Dunstan, who had done some work on this issue long before I became aware of it. On behalf of the CAB, he has brought together all the examples of this practice in the best possible place. As a result of his work, two briefings have been published by the CAB, which I recommend to colleagues and others who have an interest in this subject. The first, “Unreasonable demands?”, was published in December 2009, and the second, “Uncivil recovery”, was published in December 2010. The subtitle of the second briefing tells us succinctly what we are talking about. It is:

“Major retailers’ use of threatened civil recovery against those accused of shoplifting or employee theft.”

Colleagues in both the last Parliament and this one have shared my interest in this subject. In the previous Parliament, I know that Ian McCartney was particularly concerned about the issue, and in this Parliament I know that Baroness Hayter has already registered her interest in the subject. I am grateful to her for her continuing interest, which I think that she will want to pursue in the other place.

None of us who are here for this debate are defending shoplifting or employees who shoplift or take property from their employer. However, there are proper procedures, proper criminal processes and proper civil processes. What should not happen is that people who often are young—that is, under the age of majority—vulnerable, mentally ill, distressed or disturbed are intimidated, charged extortionate fees or threatened with what are, bluntly, bogus actions, either by the shops themselves or more frequently nowadays by those who are employed by shops to act for them.

I have discovered that this problem is significant. In each of the past three years, some 100,000 people have received one or more letters demanding a substantial sum of money as “compensation” for their alleged shoplifting or employee theft, and threatening civil court action and associated extra costs if the sum demanded is not paid promptly. Since 2000, more than 600,000 people have received such civil recovery demands, issued by one of a handful of agents acting for well known high street retailers such as Asda, Boots, Debenhams, Tesco and TK Maxx. In the great majority of those cases, the value of the goods or cash allegedly stolen was relatively low. If the accusation is of shoplifting, the value was just a few pounds. In four out of five cases, the goods were recovered intact for resale. In many cases, somebody was apprehended when they were accused of leaving a store with an item—for example, an eyeliner worth £2 or a grocery item worth £1.60—without having paid for it. They then paid for it and were released, but they still received the civil recovery demand later. Among those cases reported to the CAB, one in four of the recipients of such demands are teenagers, most of them aged between 14 and 16, and other recipients are particularly vulnerable.

In many cases, the alleged theft is strongly denied, so it is not always the case—indeed, it is normally not the case—that these allegations are accepted by the person who is charged. In some cases, there was clearly an innocent mistake; in other cases, there was an error; and in other cases there was confusion. However, it matters not, because these stores have behind them a small but growing army of lawyers and other companies that are making a hefty profit from this business.

There is a common feature in these cases. If the sum demanded is not paid, the threat of county court action is often repeated. There is a second threat and then a third threat, giving ever closer dates of notice. However, at the end of all these threats county court action does not materialise, because it was invalid and unjustified in the first place.

The most prolific civil recovery agent, a firm called Retail Loss Prevention, is the biggest player among a small army of players in this sector. It has confirmed that it has never successfully litigated a fully contested county court claim in respect of an unpaid demand. The CAB has also received advice, which I have seen, suggesting that there is no obvious legal authority for most of these demands. Taken together, those two facts suggest that the practice of threatened civil recovery relies on fear and/or shame, as well as ignorance of the law, for its effectiveness.

When I began thinking about how I would raise this issue, I wondered which Government Department I would, as it were, “summon to answer” to me in the first place, because it is very clear that this matter is not only the responsibility of the Ministry of Justice. However, I thought that I would start there, because it is a justice issue, and I am very grateful for the Minister’s presence today and for his Department’s interest in this subject. Shortly, I want to put to him some specific issues that I hope his Department can pick up, because I believe that it has a responsibility to do so and that it can do things.

There is no way that that we should continue to permit this system of civil recovery, and I hope that today’s debate will precipitate a working-together across Departments. Obviously, there is a Home Office interest in this issue and there is also an interest for the Department for Business, Innovation and Skills, as well as an interest for the Ministry of Justice, in trying to ensure that we shut down this business and make those who are involved, which are otherwise reputable major retail outlets, behave in a much more reasonable way.

Nobody condones retail theft. It is a big issue, and we need to ensure that stores are not pilfered and that there is the best possible policing of them. However, even if one accepts that retail theft is a big problem, the percentage of the money stolen from shops that is recovered by these means is a very small proportion of the total. So it is not as if the retailers involved are able to cover all their costs by doing this type of thing. I will turn to some examples.

[Tom Brake]

Has my right hon. Friend considered that we should take up this issue in a protection of freedoms Bill No. 2? It is probably too late for the Protection of Freedoms Bill that is about to start its Committee stage, but it could be considered in a future Bill.

[Simon Hughes]

I am grateful for my hon. Friend’s suggestion, and I hope that the Minister will address the areas that the Ministry of Justice can pick up. If over the next few weeks, with concentrated efforts in both Houses, we can get a coalition—as it were—of determination to do something, I, with my hon. Friend and others, will look for the earliest available opportunity to deal with the legislative changes that I think are part of the response that is needed.

On the protagonists, I have listed some of the major retail players, and I will now deal with the agents. In eight out of 10 of the cases reported to citizens advice bureaux the demand was issued by a Nottingham-based company called Retail Loss Prevention Ltd. Since 1999, that company has issued more than 550,000 demands on behalf of dozens of retailers, including Argos, E.H. Booth, Debenhams, Harrods, Iceland, Lidl, Matalan, Morrisons, Mothercare, Netto, Primark and Waitrose. The company retains some 40% of any money it recovers and the remainder goes to the retailer client. The owner and managing director of the company, who is being pursued by Citizens Advice and by others in the media, has said that the company is

“passionate in our belief that we are helping the community by going after the ‘soft’ criminals who are often seen as lower priority by the police”.

In seven out of 10 of the cases that have come to the notice of citizens advice bureaux, the demand was issued on behalf of one of just six retailers—Boots, TK Maxx, Tesco, Wilkinson, B&Q and Superdrug. The predetermined fixed sum demanded by RLP in most if not all shoplifting cases varies according to, and is determined by, the total value claimed of the goods or cash involved. If the value is between nothing and £10, the sum demanded is £87.50 and the 21-day settlement offer is £70; if the goods are worth between £10 and £100, invariably £137.50 is asked for, with a discounted 21-day-period amount; if the value is more than £100, £187.50 is asked for, with a quick-pay discounted amount of £150; and if it is more than £300, £250 is asked for, with a quick-pay amount of £200. It is clear that the company has never justified the legitimacy of its action. It has been asked persistently about the evidence for its actions, and it has repeatedly declined to produce any evidence that claims have regularly and successfully been pursued by means of county court proceedings.

The company has also clearly misrepresented the position. Until last November, RLP’s website stated that

“we have established operating procedures for Civil Recovery and agreed guidelines with the Association of Chief Police Officers (ACPO) and Association of Chief Police Officers Scotland (ACPOS)”.

However, in October last year, the assistant chief constable who leads on retail crime for ACPO wrote to Jackie Lambert at RLP stating:

“Whilst there may have been agreements in the past about exchanging data and operating civil recovery with ACPO…there are no such agreements in place now and indeed on several occasions over the last few years I and my colleagues have asked that such references be deleted. Please remove from your website any and all references which state or imply that RLP operates its civil recovery in agreement or cooperation with the Police Service. Clearly if you have an agreement with an individual force you could make reference to that, but I know of none.”

In November last year, ACPOS said:

“At no time have ACPOS entered into any formal agreement with RLP or assisted them in any civil recovery”.

The other players are Drydens, a law firm based in Bradford, Nottingham-based Civil Recovery Solutions and, more worryingly in a way, a Florida-based law firm, Palmer, Reifler and Associates, which is a major player on the United States civil recovery scene but is not regulated to practise in the UK and uses Wigan-based law firm Goddard Smith as its agent. Lastly, there is the London-based firm Civil Recovery Limited, which acted for only Tesco and was closely related to a security company called TSS, which supplies security guards to Tesco, Boots and other retailers. Civil Recovery Limited ceased trading last summer.

Penultimately, there is of course a civil wrong if someone steals something from someone else. There is a tort as well as a crime, and there is a breach of contract if an employee steals from their employer. I am not arguing that there might not be proper civil proceedings, but this is a contrivance. It is an intimidation, with the protagonists selling their services to the retail fraternity and then recovering a large amount of money under clearly false pretences. What please can we do about it?

I would like the following from the Ministry of Justice. I would like it to ask the Law Commission, which has a report in the pipeline, to ensure that it urgently reviews the entire law on civil recovery, with a view to eventually ensuring, by law if necessary, that civil recovery is limited to cases involving serious, determined and/or persistent criminal activity for which there has been a criminal trial and conviction. I would like the Ministry, as a matter of urgency, to prepare and disseminate public information and advice on threatened civil recovery, and in particular on the options available to people who might receive a civil recovery demand from Retail Loss Prevention, Drydens or other civil recovery agents. That could be done through the Government’s public information service—Directgov—citizens advice bureaux and other advice outlets.

I also want the Ministry of Justice to talk to the Solicitors Regulation Authority to see whether it needs to take further action to ensure that the civil recovery practice of solicitors, including employed solicitors, is consistent with the solicitors’ code of conduct. I would then like the Home Office, the Department for Business, Innovation and Skills, the retail industry and the police to identify and develop a range of alternative ways of dealing with those involved who, if they are young, mentally ill or vulnerable, are often better dealt with by cautions and the early stages of the pre-criminal procedure in my experience.

As the total amount recovered by the civil recovery agents for their retailer clients each year seems unlikely to be more than £16 million, the practice is clearly completely unacceptable, given that they say that they lose £4 billion every year as an industry. I hope that some major retailers will hear this debate and agree to review their practice. Most of all, it is clear to me that the practice has become an opportunity for great profit-making by a few at the risk of improperly influencing and intimidating people who ideally should not be in the criminal process, unless they are regular offenders, and certainly should not be the victims of communications that distort the facts, misrepresent the law and often put the fear of God into people who certainly do not have the money to pay large sums.

I hope that the Minister can be helpful, that he understands the importance of this issue to all our constituents, and that today will be the beginning of the end of this practice. I am very grateful to all those people who have brought the issue to the public’s attention, and I hope that there will be continued significant public reporting, until the practice is ended.

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

I am grateful to my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes)for providing me with this opportunity to outline the Government’s position and the action being taken in respect of civil recovery.

The Government are firmly committed to working alongside business and trade associations to find effective solutions and responses to business crime, including retail theft. My right hon. Friend identified that civil recovery is dealt with by a number of Departments in addition to the Ministry of Justice—for example, the Home Office, in preventing and tackling retail crime; the Department for Business, Innovation and Skills, in retail business, sponsorship of Citizens Advice and employment relations; and both DBIS and the Office of Fair Trading, in consumer protection legislation. As my right hon. Friend requested, and as I will come to later, the Law Commission is reviewing this area, and officials in the Departments that I have mentioned will respond in due course.

Civil recovery is the legal means by which anyone who has suffered a financial loss due to the wrongful actions of someone else can seek appropriate compensation under civil law. Civil recovery schemes are used by many high-street retailers to deter shoplifting and recover from shoplifters the management, administration, security and surveillance costs incurred in dealing with the case, including the costs of the civil recovery action itself. That ambition is both understandable and justifiable. Shoplifting is not a victimless crime. Businesses employ civil recovery agents to recover through the civil courts often relatively low-value losses arising from, for example, shoplifting or employee theft. The alternative would be criminal proceedings rather than a suit, with the likelihood of a criminal record for the person being prosecuted.

Retailers have a clear legal right to recover the costs of goods that they lose as a result of crime. The Government recognise the appropriate and proportionate use of civil recovery as one option available to retailers for dealing with low-level criminal activity that also amounts to a civil wrong. We believe that civil recovery, when used proportionately, provides an effective response to low-value and often opportunistic crime that often involves teenagers and other vulnerable people.

The national retail crime steering group set up by the Home Office with the British Retail Consortium provides a forum for the Government, law enforcement agencies and retailers to discuss and devise strategies for tackling crimes of concern to retailers. At that national level, the Government are working with industry and business to broker solutions that cannot be solved by local action alone and to promote the sharing of effective practice. The group focuses on the significant crime issues affecting businesses, including tackling shop theft, violence against staff and the growing threat of e-crime, to adopt a task-focused, action-orientated approach.

We are encouraging businesses to do more to protect themselves from crime. Effective crime prevention advice is available for businesses to use, and we are making it a priority to share effective practice examples of businesses working together and in partnership with the police and other law enforcement agencies to tackle retail crime across their local areas.

As the right hon. Gentleman said, most retailers who adopt the civil recovery procedure normally employ specialist civil recovery companies to seek damages on their behalf, to meet the losses caused by individuals who steal from them. I understand that in addition to the actual cost of any goods stolen or damaged, retailers seek to recover the overall costs that they have incurred in dealing with the matter. The additional costs are usually claimed to cover the costs of general store security measures such as CCTV, security tagging and security staff, as well as any administrative costs incurred by the retailer.

In the great majority of cases, the value of the goods or cash allegedly stolen is relatively low, sometimes just a few pounds. However, the sum sought in damages can be substantially higher once additional costs are included. Such costs are often charged as a fixed sum of between £100 and £150, depending on the value of the goods or cash involved. I note that the right hon. Gentleman mentioned the amount of £137. The practice adopted by most companies involved in the sector is to write to individuals demanding payment. Failure to pay is followed by a threat of a court action for unpaid damages and the subsequent use of debt collection agencies. Such individuals are advised that their details will be entered on a national database, which can be accessed by retailers, prospective employers and credit providers.

Let me be clear that the Government are entirely satisfied that retailers have a legal right to recover the value of any goods lost or destroyed as a result of an individual’s actions. Defendants can go to their local CAB and receive advice about what to do with the claim. The Government accept that a retailer arguably has a legal right to recover any additional costs or losses directly caused as a result of dealing with a case. However, we appreciate that there is no statutory or other clear basis for setting the amounts of such costs or losses that can be recovered in an individual case. Therefore, the amount of money, if any, that a retailer can recover from an individual accused of low-level theft in respect of its wider costs is entirely a matter for the courts based on the circumstances and facts of the case.

I say “if any” because my officials have not yet been able to identify any cases in which the issue has been tested before the courts and a definitive judgment given. A specialist recovery company confirmed to Citizens Advice in 2010 that it had never issued a claim seeking recovery where an alleged shoplifter had failed to pay the sum requested. Therefore, that area of the law remains untested. CitA—the new name for Citizens Advice—has undertaken a lot of valuable work, for which we are grateful, to highlight what it believes are the relevant problems. I will refer to that valuable contribution later. However, given that some civil recovery is clearly entirely legitimate, we consider that the question deserving further examination involves the means used and the proportionality of losses recovered.

[Simon Hughes]

Has any work done by the Minister or his officials confirmed that the amounts sought in such cases have no relation to the costs incurred? People should be entitled to recover the £5 cost of a stolen item, but the £135 or £235 top-up fee does not appear to have any basis in reality.

[Mr Djanogly]

That would be a matter for the courts to decide, and as I have just tried to explain, there has not yet been a test case. A test case might be a good idea.

There is no clear basis for setting claims for additional costs at a specific level. Indeed, retailers can seek to recover such additional costs only to the extent that they can show that they have been incurred directly as a result of dealing with a case, so it is not at all clear how such costs could be set at standard levels. However, as I said, the point has yet to be tested fully in the courts.

As I said, Citizens Advice has raised a number of concerns about how civil recovery companies operate and has conducted valuable work on the matter, culminating in two reports. “Uncivil Recovery”, which was published in December 2010, set out detailed case studies drawn from 300 CitA-reported cases in which individuals had been accused of shoplifting or employee theft and were then pursued for substantial sums of money as compensation for what was described as

“loss and damage caused by your wrongful actions.”

I understand that in the vast majority of cases the police were not involved, nor were criminal charges brought. CitA suggested that it is unfair to use the civil courts in such circumstances, argued that the practice of civil recovery effectively relies on fear and ignorance of the law for its effectiveness and made a series of recommendations.

We believe that the recommendation that the law should be clarified to prevent any civil recovery unless there has been a criminal trial and conviction would result in undesirable additional pressure on the criminal justice system. As I have mentioned, the Government accept fully that some civil recovery is entirely legitimate. Accordingly, we consider that the question of the means used and the proportionality of losses recovered might deserve further examination. However, we accept that one important issue is what approach companies acting on behalf of retailers adopt when pursuing such cases.

In that context, I am pleased to be able to tell my right hon. Friend that the topic, and whether any guidance needs to be issued or other action taken, is being considered across a number of Departments, and good progress is being made. For instance, the Law Commission intends to seek views on the question in a paper soon to be issued on consumer redress for misleading or aggressive practices. The Law Commission project reviews the directive on unfair commercial practices implemented in the Consumer Protection from Unfair Trade Practices Regulations 2008 and asks whether consumers should have a right of redress of breaches of the regulations, and that includes the question whether civil recovery is a commercial practice within the meaning of the directive.

The issue is not beyond doubt, but on a broad interpretation of the meaning of a commercial practice, the directive could apply to civil recovery where it is used against shoplifters. That would not make civil recovery illegal, but specialist recovery companies would not be permitted to send misleading or aggressive letters. More generally, the Law Commission is also considering whether there should be a statutory right of redress for people to reclaim, along with moderate and appropriate damages for distress and inconvenience, any moneys that they might have paid as a result of a misleading or aggressive letter.

The Citizens Advice report implies that civil redress is sometimes uncalled for, but the Government do not support that position. The report is certainly useful in raising important issues, not least those that concern aspects of consumer protection, but I accept that some technical issues need to be resolved.

[Simon Hughes]

I see that the Minister is on his last page, so I will ask him one last question. A Law Commission report is imminent. Do the Government have a plan to bring together views across Departments and produce a coherent collective response later in this parliamentary Session? I am sure that it would be welcome in both Houses.

[Mr Djanogly]

I cannot guarantee the timing today, because it will need to be agreed among several Departments, but the issue will be considered on a cross-departmental basis, and we will come back with proposals.