Compensation Act 2006

Compensation Act 2006
The Compensation Act 2006[1]

Parliament of the United Kingdom
Long title An Act to specify certain factors that may be taken into account by a court determining a claim in negligence or breach of statutory duty; to make provision about damages for mesothelioma; and to make provision for the regulation of claims management services.
Statute book chapter 2006 c 29
Introduced by Baroness Ashton Department of Constitutional Affairs, 2 November 2005
Territorial extent England and Wales, but sections 3 and 16(3) to (6) also extend to Scotland and Northern Ireland.[2]
Royal Assent 26 July 2006
Commencement from 26 July 2006, s.3 retrospective
Repeal date
Other legislation
Related legislation
Repealing legislation
Status: Current legislation
History of passage through Parliament
Text of statute as originally enacted
Revised text of statute as amended

The Compensation Act 2006 (c 29) is an Act of the Parliament of the United Kingdom, introduced in response to concerns about a growing compensation culture but conversely to ensure that the public received dependable service from claims management companies. In introducing the Bill, Baroness Ashton said that it was intended "to tackle perceptions that can lead to a disproportionate fear of litigation and risk averse behaviour; to find ways to discourage and resist bad claims; and to improve the system for those with a valid claim for compensation."[3]

The Act brought in specific changes to the law of liability and damages in negligence and breach of statutory duty. It further introduced a scheme of regulation for claims management companies.



Section 1 of the Act makes statutory provision that, in determining whether the omission of certain steps amounts to a breach of duty, the court may consider whether such steps, had they been performed, would prevent some desirable activity. For example, the court must consider whether precautionary and defensive measures might prevent something socially useful. Though this principle had often been observed by the common law (see Miller v Jackson 1977, Denning's judgment), the Act places it on a statutory footing.[4][5][6][7]

Section 2 stipulates that, in the event of an accident, an apology or offer or redress, such as paying for medical treatment, is not, of itself an admission of liability.

Sections 1 and 2 came into force on royal assent on 26 July 2006 (s.16(1)).


Asbestos fibres - a single fibre is believed to cause mesothelioma

Section 3 reverses the common law on allocation of damages in various mesothelioma claims arising from unlawful exposure to asbestos. In 2002, the House of Lords had controversially ruled that, where several parties had unlawfully exposed the claimant to asbestos and risk of pleural and peritoneal mesothelioma, all were liable for his injury, even though the claimant could not prove which individual party had provided the asbestos fibers that cause the disease.[8] However, in Barker v. Corus UK Ltd[9] the House of Lords held that the parties who contributed to the risk were severally but not jointly liable. This meant that a single defendant could only be held liable for a fraction of any damages proportional to the exposure for which they were responsible and that a claimant could only recover all their damages if they succeeded in actions against all such contributors. Section 3 reverses the House of Lords decision by making all such parties jointly and severally liable for the damage so that a claimant could recover the totality of their damages, even from a subgroup of potential defendants.[10]

Section 3 is "treated as having always had effect" (s.16(3)) and also extends to Scotland and Northern Ireland (s.17).

Claims management companies

Part 2 of the Act seeks to regulate the provision of claims management services. As of 23 April 2007, an individual or a corporation may not provide claims management services by way of business unless authorised, exempt or otherwise in receipt of a waiver (s.4(1)).[11] The Act creates a Claims Management Services Regulator to authorise and regulate claims management companies and to (s.5):

  • Set and monitor standards of competence and professional conduct;
  • Promote good practice, in particular as to the provision of information about charges and other matters to users;
  • Promote practices likely to facilitate competition;
  • Ensure that arrangements are made for the protection of users, including complaints handling.

It is a crime for an unauthorised person to provide or offer claims management services, or to pretend to be authorised. Offenders are punishable, on summary conviction, by a fine of up to level 5 on the standard scale or 51 weeks' imprisonment. If convicted on indictment in the Crown Court, offenders can be sentenced to an unlimited fine or two years' imprisonment (ss.7 and 11). Where a corporate crime is committed, the offender can only be fined and not imprisoned. The Regulator may investigate unauthorised trading and seek an injunction to prevent it or bring a criminal prosecution (s.8). It is a crime to obstruct the Regulator, punishable on summary conviction by a fine of up to level 5 on the standard scale (s.10).

Section 12 creates a Claims Management Services Tribunal to which a person may appeal a decision of the Regulator about authorisation (s.13(1)). There is a further route of appeal to the Court of Appeal (s.13(4)). The Regulator may also refer complaints or questions about the professional conduct of a claims management company to the Tribunal (s.13(2)).

Part 2 came progressively into force from 1 December 2006. As of March 2008, only section 13(2) (referrals to the Tribunal by the Regulator) remains to be brought into force.[11]

Section 16 - Commencement

The following orders have been made under this section:


  1. ^ The citation of this Act by this short title is authorised by section 18 of this Act.
  2. ^ The Compensation Act 2006, section 17
  3. ^ Baroness Ashton (2005). "Written ministerial statement - House of Lords". Department of Constitutional Affairs. Retrieved 2008-03-20. 
  4. ^ Daborn v. Bath Tramways Motor Co Ltd & Trevor Smithey [1946] 2 All ER 333, CA, at 336
  5. ^ Miller v. Jackson [1977] QB 966, CA
  6. ^ Bolton v. Stone [1951] AC 850, HL
  7. ^ Lunney, M. & Oliphant, K. (2003). Tort Law:Text and Materials (2nd ed ed.). Oxford: Oxford University Press. pp. pp156–158. ISBN 0-19-926055-9. 
  8. ^ Fairchild v. Glenhaven Funeral Services Ltd [2002] UKHL 22
  9. ^ [2006] UKHL 20
  10. ^ Brett v. University of Reading [2007] EWCA Civ 88
  11. ^ a b The Compensation Act 2006 (Commencement No. 3) Order 2007 (SI 2007/922)


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