Law firms that grew rich by exploiting sick miners are to be forced to repay tens of millions of pounds that they wrongly sliced from their clients’ compensation.

The multimillion-pound payback follows an investigation by The Times into a series of abuses linked to the Department of Trade and Industry’s £7.5 billion coal health compensation scheme.

An estimated 75,000 former pit workers are likely to receive payments under a nationwide scheme that has been agreed in principle by the Government.

The cost to those solicitors who improperly deducted money from awards given to elderly and vulnerable clients may top £50 million.

Claims were registered by more than 760,000 former miners with chronic lung disease or a crippling hand condition caused by their work underground.

Solicitors handling each claim were paid a fixed fee by the Government, but many chose to make additional deductions from the compensation awarded to their clients.

The money they sliced off was sometimes banked by the law firms themselves and in other cases was passed to miners’ unions or claims handling companies.

Some solicitors’ firms earned significant profits by bulk-processing tens of thousands of claims. Two, Thompsons and Beresfords, have earned fees totalling £131 million and £123 million respectively.

When the final claim is settled, solicitors will have been paid a total of £1.3 billion, yet tens of thousands of their clients – or their widows – received less than £1,000 each. The lowest award was 50p.

Many claimants then suffered the further indignity of losing part of their award as a result of solicitors double-charging for their services.

Disclosures in The Times in 2005 about the financial relationship between the Union of Democratic Mineworkers and solicitors handling its coal health claims led to an independent inquiry and a lengthy criminal investigation which is still being conducted by the Serious Fraud Office.

The inquiry’s findings led Malcolm Wicks, the Energy Minister, to lam-bast law firms that took a cut from miners’ compensation. He demanded that all the money should be repaid.

In a pilot project in one parliamentary constituency, Rother Valley in South Yorkshire, the Legal Complaints Service (LCS) contacted every claimant who received a coal health award. Each former miner was asked whether he had money taken from his compensation and was offered the chance to have any concerns investigated by the service.

Out of 3,600 claimants, 345 people, or slightly under 10 per cent, were found to have had money – £450 on average – wrongfully deducted by their solicitor.

Most of the lawyers realise that “the game is up” and are volunteering the cash on request, according to those involved in the project.

Ministers have decided that the Rother Valley trial was so successful that the scheme should be rolled out to cover every constituency in England and Wales.

If a similar rate of double-charging is found nationally, more than 75,000 miners stand to be reimbursed sums totalling £34 million. If every penny deducted from each client was repaid, the final total would be at least £50 million.

Kevin Barron, the Labour MP for Rother Valley, described the expansion of the scheme as “a major breakthrough”.

“It’s been a slow process, but justice is now being done. There are many thousands more people out there who will now get the opportunity to have their case investigated and receive money back,” he said.

The Department for Business, Enterprise and Regulatory Reform said last night that there had never been any justification “for solicitors to charge miners a penny extra” on top of the fees they were paid by the Government.

“The successful Rother Valley pilot and proposed LCS roll-out throughout England and Wales would help bring this to the attention of more miners who feel they have been double-charged,” she said.

A spokesman for the LCS said that funding for the scheme had not yet been agreed and it was unlikely to start before the autumn.

Coal health scandal

June 2005 The Times reveals that a criminal inquiry is being launched into the Union of Democratic Mineworkers (UDM) over compensation claims

July 2005 The Law Society reveals that it is investigating more than 30 law firms handling coal health claims. Energy Minister orders an independent inquiry into the DTI’s running of the scheme

December 2005 Independent inquiry criticises law firms that made deductions from clients’ damages and urges repayment

April 2006 The Law Society reveals that 45 solicitors from 10 law firms are being taken to the Solicitors Disciplinary Tribunal

July 2007 The National Audit Office identifies “significant weaknesses” in the DTI’s handling of the coal health scheme and reveals that 296,000 miners received less compensation than the £3,200 paid by the Government for administration

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