It refers to the Access to Justice 'Bill', which received Royal Assent on 27 July 1999."Claims Direct's independent directors, who joined the company when it floated, obtained a copy of the letter three weeks ago, shortly after Mr Sullman and Mr Poole launched an opportunistic 10p-a-share bid for the firm that floated a year ago at 180p a share. The correspondence was made public in The Independent yesterday.While the independent directors of Claims Direct were vigorously opposed to the takeover bid, they chose not to release the letter before Hammond Suddards Edge, the company's lawyers, had completed an investigation into the matter.That inquiry is ongoing, and is focusing on why Mr Sullman and Mr Poole believed that the changes to the law on recoverability came into force upon the related bill receiving Royal Assent. The inquiry has already found that the company had adequate knowledge about the recoverability issue in August 1999.The Lord Chancellor's Department said yesterday that it was hard to conceive why Claims Direct had interpreted the letter as it had. A spokesman said: "It simply does not happen that Acts come into force as soon as Royal Assent is given There is always a long time between a Bill and an Act. Legal aid was still being granted to personal injury claimants between July 1999 and April 2000 when the Act came into force."It is thought that Claims Direct relied heavily on the legal expertise of Mr Poole, a former lawyer, and did not obtain external legal advice.The latest twists come as the Department of Trade and Industry intensifies its investigation into Claims Direct.

It is thought that the DTI is considering whether the Government's letter ought to have been mentioned in the prospectus for the company's flotation.This weekend, Simon Ware-Lane, the property tycoon who owns the rival Claim Line company, will finalise a statement on his intention to buy Claims Direct after Mr Sullman and Mr Poole's victory in their bid this week.It is thought that he wishes to merge the company with Claim Line, but is only willing to proceed on the basis that the founders leave the company.Mr Ware-Lane was expected to declare his interest yesterday, but is thought to have became embroiled in last-minute discussions with his lawyers He has yet to appoint financial advisers for a bid.. The demise of the chino and checked shirt combination was confirmed yesterday when the American fashion retailer Gap announced a second consecutive set of disastrous financial results. Profits fell by 51 per cent for the last quarter to $90m (£62m) and the company forecasts worse to come as it triesto reinvent its khaki-and-cream casual wear which became one of the High Street sales successes of the 1990s. The demise of the chino and checked shirt combination was confirmed yesterday when the American fashion retailer Gap announced a second consecutive set of disastrous financial results.

Profits fell by 51 per cent for the last quarter to $90m (£62m) and the company forecasts worse to come as it triesto reinvent its khaki-and-cream casual wear which became one of the High Street sales successes of the 1990s. Retail analysts said it showed that Gap had fallen from favour for failing to adapt to an emerging polarisation in shopping trends that, over the next decade, will favour either discount or upmarket fashion.Discount chains such as Primark are forecast to take 10 per cent of clothes sales by 2005, while designer labels sold in stores such as Harvey Nichols and Selfridges take trade away from the middle market.The analysts, Verdict Research, predict that the "middle-market" will shrink in the next decade as shoppers reject the current "price/quality" ratio displayed in stores such as Gap, and Marks & Spencer. One analyst, Sally Bain, said: "Gap is under pressure from above and below. There is so much choice on the high street that, if retailers get it wrong, people will go elsewhere."In the past four years, discount retailers such as Primark, TK Maxx and Matalan have all more than doubled their share of the clothes market and further pressure on specialist clothes retailers is being applied by the supermarkets.With its utilitarian range of "George" branded clothes, Asda increased its market share during four years to 2.6 per cent last year. Tesco has captured 1.2 per cent of the market by selling designer labels against the brand owners' wishes and launching a "Florence + Fred" range of adult clothes.Analysts at Retail Intelligence have blamed the downturn at Gap on a globalisation strategy that opened 700 new stores last year.They say that, with a chain of almost 3,900 stores worldwide, Gap was unable to react quickly enough in a fickle market and was being outpaced in Britain by "value-for-money" chains such as Next, H&M, Zara and Mango.Gap has had to learn the same painful lessons of "bulk selling" as have the now-defunct C&A, as well as Marks & Spencer, which recently announced quarterly profits in women's clothes were down by nine per cent. Ms Bain said Gap's British operations had suffered from failing to follow up its success in creating the "casualisation of fashion".Although high street spending remains strong in defiance of a widely forecast recession in Britain, the economic downturn in the US has provided no such comfort to Gap management.

The chief executive of Gap, Heidi Kunz, predicted that profits would continue to fall for the rest of the year. The company's president, Millard Drexler, blamed "difficult and disappointing" trading conditions. He added: "Consumers are cautious – they are selectively buying new fashion but primarily shopping for value." In May, the company announced a fall in profits of 51 per cent and, within weeks, decided to cut its 10,000 workforce by 7 per cent.Several hundred redundancies have been made in the UK and the company last week announced it was relocating its headquarters from London's Mayfair to Rugby.. With memories still fresh of the music industry's battle to stop Napster and other rogue music-swapping services on the internet, five of Hollywood's leading studios have announced a joint initiative to create a pay-per-view online video system that they hope will pre-empt the pirates.