Non-Contentious Probate (Fees) Order 2018

Debate between Lord Sharkey and Lord Hodgson of Astley Abbotts

Tuesday 18th December 2018 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I am not a lawyer. I have never applied for probate, I know nothing about the operation of the probate service and I come at this as a babe in the legal wood. But having read the paperwork that was put down and heard this afternoon’s discussion, I see four things. I see us helping the poorest in our society by eliminating any charge for estates between £5,000 and £50,000. I see us ensuring that the maximum charge is never more than 0.5%, and sometimes less than that. I see a maximum of £6,000 on even the largest estate, and I see this providing a degree of cross-subsidy to ensure that we have an efficient courts and tribunals system—a point that the noble Lord, Lord Pannick, has just made. So I say to my noble friend Lady Browning, with the very greatest respect, that those seem to be perfectly good Conservative principles, and I therefore support what the Government are trying to achieve here.

If we chase down the vires point which the noble Lord, Lord Marks of Henley-on-Thames, focused on, surely any amount of return above cost is not allowable in his argument. We are about to have a reduction in the cost, as I read the papers, of £9.30—the estimated reduction in the average unit cost of applying for probate—as a result of the new system. I am not clear—perhaps the noble Lord can enlighten me when he concludes—about whether his proposal is now to reduce the fees, because of course they will be above the cost of providing the service.

I have been involved in the charity and voluntary sectors. I have worked on their behalf, written reports to the Government, supported them and fought their corner in third-party campaigning and other areas. The reports have been well received by the sector, and sufficiently well received that the Government immediately banned any idea of bringing them in—but never mind about that. The point is that they have made a great case about the impact on charities and charitable donations of the imposition of these particular charges. I must say that, however I work the maths and however I try to work through the ideas, I do not see the logic of the more extreme and indeed scaremongering issues that have been raised by many parts of the sector.

It must surely be perverse that under the present system we are charging the same fee to someone who has a £5,001 estate as to someone who has a £20 million estate. That must be perverse and the present system must not be right. This must be a way of improving it.

[Lord Sharkey (LD)]

My Lords, I will not join in the discussion about what is or is not a Conservative principle, but it is clear that this measure is in fact highly contentious, drafted as it is by the irony division of the Ministry of Justice.

Its 2016 predecessor was also highly contentious, as it attempted to impose probate fees of up to £20,000. The consultation response, which has not so far been mentioned, to the 2016 proposal was overwhelmingly negative. It was opposed by both the Law Society and the Bar Council, among others, and both Houses were, to say the least, worried and unenthusiastic about the proposal.

The grounds for opposition were clear. The proposal was a tax poorly disguised as a fee. It may well have been ultra vires. The use of Section 180(3) of the Anti-Social Behaviour, Crime and Policing Act 2014 as a legal base for the absolutely enormous increase in costs may well not have been within what Parliament envisaged. As the noble Baroness, Lady Meacher, noted, there was no indication at all as that Bill proceeded through Parliament that the power in Section 180(3) would be used to prescribe probate fees to fund the courts and tribunal service generally.

The 2018 version of the SI that we debate today is different from its 2016 predecessor in only one main respect: its charges are lower. In the abandoned 2016 version, the probate fee for estates of £2 million was set at £20,000. In this version, the fee is £6,000. That is a reduction in the quantum only. It does not address the objections raised to the principle of such a charge, so very far above the cost of providing the probate service.

As noble Lords have said, the current probate fee is flat across all sizes of estate. It stands at £155 for an application made by a solicitor and £215 for an individual application. Those fees are based on cost recovery. The principle of cost recovery as the basis for charging for the service is abandoned by this new SI. An estate worth £2 million will pay nearly 40 times the actual cost of the service.

Civil Liability Bill [HL]

Debate between Lord Sharkey and Lord Hodgson of Astley Abbotts

Committee: 2nd sitting (Hansard): House of Lords
Tuesday 15th May 2018 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, as we begin to discuss Part 2, I return to an issue I raised at Second Reading: the use—or perhaps the insufficient use—of periodical payment orders, particularly in cases where compensation is payable for long-term injuries.

To summarise the position, periodical payment orders are a form of annuity that ensures that a guaranteed sum, usually index linked, is paid to the injured party as frequently as he or she requires—weekly, monthly, quarterly or annually. PPOs have two particularly significant aspects. First, they transfer all longevity risk to the insurance company. The insured does not have to be concerned that he or she may live longer than is actuarially assumed, with the possibility of having to live in reduced circumstances for the last years of their life. Secondly, PPOs transfer all investment risk to the insurance company. The insured does not have to worry that bad investment decisions made on his or her behalf might result in a reduction in his or her income. Those are two significant factors.

I hope that it is common ground that one of the major purposes of the Bill is to ensure fairness—to ensure that individuals suffering life-changing injuries are properly compensated for the rest of their lives, however long or short these may be, and that these payments are made within a framework that is fair to the other insured individuals, who will have to pay their share of the expenses. I remind the Committee once again that I am not a lawyer—but a court must find it incredibly difficult from a purely practical point of view when faced with, say, the tragic case of a young man aged 25 who is badly injured in a road traffic accident, and the impossible task of ensuring fairness between the parties and deciding in such a case what the right single lump-sum award of damages should be. What is the life expectancy of such a person?

I have heard it argued that one does not need to be concerned about individual cases because average life expectancy over a number of cases can actuarially be determined fairly. However, that considers the case only from the point of view of the insured and, indeed, the co-insured. It is not much help to the individual injured party—injured, say, at the age of 25—to hear, “We thought you’d only live for 35 years, but here you are. I’m so sorry that you’re still living now and that the money is running out”. Nor is it fair to the insured and the co-insured, that when such a person, very sadly, dies early of complications aged, say, 40, a potentially significant lump sum is passed to his or her descendants, who have virtually no locus in the case.

In those situations, periodical payments would ensure fairness—so why are they not the default option in cases of long-term injuries and for people with low risk tolerance? There appear to be a number of structural reasons why that is so. First, from the point of view of the insurance company, a lump-sum payment is neater and more administratively convenient. In essence, one could put a pink ribbon round the file—or, in modern parlance, send the case to the cloud—and forget all about it. Further, PPOs are unattractive to insurers because of the method by which they are rated for capital adequacy purposes. I will not detain the Committee this afternoon with a detailed explanation except to say that, under the technical provisions of reserving, the combination of a best estimate of liabilities, the risk margin and the solvency capital requirements makes PPOs unattractive.

Secondly, from the point of view of the insured, particularly someone who is less financially sophisticated, an offer of, say, £6 million as a lump sum may on the surface appear to be more attractive than, say, a quarterly payment of around £50,000. I have also heard that it is not impossible that families might prefer the lump-sum route in the hope of some windfall, and there may be financial advisers who see a long-term stream of fees for providing investment management advice and might prefer a lump sum to a PPO.

Thirdly and finally, the individual judge considering the award might find it outwith the court’s role to opine too definitely on the method by which the award should be paid. All these influences, although individually not particularly significant or decisive, collectively tilt the balance away from PPOs.

The Government recognise the challenge in increasing the take-up of PPOs in paragraphs 48, 49 and 50 of their response to the report of the Justice Select Committee. Paragraph 48 states:

“The Government therefore sees many benefits in the use of PPOs to provide compensation in respect of future losses … particularly those who are most dependent upon the provision of long-term future care. The Government agrees with the Committee that it is not obvious why PPOs are used in relatively small numbers of cases”.


The following paragraph states:

“Perhaps even more tellingly, there was little enthusiasm for any changes to the law regarding PPOs in response to the consultation … It is therefore not clear what might be done to increase the take up of PPOs”.


For those of us who received today’s briefing from the Association of British Insurers ahead of this Second Reading debate, we can see the push-back already beginning. Under the section on PPOs, it says that they are,

“available in 99% of all cases … Insurers continue to make PPOs available for claimants when requested”.

I think that the use of those words indicates that it is not top of insurers’ lists to make sure that it is even Steven between the ways in which these awards are paid.

I have been seeking ways to redress this imbalance and move towards a position where PPOs might become the default option in cases where compensation for injuries will be paid out over the long term or where the injured party has a low tolerance of risk or is risk averse. Amendment 55 is intended to achieve this by requiring changes to the rules of court which would encourage or require judges to consider wider factors, in particular longevity risk and investment risk.

As I said a few moments ago, I am no lawyer, and I have no idea whether Parliament can require the inclusion of specific provisions in the rules of court without infringing judicial independence. It may be that, in the course of this debate, there are other, neater ways of achieving this shift of emphasis. So Amendment 55 is a probing amendment at this stage. However, I am convinced that the present position is not satisfactory, and the Government essentially agree that that is so. I look forward to hearing my noble friend’s reply. In the meantime, I beg to move.

[Lord Sharkey (LD)]

My Lords, Amendment 92 in this group would require the Lord Chancellor to carry out a review of the impact of any new rate on the extent of the use of PPOs and to lay this report before Parliament. Our amendment has the same general purpose as Amendment 55 and as other amendments in this group.

The noble Lord, Lord Hodgson, has already spoken eloquently to Amendment 55 so I can be very brief. It seems to me that all the amendments in this group are intended to provide a gentle nudge in the direction of PPOs. Their purpose is to create conditions in which the incidence of voluntary uptake of PPOs may increase. Given the scope of the Bill, not to mention the ethical questions that would be created by any reduction in the freedom to choose or not choose PPOs, this is probably as far as we can go.

I hope the Minister will be sympathetic to the thinking behind all of these amendments, coming as they do from various parts of the House. If he is sympathetic, perhaps he would be willing to meet interested noble Lords before Report with a view to drafting an amendment or amendments that he might consider bringing forward or supporting.

Civil Liability Bill [HL]

Debate between Lord Sharkey and Lord Hodgson of Astley Abbotts

Committee: 1st sitting (Hansard): House of Lords
Thursday 10th May 2018 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, Amendment 2 in this group, which is in my name, tackles the same issue. The noble Earl, Lord Kinnoull, has laid out the background and reasons why this House and the country should be concerned about whiplash—false whiplash—and what are rather inelegantly called “cash for crash” events. I do not propose to weary the House by running over those issues again, which we discussed quite a lot at Second Reading.

Amendment 2 addresses the point made by the Delegated Powers and Regulatory Reform Committee about the lack of a definition in the Bill and does so in a slightly wider way than Amendment 1, moved by the noble Earl. It proposes a definition in proposed new subsection (1) but, at the same time, proposed new subsection (2) recognises the need for flexibility, in the sense that medical technology and medical sciences are always changing and there will need to be some flexibility in keeping the law up to date with those developments. Amendment 2 therefore aims to create an overarching definition, clarifying what is included within a soft tissue injury, but then provides room for flexibility, so that new ways of describing these injuries do not result in them falling outside the definition. At the same time, it allows the definition to be changed to reflect improvements in diagnosis and prognosis of these subjective injuries.

I should say that I was somewhat concerned that, having got a definition of whiplash in the Bill, a definition gap might have been left by not defining soft tissue. But the insurance industry tells me that this term is well understood and does not need a detailed definition here; the noble Earl referred to that. What I understand is called the pre-action protocol for low-value personal injury claims—I am reading this carefully because I am not entirely familiar with it myself—uses the term to define the scope of powers and has been in force since 1 October 2014, apparently so far without challenge or the need for a judicial ruling on its meaning. I hope that this amendment will be a useful contribution to the debate on this important topic.

[Lord Sharkey (LD)]

My Lords, Amendment 3 in this group is in my name and those of my noble friend Lord Marks and the noble Baroness, Lady Berridge, for whose support I am very grateful. Following the two preceding and eloquent speeches, I can be very brief. The point of the amendment is simply to put a definition of whiplash in the Bill. There are rival definitions in various other amendments, and there is now also a government definition contained in the draft SI published yesterday. At first glance, this government definition seems to provide a sound basis for discussion, but it is in the wrong place. It should be in the Bill.

As the noble Earl, Lord Kinnoull, has already said, our Delegated Powers Committee said clearly in its 22nd report that,

“it would be an inappropriate delegation of power for ‘whiplash injury’, a concept central to a full understanding of the Bill, to be defined in regulations made by Ministers rather than being defined on the face of the Bill”.

At Second Reading, many noble Lords strongly agreed with this conclusion and it is disappointing, now that they have a draft definition, not to see the Government bringing forward an amendment to put this in the Bill.

In his Second Reading reply and in his subsequent letter to us of 30 April, the Minister did not respond substantively to criticisms of using secondary legislation to define whiplash. He merely noted that he did not entirely agree with the DPRRC recommendations and that noble Lords were anxious about the definition of whiplash.

In fact, the Government had already set out elsewhere in correspondence with the Delegated Powers Committee their case for using secondary legislation. The DPRRC helpfully summarised this by saying that, first, whiplash must be defined accurately; secondly, there must be extensive consultation; and thirdly, the definition must remain accurate. The Delegated Powers Committee agreed with these propositions but said,

“it does not follow from them that the definition of ‘whiplash injury’ should be contained in regulations rather than the Bill. Neither the Lord Chancellor nor the Ministry of Justice is best placed to make this determination”.

We agree with the conclusions of the Delegated Powers Committee and invite the Minister to explain why the Government have rejected them and are still pursuing the statutory instrument route.

As to the Government’s definition itself, as I have said, it seems to provide a sound basis for discussion but we have not had enough time to make a proper assessment and to canvass the opinion of other stakeholders. We will want to return to this issue on Report.