Prisons and Courts Bill

Chris Philp Excerpts

2nd reading: House of Commons
Monday 20th March 2017 Commons Chamber

[Elizabeth Truss]

The hon. Gentleman will have noticed that we have changed the figures in response to the consultation document. Those were judged to be fair and reasonable for the level of injury that we are talking about in this case.

[Chris Philp (Croydon South) (Con)]

I strongly welcome the provisions in the Bill to clamp down on whiplash fraud. Will the Lord Chancellor consider widening very slightly the definition of “whiplash injury” in clause 61 to include injuries to the lower back as well as the upper back?

[Elizabeth Truss]

That issue was covered in the consultation, and we have brought it back after listening to what people fed through in the consultation. The Bill will end the unfairness of higher premiums for motorists while ensuring that fair compensation remains available for genuinely injured claimants.

The Prisons and Courts Bill will usher in a new, modern era for our prisons, courts and justice system. It will do three key things. It will ensure that our prisons are places of reform so that offenders have the skills they need to return to society, to secure employment and to turn their back on crime. It will create a courts and tribunal system that protects the most vulnerable and is more straightforward and accessible for all. It will also enable the judiciary to meet the demands of a modern justice system and enhance our reputation for legal excellence around the world. I commend the Bill to the House.

Prisons and Courts Bill (First sitting)

Chris Philp Excerpts

Committee Debate: 1st Sitting: House of Commons
Tuesday 28th March 2017 Public Bill Committees

[The Chair]

Chris Philp, on this point. I want to exhaust this area before we move on to the next questions.

[Chris Philp (Croydon South) (Con)]

Q Mr Lomas, you said a moment ago that you thought that there were some failures of leadership in this area. Will you expand a bit on what you mean by that?

Martin Lomas: I was making a broad point about there not being a single solution to the problem, and about how there needs to be analysis of what is needed in particular institutions. The Bill requires us, as an inspectorate, for the first time to take account of leadership, and we will be commenting on it. We sort of do already, but this will be a more transparent arrangement. Our intent is to link our commentary on leadership very directly to the outcomes that we see in the prison. We are not management consultants as such, but we will look for there to be evidence of leadership—at every level, because it is not just about the governor. There needs to be leadership among staff and at the Ministry of Justice. A variety of influences will create a situation in a particular institution.

[Chris Philp]

Q In your experience of inspecting prisons, how frequently are there comprehensive searches both of prisoners and their cells, with the purpose of identifying things like mobile phones and drugs?

Martin Lomas: It is not something we specifically look at, although they are going to begin looking at it, but every prison will have a security protocol that will specify the amount of searching that takes place. That is just the routine element. There will be search protocols around specific risk areas like visits, reception and the like, and there will be targeted searching in response to intelligence that comes in through information reports. There will be a variety of responses and different levels of searching, some more intrusive than others. Beyond that, there will be the application of technology, dogs and all sorts of available options.

[Chris Philp]

Q In your experience of inspecting prisons, do you think that search, whether of individual prisoners or of their cell accommodation, is adequately frequent, bearing in mind the amount of contraband that seems to be in circulation?

Martin Lomas: I do not think that I can give a broad-brush answer to that. There are 120-odd institutions that perform differently, and the identification of contraband might be a sign of the success of searching, so it is a difficult one to answer. We look at the security of the institution, the risks that it faces and questions of proportionality. Prisons have to be constructive places, so searching needs to be justified, reasonable, effective and for a purpose. A variety of factors need to be considered.

[Chris Philp]

Mr Simpson, what is your view of the search regime?

Joe Simpson: At the moment, it is hit and miss across the whole system, and that is down to staffing pressures and the regime. The Prison Service ultimately does whatever it has been told to do by the Secretary of State in power at the time. We have gone from “security, security, security” to “regime, regime, regime”. Only at the weekend one of our prisons had to shut down the whole prison in order to put on visits on a Saturday afternoon. Nothing else happened—there was no searching and the prisoners were not out of their cells. They were in their cells because there were not enough staff on duty to get them out.

It depends on what the searching protocol is for the prison as well. Obviously, we have got different categories—A, B, C and D. I would say that the searching strategy in the category A and B systems is more robust because of the types of prisoner being held. In cat C and cat D, I would say it is not as much as we would like to keep people safe—especially in the cat C estate.

[Nick Thomas-Symonds]

Q Rachel, a moment or two ago, you were taking about what the prisoners themselves have to offer in this. I know that the RSA has spoken about things such as rehabilitation culture—I think “rehabilitation capital” is the phrase that is used by the prisons. Can I pick up on that and, in a general sense, ask you whether you think the Bill incorporates that sort of culture and those sorts of measures in the way you would like to see?

Rachel O'Brien: I am slightly nervous of the new HMPPS defining this thing. We know a lot about wellbeing: for example, we can measure people’s ability to make good decisions and their self-confidence—all sorts of things that are prerequisites for the resilience they will need going forward. We are working with a high-security prison at the moment to develop a community-wide strategy. The outcome is going to be great. It is about thinking about, in a very closed system, how you have a better relationship with the outside world, family and so on. Actually, it is about the process of engagement with those prisoners, when they are talking strategies and tactics. They would not necessarily agree to do desktop publishing, but they will do it because they are producing a newsletter to communicate. It is that kind of approach, and you can measure people’s progress—partly because they will tell you and partly because you see it. It is that kind of approach that we need to replicate. Prisons need to be able to do things themselves rather than outsource them, because that is how staff can get those really valuable relationships.

Prisons and Courts Bill (Second sitting)

Chris Philp Excerpts

Committee Debate: 2nd Sitting: House of Commons
Tuesday 28th March 2017 Public Bill Committees

[Suella Fernandes]

Q Does Mr Dixon wish to comment?

Brett Dixon: Yes, I would—thank you.

In some respects, the debate has moved on from fraud and low-velocity impact. That is because of the provisions that were enacted in relation to fundamental dishonesty, which are in the civil procedure rules at rule 44.16 and in section 57 of the Criminal Justice and Courts Act 2015.

If a defendant thinks that there is fundamental dishonesty involved in a claim, they have two opportunities to challenge it. They can challenge it at the conclusion of a case, when the case is unsuccessful, and then seek their costs. They can also challenge a case if it is successful but there is a question mark over what has been claimed, and that can lead to a claimant losing all of their damages and to a cost order as well. There are sufficient drivers in the system and levers that can be pulled to discourage any type of claim like that.

It is important, though, to understand this in context. First, the most important thing is to consider proven fraud. I see in practice, from different members of our organisation, many allegations of fraud or fundamental dishonesty that are not made out when tested by the court. You only need to look at a recent Court of Appeal decision by Lord Justice Briggs in Qader & Ors v. Esure Services Limited to see that there is a developing gaming of the system by insurers to prevent people from being able to challenge those cases properly. That case was about trying to prevent a claimant from having access to the same tools to fight the allegations as a defendant has to bring them.

There was an implicit recognition from the Court of Appeal in that judgment that it is important that a person who is accused of something like that has the ability and resources to answer it. It is a serious issue for somebody accused of it and it is about what is proven fraud, rather than vague statistics of about 70,000 cases, where we are not quite sure whether it is fraud, detected fraud or suspicion of fraud and what standard that is at. It is for the judiciary to decide if that is an issue and, if it is found to be an issue, that person should be dealt with. Equally, if you are going to have access to justice and equal rights on a level playing field, they need the ability to challenge it in appropriate circumstances.

[Chris Philp (Croydon South) (Con)]

Q Welcome to our panellists this afternoon. About three years ago, my wife and I were involved in a relatively minor road traffic accident. For the year that followed that, I was phoned up on my mobile almost every week by people talking about the accident and trying to make me submit a claim for a neck injury. No matter how many times I told them that neither I nor my family had suffered any injury, they persisted in trying to incite me to commit fraud. Mr Townend, why were they doing that?

Rob Townend: I spoke a bit about it earlier: it is encouraging you to make a claim so they can access the cash. The referral fee ban that was put in LASPO obviously is not working. There are marketing fees available for people to attract you to make a claim. I agree with Mr Dixon and his earlier comment about regulation of claims management companies. Insurers and lawyers are heavily regulated; I would still like to see more regulation of the legal fraternity by the Solicitors Regulation Authority. The regulation around CMCs has been pushed back, I understand, to 2019. The referral fee ban has not worked. There is too much money still in the system and they will keep pestering. We know that. We have got a lot of examples where vulnerable customers are being contacted repetitively, like you were, until they make a claim.

[Chris Philp]

Q Am I right in saying that panel members are unanimous in their view that cold calls by CMCs should be banned?

Brett Dixon: Yes.

James Dalton: Yes.

Rob Townend: Yes.

[Chris Philp]

Q The panel is unanimous on that point.

You mentioned referral fees, Mr Townend. As you say, they were banned a few years ago. My understanding is that some organisations, including insurance companies, seek to circumvent the referral fee ban by entering into what they euphemistically term “alternative business structures”, where they essentially have some kind of equity stake in a claims management company and, effectively, get paid via their equity stake or similar arrangement, rather than an explicit referral fee. Is it the opinion of the panel that this practice, designed to circumvent the will of Parliament, is going on?

James Dalton: The referral fee ban is widely regarded as being relatively ineffective. The mechanism you have articulated is one of the ways people have chosen to get around that ban, including insurance companies and law firms, I would emphasise. That problem is addressed substantially by the reforms in this legislation, because what they do is take that money out of the system and, therefore, take out the incentive to try and circumvent a referral fee ban.

[Chris Philp]

Q Mr Dixon, do you want to add at all to that before I move on?

Brett Dixon: I will with an anecdote, more than anything else. I shared a similar experience to you where I had vehicle damage. I was not in the vehicle. It was in a supermarket car park and an older gentleman was kind enough to leave his details. I was pestered by my insurance company. I was even asked, “Are you sure you weren’t in the vehicle?” Take that on board.

If you have damage to your vehicle—your car that is insured—the first organisation that has access to knowledge that you have had an accident is the insurance company. They take referral fees for work—I am aware of that practice—and they also make a profit from referring such cases on. You only need to look at some of the reports that they make as part of the stock market requirements in relation to that.

Generally, if you take claims management companies out of the equation, you will remove one of the drivers. If you look at banning the practice of insurance companies and claims management companies referring work on, you go some way towards doing that as well. If you ban cold calls, for which the Association of Personal Injury Lawyers has been campaigning for some time, you remove the possibility of what I call the one-way bet and you are focusing then on the real problem, rather than on the genuinely injured person.

[Chris Philp]

Q Your mention of the one-way bet brings me to my next area of questioning. Take the example I experienced: had the recipient of that cold call been someone who was more open to temptation than I am and gone along with what the claims management company was suggesting, how would the claims management company have ended up making money out of an essentially bogus claim? They must be able to make money out of it, otherwise it would not be worth them soliciting the public.

Brett Dixon: It is the one-way bet analogy. If you then compound the problem by allowing an insured defendant to make an offer to somebody without seeing medical evidence, where are the checks and balances in the system? Bear in mind that a claims management company may be dealing with that, rather than a lawyer or a solicitor at that point. If you remove those two levers, those two drivers—the cold calling and the effect of a claims management company encouraging somebody to make it, and an insurance company then making pre-med offers without evidence of the actual injury—then you can deal with a lot of the problems that are inherent in the sector.

[Chris Philp]

Q Am I right in saying that under qualified one-way costs shifting, were an insurance company to take the choice to defend a claim, even if it were successful in defending that claim—if the claim was found to be without foundation—the insurance company would none the less bear both sides’ costs? Would it not further be the case that those costs would be substantially—probably by a factor of two or three—in excess of the value of the claim, and that is why for the past five, 10 or 15 years, insurance companies have simply coughed up without challenging the case? Perhaps Mr Townend might comment on that.

Rob Townend: Yes; I am one of the insurers who has been defending despite the costs.

[Chris Philp]

Q When you defend a claim and win, do you lose money?

Rob Townend: It depends on whether we then go for a costs order. We will try to if we think we will be successful in that. What is really interesting is that, in the model I operate, the only person I am paying as a result of an injury claim is the party who has been injured and their lawyer. How the CMC gets remunerated for that introduction, I do not really know. The only person I am paying cash to is the plaintiff and their lawyer.

[Chris Philp]

Q Presumably one of those two makes an onward payment to the claims management company?

Rob Townend: I do not know how it works.

[Chris Philp]

Q Mr Dixon, you practise in the area. How does the money get to the CMC—by magic?

Brett Dixon: I do not take any work from CMCs; I take the work from personal referrals. What I would like to do is to pick up on some of your questions.

[Chris Philp]

Q Before you do, you also represent the trade body representing personal injury lawyers, so you can answer in general terms. How does the money get from the claimant’s lawyers or the claimant to the CMC?

Brett Dixon: We do not recommend that any of our members interact with CMCs.

[Chris Philp]

Q I did not ask what you recommend, which I am sure is very virtuous; I asked what actually happens in practice.

Brett Dixon: I would not know what happens in practice because I don’t do it and our members are told not to do it either.

[Chris Philp]

Q They clearly do, otherwise CMCs would not exist.

Brett Dixon: We have a large membership but it is not all people who practise in the area. There may be areas where they are not APIL members where that practice goes on. To go back to your earlier point about the qualified one-way cost shifting and the effect of it, qualified one-way cost shifting was brought in to replace the after-the-event insurance policy, which was something insurance companies were making money out of.

Now, if a claim is not successful, then there are exceptions to the qualified one-way cost shifting rule. Take the example of the one-way bet, where someone has not actually had an accident. There would be two different provisions in the civil procedure rules whereby a defendant could get their costs paid. There would be fundamental dishonesty, and there would also be the fact that the claim would be struck out for being no cause of action, or an abuse of process. If there was no actual accident, then it is not a viable claim. It would be an abuse of process.

If the claim was successful, there is a provision in section 57 of the Act for them to recover in circumstances where there is a taint of fraud in relation to a fundamental, or large, part of the claim. If a defendant challenges a claim where there is evidence of fundamental dishonesty, or it is based on a one-way bet, there is a mechanism for them to be paid. It is a mechanism that is being used and, like any provision that you introduce into the civil procedure rules, the mechanism takes time for the courts to interpret and to bed in. However, there have been quite a lot of cases—at county court level, High Court level and some in the Court of Appeal—that are starting to shape how that works. The fundamental point is that, in those circumstances, there is a mechanism for a defendant to be paid for the costs they have incurred.

The final point you made was about the cost being two or three times the likely damages. If it is for a whiplash claim that is in the fast track, then that is fixed cost, so you will not get two or three times the damages. The only circumstances in which you would are if you have made a part 36 offer to the defendant and then gone on to do better than it. In other words, you offered to settle at an early stage and that offer was ignored. That is there to promote settlement between the parties and save court time.

[Chris Philp]

Q The phrase I have heard several of you use is this idea of a one-way bet. Given that it is a one-way bet, it is no surprise that the floodgates have opened in the past few years.

I would like to come on to the pre-med offer point, which is important. In clauses 64 and 65, legislation contemplates essentially banning pre-med offers where there has been a whiplash claim—a whiplash claim is defined as in clause 61. Would it not make sense, in relation to the banning of pre-med offers, to suggest that any personal injury claim in relation to a road traffic accident should involve a face-to-face medical examination, rather than just the whiplash claims, as currently drafted? Would that not be a much stronger way of ending the pre-med offer practice?

Rob Townend: From our perspective, absolutely. We would like to see a pre-med offer ban. In Aviva, we do not make any offers without a medical—again a decision we made—

[Chris Philp]

Q Are those face-to-face medicals?

Rob Townend: Yes.

[Chris Philp]

Q You are unusual in doing that, are you not?

Rob Townend: Yes, we are pretty unusual doing that. We looked at the overall system and said, “We do not want to feed it”. We wanted to make sure we have medical evidence around the settlements we make, and that we then follow through and defend those if we think the injury is not in line with either the accident—

[Chris Philp]

Q So the suggestion I just made is in line with your current practice, and it would effectively force the rest of the insurance industry to adopt the very commendable practice you are already adopting voluntarily?

Rob Townend: Yes, I think: do not pay a claim without medical evidence, whether that is a motor accident or a liability claim in the commercial courts.

[Chris Philp]

Q Mr Dixon, are you happy with that?

Brett Dixon: Very short and very simple: yes, ban it in all personal injury claims. Pre-med offers should not happen.

[Chris Philp]

Goodness me, there we are! A further usual outbreak of unanimity.

Rob Townend: There is one point to go back to. Do not end with a system with your current definition of whiplash that excludes back because, unless you do that, you will have no pre-med offers—

[Chris Philp]

Q There are two operative provisions in the Bill. One is in relation to the fixed tariff, and one is in relation to pre-med offers, and one might treat them slightly differently.

In relation to the definition of whiplash in clause 61, my colleagues have asked about this already but, having read your submission to the Committee, Mr Dalton, I think I am right in saying that you are concerned that the definition in clause 61(1) is too narrowly drawn. In particular, it excludes the back, and you are worried that there will be a sudden miraculous upsurge in people with bad lower backs.

James Dalton: Absolutely correct. I repeat the point I made earlier: getting the definition right is absolutely critical to ensuring the success of this legislation, in terms of delivering the outcome that the Government have articulated that they want to achieve. At the moment, I am concerned that by excluding back you will see a surge in back claims that are not covered by this legislation.

[Chris Philp]

Q To be clear, we have heard a figure of £1 billion a year of savings mooted in the past. If we adopt the definition as drafted, in your opinion what proportion of those estimated savings will in fact be realised?

James Dalton: I think you said earlier that Aviva’s figures suggest that 60% of the claims are probably going to be excluded, so take away 60% of £1 billion.

[Chris Philp]

Q The final question I would like to ask is about a matter I understand might be introduced into the Bill at a later date, which is to do with the discount rate used when paying claims for long-term injuries. It has recently been amended by the Lord Chancellor from, I think, 2.5% down to minus 0.75%. I would like to close by giving each of the panellists an opportunity to comment on that move and the impact it may have on the wider public.

James Dalton: The decision to reduce the discount rate by 325 basis points has imposed substantial costs on the insurance industry. By “substantial”, I mean to the tune of about £6 billion. That is about 60% of the annual claims cost of motor claims. That cost simply cannot be absorbed; it must be passed on to consumers. Premiums will inevitably rise as a result.

A number of firms have indicated in the public domain that that is the case. The Government need to put out the consultation they said they would produce so people can address the principles underpinning how a rate is set. At the moment, it is linked to Government bonds. No one goes and buys Government bonds. It makes assumptions that 100% of a claimant’s damages are invested in one asset class. No rational investor would do that. So the fundamental underpinnings of how the discount rate are set are fundamentally wrong, and we need to address that.

[Chris Philp]

Q In the absence of any change, what is your assessment of the percentage impact on the average car insurance premium in this country?

James Dalton: It will go up significantly. I think the impact on young drivers is going to be particularly bad, because those are the customers who are most likely to have catastrophic injuries. It is estimated that their premiums could increase by £1,000.

Rob Townend: I will not say a lot that differs from what Mr Dalton has said. We have got to sort out the methodology for setting out the discount rate, because I think nobody would say that it fits the current world, either from an investment return point of view or from the point of view of looking after those who are seriously injured.

The fact that there are so many variations of the potential solution that the Lord Chancellor could have chosen tells you that the mechanism does not work. At the moment, while the consultation is happening, there is a world of uncertainty around what will happen in the future. I think it is in everybody’s interest to get clarity around a longer-term rate that can be as formulaic as possible and looks after the long-term interests of those who are seriously injured while looking at the longer-term investment returns that lump-sum payments can achieve. We just plead that the consultation is got on with quickly. We would love to see the piece of legislation that it could be put into.

Brett Dixon: It is important to understand that you are dealing with issues at two ends of a different spectrum. You are talking about a whiplash claim, and in the same breath, in terms of the discount rate, you are talking about the catastrophically injured person. The important point in relation to that is that, first, the insurers have known for some time that this change was coming. It was long overdue. For a number of years they have made provisions in their own accounts for this, so to suggest that this has come like a bolt out of the blue is disingenuous.

Secondly, the changes are to ensure that a seriously injured person has sufficient moneys available to make provision for their future needs because of somebody’s negligent act. A lot of it is about care. If you are not making sure the person who did the damage is paying via their insurance policy, it will be the NHS and the taxpayer who ultimately have to foot the bill to look after that seriously injured person. What you will not change by changing the mechanism for the discount rate is the fact that that person is seriously injured and needs that care. It is right for society that the person who did the damage should foot the bill, not the taxpayer.

Insurers knew this was coming. I hear a lot of talk about how you cannot buy Government gilts. Because of the mechanism chosen in the Damages Act 1996, the person who is investing their money does so on the basis that they are taking a no-risk investment. That is why that is there. There are no other no-risk investments available. If you want a judge to calculate damages, he has to have a methodology and a starting point.

James Dalton: No one is arguing about whether these claimants need the support that an insurance company is going to provide. No one is saying that these people should get less money. What we are saying is that the formula for setting the rate, which is now 20 years old, needs to be updated to take into account the fact that it is linked to Government bonds and assumes 100% compensation. These things do not just happen in practice.

[Sir Oliver Heald]

Q I do not know if Mr Dixon and Mr Dalton would agree that the Lord Chancellor has had to exercise her duty in a quasi-judicial way under the existing mechanism as it stands. It is right for this to be a consultation about the future, but that was the law. Do you agree?

Brett Dixon: I agree entirely. The Lord Chancellor made the decision that she was legally required to make. She was exercising a quasi-judicial function when we made the reforms, introduced the Supreme Court and made other changes. That role was retained by the Lord Chancellor, even though setting damages is properly a judicial function.

James Dalton: I do not agree. The Government undertook consultation exercises in 2012 and 2013 specifically asking questions around whether the regulatory framework for setting the discount rate was right. Indeed, there is going to be a consultation now asking similar questions. To me, that suggests that the Government do not think that the framework is right. In that context, it also suggests that the decision that the Lord Chancellor has decided to take, based on legal advice, is questionable. I do not think that the way that she has taken that decision is right.

Prisons and Courts Bill (Third sitting)

Chris Philp Excerpts

Committee Debate: 3rd Sitting: House of Commons
Wednesday 29th March 2017 Public Bill Committees

[Mr Gyimah]

The amendment is about a duty for the Secretary of State to co-operate with other agencies and bodies whose functions are relevant to the purpose outlined in the Bill. There are already well-established ways of working between governors and different agencies and bodies, some with their own pre-existing legislation. For example, the multi-agency public protection arrangements provide a process through which the police, probation and prison services work together with other agencies to manage the risks posed by violent and sexual offenders living in the community, in order best to protect the public. Probation is one of the represented bodies, along with the police, local authorities, fire and rescue authorities and health, represented on community safety partnerships, which were set up under the Crime and Disorder Act 1998. The responsible authorities work together to protect their local communities from crime and help people feel safer.

[Chris Philp (Croydon South) (Con)]

Will the Minister confirm whether the Prison Service also works closely with the Home Office to ensure that we act quickly to deport foreign national offenders at the end of their sentences?

[Mr Gyimah]

I assure my hon. Friend that we work closely with the Home Office, which is ultimately responsible for deportation. The Prison Service has to facilitate its work in prisons. There is a lead Ministers group, including Ministers from the Home Office, the Foreign Office and the Department for International Development, which meets regularly to discuss all the issues about moving foreign national offenders under various schemes.

New legislation is not needed to ensure that co-operation between governors and other agencies and bodies continues; governors do that on a daily basis to ensure that different services, from education and employment to healthcare, are carried out. That can be seen in the relationships with employers, such as Timpson and Halfords, which run academies within prison to train offenders for employment on release, and in formal arrangements with NHS England to ensure that prisoners have access to the healthcare they need. We are introducing new performance measures to hold governors to account for their performance in a wide range of areas, including education and housing, and we expect governors to work closely with other agencies and bodies to do that.

The hon. Member for Bolton South East mentioned probation and, in particular, the community rehabilitation companies. I assure her that we are going through a probation system review and will publish the results shortly. That will deal with some of the challenges she outlined. Furthermore, the National Probation Service—as opposed to the community rehabilitation companies—is already covered by Her Majesty’s Prison and Probation Service, so the amendment would have the effect of creating a duty for the Secretary of State to co-operate with herself. We already have a formal contract with CRCs, so it would be unnecessary to create an additional duty to co-operate. I therefore urge the hon. Lady to withdraw the amendment.