Civil Liability Bill [HL]

Lord Beecham Excerpts

2nd reading (Hansard): House of Lords
Tuesday 24th April 2018 Lords Chamber

[Lord Beecham (Lab)]

My Lords, I begin by referring to my interest as an unpaid consultant with my former solicitors’ firm, and to a paternal interest, inasmuch as my daughter is a barrister and a part-time deputy district judge.

This Bill, as the noble and learned Lord has reminded us, covers two discrete areas of personal injury law: claims for damages for whiplash injuries, and the way compensation for financial loss in serious injury claims, by way of lump sums, is to be calculated. The former is, in effect, a response to exaggerated claims. Exaggeration is, however, not confined—as the media, the insurance industry and the Government would have us believe—to claimants and their advisers. A small number of insurance companies, operating under a variety of labels in the market, constantly claim that the number and cost of damages claims for whiplash injuries is rising, with a consequential impact on premiums, which would otherwise be lower.

We are all familiar with the benevolent intentions of the industry and its heartfelt aspiration to reduce premiums. A degree of scepticism about the industry’s case, is, however, justified. In his seminal report, Common Sense, Common Safety, the noble Lord, Lord Young of Graffham, who it was a pleasure to see in the House yesterday, declared:

“The problem of the compensation culture prevalent in society today is, however, one of perception rather than reality”.


Road traffic accident claims have fallen by 14% since 2013 and by 10% in the past year, while last year the number of claims relative to the number of vehicles on the road was the lowest since 2008. Interestingly, the latest data published—just today—by the Compensation Recovery Unit records a fall in the number of motor cases registered to the unit from 780,000 in 2016-17 to 650,000 in 2017-18. The numbers between 2010-11 and 2017-18 ranged from 828,000 to 761,000. Settlements recorded by the CRU were, at 683,000, the lowest since 2011. Moreover, the cost of such claims in the UK is in the lower half of the European league table of such costs.

There is a legitimate concern, to which the noble and learned Lord has referred, about the activities of claims management companies—and indeed of “McKenzie friends”, a growing feature in the courts these days in this and other areas—about which little or no action has so far been taken, either by the Government, or, in relation to connections between solicitors’ firms and such companies by the Law Society, which I find somewhat deplorable.

In any event, in practice the proposals will impose a tariff system for compensation for pain and discomfort ranging from £235 for up to three months to £3,910 for 18 to 24 months—respectively 76% and 49% less than the guidelines prescribed by the Judicial College. Crucially, the system is entirely based on the timescale, and not the severity, of the pain and suffering endured. These replace, for road traffic cases, payments which the MoJ—without adducing any evidence—regards as “out of all proportion” to the level of injury suffered. Having said that, I welcome the provision that no case should be settled without a medical report.

Someone suffering a comparable injury sustained otherwise than from a road traffic accident—for example, a workplace accident—with effects lasting two years, could recover £3,000 more in damages and the costs of the claim, which, in RTA cases, would in future have to be paid out of the damages and not by the defendant.

Some noble Lords may be aware that a few weeks ago I sustained an injury, which left me with a colourful presentation around my eye, when I was thrown to the floor in a Tube train that made a violent, sudden halt. It was not a soft-tissue injury but if it had been—I suppose it could have been in those circumstances—any claim would not have been affected by the provisions of the Bill, whereas it would if I had been a passenger in a road vehicle. Some friends of mine recently experienced precisely that kind of accident. The question arises: why should comparable injuries not attract comparable awards, and comparable recovery of the cost of a claim, whether they are incurred in a road traffic accident or any other accident for which a defendant is deemed liable?

There are, moreover, serious questions to be asked not just about the scale of damages deemed recoverable but about how the level of damages is to be determined and by whom. The 22nd report of the Delegated Powers Committee asks some salient questions and makes some powerful comments on the way the Government are proceeding. It poses what it describes as two central questions:

“What is meant by ‘whiplash injury’?”,


and:

“By how much are awards of damages to be reduced?”.


The answer it divines is:

“‘Whiplash injury’ means whatever the Lord Chancellor says it will mean, in regulations to be made by him or her at some future date”,


with “a full definition” emerging once the Bill is enacted and not before. It also observes:

“Given the complex physical and psychological components of whiplash injury, it is not satisfactory that these matters should be left to regulations rather than being subject to a rigorous debate in Parliament”—


a refrain all too frequently heard in this House in relation to secondary legislation. As to the second question, about the quantum of damages, the committee points out that the reduction,

“will be whatever the Lord Chancellor says it will be, in regulations to be made … at some future date”.

The Government pray in aid the need for what they say is,

“flexibility ... to reflect possible changes in society’s perception of the value of”,

pain, suffering and loss awards over time and a possible need,

“to change the parameters of the categories of the tariff to adjust or refine the approach to different severities of injury should this become necessary in future and in the light of experience over time”.

Those are two possible candidates, I suggest, for the Nobel Prize for vacuity. Unsurprisingly, the committee was less than impressed by these responses and in five sub-paragraphs it demolished the Government’s position, pointing out that the need for possible updating figures or mechanisms does not justify a failure to include them initially in primary legislation.

Rather than relying yet again on unamendable statutory instruments, Acts of Parliament are to be preferred for this, and for quantifying damages, and are equally preferable where,

“society’s perception of the value of”,

pain, suffering and loss claims changes over time. Equally, it said:

“The need to refine the tariff in relation to different severities of injury”,


can be accommodated by a new Act.

Crucially, the committee avers that the judiciary, with its long experience of personal injury claims, should determine the provision for damages or, failing that, responsibility should be undertaken by independent medical experts. Its emphatic conclusion is that,

“it would be an inappropriate delegation of power for damages for whiplash injury to be set in a tariff made by Ministerial regulations rather than on the face of the Bill”,

and that the initial tariff,

“should be set out on the face of the Bill, albeit amendable by affirmative statutory instrument”,

in the future, following further recommendations by the judiciary or an expert panel. This of course echoes repeated expressions of concern about the use, and indeed abuse, of delegated legislation, with the limited opportunities afforded to persuade Governments to think again and respond to concerns expressed in either House. Will Ministers delegate the decision on this critical issue, as suggested by the committee, albeit subjecting any recommendations for approval under the affirmative procedure? My suggestion would be that the decision should be made by an advisory panel or the judiciary. Then, if we are proceeding by the secondary legislation procedure, the Lord Chancellor should embody that recommendation in an affirmative order.

Much is being made of promises made by the insurance companies that savings will be passed on to their customers. Indeed, the Minister has repeated that today. Can he say what estimate of such savings has been made over time and what is their current level? How will we ensure that the industry delivers on the promise, and in what form? The Minister has said that it will, but how will that be ensured? Can he also tell us how much the Government have raised in the form of insurance premium tax since the standard rate rose from 5% in January 2011 to 12% in 2017, and for the higher rate from 17% to 20% in the same period? I recall once suggesting a small percentage increase in insurance premium tax some years ago to fund a reduction in the savage cuts to legal aid made by the coalition Government, but that, unsurprisingly, never materialised. The Minister may not have those figures to hand, but it would be interesting to see them in due course.

There is real concern about the pending increase in the small claims level, which, apart from the £5,000 limit chosen for whiplash claims—however loosely defined— will now be set at £2,000 by the Lord Chancellor. Below that figure, noble Lords will be aware that costs are not awarded. This is significantly higher than would be the case if the existing level was increased to reflect inflation. I have seen two suggested figures for that: £1,400 and £1,600, but these are still significantly lower than the £2,000 now prescribed. If we are to retain the system, should it not be on the basis of RPI or CPI, reviewed every three years as a matter of course? Interestingly, I understand that Scotland has chosen not to apply its version of the small claims regime, known as the simple procedure, to personal injury claims up to £5,000 such that, successful parties in these cases, described as “summary causes”, can recover their costs. Given the Minister’s role as Lord Advocate and his deserved reputation as one of the most eminent Scottish lawyers, would he encourage the Lord Chancellor to look again at the small claims limits?

In light of the current impossibility of successful claimants claiming costs or obtaining legal aid, has the Ministry of Justice made or received any assessment of the impact on the court system of more unrepresented claimants in this area of the law? There is existing concern, which has been voiced several times in your Lordships’ House and elsewhere.

Finally, in relation to this part of the Bill, I revert to the issue of claims management companies: a parasitic growth in our justice system, seemingly able to pursue potential clients via cold calling and seek disproportionately large fees out of the modest damages recovered. I understand that the Government are looking at this matter, but can the Minister indicate how this unacceptable approach might be curbed?

Part 2 of the Bill deals with the discount rate, which is, as the Minister explained, the rate used to calculate the level of damages to be awarded in the most serious cases, having regard to investment returns and inflation. We are looking here at cases of very serious injuries with life-changing consequences that might last a very long time. The Government are proposing a change from very low-risk investments to low-risk as the basis for calculating compensation. It is, however, inherently difficult to predict what future loss or cost of care or treatment would be occasioned in such cases. Greater reliance on periodical payment orders, to which the Minister referred, would help. Can he update us on government thinking on this aspect and how they might be promoted? His evidence to the Justice Committee implied support for this approach, and that is welcome.

The NHS is in a curious position on the issue of damages. Treatment in such cases can be expensive and the NHS must be compensated for costs incurred where the damage is inflicted by a third party, but sometimes the NHS is the defendant, as in clinical negligence cases, but also potentially in other cases, where the negligence is not related to clinical error. Accidents can take place on NHS premises, for which the NHS is liable.

It is in all our interests that the NHS should not see its resources reduced by the requirement to pay large sums to unfortunate patients who have suffered from clinical negligence. However, surely such compensation payments should be funded out of general taxation rather than being avoided by requiring the victims of clinical negligence to take greater risks in investing the proceeds of damages. We surely all agree that the NHS should be protected but the question is: by what method? My submission is that the method that the Government are proposing will ultimately perhaps be at the expense of the people who have been injured rather than of the community collectively, and I invite the Government to think again about that aspect.

The House will wish to give careful consideration to the changes proposed in the Bill. I trust that in doing so we will put the interests of the victims of negligence at the top of our deliberations, but also that we will ensure that crucial decisions are made not by ministerial fiat but with the full involvement of the judiciary and are subject to proper parliamentary scrutiny.

Civil Liability Bill [HL]

Lord Beecham Excerpts

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

[Lord Beecham (Lab)]

I must apologise to the noble Lord for delaying his expectations slightly, and declare my interest as an unpaid consultant in my old firm of solicitors.

It is clear that we must have a proper definition. It is equally clear that the definition ought to be provided by a medical source. The groupings of this rather long day are such that the recommendation that I shall be making in the next group is relevant to this first group, in that the responsibility for defining a whiplash injury should be on the Chief Medical Officer and the definition incorporated into primary or secondary legislation. That takes the decision away from politicians. I disagree with the noble Lord—I do not think that the definition should be a political decision: it should emanate from the medical profession and be embodied in legislation. An amendment to that effect on Report would perhaps be helpful.

It is clear that there are problems; nobody denies that. There is an argument about the extent to which the current system is being abused, but any abuse is unacceptable and reflects on innocent people who have suffered genuine injury. Their cases need to be dealt with properly. So there has to be change. However, with due respect to those who tabled these amendments, who may well have drawn on medical advice, we should at some point incorporate a requirement for that medical advice to emanate from a medical source—I have suggested the Chief Medical Officer but it could be another source—rather than be determined by politicians.

[Lord Faulks]

The term “whiplash” is pretty loose. What is the noble Lord inviting medical experts to do to interpret a term that is not really medical?

[Lord Beecham]

There surely has to be a medical definition—and where better to get it from? The medical profession deals with injuries that are labelled “whiplash injuries”. There may be some argument about the definition, but surely it can be decided only on the basis of medical skills.

[Lord Mackay of Clashfern (Con)]

My Lords, I thoroughly agree with the proposition that is highly desirable for the definition used as the basis for later provisions in this part of the Bill to be on the face of the Bill. The difficulty I have had so far is in identifying what we want to do. It is the area of exaggerated claims, or something of that sort, that underlies the Government’s proposals. I agree that it must be, ultimately, a medical definition, because a medical report saying that you have this injury is an essential requirement for you to come under this part of the Bill.

The difficulty, however, is that the doctors have to know where these exaggerations take place. I have been instructed by people who suggest that if you go for the back, and the rest, you are extending the thing beyond the real position. I have, therefore, some sympathy with the amendment restricting that, which I think is to be moved or spoken to later. I do not, however, profess to know exactly what the problem is, in the sense of the area of medical expertise that is being used by the claimant industry to exaggerate claims. That is their idea: to exaggerate these claims and ask for more than they are worth. As I said at Second Reading, I have some experience long past of the difficulty of actually quantifying the correct amount for these injuries, particularly if they are serious—and they can be quite serious, I think. This is my problem and I would be glad of help when the Minister comes to speak.

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Moved by

[Lord Beecham]

4: Clause 1, page 1, line 6, leave out “, back or shoulder”

[Lord Beecham]

My Lords, I shall speak to the amendments in my name. I have already effectively, I hope, spoken to Amendment 5. Amendment 4 is a probing amendment that seeks to alter the definition of a whiplash injury to confine it to neck injuries. I accept the point that the noble and learned Lord, Lord Mackay, made about the precise definition, and also the fact that I am effectively in the position that I was questioning before, of not having the medical authority to give a prescription. That underlines the need for independent medical advice as to what constitutes the kind of injury that needs to be covered.

Amendment 5, to which I referred before, would require the definition to be provided by the Chief Medical Officer. There may be other professional sources that would be as effective, but the independence and status of the Chief Medical Officer strikes me as highly relevant.

The other amendments in this group to which I will refer are, particularly, Amendments 8 and 10, which suggest a new tariff for 12 months rather than the two years in the Bill. I understand that the vast majority of cases are within that one-year period, so to extend it to two years seems somewhat invidious, given that there has to be proof of the effect of the accident. Two years is a long time to be subjected to, for what would be a pretty minimal level of compensation provided for in the tariff. I hope that that would improve the Bill somewhat.

In relation to Amendment 9, sub-paragraph (ii) seems superfluous because it requires the claimant to have mitigated the damage suffered, but in common law the plaintiff has to demonstrate that he has done precisely that. Sub-paragraph (ii) does not seem to add anything to the current legal position and, for that reason, it should be removed.

Amendments 15 to 20 are in this group. They would remove references to psychological injury from Clauses 2 and 3. That is a matter which we feel should be dealt with in the ordinary way. I beg to move.

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[Lord Faulks]

I am grateful for that intervention. My point is that if someone has been genuinely injured, whether in the course of employment or not in the course of employment, they are entitled to make a claim, and nothing should preclude that, regardless of whether they receive a message in the current form or in an amended form. It seems to me that it would be inappropriate to make a distinction between the circumstances in which you may or may not suffer a whiplash injury. My point was simply that if there is an amendment to the law, those seeking to encourage not the genuine claimants—of which there are certainly some—but those who are not genuine may revise their message to take into account the revision that we make in the law. Of course I am not against genuine claims. On the amendment tabled by the noble Earl, Lord Kinnoull, and my noble friend Lord Hodgson, although I understand the disaggregation that lies at the heart of their amendment, I am not for the moment persuaded that this is not a matter that is catered for under Clause 2(3) and (4). I shall listen with interest to what my noble and learned friend says.

[Lord Beecham]

Perhaps I may invite the noble Lord to refer to the provisions that refer to MedCo. He talked about doctors’ reports as if they could be made by rather unscrupulous doctors at the behest of a client. Would not use of the MedCo system pretty well ensure that the reports would be valid and authentic?

[Lord Faulks]

The MedCo system has contributed very considerably to the improvement in the standards of medical reporting. For those of your Lordships who are not familiar with it, it was a system to prevent what was undoubtedly an abuse of the system by some doctors, to allow the random allocation of medical experts to deal with whiplash injuries. It is certainly an improvement. My point is that there is still a risk in certain cases of there not being reliable medical evidence.

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[Lord Keen of Elie]

I am grateful for the noble and learned Lord’s assistance. In the past his interventions have not always been of assistance, but they certainly are on this occasion. I would go further and suggest that it would make no more sense to exempt people who were driving red cars at the time of the accident. It is a distinction without a difference; it is as simple as that. That is why we do not consider this to be a helpful line of inquiry, and it is not one that we intend to pursue further.

With regard to the other amendments that were spoken to in this group, I have endeavoured to address the points made. I acknowledge the point made by the noble Earl, Lord Kinnoull, and indeed by the noble Lord, Lord Trevethin and Oaksey, about the potential for anomalies where someone suffers a whiplash injury and other forms of injury as a result of the same accident. That is there, and there is no obvious answer to that. Nevertheless, the Bill is structured with the intention of addressing the vice we are really concerned with here and which is generally acknowledged to exist. In these circumstances, I invite noble Lords not to press their amendments.

[Lord Beecham]

My Lords, I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

Civil Liability Bill [HL]

Lord Beecham Excerpts

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

[Lord Marks of Henley-on-Thames]

Of course I accept that. It is a question of whether the cost in unfairness is worth paying. It is a dilemma that the noble Lord himself correctly outlined in his speech. We are simply saying that we ought to try every other avenue before trying this drastic avenue of introducing an unfair system for genuine claimants. I will see if I can get beyond the next couple of sentences.

My point about the £225 and £450 figures is that they represent a cliff edge. They compare to £1,800, which is the expected award set out in the Government’s impact statement for such injuries of less than three months’ duration to date. The Government’s response to the outcry that these damages are so low has not been to meet the outcry at all but to reduce them from £235 to £225 and from £470 to £450.

One of our problems with the present proposals is that there is no evidence base for a recent increase in the number of fraudulent claims. We entirely accept the case that the noble and learned Lord, Lord Keen, made both at Second Reading and today that there is a wide prevalence of fraudulent claims that we have to tackle. However, there is not a wide base of evidence for an increase in such claims, nor is there sufficient evidence of how many claims are fraudulent or genuine. There is certainly no evidence that only the fraudulent claims would be deterred and that the genuine claims would continue. That worries me seriously, because the noble and learned Lord suggested earlier today that a genuine claimant might continue whereas a fraudulent one might be deterred. We simply do not accept that. It is just as likely—and I say this also without an evidence base—that genuine claimants would be deterred because the amount at stake had become so low, even though they had a fair claim.

We entirely agree with the Government that the proposal for compulsory medical reports discriminates between genuine and fraudulent claimants. I repeat my declaration at Second Reading that I have just concluded some litigation about compulsory medical reports and the operation of the pre-action protocol. However, there is no corresponding evidence of discrimination in the case of these drastic cuts in damages, which we say are unjust, unfair and fail to give fair compensation to genuine claimants. They discriminate unfairly between injuries sustained in road traffic accidents by drivers and passengers in motor vehicles and those sustained in such accidents by cyclists and pedestrians. Who would receive the traditional level of damages? Passengers and motorists would not, even in genuine cases. They discriminate unfairly between accidents which are covered by the Bill and accidents at work or accidents caused by, for instance, a council’s negligence. Those can also be a source of fraudulent claims.

If the Government are determined to have a tariff, we are worried about the cliff edge. I see no fundamental reason in principle against a tariff; it is a question of weighing the advantages of certainty outlined by the noble and learned Lord against the fact that you have a cliff edge where those cases that are very close to the three-month level produce very large discrepancies in damages. If we are to have a tariff, let it at least be one that does not penalise genuine claimants by allowing them an award that is far too low. That is the basis for our alternative Amendments 13 and 96. We do not put them forward as a preferred option, but they are more acceptable than the Government’s proposals.

[Lord Beecham (Lab)]

My Lords, I concur with the views expressed and proposals made by the noble Lords, Lord Sharkey and Lord Marks. They are absolutely on the right track, although I do not agree with the provision for the Judicial College guidelines to be taken into account. It will be seen that in the next group, we have an alternative proposal suggesting that the Civil Justice Council should be involved in making the decisions.

In this group, however, there is an amendment in my name and that of my noble friend Lord McKenzie which would restore a degree of discretion for the court to uplift the amount of damages payable where it deems it just to do so in all the circumstances of the case. That would revive the role of the judiciary in assessing damages, at least to some extent, where it felt that the scale proffered under the legislation was inadequate—as noble Lords have already made clear, that seems likely in many cases.

I broadly support the amendments of the noble Lord, Lord Sharkey and Lord Marks, and will revert to one aspect to which I referred in the next group.

[Lord Keen of Elie]

My Lords, I am grateful for the contributions that have been made. It respectfully appears to me that the points made by the noble Lords, Lord Sharkey and Lord Marks, materially bolstered the approach that the Government take in the Bill. Why do I say that? Because it is quite clear that we are addressing a matter of policy and have to do so as such. What ultimately has to be taken here is a political decision, not a judicial determination.

In fairness, I think it was a slip from the noble Lord, Lord Sharkey, but when he talked about the question of whether claims are genuine or not reasonable, he said that it was unquantifiable—and then corrected himself to unquantified. The former is more accurate than the latter.

Let us be clear. More than 80% of road traffic injuries are allegedly whiplash-induced injuries. The vast majority of all personal injury claims are whiplash claims. Over 10 years, the number of whiplash claims has rocketed—yes, it has stabilised a little in the past year or two, but it has still rocketed. At the same time, the number of road traffic accidents reported has dropped by 40%. At the same time, the number of vehicles classified by Thatcham as safe from the perspective of seating and headrests has increased from 18% to 80%.

As some people have said, an industry is going on. As others have suggested, there is a racket. We have a claims culture that has built up—I attribute no blame to any one party; all sides involved have contributed in one way or another to the ballooning of the claims culture. The time has come—indeed, the time may be almost past—when we need to address it as a political issue.

The noble Lord, Lord Sharkey, suggested that somehow we were making a transfer from claimants to motorists. With great respect, a very large proportion of claimants are motorists, so it is not as simple and straightforward as that. Secondly, he talked about the transfer requiring to be justified. The transfer is a consequence of the policy decision we are making to deal with the industry, the claims culture; it is not the purpose of it. It is, as I say, the consequence.

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Moved by

[Lord Beecham]

12: Clause 2, page 2, line 35, leave out “specified” and insert “recommended annually by the Civil Justice Council and set out”

[Lord Beecham]

My Lords, this amendment and Amendment 29 set an alternative method for recommending a tariff, not via the Judicial College but via the Civil Justice Council, and it is suggested that this should be done on an annual basis. The Civil Justice Council is a body established by the Civil Procedure Act 1997, and it acts as an advisory body to the Lord Chancellor, who must then set out the recommended tariff under this amendment, in regulations. That is the substance of Amendment 12.

Amendment 29 makes the necessary changes to the Civil Procedure Act, which then empower the Civil Justice Council to include recommendations on the whiplash injuries damages tariff. In my submission, that is a better way of dealing with matters than either the Lord Chancellor doing it on a political basis or leaving it to the Judicial College. I understand the reservations about them. This is a better way of dealing with the situation, and I commend it to the House. I beg to move.

[Lord Bassam of Brighton (Lab)]

My Lords, I have Amendment 14 in this group. Much of this ground was covered in the earlier debate, and I anticipate the Minister’s response in that light. I take the point made by my noble friend Lord Beecham that we perhaps need to find another route on this issue, and in a sense that is what Amendment 14 does. It seeks to place a duty on the Lord Chancellor to consult the Lord Chief Justice and obtain the agreement of the Judicial College on the proposed amount for tariffs, before making regulations to set damages tariffs for whiplash.

The Delegated Powers and Regulatory Reform Committee of your Lordships’ House recommended that it is the judiciary, with its experience of personal injury claims, that should determine the provisions for damages or, failing that, the responsibility should be undertaken by independent medical experts. Noble Lords have referred to medical experts in earlier debates and recognise their value. I know that many would prefer the Government to abandon their plan to discard the use of the Judicial College guidelines for general damages claims, but there is value in the current guidance. This is a probing amendment, along with others, to find a way of enabling consultation and constraining the absolute power currently set out for the Lord Chancellor.

One of the worries that feeds this is that genuine cases may be dealt with in a way that leads to undercompensation. We do not know what the scale of the problem is, because the Government have not produced statistics on what they believe to be the level of genuine or, for that matter, fraudulent claiming. While that remains the case, we must surely protect those who have genuinely suffered and need to make a claim for good reasons.

It is worth reminding ourselves that the Bar Council recommended that the Lord Chancellor should be required to have regard to decided cases. That seems a reasonable approach. If the Lord Chancellor is required to consult the Lord Chief Justice before making regulations on the uplift in exceptional circumstances, what justification can there be for him not to consult the Lord Chief Justice on the tariff amounts generally? It may be that, with its experience, the Judicial College guidelines would be an appropriate starting point and basis for consultation.

We recognise the power of the Government’s argument generally to change and make reforms, but it is also important to recognise the value of the judiciary’s knowledge in this field and the importance of consulting it in setting tariffs. After all, it has the experience.

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[Lord Keen of Elie]

My Lords, I was rather hoping that my noble friend was going to explain the tariff, but that may be for another day.

If I respond shortly, it is not because I dismiss the importance of the amendments that have been moved but because I have already sought to set out the Government’s approach to the tariff, and I hope that will be appreciated. However, I understand the purpose of these probing amendments, in particular the amendment spoken to by the noble Lord, Lord Bassam, which reflects some recommendations from the Bar Council. I will add two short points.

First, as I mentioned before, we allow for the 20% uplift for exceptional circumstances to be placed in the hands of the judiciary. Secondly, in setting the tariff, the Lord Chancellor is going to consult widely and take into account the views of a wide spectrum of interested parties in order to arrive at what is considered, for policy purposes, to be the appropriate levels, both now and in the future. However, we do not consider that it is appropriate to formalise any part of that consultation, for example by reference to consulting the Lord Chief Justice.

I have heard what has been said; it is essentially a development of the previous group of amendments. I appreciate why these additional amendments have been moved, but invite noble Lords to withdraw.

[Lord Beecham]

My Lords, I beg leave to withdraw the amendment.

Amendment 12 withdrawn.

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[Lord Hodgson of Astley Abbotts]

My Lords, at this stage in proceedings on the Bill most of the ground has been pretty extensively ploughed, and I shall endeavour not to till it longer than I have to. We had a long discussion about the setting of the rate on the group taken with Amendment 11, and the noble Lord, Lord Beecham, got even closer to the matters I have in mind with his Amendment 38. However, Amendment 35 is concerned with the provisions of Clause 3, which, as the title suggests, permits uplift in exceptional circumstances.

The question I wish to discuss is whether there should be any limit on the amount by which these exceptional awards can exceed the basic tariff, and if so, whether that limit should be in the Bill. I think there is a strong argument for limiting the exceptional awards, and for putting that into the Bill; the noble Lord, Lord Marks of Henley-on-Thames, was kind enough to take my intervention in an earlier debate. I wish to see judicial discretion limited because I think this is a political matter, not a matter for judicial discussion and discretion. Therefore the limit should appear in the Bill—as a percentage, not as an absolute amount, because if the tariff goes up, obviously the amount of an exceptional award should also eventually increase.

My noble and learned friend referred to this matter in the letter he sent to those of us who participated in the Second Reading debate about the need for a degree of judicial discretion. He suggested that the uplift should be capped at 20% and he has already referred to that this afternoon. I do not disagree with any aspect of his remarks, except that I think it is important that the percentage should appear in the Bill. This is in the interests of stability and clarity—stability because if the exceptional amount could be increased by the court without limit the temptation for claimants to game the system would be greatly increased, and clarity because such a limit would facilitate the setting of the rates of motor insurance and reduce the volatility in the amount of such rates year by year. That is an important distinction to remove absolute discretion from the courts, to bring it into the political arena and to set that percentage in the Bill so it is clearly a political, parliamentary decision. I beg to move.

[Lord Beecham]

My Lords, I am a little concerned at the degree to which political considerations are supposed override our system of justice. This is not the first time it has been mentioned. However, the latest case is perhaps the least acceptable of the recommendations of this kind. Why on earth should Parliament decide on the so-called exceptional circumstances—undefined, of course, for the purposes this debate—on what are already constrained sums to be awarded in damages? It is trespassing too much on the rights of the citizen and the role of the judiciary. I hope that the Minister will concur with that, given his enormous experience of these matters, and, I apprehend, a real interest in justice being effective and available. With all due respect, the amendment moved by the noble Lord undermines both.

[Lord Keen of Elie]

My Lords, I am obliged to my noble friend Lord Hodgson for his amendment. I understand the intent when we are seeking to address a very particular problem. However, I cannot concur with the proposal that we should set in the Bill some limit to the judicial discretion that will be exercised in exceptional circumstances. We have yet to see how exceptional circumstances will develop once the Bill comes into effect. We therefore consider it more appropriate that the percentage increase in tariff should be determined by regulation by the Lord Chancellor in order that he may, from time to time, have regard to developments once the Act is in force. We do not consider it appropriate to constrain that exercise by setting a ceiling in the Bill. For these reasons, I invite my noble friend to withdraw his amendment.

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Moved by

[Lord Beecham]

39: Clause 4, page 4, line 27, after “injury” insert “provided by an accredited medical expert selected via the MedCo Portal”

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[Lord Beecham]

My Lords, the amendments in this group pray in aid, as it were, for the work of MedCo, a body set up by the Government, I believe in 2015, to facilitate the sourcing of medical reports on injuries of the kind that we are debating under the terms of the Bill. The Ministry of Justice produced a pre-action protocol for what it calls low-value personal injury claims in road traffic accidents. Before that, there was no system at all to effectively source reports, and apparently a practice was developing of some claimant representatives—not necessarily solicitors—and insurers using what are described as “tame” doctors to produce medical reports for the purposes of securing compensation.

The Government set up the MedCo organisation to provide claimants with access to independent medical reporting facilities from reputable sources, which are themselves subject to regulation and control by the MedCo board. Apparently MedCo had a bit of an uneasy period in its early days and there have been a number of reviews, but the principle remains valid. I understand that it is now working better and that there is no channelling of medical reports to, as it were, sympathetic doctors who might be relied on to back up claims that are less than valid. To that extent, the Government’s original idea has proved right.

In relation to the Bill, it appears that there will be a necessity to reconstruct the portal so that litigants in person can access and use the portal themselves. Therefore, it is all the more necessary to ensure that the MedCo system is available and as user-friendly as possible. I hope that the Minister will acknowledge that I am taking the unusual stance of having supported a decision made by the Government some time ago and seeking that it should continue to flourish. I look forward to his acknowledging that this is a good way of serving justice for both sides in such cases, by having thoroughly professional, independent people providing the necessary political evidence, not being paid for a particular kind of evidence—which one suspects can happen and perhaps has happened hitherto, producing some decisions that were, frankly, unjustified. I hope that the noble and learned Lord will build on the position created originally in 2015 by the Government and ensure that it remains applicable and useful under the new regime being developed.

[Lord Keen of Elie]

My Lords—

--- Later in debate ---

[Lord Keen of Elie]

I quite understand the noble Lord’s concern, and I would be willing to consider any further amendment that he puts forward on this in due course. At this stage, I invite the noble Lord to withdraw the amendment.

[Lord Beecham]

I am obliged to the Minister for his invitation, which I will certainly take up. The intention of the amendments is to fill out, as it were, the provisions in Clause 4 relating to regulations to be made by the Lord Chancellor about the appropriate evidence of an injury for the purposes of this clause. It may be that both of us are replicating something that already exists, but we can have a look at it and I am sure it is a matter on which we can reach agreement one way or another. I beg leave to withdraw the amendment.

Amendment 39 withdrawn.

Civil Liability Bill [HL]

Lord Beecham Excerpts

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

[Lord Woolf (CB)]

My Lords, we have had great help on this subject in the preceding speeches. Perhaps I should begin by giving my thanks to the noble and learned Lord, Lord Mackay, who is in his place, because many years ago he gave me the task of looking at civil justice with a view to producing a report on access to justice, which I did. Since that time the report has had a significant influence. However, when I wrote that report I could not possibly have anticipated the changes that would be needed as time went on, and what has just been said by the last speaker emphasises the fact that perhaps there are advantages in learning from experience.

There is no doubt in my mind about the problem that this Bill is intended to deal with, particularly in Part 1. Unfortunately, I could not take part in the discussion that took place on that part because I was not in the country at the time, but I shall try to avoid saying on Part 2 what I failed to say on Part 1 and thus use up the time of the Committee. However, to some extent one has to look at the whole of the situation in order to get the context. I would emphasise that although the Government’s motives here are good, they must appreciate that there are real dangers in interfering with the normal machinery used for dealing with questions around the assessment of damages which follow injuries. It is very important that justice is done in the case of small damages claims just as it is in large claims. One of the matters that I complain about in the whole of the Bill is that it is taking on responsibilities which are better dealt with elsewhere.

First, it is obvious that the assessment of damages has always been the responsibility and under the control of the judiciary. Indeed, following my report, it was initially felt that legislation was not required because the Civil Procedure Rule Committee and other methods existed which meant that changes could be made that were flexible. What one really has to do is get the culture right, and the culture is that those who are justly entitled—not those who make false claims—are given the proper award by what justice lays down for them on the circumstances of their case. I may well come back to this subject on Third Reading or on Report because Part 1 introduced principles that, as far as I saw it from what was said, were novel in so far as they distinguished between two people with very similar claims in the same circumstances by imposing artificial caps on damages. That leads to bad justice, I would say, in the sense of unfairness, as was said by other noble Lords when considering Part 1.

Coming on to what is being proposed—particularly by the noble Lord, Lord Hodgson, in his admirable remarks in support of his amendment—I want to make it clear that this matter is very important. Obviously, it is very desirable, as a matter of principle, for the courts to be given the power to make awards that will reflect the future. You cannot complain if the situation changes, so as to make the award of compensation either too low or too high, if it is able to be put right. As I understand it, the noble Lord, Lord Hodgson, has suggested machinery for doing that very thing, which is obviously a very significant change from what has happened so far in the courts. Therefore, leaving it to the courts to exercise flexibility and carry forward the principles that the legislation could support, as far as the detail in individual cases is concerned—so that they evolve with experience as well as with the change of facts—would be a very much better and more just result for the litigant. In fact, it would lead to economies in costs, which was one of the Government’s motives in the legislation.

If we have bad law, people will want to challenge it. They will argue against it and seek to lever the facts of their case into a situation that does not justify that approach. However, having a broad and wide approach that evolves in the way I said it should, and can—because of the intervention of either the rule committee or practice directions, which can be done by judges without the committee—is a much better way forward. In principle, we want to take what has been urged by the noble Lord, Lord Hodgson, and apply it. That would leave it to those who do the work day by day to do it in the best practical way.

[Lord Beecham (Lab)]

My Lords, it is a great pleasure to follow the noble and learned Lord, Lord Woolf. We very much look forward to his participation at this stage and on Report.

At the outset of our discussion on Part 2, I want to set out the underlying approach that we on these Benches are adopting. The Bill and the problem that it seeks to address in Clause 8 represent a challenge to two groups. The first comprises those who have suffered serious injuries that, in many cases, will have a lasting impact on their well-being and will engender financial loss, expense, pain and discomfort. The second group includes the first one, but it potentially extends to everyone who will require the services of the National Health Service at some point. We ought not to protect the second group at the expense of the first by artificially limiting the compensation payable to victims of negligence, whether by the NHS or other parties. We should look at ways to fund any liabilities incurred by the NHS for clinical negligence claims as part of society’s financial responsibility to maintain the service, rather than looking to victims to do so.

Periodical payments, to which noble Lords have already referred, clearly have an important future role and we would certainly wish to see them carried forward. The amendments before us touch on a number of issues. Amendment 92 calls for a review of periodical payment orders within a period of six months of this part of the Act coming into force. That might be too tight a timetable. The work certainly needs to be done, but that strikes me as potentially rather early.

--- Later in debate ---

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I apologise for not having been able to speak at Second Reading. I will briefly intervene on these amendments, because I find the content of all of them quite persuasive. The mover of Amendment 56 touched on an important point: who owns the risk if you accept a lump sum payment instead of periodic payments? If, hopefully, the routine is that in most circumstances, one finds out what a periodic payment would look like, one needs to consider this: if you prefer to have a lump sum and take the investment risk, the person who makes that choice owns it, which in turn reflects upon how you would make presumptions about their investment strategies. I intended to touch on this when we come to my amendment in a later group, but as this is the other side of the argument, I wished to raise that point now and to say that I am in the “shove” rather than “nudge” brigade.

[Lord Beecham]

My Lords, the noble and learned Lord, Lord Mackay, referred at Second Reading to Clause 8(3) and the assumptions to be followed in determining the rate as set out in, notably, paragraph 3(3)(a) of proposed new Schedule A1, in which the Lord Chancellor must assume that the relevant damages are payable in a lump sum rather than under an order for periodical payments.

Paragraph 3(3)(d) of proposed new Schedule A1 prescribes an assumption that the relevant damages are invested using an approach that involves,

“more risk than a very low level of risk, but … less risk than would ordinarily be accepted by a prudent and properly advised individual investor who has different financial aims”.

The noble and learned Lord observed that the Lord Chancellor would have to have,

“a certain element of the prophet about him”,

and that:

“Getting an expert panel to agree … will be very difficult” .—[Official Report, 24/4/18; cols. 1504-05.]


Perhaps the Minister could confirm this, or make it clear that this a not-for-prophet provision.

The decisions that will be made will impinge heavily on the innocent victims of negligence or breaches of statutory duty over a wide range of circumstances, hence the noble Lord’s amendment that would provide that an order may distinguish between different classes of case by reference to the description or anticipated scale of future pecuniary loss involved. But the amendment to Section 1 of the Damages Act 1996—in Clause 8, lines 29-34—which states that the provision of the preceding subsection requiring the court to,

“take into account such rate of return (if any) as may from time to time be prescribed by an order made by the Lord Chancellor”,

is qualified such that it,

“does not however prevent the court taking a different rate of return into account if any party to the proceedings shows that it is more appropriate in the case in question”.

This seems to create the possibility of the courts departing significantly in individual cases from the Lord Chancellor’s prescribed tariff. This would be welcome, but can the Minister confirm that that is the intention behind the Bill in that context?

I certainly endorse the noble and learned Lord’s Amendment 57A and I hope the Government will adopt it.

--- Later in debate ---

[Lord Hunt of Wirral (Con)]

My Lords, I declare my interest as set out in the register, particularly as a partner in the global commercial law firm DAC Beachcroft. I completely agree with the words of the noble Earl. I understand that it is a favourite expression of officials in the Ministry of Justice that they are proceeding “at pace”. This group of amendments and the important concept of a shadow process prior to Royal Assent at Amendment 89, which we will look at a little later, give the Minister a range of options from which to choose to demonstrate that he intends to do just that.

I will focus on and entirely support Amendments 58 and 94. The Bill allows a number of different periods, which could lead to delay. The amendments ask the Minister to consider better and more rigorous options. The idea of any delay between Royal Assent and commencement is of particular concern because it is open-ended and uncontrolled. As has been mentioned, in his letter of 30 April to noble Lords the Minister suggests that a period of two months may be needed, but there is no indication why. No regulations are needed. The decisions that need to be made to constitute the expert panel, as just mentioned by the noble and learned Lord, Lord Judge, are obvious ones, and even if they have not been made already, the Minister still has a few months before Royal Assent in which to consider them.

My concern is that there is nothing to keep it to two months; it could turn into two years or more. I recall that the Third Parties (Rights against Insurers) Act 2010 was an uncontroversial statute, so much so that it was first considered in this House under the accelerated procedures for Bills proposed by the Law Commission, and indeed I participated in those debates. It received Royal Assent on 25 March 2010 but was not brought into force until 1 August 2016, more than six years later. I am sure that that will not happen in this case, but it is an example of how open-ended periods can give rise to all sorts of uncertainty and problems.

I am personally attracted to the idea of removing any possible delay between Royal Assent and commencement or between the commencement of Part 2 and the start of the first review. I therefore earnestly encourage the Minister to find a way of accepting these two amendments.

[Lord Beecham]

My Lords, I simply wish to confirm that we on this side agree with what noble Lords have suggested, so the quicker we can get things moving, the better for everyone.

[Lord Keen of Elie]

My Lords, I believe that we are as one in our desire to see these provisions brought into force as rapidly and as sensibly as possible, and all of these amendments stem from the entirely reasonable, and indeed strongly argued, wish for the review to be carried out in order to minimise the impact that the present discount rate is having—disproportionately, one would venture—on defendants and in particular on NHS Resolution.

As I explained in writing to noble Lords following Second Reading, to which the noble Lord, Lord Sharkey, referred, the Government remain fully committed to beginning the first review of the rate promptly after Royal Assent and to completing that first review as soon as is practicable in 2019. To that end, I indicated that although the expert panel cannot be appointed before the power to do so has been created, preparatory work on the setting up of the panel is already under way and the Government will progress the appointment process as far as they properly can before Royal Assent. I hope that that goes some way to meeting the point made by the noble and learned Lord, Lord Judge. As part of that preparatory work, the Government intend to publish the draft terms of reference for the expert panel in time for the Report stage of the Bill in this House. However, the appointment of the expert panel cannot take place until after Royal Assent and thus the completion of the appointment process cannot be predicted with absolute certainty.

The effect of Amendment 58 and its related Amendments 63 and 66 might be to force the Lord Chancellor to delay commencement or risk the time to conduct the review being eaten into, thereby reducing its effectiveness. We have in mind the stages that have to be gone through. Amendment 59 would reduce the period of time within which the first review of the discount rate must be started following commencement from within 90 days of commencement to 10 days of commencement, and other amendments specifying 30 days have been referred to as well.

What I would emphasise is the word “within”. These are outliers, but we are determined to carry out the process as swiftly as we reasonably can. Having regard to that, however, we have to make provision for any uncertainties that may emerge, and therefore to fix too stringent a period might impact adversely upon the whole process that we want to carry out. In other words, while it is important to move quickly, it is also important to ensure that any review is completed fully and properly and is not going to be the subject of untoward challenge.

As I have said, the appointment of the expert panel to advise the Lord Chancellor simply cannot take place until after Royal Assent and even then it may still take a little time, despite the preparations that are ongoing even now. If the review starts without the panel being ready to start work, the whole task is going to be thrown into some difficulty.

--- Later in debate ---

[Lord Beecham]

My Lords, I have two amendments in this group. They are fallback amendments, because noble Lords will see that I have joined the noble Lords, Lord Sharkey and Lord Marks, in signing up to Amendment 74. That is certainly my preference; these are fallback positions which at this stage I would not like to advance over the amendments in the name of the noble Lord, Lord Sharkey, although we may have to see how it goes on Report. It may be necessary to have a fallback position in light of today’s debate. I am sceptical, to put it mildly, about treating these critical issues as matters for political decision. Despite what some noble Lords have said, I would have been happier to see that replaced, but we will have to wait until Report before we come to a conclusion about that.

[Lord Cromwell (CB)]

Was the noble Lord speaking to Amendment 77 or to Amendment 74?

[Lord Beecham]

I was speaking to Amendments 74, 77 and 84.

[Lord Cromwell]

In that case, I shall speak in support of Amendment 77 and cover Amendments 82A, 85A and 90A, which are tabled in my name as probing amendments.

I do not want to make a Second Reading speech, but will open with three points. The first is on the context of the amendments in my name, which is that we are talking about a one-off payment. It has to last the recipient the rest of their days, which is a pretty daunting prospect. Will it keep pace with inflation? Will the recipient die before or after the money runs out? Will the UK and global economies do any good in the next 10, 20 or more years? What returns will be achieved each year from now until the recipient’s death? No matter how clever the Lord Chancellor or expert the panel, these will remain unknowns or, at best, haphazard guesses.

The one thing we do know is that if the discount rates rise, which this Bill is intended to achieve, returns to recipients will fall. By raising the discount rate, we are saying that the investor must—they have no choice—take on more risk. We oblige them to do so. This calls into question the underlying principle of achieving 100% compensation.

Let us not take false comfort from the idea of an expert panel. This is a group of five people who will have to come up with a series of “best guesses” and then seek to arrive at a “best guess of those guesses” to suggest to the Lord Chancellor. The Lord Chancellor remains free to override them.

My concern is that, in its enthusiasm for reducing costs to the NHS and others, the panel will be encouraged in various ways to impose risk on recipients which they are not equipped to gamble with. If the panel does not do so, the Lord Chancellor may. I expressed my concerns about the make-up of the panel at Second Reading, so I will spare your Lordships a repeat of that. We should not forget that the Chancellor is acting for the Government in many of the highest-value cases. That seems a conflict of interest.

What should we do? If the panel is trying to determine a rate on which so much life-altering importance hangs and if we are allowing the Lord Chancellor potentially to vary that rate, we need to be assured that, as far as possible, the rate arrived at is the result of a transparent process and not some magic number produced from a black box and then applied.

My amendments seek to achieve three things: to oblige the Lord Chancellor to a greater extent than the Bill suggests to take account of the panel’s deliberations; to make the panel more transparent in its deliberations and conclusions; and to enable the panel to take into account the realities that the recipient will face in the real world—taxation, inflation and management charges. In the Bill, it is the Lord Chancellor who may take these things into account.

Anyone who has worked in investments knows that such costs are a key determinant of actual returns. With RDR and MiFID II, such charges—for example, management charges—are becoming far less opaque than they used to be. Surely the panel should present the Lord Chancellor with a fully baked rate, not a half-cooked one that has significant ingredients missing.

Turning to the specific amendments, Amendment 77, to which my name was added, obliges the Lord Chancellor to take proper account of the panel. It relates to Amendment 78 in a later group, but that requires matters not to be left simply to the Lord Chancellor’s opinion. I anticipate others speaking to Amendment 77, so I shall leave it there and speak to Amendments 82A, 85A and 90A which are in my name. On Amendments 82A and 90A, the expert panel are supposed to be the experts but they are denied the opportunity to consider the rate in the round, rather than give the Lord Chancellor the half-baked suggestion I referred to a moment ago. The Bill as drafted just provides the Lord Chancellor with opportunities to select his or her own rate. Amendments 82, 82A and 90A place the making of key assumptions where they belong: with the expert panel. Amendment 90A also requires a reasoned explanation by the panel of its decision. This is vital for transparency and understanding. It is also the basis, one hopes, for its voting and for discussion with the Lord Chancellor, including any override that he or she may choose to impose.

Finally, Amendment 85A in my name is again about transparency. Under the Bill as drafted, the Chancellor must give reasons for and publish,

“such information about the response of the expert panel … as the Lord Chancellor thinks appropriate”.

No, my Lords: the Lord Chancellor should publish what the expert panel advises and give a reasoned explanation if he or she departs from its advice. Echoing the point made by the noble Lord, Lord Sharkey, a few moments ago, just as the Bank of England publishes the voting pattern, so the voting pattern cast by this panel should be published. Only then will we have a clear basis for understanding how the rate has been suggested, whether the Lord Chancellor has altered it and, if so, why. The setting of the rate, we should remember, will have fundamental effects on the lives of people in very distressing circumstances. Surely, they and we have the right to an understanding of what has gone on. My amendment builds on what is already proposed in the Bill but will, I suggest, lead to clearer and more transparent outcomes that are therefore more meaningful, more useful and less open to the temptations of distortion.

--- Later in debate ---

[The Earl of Kinnoull]

I am sorry if I have confused the noble Lord. I am merely saying that once the review has been sparked off by the Lord Chancellor’s decision—it does not matter what the periodicity is; I was very interested in the arguments advanced by the noble and learned Lord—it should take place at a reasonable pace, because somebody is suffering if it is done slowly. That is the purpose of trying to trim the rates. This is not difficult; one discount rate has been set by a group of people who will have exactly the right sort of skills. I therefore think it can be done a bit quicker but, as I said, it is probably best discussed not in the Chamber but with the Minister.

[Lord Beecham]

I am not really persuaded by the logic of the amendment of the noble Lord, Lord Faulks. It is not as if all claims will be faced with a five-year period. If a case is brought two years before a review, the courts will be dealing with a more recent determination than if it had been five years. I do not see the advantage of the noble Lord’s proposition. There will be some cases that will obviously be closer to that date than others.

[Lord Faulks]

May I help the noble Lord? When you are coming up to a review period, whenever that is—whether of three years or five—there will be an element of one party or another seeking to guess the outcome. My point is that you do not come up to that cliff edge so often if it is five years rather than three.

[Lord Beecham]

Yes, but if you bring your case a year or two before a review, whether it is a three-year or a five-year review, your position is not changed, is it? I just do not see the logic of the amendment, and I will not be supporting it.

Civil Liability Bill [HL]

Lord Beecham Excerpts

Report stage (Hansard): House of Lords
Tuesday 12th June 2018 Lords Chamber

[Lord Beecham]

My Lords, I refer to my interest as an unpaid consultant to my former legal practice. A distinguished former Member of this House in the late 19th century, Lord Bowen, who served as a Lord of Appeal in Ordinary, was a noted wit. He it was who wrote:

“The rain it raineth on the just


And also on the unjust fella;

But chiefly on the just, because

The unjust hath the just’s umbrella”.

In its enthusiasm to deprive the unjust claimant in whiplash cases of the umbrella of justice, the Government’s measures, embodied in Clauses 2 and 3, will effectively remove it from the just claimant—a reversal of Lord Bowen’s scenario. As the noble and learned Lord, Lord Woolf, asserted, this is,

“a proposal which involves a genuine victim of whiplash injuries receiving reduced damages in order to deter a dishonest claimant from bringing a claim”.

Let me be clear. There can be no one in this House who wishes to facilitate false claims. All of us support the need for any claim to be founded on objective medical evidence, and it is right for this to be a requirement of any out-of-court settlement. However, as the Bar Council points out, the effect of the Bill as originally drafted, and the draft regulations that have been published, would result in reductions of between 22% and 89% in compensation for the victims of whiplash injuries for up to two years, coupled with the costs that they will have to bear no longer being recoverable by the defendants. Thus the compensation under current Judicial College guidelines, set in 2017, for a four to six-month duration of injury, would drop from a range of £2,150 to £2,703 to £470 under the draft regulations, and for a 10 to 12-month duration from £3,257 to £3,810 as a range to £1,250. Of course, the new arbitrary figures for damages would relate only to the time factor and not, for example, to the intensity of any pain suffered.

The amendment proposed by the noble Lord, Lord Sharkey, comes closer to the Judicial College guidelines, but it would be better in my submission simply to delegate the responsibility for certain tariffs to the college rather than to either Ministers or Parliament. That should be a matter for the judiciary.

The Minister’s letter of 7 June contains some welcome changes to the Bill as drafted, including a triennial review of Part 1. However, it contains a statement that underlines the problematic nature of the Government’s response. The Minister avers:

“The Lord Chancellor should set those tariffs which will act to disincentivise unmeritorious claims to reduce costs for all motorists but which will also continue to provide a proportionate amount of compensation where genuine injury is suffered”.


In other words, a genuine claimant is to recover less compensation than he would otherwise receive in order to deter the fraudsters.

But why are the insurers not more rigorous in their assessment of claims, and what happens when the fraudsters cotton on to the implication that they simply need to moderate their claims and the insurers will be content to pay up, effectively on demand, without demanding proper examination of the claim? As the noble and learned Lord, Lord Woolf, averred in a note circulated some time ago, this proposal,

“involves a genuine victim of whiplash injuries receiving reduced damages in order to deter a dishonest claimant from making a claim”.

There is of course disagreement about the extent and cost of fraudulent claims, which should certainly be resisted by insurance companies. It has been suggested that they have been too ready to settle dubious claims rather than risk the costs of defending them. But, importantly, the insurance industry’s own estimates show that the amount paid out on whiplash claims declined by 17% between 2007 and 2016, while premiums rose by an average of 71%. Meanwhile, premium tax—imposed, of course, by the Government—doubled to 12% between 2014 and 2017, and the cost of repair bills has risen by 33% since 2013. The noble Baroness, Lady Berridge, gave us further illustrations of where costs are rising. I remind your Lordships at this point that there is not a consensus on the number of fraudulent complaints brought and settled hitherto. Of course fraud must be deterred—but again I say, not at the expense of genuine victims.

Another consequence that is highly likely to flow from the Bill’s proposals is on the working of an already overstretched court system, with the increased number of litigants in person already causing delay likely to rise even further. Perhaps the forthcoming courts and tribunals Bill will impact on this, as more people who work in the system will be empowered to offer advice—although not representation, which is no longer available from legal professionals. However, there must be a risk in reducing the level of expertise in this way.

Amendments 6 and 8 in this group would restrict the application of the clause to 12 months rather than two years. Most cases are in that category, and two years of pain and discomfort is surely too long for the lowest level of compensation. Injuries that are serious enough to last over one year and up to two years are not “minor” by any reasonable definition. The effect of the reductions in damages is the removal of the right to claim full compensation. These are arbitrary and disproportionate measures.

Amendment 7 deletes an unnecessary requirement to mitigate the effect of damages which of course is already part of common law. We on these Benches support Amendment 9. On Amendment 10, there has been much pressure, understandably, for the tariff to be in the Bill. However, the problem with that amendment, and generally with Clause 2, is that the figures would be determined by the Lord Chancellor—with all due respect to former Lord Chancellors in your Lordships’ House. Our view is that, while any changes would be made by secondary legislation, the setting of the tariff should be determined by the Judicial College—and we concur with the argument of the noble and learned Lord, Lord Woolf, in that respect—in accordance with the practice as exemplified by the 14th edition of the Guidelines for the Assessment of General Damages in Personal Injury Cases. It should be for the judiciary, not the Government of the day, to determine this, and we do not favour Amendment 10 on that ground.

Amendment 12 goes some way to meet that requirement, but still leaves it open to the Lord Chancellor of the day—now, of course, no longer necessarily someone well-versed in legal matters, as other noble Lords have pointed out—to take a position contrary to that of the judiciary. This could be a troublesome precedent for other areas of justice at a time when it seems to be increasingly difficult to recruit judges of calibre, let alone with the experience of the noble and learned Lords participating in today’s proceedings.

Amendment 29A follows in seeking to leave out Clause 13 and giving the court power where it seems that the tariff is inadequate in respect of damage inflicted. We on these Benches support Amendment 46, which would require regulations for the FCA to report on the effect of insurance practices in relation to premiums and savings.

The noble and learned Lord, Lord Woolf, made a powerful case for removing Clauses 2 and 3 from the Bill. If the real concern is the prevention of fraud, with which we all concur, we should look at other measures. These could include heavier sentences for insurance claims fraud, higher no-claims bonuses and, above all, not punishing a genuine claimant for the misdemeanours of the fraudulent or the laxity of the insurance industry in resisting the fraudster. Of course, the role of claims management companies demands rigorous examination and action.

In the light of our support for the noble and learned Lord’s proposal to delete Clause 2, we will not push our amendments to Clause 2 today, as we hope that the clause will disappear. However, should it remain, we will need to bring our amendments back at Third Reading.

[The Advocate-General for Scotland (Lord Keen of Elie) (Con)]

I am obliged to noble Lords for their contributions. I will speak to Amendment 6 and to Amendments 7, 8, 9, 10, 11A, 12, 17, 17A, 17B, 18, 19, 20, 25, 26, 27, 29A, 30, 32, 39 and 46. I hope noble Lords will forgive me if I take a little time over some of the points.

I begin by picking up on some of the observations made by noble Lords but will begin with a generality. I sometimes have the feeling that, were some noble Lords faced with an enormous edifice, their response would be, “You have to explain how every component part is held together before I am prepared to believe that I face an edifice”. The reality was outlined by my noble friend Lord Faulks, who pointed out that there has been a 70% rise in whiplash-based claims in the past 10 years, during which time the number of road traffic injuries reported has dropped dramatically and during which time Thatcham Research has identified that the safety of seats and headrests in cars has improved in something like 88% of vehicles on the road, up from 18%.

Seven hundred and eighty thousand personal injury claims arising out of road traffic accidents were reported in 2016-17. That is the totality. Of those, 670,000 were whiplash claims. It is an astonishing statistic, and the edifice, let alone its component parts, is enormous. As some have already observed, there is clearly widespread abuse.

We have heard reference to the need to test the validity of claims. I noted the reference of the noble Lord, Lord Beecham, to the impact on the courts of increased litigation. One has only to stop and imagine the impact of trying to litigate 650,000 claims in the courts in order that liability can be established and the claim can be tested in each case. The cost implications of that go wider than just the impact on the courts.

There was a call from the noble Lord, Lord Marks, to do more to test the validity of claims. Again, one of the difficulties is the sheer magnitude of the problem that we now face. He also alluded to the need for further measures in relation to aspects such as cold calling, which feed this enormous industry.

To address that point, the GDPR and the Data Protection Act 2018 ensure that, where personal data is obtained through an unlawful cold call, further use of that data will not be allowed, and indeed the ICO can impose very large fines. In addition, the Financial Guidance and Claims Act bans any legal person, not just claims management companies, from making unsolicited calls relating to claims services without having first obtained consent. Crucially, changes made by that Act make it explicit that any organisation in the United Kingdom cannot make unlawful cold calls and, in addition, cannot instigate others to do so on their behalf. Notwithstanding that, there is an enormous unregulated industry out there, much of it based abroad where we cannot touch it, and it continues with these practices. It is a major social problem and requires a policy decision.

Touching on the matter of the damages, the noble and learned Lord, Lord Woolf, referred to a highly complex judicial process, but I take issue with that. As my noble and learned friend Lord Mackay of Clashfern pointed out, the assessment of damages for pain, suffering and loss of amenity is essentially a jury question. Whether you give it to a judge or a jury is neither here nor there; it is essentially a jury question and it always has been.

--- Later in debate ---

[The Deputy Speaker (Lord Faulkner of Worcester) (Lab)]

I advise the House that if Amendment 32 is agreed I shall not be able to call Amendments 33 and 34 for reasons of pre-emption.

[Lord Beecham]

My Lords, I shall speak very briefly to the amendments in my name and that of my noble friend Lady Chakrabarti. There is not, I think, a great deal of difference across the House on the need to ensure that there are proper medical reports and that the MedCo website should be used. The amendments would allow the Government to employ others with medical qualifications, in addition to MedCo, if that was thought to be helpful. Our amendments expressly state that there must be appropriate medical evidence of injury. The amendments are fairly straightforward: we do not dissent from those of the noble Lord, Lord Sharkey, and we hope that the Government will look sympathetically on the amendments here.

[Lord Marks of Henley-on-Thames]

I shall speak very briefly to Amendments 35 and 36, both of which concern medical reports. These and also Amendment 39, to which my noble friend Lord Sharkey spoke, are in my name. The purpose of Amendment 35 is simple. While it is very difficult to prove, there is widespread concern that the quality of medical reports and, sadly, sometimes the quality and genuineness of those who provide them, is low.

Of course, it is notoriously difficult for clinicians to give reliable evidence of whiplash injuries, both because the symptoms are self-reported—and reported differently by different patients depending on their robustness—and because patients’ accounts are hard to test objectively. Assessment of the likely duration of whiplash injuries, which becomes increasingly important in view of a cliff edge-type tariff, is also very challenging because the course of recovery is extremely difficult to predict and varies from patient to patient, again often dependent on no more than the robustness of the patient concerned. However, some clinicians develop considerable experience of these injuries, and a sensible system of accreditation, with the assistance of MedCo—which is already involved in assisting with the criteria for qualifications to produce medical reports, and quality assurance—ought to be able to encourage some consistency. That is why we seek the incorporation of a reference to MedCo in the legislation.

Amendment 36 would require the Lord Chancellor,

“by regulations make provision for the cost of obtaining appropriate medical evidence … to be recoverable by a claimant who succeeds … unless the court decides that such recovery would be contrary to the interests of justice”.

This is a topic on which I have sought reassurance from the Minister in previous stages, and I have received some. But the current position is that recoverability is a matter of discretion. With the proposed change in the small claims limit and the proposed new portal, we would like to hear a statement that it is intended that in all cases where a claimant, even one below the small claims limit, succeeds in recovering damages for pain, suffering and loss of amenity under the tariff, the cost of obtaining the medical report, which will be compulsory, will go with it, unless doing so,

“would be contrary to the interests of justice”.

--- Later in debate ---

[Lord Faulks]

My Lords, I could not hope to better that very compelling speech and I will not try to add any confusion to the analysis. I agree with what my noble friend Lord Hodgson said about the desirability of periodical payments, but all is not gloomy on that front. I regularly act for the NHS in settlements involving periodical payments even now, when it is probably less attractive for periodical payments than it has ever been, having regard to the change in discount rate. Nevertheless, the desirability for periodical payments is a point that the House is generally agreed upon and I entirely accept what my noble friend has said.

However, it has to be said—my noble and learned friend the Minister will confirm it—that the courts have power to order periodical payments by virtue of Section 100 of the Courts Act 2003, which built on the original Act—the Damages Act 1996. The fact that they do not is usually because both sides are advised at a reasonably high level, having regard to the size of the claim and the complexity of injuries, so on the whole the courts will stand back and not seek to impose on or insist against somebody’s periodical payments. None the less, it is something that all advisers will be very much bearing in mind, and I do not disagree with the suggestion that the rules of the court may well be useful to ensure that as far as possible these are considered by the courts, the parties’ advisers and the parties themselves.

I turn to the amendment tabled by the noble and learned Lord, Lord Hope, which, as he kindly said, built on something that I put down in Committee. He puts it much better in his amendment than I did. Of course, the variation in rate is something that was explored, as I said in Committee, by Jonathan Sumption QC, as he then was, in a case in Guernsey, when he decided that it would be appropriate in certain cases to have a different discount rate. As the noble and learned Lord, Lord Hope, said, the amendment makes the scope of the power clearer. There is much in what he says.

I look forward to what will apparently be a fruitful analysis by the noble Lord, Lord Beecham, when he comes to address his amendments. The review that he suggests in Clause 89 troubles me a little because, although all noble Lords are concerned to encourage periodical payments, I am not quite sure how that will work. There are all sorts of reasons why people may or may not have periodical payments. Certainly by changing the discount rate in an upward direction from, say, 0.75% to 1% or 2%, it is much more likely that they would go for periodical payments. However, there are a plethora of reasons why they will or will not seek periodical payments. It is quite a difficult thing for that review to provide the sort of clarity that I am sure the amendment is seeking to achieve. I look forward with interest to the explanation behind it.

[Lord Beecham]

My Lords, I shall attempt to provide some sort of explanation. The amendment seeks a review of what is actually happening in the light of the changing circumstances; it does not prescribe a particular solution. It offers precisely the opportunity for the professions to contribute to ensuring that the arrangements for periodical payments suit the client, particularly those who have suffered significant injuries and may be looking for lifetime support. It is very much an open request, and the expertise of the noble Lord—and others, of course—is very welcome in dealing with it.

Amendment 73A in my name also seeks a different review on the assumptions on which the discount rate itself is based and how investors have dealt with that over time. As will be seen, the review should, I hope, indicate whether the assumptions on which the discount rate is based need to be changed, and set out any recommendations.

This is entering new territory, and it is reasonable to have a report within a reasonable time—three years is probably long enough—to allow a proper examination of the impact of the new arrangements. For that matter, there is a question of course about how often there should be such a review. It would be difficult to prescribe, because interest rates and returns on investments change. We have been living in a fairly good period in terms of returns, but that may not last. So periodic reviews should be very much part of the agenda.

On the amendment proposed by the noble Lord, Lord Hodgson, I strongly support the position that he takes and hope that the Minister will feel sympathetic to it and to the other amendments in this group.

[Lord Keen of Elie]

I am obliged to noble Lords. In speaking to Amendment 49, I shall also address Amendments 50, 73, 73A and 89. Clearly, we welcome the support on all sides of the House for the appropriate use of periodical payment orders as a means of ensuring that the anticipated future needs of an injured person are met. Of course, periodical payment orders avoid many of the uncertainties inherent in taking damages for future loss as a lump sum.

My noble friend’s Amendment 49 would require new rules of court to be made to highlight features of PPOs that may make them more appropriate than a lump-sum payment for a person with a long-term injury who is risk-averse, who would otherwise receive a large award for damages for future pecuniary loss. In responding to the very similar amendment tabled by my noble friend in Committee, the Government underlined their support for the use of PPOs. However, they also recognised that claimants and defendants must be able to make choices, and that the best choice for any individual is dependent on the circumstances of their particular case. My noble friend Lord Faulks pointed out that under Section 100 of the 2003 Act it is open to the court to insist on a PPO being utilised. As far as I am aware, the court has never actually exercised that power, but it does exist in statutory form.

It is vital that claimants who have suffered long-term serious injuries are well informed as to the implications of their choice between a lump-sum payment and a PPO, irrespective of whether their particular case reaches such a stage that the court has to consider whether to order a PPO. The Government remain fully committed to ensuring that appropriate advice is available to claimants in all cases. We are working to encourage the use and understanding of PPOs. In particular, we will over the coming months provide, or at least endorse, guidance that ensures claimants fully understand the choice between a lump sum and a PPO, and investigate whether current advice received by claimants on the respective benefits of lump sums and PPOs is effective.

Over and above that, we have listened carefully to the points raised in Committee and in further engagement with noble Lords. I am obliged to many of them for their engagement in the period running up to this stage of the Bill. The Lord Chancellor has now written to the Master of the Rolls on this matter, and I am pleased to say that he has recently agreed in principle to the Civil Justice Council, with its specialist expertise, exploring the issue with a view to suggesting the most practical, beneficial steps to increase the use of PPOs within the current system. The Government are grateful to the Master of the Rolls for this.

Taken together, we believe that these steps will ensure that focused and practical action will be taken to identify effective reforms that will encourage the use of PPOs whenever they are suitable. These measures can be tailored to address specific identified problems. Rules of court may be part of the solution, but they will relate to the practice and procedure of the courts. That is the appropriate function of rules of court and their related practice directions, not providing guidance as to when one form of taking an award of damages might be better than another, which might be better in guidance itself. In light of that explanation, I hope that my noble friend would consider it appropriate to withdraw his amendment.

I turn now to Amendment 50 in the name of the noble and learned Lord, Lord Hope, which, as he says, would require the court to consider certain factors in deciding in an individual case whether it would be appropriate to take into account a different discount rate to that prescribed by the Lord Chancellor. As he pointed out, the wording in the present Bill reflects almost exactly the wording that appeared in the original provisions in the Damages Act 1996. The application of those earlier provisions is, of course, coloured by the decision of the Court of Appeal in Warriner, and the more recent decision in the Inner House in Tortolano. In light of that, I wish to give further consideration to the matter that the noble and learned Lord has raised to come to a view as to whether something might be done to tailor the wording to address the almost complete guillotine that is, in effect, in place in the two Appeal Court decisions.

Civil Liability Bill [HL]

Lord Beecham Excerpts

Report stage (Hansard - continued): House of Lords
Tuesday 12th June 2018 Lords Chamber

[The Earl of Kinnoull]

I will speak extremely briefly in support of the noble Lord, Lord Hodgson of Astley Abbotts. It seems to me that the Lord Chancellor would, very properly, have two questions in life that he would want to ask of an expert. The first is: “Do we need a review?” The second is: “Please will you conduct the review?” However, unless there is a standing panel, who on earth can he ask the first question of? I assume that he will not have anyone within the Ministry of Justice to whom he can turn and say: “Are we in circumstances where we need a review?” That is, in itself, a powerful argument for having a standing function that would allow him some access to expertise in this difficult and esoteric area. So, if the Minister is not minded to be amenable to the amendments proposed by the noble Lord, Lord Hodgson, how will that question be answered?

[Lord Beecham (Lab)]

My Lords, at this late hour I propose only to express agreement with much of what has been said from all round the Chamber in these debates. I am not as concerned as the noble Lord is about the role of the Lord Chief Justice. It does not seem at all inappropriate for the Lord Chief Justice to be consulted, which is all that the amendment suggests, in the course of making these very difficult decisions. The noble Lord need not worry very much about the consequences of that.

I am happy to support all the amendments that have been discussed and I congratulate noble and learned Lords on the progress that has been made. I assume that the Minister will be inclined to accept, and I certainly hope that that will be the case.

--- Later in debate ---

[The Earl of Kinnoull]

My Lords, I support the noble Lord, Lord Faulks, in his amendments. I should explain why I did not support them in Committee. In Committee, I listened to two eloquent speeches—one from the noble Lord and one from the Minister. They went carefully through the arguments about gaming and not gaming. I thought it was very interesting. I have a lot of knowledge in this area, but I did not actually know. I then spoke to a large number of practitioners on the insurance side to try to form my own view on whether three or five years was right for gaming. I am afraid I strongly formed the view that five years was right and therefore strongly believe that the noble Lord, Lord Faulks, is on to something that would greatly benefit all concerned. That is why I support the amendment.

More importantly, I have tabled Amendments 68, 70 and 71, which are to do with the timing of the second review. Broadly, they try to bring the timing in from what I thought was 180 days to what I thought was120 days. Those thoughts were prior to the arrival from the Minister’s office of the draft terms of reference of the expert panel, which I have in my hand. It is very interesting because the expert panel is established at the very moment that the review trigger is pulled—or, I suppose, immediately after. In fact, in a section entitled “Preparation”, before the review is triggered there is a call for evidence, which asks for all sorts of evidence all round.

That raises two issues for me. The first is that it extends the period of uncertainty. There is a 180-day review period and the call for evidence period, which I assume is at least 60 days—probably 90 days—to increase the level of uncertainty. During this uncertain period, the people who suffer are not the banks of lawyers on either side of the argument; the fee clock is still running. The people who suffer are the individuals who have the catastrophic injuries. So I worry about that.

The second thing I worry about is that if I were an expert, I would not want someone else to draft my call for evidence. I probably do not need the call for evidence because I am an expert. The idea that the poor old Ministry of Justice will be able to ask for all this expert evidence is wrong. The Ministry of Justice is not full of this sort of specialist in the esoteric areas around the setting of a discount rate. I do not believe that is a wise thing to do, so will the Minister look again at the draft terms of reference? Maybe, when we have our coffee to discuss timings, we could have a short session on the terms of reference so that we can try to align this. The basic point behind Amendments 68, 70 and 71 is a desire to allow enough time for a panel of experts very well versed in discount rates to arrive at the correct answer, without extending that time unreasonably. The uncertainty is bad for the victims of the catastrophic injuries.

[Lord Beecham]

My Lords, I am inclined to agree with the noble Earl about Amendments 68 and 71, but I am afraid I remain unconvinced about the five-year period as opposed to the three-year period, and find myself in the rather strange position of agreeing with the Minister. It is not as though all claimants will be five years off a review. Some will be and others will not necessarily be. There will be different timescales for individual claims, and I do not think five years is necessary to protect the integrity of the system. Some people will try to game, whatever the period. Five years is not necessarily more likely to protect against that than otherwise. Rather unusually—I am sure the noble and learned Lord will stick to the three-year period in the Bill—I will have to agree with him.

I should like to say at the end of this very long day that the House has done its usual very good job of scrutinising difficult legislation. It is a little late to try to recall everything that we have discussed and agreed, but a good job has been done today and I hope the Bill will be improved. The Minister has offered to consider a number of matters before Third Reading—and, in any case, the Bill will go somewhere else in another week’s time and come back to us eventually for further consideration. There may be changes that we have to consider at that stage.

On behalf of these Benches—or what is left of us—I thank the Minister for his running of the Bill. He has been more than willing to talk to colleagues, even when some of them, like me, are rather slow on the uptake in this rather technical area. It is not one where, in practice, I had very much to do with cases at this level, as a personal injury lawyer—thank heavens. Around the House, we have heard some very important contributions from Members from all sides, and there is every prospect of further changes being made at Third Reading or in another place on the basis of the level of debate, discussion and argument that we have had. That is a signal tribute to the work of the House.

[Lord Keen of Elie]

I am obliged to noble Lords for their contributions, not only to this grouping but to the debate as a whole that has taken place this afternoon and evening. In speaking to Amendment 54, I shall speak also to Amendments 57, 61, 62, 67, 68, 70 and 71. I do so because, although they were not formally moved in this grouping, the noble Lord, Lord Marks, made it clear that he was addressing the amendments in this group when he spoke earlier. I appreciate his determination not to repeat himself.

As I explained in Committee, the choice between three and five years is not one of principle. The three-year period adopted in the Bill represents a compromise approach based on the responses received to the March 2017 consultation, which included a wide range of views, ranging from automatic reviews at short intervals up to a 10-year fixed maximum. We have listened carefully to the arguments this evening and in Committee from noble Lords about the potential for the gaming of the system, depending on whether there is a three-year or five-year maximum between periods.

I note the observations of the noble Lord, Lord Beecham, who brought himself to agree with the Government on this matter. Tempted as I am to move away from the Government’s position in light of that, I maintain that, overall, it would be appropriate for us to look to three years. But there is no clear-cut case, and I am perfectly content to speak again to noble Lords before Third Reading if they wish to make further representations to the Government with regard to the period. So I do not close the door on that, but our position is that three years would be appropriate, and we would have to be persuaded by something that might be termed “new evidence” before we would consider moving away from that position. However, as I say, the door is open.

Amendment 67 largely replicates the provisions already in the Bill for the conduct of a review, but applies them only to the second and subsequent reviews, in light of Amendments 65 and 66. But Amendment 67 in isolation makes a relatively small number of changes to the procedure for the conduct of the second and subsequent reviews. First, it adopts the language of advice rather than response to describe the panel’s reply to the Lord Chancellor. Secondly, it makes clear that it is not just the question of whether the rate is to be changed but what the new rate is to be that is subject to the provisions for determining the review in paragraph 3 of the new Schedule A1—and that, in reaching these decisions, the Lord Chancellor should have regard to the advice from the panel. Finally, that amendment would introduce a requirement that the Lord Chancellor will consult the panel within 10 days of the start of the 180-day period for the completion of the review. This is new, but noble Lords’ proposals for the first review contain a similar provision, albeit with a 25-day period, and we are conscious of that.

Civil Liability Bill [HL]

Lord Beecham Excerpts

3rd reading (Hansard): House of Lords
Wednesday 27th June 2018 Lords Chamber

[Lord Faulks (Con)]

My Lords, either there is a realistic power to vary the rate—I can see that there are some arguments in favour of that, which found favour with Mr Sumption, as he then was, when sitting in Guernsey—or it does not have any real meaning, as is the case following the decisions of the Court of Appeal. Although flexibility is desirable, if it is meaningless and if we as a legislative body decide that we are not going to overrule any decisions of the Court of Appeal, the noble and learned Lord, Lord Hope, is absolutely right about being accurate in the way that we legislate.

[Lord Beecham (Lab)]

My Lords, I hesitate to take either side of this argument, given the wisdom and experience of both noble and learned Lords, who have given conflicting views. I am therefore perfectly content, for once, to allow the Minister to indicate the Government’s attitude. After all, this Bill is not ending here; it is going to another place and there will be time for people with greater acumen than mine to look into the arguments advanced by the noble and learned Lord. It will be interesting to see what the Minister makes of them, but, of course, it is not the end of the day and perhaps this elevated discussion can take place with a more useful result than we are likely to see today.

[The Advocate-General for Scotland (Lord Keen of Elie) (Con)]

My Lords, I am most obliged to the noble Lord, Lord Beecham, for his positive contribution to the debate, to all noble Lords and noble and learned Lords for their observations on this amendment, and to the noble and learned Lord for moving it.

From the very outset—I go back to the Law Commission’s 1994 report on structured settlements—it was intended that a provision of this kind to depart from a prescribed rate should be very much the exception rather than the rule. Clearly, it recognised that it would be both expensive and time-consuming if the prescribed discount rate could regularly be the subject of challenge on the basis that there might be another more appropriate rate for any number of reasons. That goes some considerable way to explaining the position of the Court of Appeal in the case of Warriner v Warriner.

As the noble and learned Lord, Lord Hope, observed, I referred to a guillotine, but I qualified it with the words “almost complete”—this is a deficient guillotine; it is not a complete guillotine. I said that because, for example, the decision of the Inner House of the Court of Session, the appeal court in Scotland, in Tortolano v Ogilvie Construction, indicated that there may be cases in which the power to depart from the prescribed rate can be applied—but I accept that they will be wholly exceptional. In Tortolano, the court suggested that there might, for example, be a need to take account of a claimant who had to pay tax in a foreign jurisdiction, and that impacted upon the valuation of the award.

These are wholly exceptional circumstances, but the provision in Section 1(2) of the Damages Act 1996, which would be preserved by the words in subsection (2) of the proposed new Section A1, would allow for those wholly exceptional circumstances where the judiciary would be entitled to exercise an inherent discretion in order to achieve justice between the parties. It is in these circumstances that I would resist the amendment; I recognise that there may be room for taking this further, although I have been unable to identify it so far, to ensure that we can perhaps more clearly identify circumstances in which the exception would be applicable.

As the noble Lord, Lord Beecham, indicated, the Bill will be considered in the other place, and I and my officials would be content to explore further with the noble and learned Lord, Lord Hope, if he wishes to do so, whether the provision might be improved in some way. However, I have difficulty with that because I am concerned that if we intrude too much into this quite exceptional discretion, there is a risk of encouraging unnecessary and expensive litigation over the appropriate rate in individual cases.

On that basis, and recognising the point that the noble and learned Lord makes, I invite him to withdraw the amendment.

--- Later in debate ---

[Lord Faulks]

My Lords, I return to a group of amendments concerned with the regularity of the review of the discount rate. I raised this matter at Second Reading, in Committee and on Report, so I will not weary the House by going over the arguments again. Suffice it to say that I entirely agree with what the Bill does in providing for the obligation to have regular reviews at a certain juncture, although the Lord Chancellor has the right to have an earlier review if necessary. My argument, which I am glad to say the noble Earl, Lord Kinnoull, supports, as I think others in the House do, is that it is important that the reviews be regular and there would be an obligation to hold them, but that they do not have to take place too frequently. Why is that? Because those involved in litigation, on both sides, will inevitably seek effectively to guess—however well informed that guess might be—what the discount rate will be after it has been determined.

If there is to be a change every three years, the period leading up to the moment of change is likely not to result in settlements or to result in adjournments—in other words, in perfectly legitimate gaming of the system. This will happen inevitably whenever a review is about to take place, but it will happen less often if it is five years than if it is three years. This will, I think, help to produce more settlements. There are always uncertainties in litigation, but this is a particular uncertainty in large cases, where the discount rate can have such an effect on the quantum of damages. My submission is that five years, for the reasons I have already advanced, remains a better provision than three years. I accept that any provision is arbitrary, but I hope that the Government will listen to me today, will take into account all the evidence they have obtained and decide that, after all, five years might be a better period than three years. I beg to move.

[Lord Beecham]

My Lords, I am slightly puzzled at the effect of amendment as moved by the noble Lord, because the Bill prescribes that the rate of return must be started within a period; not every three years, or every five years, but within that period. So potentially, it seems to me—perhaps the noble and learned Lord will either correct me or confirm that I am right—that you could have a review at less than five years, depending on the circumstances. If, for example, there were a crash, as in 2008, which affected rates of return and so on very significantly, you would not have to wait up to five years to deal with it; you could have that review within the period. In effect, any time within that five years could mean a three-year review, a shorter review or something with a maximum of five years. If that is the case, is that acceptable to the Government?

[Lord Keen of Elie]

My Lords, I am obliged to my noble friend Lord Faulks and to other noble Lords who raised this matter in Committee and on Report. On the point raised by the noble Lord, Lord Beecham, it is indeed the case that we are talking about a maximum period for review, and therefore it can be at any time within that period. What we are concerned to avoid is the situation that arose in the past where many years passed before a review was carried out.

The choice between the two periods, three years and five years, is essentially a pragmatic one, I suggest. The arguments for the two options appear to me to be quite evenly balanced. A number of noble Lords have made the point that there would be less likelihood of a gaming of the system if that period were extended to five years. It was a point made in particular by the noble Lord, Lord Marks, on Report, when he indicated that he would prefer a five-year period over a three-year period.

Following discussions with several of your Lordships after Report, we have given further consideration to the question of the length of the review cycle and we accept that a five-year maximum period could help to reduce the effect of the litigation practice of trying to game the system, as distinct from a three-year period. In light of the arguments that have been made, the Government propose to accept these amendments.

--- Later in debate ---

[The Earl of Kinnoull (CB)]

I was not intending to speak, but I associate myself entirely with the remarks and thanks made and given by the noble Lord, Lord Marks. I was going to add only what fun it has been working with the Bill team, who have worked immensely hard. They have done a particularly good job on this Bill, which should be recorded.

[Lord Beecham]

My Lords, I am not sure I have enjoyed much fun as we have gone through this Bill but, as it leaves the House, I thank the Minister and his colleague on the Front Bench, and the Bill team for their readiness to discuss its provisions and respond to some, at least, of the concerns and suggestions that have been made from all sides of the Chamber. I also express my admiration for those who have brought their professional expertise and knowledge to our debates and discussions. It has been quite an awesome experience to listen to some of those who have spent a lifetime dealing with these matters.

Nevertheless, from these packed Benches, we believe that the Bill is fundamentally flawed and hope that, when it returns to us, it will have been improved. In particular, we would like to see the definition of “whiplash” made by medical experts and the damages determined by the judiciary based on Judicial College guidelines, rather than by a tariff specified for whiplash injuries. If there is to be a tariff, the college should be involved in determining the levels.

The Law Society suggests that the Government should clarify what would constitute a failure to take reasonable steps to mitigate the effect of an injury, which is part of the Bill’s proposition. It is also concerned about the provision in Clause 3 that means the capacity of the Lord Chancellor to allow discretion to increase the award in exceptional circumstances is by way of regulation, again, rather than being left to the judiciary to determine what constitute such circumstances.

Underlying the Bill and the proposals to raise the small claims limit for whiplash injuries to £5,000, and for other personal injuries to £2,000, is the effect of creating obstacles to justice likely to deter legitimate claimants from pursuing and receiving compensation. Where they do, they are likely to add to the growing difficulties experienced by the courts in dealing with unrepresented litigants. To most Members of this House, the sums involved are very modest; to many potential claimants, they are not. For our part, we will in future seek to oppose the intended increase of the small claims limit to all RTA cases to under £5,000 and for all other personal injury claims to £2,000, when the relevant regulations are laid.

We look forward to a review of the impact of this legislation on the much-vaunted claims of the insurance industry significantly to reduce insurance premiums—the noble and learned Lord has referred to that aspiration, as I would describe it—and, more positively, to a significant growth in the number of periodical payments orders in the most serious cases of injury, which are the subject of Part 2 of the Bill, which deals with the discount rate. That is the most positive part of the Bill, and it certainly has our support.

It has been an interesting experience to participate in these debates, and I hope that the Bill will return to us in due course, in an improved form. I await that moment with barely contained impatience.

Bill passed and sent to the Commons.

Civil Liability Bill [HL]

Lord Beecham Excerpts

Ping Pong (Hansard): House of Lords
Tuesday 20th November 2018 Lords Chamber

[Lord Judge (CB)]

My Lords, in view of everything that has been said about the Minister, perhaps he does not need any help from me in addressing the concerns expressed by the noble Lord, Lord Hodgson, but I will offer him some comfort. Many people will want to make a contribution to the discussion with which the noble Lord, Lord Hodgson, has been concerned. They may not all have the same interest as the judiciary has in seeing that there is a fair balance between the way in which the whiplash injuries damages are to be assessed and the way that all other injuries are assessed—the process of assessing damages as it develops over the years.

I specifically asked that we should not have the concurrence of the Lord Chief Justice. We simply asked that he should be consulted. When he is consulted, like everyone else who has been consulted, he will be someone making a contribution to the final decision of the Lord Chancellor. As he will be merely consulted and not asked to concur, there is no danger that my successor many years down the line will find himself at the wrong end of a claim.

[Lord Beecham (Lab)]

My Lords, I refer to my interest as an unpaid consultant with my old firm. I begin somewhat unusually by congratulating the Minister on having improved a pretty flawed Bill since it left us. I assume that he has played a significant part in that. In particular, I strongly endorse the provisions of Amendment 1, which are an improvement on the original wording. However, we would still have preferred the retention of the existing system which allows judicial discretion on the level of compensation to be awarded based on judicial guidelines. To answer the noble Lord, Lord Hodgson, that is how the system operates and there seems to be no good reason why the assessment of damages for this kind of injury should be different in those terms from any other form of injury.

Of course, we also continue to be opposed to the increase in the small claims limit by an amount higher than inflation, in accordance with the review carried out by Lord Justice Jackson several years ago of civil litigation costs. In fact, the increase is something like 100%, although I take the noble and learned Lord’s point that that is not strictly within the scope of this Bill.

The Justice Select Committee warned that,

“increasing the small claims limit for PI creates significant access to justice concerns”.

The Government’s plans to increase the small claims limit will mean that more cases are allocated to the small claims track. That will leave tens of thousands of working people priced out of getting proper legal representation. These measures are a further gift to insurance companies which are already experiencing increased profits at the expense of people injured through no fault of their own.

What assessment have the Government made of the impact of the changes to the operation of the courts, given that increasingly claimants will be unrepresented? Within the last fortnight, the Permanent Secretary at the Ministry of Justice has told the Justice Select Committee that two of the main spending assumptions were fundamentally “unrealistic” and that even the Treasury recognised that the department was under “considerable strain”. In these circumstances, how confident is the Minister about the ability of the courts to deal with an increase in unrepresented claimants from 5% to 30%, as predicted in the whiplash impact assessment? That of course relates only to that particular area; there will be another shortfall in relation to other claims. How long do they anticipate will be the “long term” envisaged before the courts operate at cost recovery level, as suggested in the whiplash impact assessment? To be clear, whiplash impact for this purpose is on the system, not on the unfortunate claimant.

It is estimated that insurers will gain £1.3 billion a year. I hope that the noble and learned Lord’s confidence that the industry will ensure that those savings are passed on to policyholders will be proved correct. Why will it be six years before the Treasury reports to Parliament on the savings accrued to policyholders, as apparently will be the case? It seems an inordinately long time to assess the impact of this provision. Further, is it not ironic that the Government, who make so much of the need to protect policyholders from the impact of exaggerated or fraudulent claims, have themselves increased insurance premium tax four times in eight years, thereby currently collecting £2.6 billion a year more from the people they purport to be helping through this Bill?

While the commitment given at Third Reading in the Commons that vulnerable road users will be exempt from the changes is welcome, why are children and people injured at work not included in the exemption? Extending the change to those two groups would seem to be a reasonable move.

By sheer coincidence, today sees the publication of the report of the Constitution Committee. It is highly critical of the Government’s increasing reliance on secondary legislation. The committee supported the views of the Delegated Powers and Regulatory Reform Committee earlier this year that key measures should be included in the Bill and not left to secondary legislation. Also, most tellingly, it said that judges, not the Lord Chancellor, should set the new tariff and that the Lord Chancellor should not be granting powers to make provision for damages relating to minor psychological injury. This accords with amendments debated during the passage of the Bill through this House but not enacted.

I hope that a review of this measure will provide an opportunity to return to this issue and adopt that approach in due course. I repeat that the Bill comes back to us in better condition than it was, but I remain convinced that it is not in as good condition as it should be.

[Lord Keen of Elie]

I am obliged to the noble Lord, Lord Beecham, for acknowledging that we have at least achieved a curate’s egg, if nothing more.

The Bill makes important changes to our personal injury compensation system; it makes that system fairer, more certain and more sustainable in future for claimants, defendants, motorists and the taxpayer. That builds on our wider reforms to cut the cost of civil justice claims and strengthen the regulation of claims management companies, which play such a big part in this. The first part of the Bill will deliver a key manifesto pledge. It will support the consumer by bringing down the cost of living through a crackdown on exaggerated and fraudulent whiplash claims that lead to higher insurance costs. The second part of the Bill will provide a fairer method for setting the personal injury discount rate and reviewing it so that it does not remain at one level, as it did for 16 years.

I am grateful for noble Lords’ observations and careful scrutiny of the Bill. I want to touch on one or two of their points. The noble Lord, Lord Sharkey, commented on the complexity of the approach taken on Clause 11. That approach was carefully crafted after consultation with interested parties, including the FCA, to ensure that it is as effective as possible. At the end of the day, the Government’s approach has been determined by the need for a rigorous and proportionate regime for insurers as far as savings are concerned. We have to remember that the FCA is an independent body. Clearly, we cannot confirm exact FCA action in respect of these matters but we assure the House that it will take very seriously any case where an insurer does not treat customers fairly. That could include a public commitment not being met if that formed part of a policyholder’s or consumer’s expectations.

The Government have taken a careful and considered approach to what is sometimes termed “naming and shaming”, particularly with regard to the provisions in Article 6 of the European Convention on Human Rights. There are circumstances in which the FCA may decide publicly to censure a firm, but that would typically follow a detailed investigation. The idea of somehow naming and shaming a firm before such an investigation could raise questions about convention rights under Article 6. I suggest that we have taken a considered approach to this but, ultimately, those outliers—if I can call them that—who might seek to abuse the system will be open to censure, potentially publicly, by the FCA in due course.

In the context of the point made by the noble Lord, Lord Hodgson, I readily adopt the observations of the noble and learned Lord, Lord Judge. At the end of the day, consultation with the Lord Chief Justice will allow the judiciary some input into, or comment on, the setting of the tariff of damages against the background of its knowledge of the general level of damages awarded for personal injury in diverse cases. One would hope that this would ensure no material divergence in levels of damages as far as that is concerned.

The noble Lord, Lord Monks, raised a number of questions. Regarding Amendment 1, the primary legislation approach to setting the tariff is not considered appropriate because it should be amenable to review and flexibility. Setting it in stone would not allow for that. Regarding the question of employers’ liability and employers’ liability clauses, we consider that the courts are equipped to cope with such claims. On cost recovery, referred to in the impact assessment at paragraph 5.66, I note that the aim is ultimately to try to achieve cost neutrality so far as the court process is concerned, but I acknowledge that that is a long-term aim.