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.

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[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”.

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[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.