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.

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[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.