Civil Liability Bill [HL]

Lord Hope of Craighead Excerpts

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

[Lord Hope of Craighead (CB)]

My Lords, I do not wish to say very much about the general principle that lies behind Part 1, which deals with damages for whiplash injuries, except to make three points. First, we have been subjected to quite a bit of lobbying by those who object to the measures that it contains. Some, I have noted, say that they are punitive and arbitrary—words which I myself would not attribute to Part 1 as I read it. Indeed, the noble and learned Lord has said enough to persuade me that it is necessary to do something to try to minimise the abuse that has given rise to such a large and disproportionate number of whiplash claims. The abuse has been going on for some considerable time, and it is time that something was done to address it.

My second point is that I particularly welcome the provisions in Clause 3 for an uplift beyond the tariff amount in exceptional circumstances and the provision in Clause 2(8) which deals with the situation where a whiplash injury is combined with other injuries which also require to be compensated. Those are sensible precautions against the risk of unfairness in particular cases. Thirdly, I associate myself—at least for the time being—with the remarks of the noble Lords, Lord Beecham and Lord Sharkey, on the need for thought to be given to putting the definition of the phrase “whiplash injury” in the Bill, rather than leaving it to delegated legislation, because it is so central to the whole system set out in this part. There is something to be said for at least the starting point of the tariff to be in the Bill too, although, of course, amendable in as simple a way as possible by statutory instrument.

My reason for speaking in this debate is that I would like to say a bit more about the personal injury discount rate provided for in Part 2. My reason for doing so is that I was one of the members of the Appellate Committee which heard the case of Wells v Wells 20 years ago in May 1998. Power was first given to the Lord Chancellor to set a discount rate by Section 1 of the Damages Act 1996, when the noble and learned Lord, Lord Mackay of Clashfern, was Lord Chancellor. I very much look forward to hearing what he has to say when he contributes to the debate later. I hope to be in the Chamber when he speaks, although I have other things to do. For reasons that he may be able to explain, he did not set a discount rate before the Government changed shortly after the Act came into force.

The baton passed to his successor, the noble and learned Lord, Lord Irvine of Lairg, who was here earlier but is no longer in his place to listen to the rest of the debate. He did not indicate that he was willing to exercise that power. One might sympathise with him, because of the difficulties in finding a solution to it. In that situation, it was left to us in Wells to deal with the issue and to devise what we thought would be a firm and workable principle which the courts could apply. The solution which we derived in that case set out the basic principle which was applied by the Lord Chancellor when, in due course, the power was exercised in June 2001 and again in March last year, resulting in the figure to which the noble Lord, Lord Beecham, referred. As is stated in the Explanatory Notes, Wells provided the basis for the calculation of the discount rate which has been followed ever since.

I certainly do not wish to quarrel with the proposition that a fresh look needs to be taken at this problem. It is, of course, an inescapable fact that the lower the discount rate, the higher the award will be. So there is a tension between those who wish to raise the rate so as to reduce the burden on those who have to bear the cost of the award and those who do not wish to see a reduction in the general level of damages where the award has to provide compensation for future loss. The Explanatory Notes say that the basis of calculation which was held in Wells to be appropriate is that the claimant is a very risk-averse investor. I do not think that any of us on the Appellate Committee used those very words, but the thrust of our judgment was similar to what the Explanatory Notes say, for reasons that I will explain.

The Bill seeks to change this assumption by substituting that which is set out in paragraph 3(3)(d) of the proposed new Schedule Al to the Damages Act 1996. This is that the damages will be invested adopting an approach which involves more risk than a very low level of risk, but less risk than would ordinarily be accepted by a prudent and properly advised investor. How one reacts to that proposal may well depend on how essential it will be for the claimant to be able to rely on the award to provide for his or her needs for the rest of their life. Claims that require recourse to the discount rate vary widely, from those in which the main element is to make good a relatively small element of future wage loss to those where the award has to provide for the future care and support of those who are very seriously injured.

As it happens, the claimants whose cases we were dealing with in Wells had all sustained very serious injuries of the kind which are normally classified as injuries of the maximum severity. In one case, the claimant had suffered serious brain injuries, as a result of which she was no longer capable of working or looking after herself or her family. In another, the claimant had been injured before birth, was suffering from cerebral palsy and was very severely handicapped.

It was against that background that, in my speech in Wells, I said that the assumptions that had to be made were, first, that the lump sum would be invested in such a way as to enable the claimant to meet the whole amount of the losses or costs as they arise as the years go by during the entire period for the assumed lifetime while protecting the award against inflation, and, secondly, that the losses or costs will have to be met entirely out of the relevant proportion of the lump sum. Those assumptions indicate the challenge that lies behind the exercise that we are contemplating. I went on to say that this meant that the rate should be one that is to be expected where the investment is without risk and which takes full account of the effects of inflation.

As Lord Lloyd of Berwick, who was with us on the committee, said, if the claimant has to realise capital from investments in a depressed market—and, as we know, the markets go up and down—the depleted fund may never recover. We were aware that a lower rate of discount would lead to increased insurance premiums. We were not addressed in detail on this subject, so we were not in a position to form a view about the wider consequences of our judgment. However, it is worth noting that the noble and learned Lord, Lord Steyn—who was also on the committee—pointed out that if the right decision was that the discount rate should be modified to ensure that victims were compensated as nearly as possible for the consequences of their injury, by and large the public would have to pay for the increase in awards. He said that because he was applying the principle which lies at the heart of the assessment of damages at common law, which is to provide injured parties with a sum which will be adequate to cover their loss over the whole of period during which the loss is likely to continue: no more, but certainly no less.

The noble and learned Lord talked about transparency and fairness, but there is no doubt that Part 2 seeks to alter the balance in favour of the public and thus, to an extent, undermine the principle that lies behind the common law. Reasons have been given as to why that might have to be done. For my part, I would have been very much more concerned as to where this reform was leading us if there had not been the provision in new Clause A1 of the 1996 Act which is set out in Clause 8(1) of the Bill. This is a clause which would allow a court to take a different rate of return into account, including a lower return, if any party shows that it would be more appropriate in the case in question.

I have in mind—and I have never forgotten it—a case I once had to deal with where a highly talented young woman had been rendered tetraplegic as a result of a road accident which was certainly not her fault. The injury was so severe that she was almost totally paralysed. She could not move any part of her body below the neck. She could breathe but she could not speak. She could communicate only by sucking and blowing through a tube to spell out words on a screen in front of her. For her, the award was assessed on the assumption that it would be necessary to provide and pay for 24-hour care and attention every day, and for the accommodation and equipment she needed to sustain any kind of reasonable comfort, for the rest of her lifetime.

It would seem quite wrong for someone in her condition to be required to expose the award to risks to any degree just because, without that, her award may bear more heavily on the defendants and their insurers—and perhaps through that, on the general public. So I not only welcome the new clause as a safeguard against the risk of unfairness in these extreme cases; without it, the Bill would risk, in the more extreme cases, giving rise to an injustice which ought never to be contemplated.