Civil Liability Bill [HL]

Lord Hope of Craighead Excerpts

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

Moved by

[Lord Hope of Craighead]

1: Clause 10, page 9, leave out lines 3 to 5

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[Lord Hope of Craighead (CB)]

My Lords, my amendment relates to the personal injury discount rate, which is the subject of Part 2 of the Bill. Clause 10(1) provides for new Section A1 of the Damages Act 1996. Two of its provisions are important to what I am about to say. One directs the court to apply a rate of return, as may, from time to time, be prescribed by an order made by the Lord Chancellor. The other, which I am concerned about, is new Section A1(2), which states:

“Subsection (1) 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”.


The Minister will recall that I raised this issue on Report when I moved what was then Amendment 50 on the Marshalled List. That amendment sought to tailor the wording of subsection (2) to address a problem that had been the subject—the result, I should say—of decisions in the Court of Appeal in the cases Warriner v Warriner and Warren v Northern General Hospital Trust, following the House of Lords case in Wells v Wells in 1999.

The problem that has arisen as a result of those cases in the Court of Appeal, which was expounded with some care by Lord President Carloway in his judgment in Tortolano v Ogilvie Construction Ltd in 2013, is that there is a very tight straitjacket on any use of subsection (2) in the Damages Act 1996, which is the predecessor of the provision in this Bill in cases where people seek a different rate of return from that prescribed due to the circumstances of the particular case.

Each of these three cases, the two from the Court of Appeal and the one from the Court of Sessions in Scotland, involved injuries of maximum severity—perhaps a prime example of cases where litigants would wish to have a more generous rate of return. However, in each of these cases, it was said that that could not be done on the ground that there had to be an exceptional case-specific factor before this could be achieved.

I was concerned that the provision in the Bill simply reproduces the language of the 1996 Act without any attempt to suggest that the approach the courts have mandated should be any different in this case. I was seeking a relaxation to allow a case where, if the court felt that the award was less than adequate after applying the prescribed discount rate, it could be altered to allow a better rate of return in recognition of the compensation needed to meet the loss incurred or to be incurred during the rest of the claimant’s lifetime.

The noble and learned Lord may recall that in our discussion on Report, reported in Hansard on 12 June, he said that he wished to give further consideration to the matter I had raised so that he could come to a view on whether something might be done to tailor the wording of the provision to address what he described as “the almost complete guillotine” that is in place as a result of the two Court of Appeal decisions. As he put it, there was a balancing act to be achieved and he undertook to look at that.

It is fairly plain from the fact that there is no government amendment on this issue at Third Reading that he and his team have not been able to come up with a form of wording that would address my point without undermining the policy that underpins the scheme which this part of the Bill seeks to lay down. I am grateful to him and his team for meeting me to go over this point last week so that I could understand the position he has adopted, which I fully appreciate. It is a very difficult issue on which to find a form of words that would achieve what I sought to achieve. In the course of that meeting, I suggested that in view of that position it might be better to delete this subsection from the Bill altogether, which is what my amendment would do.

To elaborate a little more on the reasoning behind the amendment, the phrase which the noble and learned Lord used—“almost complete guillotine”—describes the situation very well, although in rather brutal language. I do not criticise that, because the Court of Appeal in its decision was building on what this House said in Wells v Wells in 1999. In that case, we said that the aim of the solution that we adopted in finding an appropriate discount rate was to create as much certainty as possible. Lord Steyn said that only in exceptional circumstances should a party be entitled to reopen the debate. The idea was to close down the expensive and time-consuming business of trying to present a different rate of return from that laid down by the court, the House or the Lord Chancellor.

The problem is that what such exceptional circumstances might be nobody has been able to discover in almost 20 years of the provision’s existence. Any idea that they could be founded on the nature or gravity of the injuries seems to have been completely cut off by the Court of Appeal. My point is that it is very difficult to see what value, if any, can be achieved by retaining this provision if there is to be no change to its wording. It has been a dead letter for some time and it seems rather a pity to reproduce a dead letter in fresh legislation. Indeed, retaining it risks raising false hopes of achieving something that it cannot achieve—indeed, according to the Government’s policy, something it ought not to be able to achieve—which is altering the discount rate in these cases. My suggestion, which I made at our meeting last week, was that it might be better to face the fact now and to delete the provision. Having made that suggestion, I thought it right to table the amendment for discussion so that the Minister could at least report to the House on the view he now takes, having had time to think about my suggestion.

It is right to draw attention to the fact that the Association of Personal Injury Lawyers has circulated a briefing among some of your Lordships in which it indicates that it opposes the amendment. As I understand its letter, that is for two reasons. One is that a court should retain the ability to apply a different discount rate, particularly in cases of injury of maximum severity. That is an example of wishful thinking in view of the decisions I referred to. It is clear that any attempt to do that in that kind of case will not succeed, which is why I am so concerned about the repetition of this amendment in the Bill.

The other reason is rather more fundamental. If I might read what the association says, it puts it this way:

“The ability for a judge to apply a different discount rate is an appropriate safeguard against any abrupt changes in the financial market. While the proposed legislation provides for regular reviews of the discount rate, a scheduled review could be too late if there is a sudden change in the market. The discount rate could be too high, and it could be years until the next review when the rate could be corrected. In the meantime, injured people will be undercompensated, and will be in fear of what happens when their money runs out”.


As I understand the system that Part 2 of the Bill seeks to lay down, it is intended to have the process reviews carried out at regular intervals, with a view to having certainty between each review that the courts would be obliged to apply, subject to the provision I am concerned about. With respect, the Government have to consider very carefully whether the point the association raises is one they would be willing to accept—in other words, that it should be open ground for parties to seek to attack the prescribed discount rate between reviews because of changes in the market. We would get back to the kind of uncertain situation that we were so concerned about in Wells; we did our best in the reasoning in that case to address our seeking certainty and to have the matter addressed in only exceptional circumstances.

For what it might be worth, the wording of subsection (2) does not permit an across-the-board change to the discount rate because it talks about a different rate being taken if a party can show that it is,

“appropriate in the case in question”,

which suggests that one is taking a particular case out of the generality that deserves special treatment, rather than something across the board, which is what I think the Association of Personal Injury Lawyers is addressing.

I have said enough to indicate that there are reasons for concern as to why this provision is still in the Bill, and to ask whether it should still be there and possibly whether, as the Bill proceeds through the other House, further thought might be given to its wording or its presence in the clause. I beg to move.

[Lord Mackay of Clashfern (Con)]

My Lords, it is fairly plain that this phrase was used by me more than once around this time. One area in which it was used was fixed sentences in criminal cases, because there was a feeling that laying a particular sentence or assigning a particular rate tended to deprive judges of their inherent discretion.

In the two judgments referred to, the Court of Appeal indicated that it felt it was given no discretion. It was enough to get me through the difficulties that I had at that time. Therefore, whether it should remain is a question I find rather difficult. I am not keen to remove anything that gives the presiding judge in a particular case some degree of discretion. If the courts have held that such sentences do not give that, it is rather difficult. I cannot think of a better phrase; needless to say, it occupied my attention quite a lot at the time and was hotly debated. Obviously, my noble and learned friend the Minister has given the phrase consideration and I would be interested to hear what he has to say.

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[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.

[Lord Hope of Craighead]

My Lords, I am very grateful to all those who have taken part in this short debate. I am grateful in particular to the noble Lord, Lord Beecham, for his suggestion that this might be considered a little further when the Bill moves to the other place. It is a very difficult issue and, as the noble and learned Lord, Lord Mackay of Clashfern, has indicated, it is very hard to find another form of words which can address it.

I am concerned about putting into the Bill something which raises false hopes. The circular from the Association of Personal Injury Lawyers indicates that it was trying to find something in the wording which is not really what the Minister was talking about. We are not dealing with cases of exceptional injury within the domestic system, which is what the association was talking about. I take it from the Minister’s reply that he would not encourage people to have a go at changing the discount rate between reviews, which would be contrary to the idea of laying down certain rules for application while the reviews subsist.

It is a very tight issue as to whether there is a point in this provision at all. But having heard what has been said, and with particular thanks to the Minister for his reply today and for the way in which he has listened to me on two occasions, I beg leave to withdraw the amendment.

Amendment 1 withdrawn.