Civil Liability Bill [HL]

Lord Marks of Henley-on-Thames Excerpts

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

[Lord Marks of Henley-on-Thames (LD)]

My Lords, we have had an extremely strong debate with important contributions from all noble Lords who have spoken, which has delivered much to consider in Committee.

I will begin with whiplash claims. There has plainly been an explosion of such claims over recent years, many of them exaggerated, unnecessary or fraudulent, even if the last few years have not continued that upward trend. My noble friend Lord McNally and the noble Lord, Lord Hayward, made the point that not only false whiplash claims but other claims have mushroomed. There can be no doubt that the ban on solicitors paying referral fees has helped to restrict the trend but there is considerable evidence of the ban being circumvented, particularly with the help of claims management companies.

Cold calling generates a great many claims—the noble Lord, Lord Faulks, is not the only Member of this House with repeated experience of this—but the very fact that this practice is so widespread suggests that not everyone responds with a rejection. I understand that it is difficult to control cold calling by claims management companies operating from abroad but there is no excuse for our not doing everything we can to stop this direct incitement to fraud. We agree with the Government that we must try to stamp out unmeritorious, exaggerated and fraudulent claims.

If I may be permitted to add to the accumulation of anecdotal evidence, my wife had a similar experience to that of Lady McNally when she hit the back of a car that was in front of her, ever so gently—so she tells me, anyway. Out stepped five strong young men, on their way to a paintballing and laser-gaming session. They were polite, charming and concerned as to whether my wife was all right, and they all assured her that they were fine. So off they went to their paintballing and laser gaming; a week later, my wife received a claim for some £13,000 in respect of their five alleged whiplash injuries. She told our insurers that she did not believe any of them were genuinely injured and that they had all told her they were unhurt. We have not found out whether the insurers paid out but, since we have heard nothing further, I suspect that they did. This illustrates a major problem, which is that it is often easier for insurers to give in and pay small claims than to investigate and fight them—a point made by the noble Lord, Lord Monks, and others. It is a point that will not be assisted by reducing the amount payable in such claims.

However, while we must do everything we can to stamp out false claims, in so doing we must take care not to prevent those with genuine claims recovering fair compensation. I reiterate the point made by a number of noble Lords: it is unfortunate that this legislation is being dealt with separately from the Government’s proposals to increase the small claims limit, with which this legislation is closely connected and which will have a number of significantly unjust outcomes.

First, increasing the small claims limit for personal injury claims to £5,000 would prevent cost recovery for claims below that sum. It would thus deny very large numbers of genuine claimants legal advice and representation because the only way they can afford lawyers in these cases is by relying on conditional fee agreements and the recovery of costs from insurers—a point well made by the noble Lord, Lord Monks, and the noble Baroness, Lady Berridge. This will affect not just road traffic accidents. My noble friend Lord Sharkey mentioned the plight of other vulnerable road users, including cyclists and pedestrians, who will find it difficult to bring claims without legal help. Many other claims will be affected as well.

The increase in the small claims limit will increase the number of litigants in person and reduce access to justice in general, hitting, as always, the most vulnerable citizens the hardest. Furthermore, the increase will take the vast majority of whiplash claims outside the pre-action protocol for low-value personal injury claims in road traffic accidents and the portal associated with it, which, for all its faults, has provided a route to settling many of these claims quickly and economically. If the small claims limit is to be increased, then I suggest the scope of the portal and the protocol should be broadened, or at least we should have a new parallel protocol to assist claimants in person in these cases. I draw some support from the speech of the noble and learned Lord, Lord Thomas, in that regard, but I regard £5,000 as simply too high for the small claims limit and would endorse the £3,000 figure proposed by the Bar Council and the Personal Injuries Bar Association.

Turning to the detail of the Bill, I share with my noble friend Lord Sharkey and the noble and learned Lord, Lord Hope, the view of the Delegated Powers and Regulatory Reform Committee, expressed in trenchant terms, that it is inappropriate that whiplash is undefined on the face of the Bill and that the initial tariff for damages is left to be determined by regulations. We hope that the Government will follow the usual line and conventional course of accepting the committee’s recommendations before the start of Committee on 10 May and put down amendments defining whiplash injury and spelling out the initial tariff in the Bill. As to the figures suggested for the tariff in the impact assessment on the whiplash proposals, included in the information pack helpfully provided by the Government, table 6 on page 26 says it all. The Government have in mind to reduce the damages for pain, suffering and loss of amenity for injuries of less than three months’ duration from £1,800 to £235, and for injuries of three to six months’ duration from £2,250 to £470 and so on. These are drastic reductions indeed. It is pretty clear that the intention is to make such claims not worth bringing. We are all for getting rid of fraudulent and unmeritorious claims; we are not for denying honest claimants reasonable compensation for genuine injuries.

We can see the reasoning behind the proposal that claims should not be settled without medical reports, and I should add to my registered interest as a practising barrister—I am not sure this is a declarable interest—in that I have recently represented an insurer in a case involving such settlements. We can see why making medical reports compulsory is likely to deter false and inflated claims. I do, however, stress the need for reporting doctors to question claimants’ accounts of whiplash injuries closely in order to weed out inflated or false claims. One of the difficulties with whiplash injuries is that generally, all the doctor has to go on is the account of the patient. Another, is that the estimation of duration is usually carried out in advance and is notoriously both difficult and variable.

However, to avoid unfairness to genuine claims, the cost of medical reports—which I understand from MedCo to be some £180 plus VAT—must be recoverable. I have asked the noble and learned Lord to find out about that, but have since noted that in paragraph 5.121 on page 33 of the impact statement, an expectation is noted that:

“Insurers will have savings for 120,000 medical reports they would no longer be responsible for of around £22 million per annum, and associated medical report VAT of about £4 million per annum”.


Doing the maths, 120,000 multiplied by £180 is £21.6 million. So it is pretty clear that whoever compiled the impact assessment expected claimants with injuries likely to have a duration of less than three months to pay £216 including VAT for a medical report in the hope of recovering £235, leaving the princely sum of £19 to represent compensation for the injury. The tariff proposed in the impact assessment is far too low, and in this I am afraid I disagree with the noble Lord, Lord Hunt of Wirral.

Furthermore, I can see no reason why the tariff should be set by the Lord Chancellor. If there is to be a tariff—though I agree with the noble Baroness, Lady Berridge, that flexible guidelines may be better, and I agree with the observations of the noble and learned Lord, Lord Thomas—is not the sensible proposal that any tariff should be established by the Judicial College? Why should damages for whiplash injuries not be comparable to damages for other injuries? The Government have made no convincing case on that.

My last point on whiplash is that all the savings from these reforms should be passed on to policyholders. I am not convinced by the Government’s touching faith in the insurance industry, nor even by the regulatory stick mentioned by the noble Earl, Lord Kinnoull. I would like to see a healthier scepticism on the part of the Government and, if need be, a clear statement that if savings are not passed on to policyholders then the industry may be subjected to a tax penalty on a windfall saving.

I turn, more briefly, to Part 2, on the discount rate. We support the move from a very low-risk to a low-risk investment assumption, principally for the reason given by the Minister that in practice the investment of damages is not generally undertaken on a very low-risk basis. In particular, we fully accept the need, on which the noble Lord, Lord Ribeiro, expounded, to reduce the cost to the NHS of catastrophic injury clinical negligence claims. I urge the Government to accept the suggestion made by my noble friend Lord Sharkey and the noble Lord, Lord Faulks, that we try to move faster in implementing the first change of rate, as the present negative rate is so plainly wrong, as the noble Earl has persuasively argued. Defining the level of risk is difficult, though, and I join the noble and learned Lord, Lord Mackay of Clashfern, in seeking more guidance from the Government on their approach; there is too little at present.

We are also unclear as to why it has to be the Lord Chancellor who determines the discount rate. The Government have said this is a political decision, but are they really right about that? Why should the expert panel not report to a judge or judges or to the Judicial College, taking on an expanded role? The speech of the noble and learned Lord, Lord Mackay, illustrated the difficulties facing a Lord Chancellor in this task.

I am also unpersuaded that a fixed period of three years for the time between reviews is appropriate, but I do not accept the point made by the noble Lord, Lord Faulks, and others that a fixed five-year period should be a substitute. Interest rates change fast in some periods and very slowly in others. Would it not be better for the expert panel to meet annually or every two years to consider whether the discount rate needed changing in the light of circumstances? If the panel’s view were that no change were needed, the rate would be left unchanged. If the panel thought the rate did or might need to change, it could conduct a full review and produce a report, which, as I say, I suggest could be to the Judicial College.

On the composition of the panel, I accept that an independent panel of experts is intended rather than one representative of either claimants or insurers. However, I suggest that to meet the point made by the noble Lord, Lord Cromwell, the legislation should include a requirement that the panel consider the interests of claimants and insurers even-handedly. I also accept that it should include a medical expert.

Lastly, I turn to periodical payments in cases where there are long-term elements to awards, often for the long-term care of the catastrophically injured, of whose claims the noble and learned Lord, Lord Hope, spoke so movingly. Unfortunately, the take-up of periodical payments orders has been low. This may be partly because the discount rate has been very low so that lump sums have been unduly high. I suggest, or suspect, that many claimants and their families are also attracted by lump sums even where periodical payments would be more suitable. The problem with lump sum awards is that expectation of life is actuarially determined and, as the noble Lord, Lord Hodgson of Astley Abbots, pointed out, it can therefore never be exactly right. Some claimants die earlier than expected, leaving a windfall inheritance for their heirs. More seriously, others live longer than expected so that their damages run out well before they die and they are left without the lifelong support the court intended them to have.

Will the Government make proposals to encourage greater use of periodical payments orders? I note the support for them expressed by the noble Lords, Lord Hodgson, Lord Beecham, and others. They provide some answers to the point made by the noble Lord, Lord Cromwell, on the need to protect claimants from the effect of a raised discount rate. I am entirely unimpressed by the argument that defendants’ insurers, the Medical Defence Union or others prefer to pay out lump sum. These parties after all represent the tortfeasors and if they are required in this sophisticated economy of ours to reinsure so as to pay out what are in effect annuities in place of lump sums, I see no reason why they should not do so.

I also join the noble Lords, Lord Sharkey, Lord Ribeiro, Lord Faulks and the noble and learned Lord, Lord Mackay, in inviting the Government to revisit the basis on which medical treatment is costed under the 1948 Act. If a way could be found to do so, it would be a beneficial use of this House’s time.

I close by expressing my gratitude to the Minister and the noble Baroness, Lady Vere, for arranging a very helpful meeting of all Peers to discuss these reforms and to consider amendments. I look forward to working with the Government and others to improve this Bill.