Moved by Baroness Vere of Norbiton
1: Clause 1, page 1, line 5, leave out from “an” to end of line 7 and insert “injury of soft tissue in the neck, back or shoulder that is of a description falling within subsection (1A), but not including an injury excepted by subsection (1B).(1A) An injury falls within this subsection if it is—(a) a sprain, strain, tear, rupture or lesser damage of a muscle, tendon or ligament in the neck, back or shoulder, or(b) an injury of soft tissue associated with a muscle, tendon or ligament in the neck, back or shoulder.(1B) An injury is excepted by this subsection if—(a) it is an injury of soft tissue which is a part of or connected to another injury, and(b) the other injury is not an injury of soft tissue in the neck, back or shoulder of a description falling within subsection (1A).”
My Lords, I shall speak to all the government amendments in the name of my noble and learned friend Lord Keen in this group. These amendments concern putting the full definition of “whiplash injury”, to which the measures in Part 1 will apply, in the Bill. Amendment 4 introduces a limited power to amend the full definition of whiplash injuries by means of affirmative regulations.
The Government have carefully considered the view of the Delegated Powers and Regulatory Reform Committee that it is important, in order to get a full understanding of the Bill, for “whiplash injury” to be defined in full in the Bill rather than in regulations. We have also reflected on the similar views put forward by noble Lords during recent debates in this House. We agree with the merit of these arguments, and as a result I now bring forward amendments to achieve this.
The Government’s proposed full definition is focused on soft tissue injuries to the neck, back and shoulder. It is particularly important to ensure that claims for soft tissue injuries to the shoulder, which are already routinely included in many current whiplash claims, will also be covered. The detailed definition provides clarity and certainty for both claimants and defendants. We have listened to experts and also broadened the definition to injuries to the shoulder to mitigate against claims displacement. It is consistent with the Bill’s aim of bringing into scope all relevant claims and injuries so we can effectively tackle the continuing high number of whiplash claims which so impact on the cost of insurance premiums for ordinary motorists.
As many noble Lords recognised in previous debates, it is essential that the full definition can be adapted so it can respond to future medical developments or changes in the behaviour of the claims market. If it cannot be amended promptly it could have an adverse impact on genuinely injured claimants and insured motorists. We therefore propose a further amendment to introduce a limited power to amend the definition by regulations. We have discussed this issue in detail with noble Lords from across the House in recent weeks and believe that many in this Chamber agree that this is necessary. Amendment 4 would therefore permit the Lord Chancellor to amend, by regulations, the definition of “whiplash injury” to include other soft tissue injuries to the neck, back or shoulder or to exclude or refine the description of soft tissue injuries to the neck, back or shoulder.
The power to amend the definition the Government are seeking is limited. No changes can be made for three years to ensure the current definition has time to bed in. Before making any changes, the Lord Chancellor must first undertake a review of the current definition and publish a report including the decision about whether to amend it. Any amendments must also be subject to consultation with the statutory consultees set out in the Bill, which are the Lord Chief Justice, the Chief Medical Officers for England and Wales, the Bar Council and the Law Society, among others. The power could not be used within three years of the previous review. I believe that the definition and power to amend, as proposed in the government amendments, reflects the will of the House. They are clear, reasonable and proportionate to the problem. I beg to move.
Amendment 1 agreed.
Amendment 1A not moved.
Amendment 2A is in my name and that of my noble friend Lord Young of Norwood Green who, sadly, cannot be here today. It is the result of a lot of discussion in Committee about how to avoid what is otherwise a very useful Bill having an adverse effect on vulnerable road users, who could be defined as cyclists, pedestrians, motor cyclists—those who can sometimes suffer most from injuries such as this. I am also grateful to the Minister for agreeing to see us a few weeks ago, when we had a useful discussion.
We were able to table this amendment only yesterday because we struggled to come up with wording that does not affect the main Bill but that protects vulnerable road users and allows them to continue, if they need to, to get legal aid under the present arrangements, rather than increasing the minimum figure to £5,000. We concluded that, as the Minister and many other noble Lords have said, this Bill is about whiplash and nothing else. As I understand it—I hope the Minister will confirm this when she responds—it is only about whiplash and nothing to do with any other kind of legal aid claim that might be needed for other issues, road traffic or otherwise.
I had a long discussion with the clerks on this issue, as well, and it seemed to me that what was needed was something that would exclude vulnerable road users from the particular issue we are talking about—raising the legal aid limit—if they suffer whiplash. One might ask how a pedestrian or a cyclist is going to suffer whiplash if they are not in a car, but they probably could, for whatever reason, if they are hit by a car.
We then looked at Clause 1(3) and I, as a non-lawyer, started to get a bit confused as to who the phrase “the person” referred to. Is it the person who suffered injury, or the person who might be alleged to have caused the injury? It seemed to me that there is a reasonably elegant solution—which I am sure my legal friends will say does not work—that clarifies what is meant by “the person” in subsection (3). If the amendment were accepted, it would be clear that:
“For the purposes of this Part a person suffers a whiplash injury because of driver negligence if … when the person suffers the injury”, that person,
“is using a motor vehicle other than a motor cycle on a road or other public place”.
I think that this is quite an elegant solution, providing an exception to this Bill for vulnerable road users who are not in cars, and who therefore would not be included.
I hope that that short explanation is helpful. I look forward to other comments and in the meantime, I beg to move.
My Lords, I have listened carefully to the noble Lord and appreciate the change he would like to make. In our view, however, the existing clause already makes it sufficiently clear that the person who suffers a whiplash injury because of driver negligence is the person who is either using the motor vehicle or who is a passenger in the motor vehicle at the time of the accident. The amendment therefore seems to add no practical difference to the construction of the clause.
In relation to vulnerable road users, I reassure the House that the clauses of the Bill relating to whiplash do not extend to cyclists, passers-by or pedestrians outside the vehicle or vehicles involved in the accident. However, I am aware that such road users remain captured by the Government’s non-Bill measure to increase the small-claims limit for road-traffic-accident-related claims to £5,000. We will deal with this issue in more detail a little later today, but I can say that we are sympathetic to the arguments made in relation to vulnerable road users and will continue to consider the matter. For the reasons that I have set out, I urge the noble Lord, Lord Berkeley, to withdraw his amendment.
Moved by Baroness Vere of Norbiton
4: After Clause 1, insert the following new Clause—“Power to amend section 1(1) The Lord Chancellor may by regulations amend the definition of “whiplash injury” in section 1, but not so as to include an injury of soft tissue other than soft tissue in the neck, back or shoulder.(2) Before making regulations under subsection (1), the Lord Chancellor must—(a) review the definition of “whiplash injury” in section 1,(b) as part of the review, consider whether to amend section 1,(c) prepare and publish a report of the review, including a decision whether or not to amend section 1 and the reasons for the decision, and(d) lay a copy of the report before Parliament.(3) After laying the copy of the report before Parliament and before making regulations under subsection (1), the Lord Chancellor must consult—(a) the Lord Chief Justice;(b) the General Council of the Bar; (c) the Law Society;(d) the Chief Medical Officer of the Department of Health and Social Care;(e) the member of staff of the Welsh Government designated by the Welsh Ministers as the Chief Medical Officer for Wales;(f) such other persons or bodies as the Lord Chancellor considers appropriate.(4) The Lord Chancellor may not carry out the first review under subsection (2) before the end of the period of three years beginning with the day on which section 1 comes into force.(5) After the first review, the Lord Chancellor may not carry out a review under subsection (2) before the end of the period of three years beginning with—(a) if regulations under subsection (1) were made following the previous review, the day on which those regulations came into force, or(b) if no regulations under subsection (1) were made following the previous review, the day on which a copy of the report of the previous review was laid before Parliament.(6) A statutory instrument containing regulations under this section is subject to affirmative resolution procedure.”
Amendment 4 agreed.
Clause 2: Damages for whiplash injuries
My Lords, I thank the noble Baroness, Lady Chakrabarti, and the noble Lords, Lord Beecham and Lord Marks, for allowing me to speak first to this amendment, which also relates to Amendments 17B, 18 and 30. I also record my gratitude to the Minister for the courteous manner in which he has promoted the Bill and for being prepared to discuss its contents with me.
I draw attention to my interest in the register. I also disclose that I have a son who is a QC practising in clinical negligence. What is most relevant so far as my own career is concerned is having chaired the access to justice inquiry and helped with the implementation of its recommendations, in my then capacity as Master of the Rolls. The recommendations included different tracks and procedures for disposing of civil claims.
The one that we are concerned with today is the disposal of small claims by what is known as a small claims court. As noble Lords would expect, this was designed to provide speedy and simple justice for litigants who are not usually represented. The assessment by a court of damages has always been accepted as a purely judicial responsibility in England and Wales, as far as I know, and that responsibility has been reflected in many decisions of the courts. The Personal Injury Bar Association published a paper that referred in this regard to the speech of Lord Blackburn in Livingstone v Rawyards Coal, 5 App Cas 25, at page 39—a decision as long ago as 1880. Lord Blackburn said:
“I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation”.
Another well-established legal principle is that if you are wrongfully injured, the wrongdoer has to take the victim as he finds them. The effect of whiplash injuries, with which we are concerned, can vary substantially according to the physical and mental sturdiness of the victim. This means that the appropriate amount of damages for a whiplash injury can vary substantially when applying the rule to which I referred. I suggest that they are not suited to a fixed cap, as proposed by the Government.
Another principle of justice is that the court’s award should appear to be fair and just between different litigants. To assist in this, for some time now, the judiciary, through the Judicial College, has issued guidelines quoting levels of damages for different injuries. These guidelines are of great value in the task of assessing the appropriate level of compensation. Establishing the right level of damages is therefore a highly complex process of a judicial nature. The quality of the guidelines explains their acceptance by the judiciary and the profession as a whole, and why they have been hugely important in the resolution of personal injury claims. There is a difference between guidelines and what the Government propose here. Guidelines are flexible and are, as the name suggests, only a guide. The Judicial College regularly revises the guidelines: the most recent issue is the 14th edition of 2017.
Turning to the amendments with which I am concerned, the most important is Amendment 18, which would delete Clause 2 and will be the focus of my attention. If the House is with me on the amendment, many of the other amendments will not be viable.
My contention is that the clause is an undesirable change from practice hitherto. It removes the judicial responsibility for the assessment of damages, and it imposes a fixed cap in place of flexible guidelines. It is unlikely that the cap will succeed in its commendable objective of preventing fraud, but will interfere with the small claims court process if tackled in the way proposed. It is being introduced before other steps have been taken or had time to demonstrate their worth. It offends an important principle of justice, because it reduces the damages that will be received by an honest litigant because of the activities of dishonest litigants.
Other initiatives in the Bill will assist and do not involve intervention in the role of the judiciary and, subject to what happens in today’s debate, I would support them. Here, the Lord Chancellor, without the accumulated experience of the Judicial College, proposes substantially to interfere with the Judicial College guidelines by substituting tariffs or a cap, which lack the flexibility of the guidelines.
Furthermore, he is motivated, at least in part, not by the normal principles of justice as I understand them but by saving insurers money, in the belief that this will result in a reduction in premiums for motorists who are insured when they come to pay for their insurance. It has to be borne in mind that if the Lord Chancellor interferes with part of the guidelines, as he now proposes, that can affect the integrity of the whole of the guidelines, because the guidelines for each injury contribute to the establishment of the whole. Here, the scale of the interference is significant.
My less important target is Clause 3. This will be necessary only if my complaints as to Clause 2 are not accepted by the House. Clause 3 proposes that the Lord Chancellor, by regulation, should have power to make regulations enabling a judge to lift the tariff under Clause 2 if the degree of pain and loss of amenity suffered by the victim of whiplash are exceptional. This device has been used elsewhere in an attempt to give relief against harsh statutory provisions. It failed elsewhere, including in the LASPO legislation. What are and are not exceptional circumstances can be very difficult to determine, and this can give rise to issues that are entirely unsuited to resolution through the limited procedures of the small claims court. Its exercise is to be subject to regulations and a permanent uplift is, I understand, likely to be limited to 20% of the cap.
The extent of the Government’s ambitions appear in a letter circulated recently by the Minister. For me, it demonstrates the extent of the proposed takeover of the normal role of the judiciary. The most relevant passage states:
“It is … the Government’s view that is wholly appropriate that regulations are used to set and amend the new tariff, and that it is the Lord Chancellor who retains control over the level of damages paid in whiplash claims … It is right that the Lord Chancellor should take control of the compensation process, and set tariffs which continue to provide a proportional amount of compensation, but which also act to dis-incentivise unmeritorious claims and reduce the costs associated with these claims for all motorists”.
There is no precedent for this intervention in the assessment of damages in civil proceedings. It may be suggested that this has happened in relation to criminal injury compensation, but this scheme is operated by an Executive agency and not the courts. I question whether the Lord Chancellor should be given the power he now seeks, and whether the department is qualified to perform this task. I challenge the validity of the statement that the guidelines are too high.
Sir Rupert Jackson, shortly before he retired recently from the Court of Appeal, was asked to review some of the issues I had previously considered in my Access to Justice report. His response to the proposals, as far as it is relevant, is:
“It is the function of judges (not Parliament) to set the tariffs for pain, suffering and loss of amenities in respect of different categories of personal injuries”.
Here, it is proposed that the Lord Chancellor, not Parliament, should do so. He continued:
“When, a few years ago, I recommended raising the level of general damages by 10%, it was judges—not Parliament—which gave effect to that recommendation”.
I accept that there is a problem with exaggerated claims being made, particularly for whiplash injuries. However, this can happen in a multitude of different proceedings that come before the courts. Whiplash is far from unique. As examples, I refer to holiday claims, industrial deafness claims, and so on. Steps are already being taken to try to deal with the specific problems relating to whiplash injuries. I suggest that in those cases, alternative methods should be given the chance to achieve what they can, before intervention of the sort proposed here, which, as I have described, is without precedent and would involve setting a precedent.
What is unfortunate is the publicity given to the steps that have been taken. The public need to be aware that fraudulent activities in seeking damages are harmful to their fellow citizens, whose insurance premiums can be increased. The courts have been using the powers they now have when fraud is detected to bring criminal proceedings and even punish by imprisonment those who seek to benefit in this way. The present legislation contains, as I have already indicated, other steps to which I raise no objection. I take as an example Clauses 4 and 5, which require a medical report to be obtained before settling a claim. That seems a simple and helpful suggestion which could be beneficial. I refer also to the Financial Conduct Authority, which is given power to intervene to enforce compliance by other bodies such as claims managers, whom I regard as possibly being part of the problem with the issues we are discussing.
In addition, the present proposals have the defect that they are unlikely to deter a dishonest claimant from making a false claim. All that he needs to do to achieve that purpose is to make a false claim that is outside the limits of the damages now proposed. Therefore, the proposal will provide no assistance. Surely, before seeking to interfere with the normal role of the judiciary, we should await the information to which I have referred. The same is true of the Government’s intention to raise the limits of small claims—but I shall not deal with that matter today.
In any event, matters of legitimate concern cannot justify fixing damages in a manner which departs from that normally adopted in assessing the damages to which a claimant is entitled. Even when the amount involved appears to be modest, claimants are entitled to have the damages to which they would normally be entitled. To deprive them of this involves discrimination against legitimate claimants, irrespective of their means. The consequence is that they do not receive the compensation to which they would be entitled if the same pain or suffering was not caused by whiplash. This is not what a system of justice should do. Simply, it is unjust to do this—and for these reasons, I beg to move.
My Lords, we share the Government’s objective of reducing fraudulent whiplash claims, but we do not agree that the proposed arbitrary reduction in damages for all claimants, fraudulent or genuine, coupled with removing judges from the assessment of damages, is a proper way in which to address it. For that reason, I shall concentrate on supporting Amendment 18, so eloquently and comprehensively spoken to by the noble and learned Lord, Lord Woolf, with his strong appeals to principle.
We welcome banning cold calling, whether by claims management companies, car hire companies, car repair companies, solicitors or anyone running a calling operation for any of them. Section 35 of the Financial Guidance and Claims Act makes a start in banning cold calling, but its main weakness is that it does not outlaw the use in this country of information obtained by cold calling, often from abroad, and the definition of claims management services in that Act looks to me insufficiently broad. By amendments in the fourth group, we try to address the use of information from cold calling.
We welcome prohibiting settlement of whiplash claims without medical reports from properly accredited clinicians. So those provisions on cold calling and medical reports are targeted on reducing or eliminating fraud. However, the proposed radical reduction in the level of damages to the Government’s very low tariff is a blunt instrument that would indiscriminately cut to the bone compensation for genuine claimants as well as for fraudulent ones. The purpose of general damages in personal injury cases has, as the noble and learned Lord, Lord Woolf, explained, always been to compensate claimants, so far as money can, for the injuries they have suffered as a result of the negligence of defendants. Clause 2 abandons that principle in whiplash cases. If Amendment 18 is carried, Clause 3 would be meaningless, so we would expect the Government to accept Amendment 30 in the name of the noble and learned Lord, Lord Woolf.
For the Government, the Minister has more or less accepted in the past that the Bill discriminates against genuine whiplash claimants covered by the Bill in favour of the Government’s proposal to cut fraudulent whiplash claims. Genuine claimants would lose out as against road accident claimants with other injuries; or as against claimants who sustain whiplash injuries in accidents not covered by the Bill, such as cyclists and motorcyclists; or as against claimants who suffer injuries of whatever type in other circumstances—for example, as a result of the negligence of their employers or local authorities. This is not just, fair or principled.
The Government have simply not established the evidence base for such a radical departure from principled law-making. There is insufficient evidence of the incidence of fraudulent as against genuine claims, and there is no evidence on the comparative effectiveness of reducing all damages as against banning cold calling or insisting on credible medical reports before settlements. Little or no pressure has been put on insurers to get tougher on claimants rather than settling low claims about which they may have suspicions with scant inquiry, because such claims are cheaper to settle than to contest.
To take an example, imagine a non-negligent driver and her partner, who have both been injured in an accident. The driver has a painful whiplash, which is likely to last just short of six months. On the Government’s proposed tariff, her damages would be £470. Her partner, the passenger, who was not wearing a seatbelt in this case, fractures his wrist as he hits the dashboard—a relatively minor injury, the effects of which will last for only a short period. His damages will be in the range of £2,300 to £3,125, and even after docking them 25% for his own contributory negligence in not wearing a seatbelt, he recovers between three and a half and five times his partner’s damages. Where is the justification for that?
These results, proposed to address an inadequately defined problem on questionable evidence, are offensive to justice. The proper ways to address fraudulent claims are to stamp out cold calling, to enforce a requirement for genuine medical reports, to encourage insurers to test the validity of claims before they settle them, and to come down hard on those caught making fraudulent claims, not to abandon basic principles of fairness and justice.
I will speak briefly to two of the other amendments in this group, particularly our Amendment 10, which proposes a tariff that would represent the damages actually awarded by the courts, based on judicial college guidance. That, and other amendments, are alternatives, tabled in case the principled amendment in the name of the noble and learned Lord, Lord Woolf, does not succeed.
I make only one further point. The provision in the Government’s proposals for an uplift in exceptional circumstances only, and limited to 20%, is far too restrictive. Exceptional circumstances have been regularly held by the courts to require a set of circumstances that takes a case well outside the norm—
My Lords, I am very grateful for that intervention, which is absolutely right. The point about an uplift is that, if it is just, it should be given. We say that there may be a whole range of circumstances where it is clear that an award greater than the tariff figure is justified. We would regard it as far better than insisting on a finding of exceptional circumstances to permit the courts, as per our Amendment 20, to increase a tariff award where satisfied simply that it would be in the interests of justice to do so. Were Amendment 18 not carried so that Clause 2 survived, we would propose to pursue that amendment to improve Clause 3, which would then remain.
My Lords, I shall comment on an amendment that has not been spoken to—Amendment 12, which I think will be articulated by the noble and learned Lord, Lord Judge—and, more precisely, on the proposed new clauses, spoken to so admirably by the noble and learned Lord, Lord Woolf.
Amendment 12 seems manifestly sensible. Of course the Lord Chief Justice should be consulted by the Lord Chancellor. That is particularly important when one bears in mind that many Lord Chancellors nowadays are not lawyers and will therefore be entirely dependent on the advice of their officials, who might themselves not be lawyers. Therefore, it seems admirable that we should put into statute a requirement that the Lord Chief Justice be consulted. If the Minister says, “But of course he will be”, all I can say is that Ministers sometimes have a curious habit of forgetting the obvious and their obligations. For example, I was rather surprised about three weeks ago when the noble Lord, Lord Callanan, during the debate on Brexit, said that Ministers had never used the phrase “meaningful vote”. That was a curious lapse of mind, and it may well be that Lord Chancellors will forget the obligation to consult the Lord Chief Justice. Therefore, I am all in favour of the amendment and I hope the Government will concede the point.
Perhaps I may move more directly to the proposed new clause in the name of the noble and learned Lord, Lord Woolf, and Amendment 18. I do not have the experience of the noble and learned Lord but for many years I practised as a personal injury lawyer. I do not do so any more, so there is no need for me to identify an interest, but I used to do a lot of work in personal injury law. Indeed, I was instructed by my noble friend Lord Hunt and I was very grateful for the briefs in those days. Back then, we were informed about the level of damages by the guidance of the Court of Appeal and by the reports, which in those days were available in the current law citator. There really was no difficulty in operating within the parameters set by the judiciary.
That takes me to my objections to what the Government are proposing. The first is a very deep-seated reluctance to see the Executive or Parliament interfering with essentially judicial positions. I am bound to say that that informed my real reservations about the determination of Parliament to impose tariffs in homicide cases, set out in a schedule to the Act. I deprecated that. This is another example which we should be very cautious about. We need to ask ourselves what the essential characteristic of justice is. It is to respond to the individual and varied cases that appear before the courts. The effect of imposing a cap of this kind is to prevent the trial judge being able to respond to the particular aspects of the case in front of him or her, and in my view that is, by definition, unfair.
There is a further point that I venture to intrude on the observations of the noble Lord, Lord Marks. It is perfectly true that the Bill provides for an uplift, but the uplift requirement is discretionary on the Lord Chancellor; it is not mandatory. The Lord Chancellor may provide for an uplift in regulations but he or she does not have to do so.
I am sorry to be pedantic about this, but your Lordships will know that on many occasions I have spoken in pretty derogatory terms about the statutory instrument process that we have. This is another example. Let me acknowledge at once that we are doing it by the affirmative procedure, which is a lot better than doing it by the negative procedure, but the cap will be determined by statutory instrument. Who, pray, is going to set the cap? I can tell you: it will be officials. Unless the Minister of the day is particularly well informed and/or intrusive, the cap will be determined by officials without interference. I am bound to say that I find that a very unpleasing prospect.
If, therefore, the noble and learned Lord, Lord Woolf, is minded to press his amendment and his proposed new clause and to test the opinion of the House, unless my noble and learned friend is even more persuasive than he customarily is, I anticipate that I will support the noble and learned Lord.
My Lords, it is a great comfort to hear the noble Viscount, Lord Hailsham, say that he agrees with what I am going to say before he has heard it. Now, perhaps he will not mind hearing it.
We have to face the reality that there are a huge number of fraudulent claims for damages arising from alleged whiplash injuries sustained in road traffic accidents—far too many of them. We also have to remember that a large number of perfectly honest claims are made as a result of injuries suffered in road traffic accidents. We have to find a pragmatic solution to the problem of fraudulent claims, given that the cost of contesting them in court tends hugely to outweigh the amount of money that is at stake if the claim is not substantial. Whiplash injury cases, in the way that will now be defined in the Bill, are not cases that attract vast sums of money in damages. I particularly welcome the requirement of medical evidence, which provides some level of protection against the fraudulent. I welcome also the prohibition on cold calling, and I think there is something in the provision for uplift.
Can we be clear, though, that some claims absolutely reek of fraud? I suspect many of us know, for example, of a case where, at traffic lights with two cars in a line and none behind, the front car moves forward across the junction, not too fast, and is followed by the second car. Then, suddenly, the front car slams on its breaks for absolutely no reason, resulting in an impact. I am certainly aware of at least one case—perhaps we all are. It was not a case in court but was narrated to me by a friend, who was rather mortified to find that, after a small accident, the recipient of the injuries in the other car came out of the car saying, “Whiplash, whiplash!”, and had no other word of English to speak. He then found that his insurance company had received claims for no less than four people, when there was only one person in the car. As I say, these cases reek of dishonesty.
I hope that, if this part of the Bill is enacted, insurance companies will continue to remember that before a claim can be made for whiplash injuries, there has to be a claim and the claim should be contested as and when there is evidence of fraud. They cannot just sit back, otherwise they will find themselves paying out more and more. Some cases reek of fraud and they should be contested, and the easy way of doing nothing much more than that should be avoided. The police should be informed and the evidence should be handed to them so that at least they can investigate. I know that they have many other things to do, but a few knocks on doors and the word would go around the fraudulent area of this particular universe saying, “Hang on, there’s something going on here”. That too might discourage the odd dishonest claim.
What I cannot accept is a solution which means that a dishonest claim is handled in exactly the same way as an honest one. We cannot have dishonesty informing the way in which those who have suffered genuine injuries are dealt with. That is simply not justice. There should not be any idea that an honest claim for a whiplash injury made by the victim of a car accident should be less well compensated than an identical injury suffered by someone at work. There are all sorts of ways in which injuries can be caused; indeed, a slip in the street or a fall down the stairs can result in a whiplash injury, so there are many perfectly ordinary ways in which these injuries can be sustained. We need a process that produces the same result for the same victim who has honestly suffered the same consequences.
The remedial system proposed in this draft is founded on regulation-making powers vested in the Lord Chancellor. I see the noble and learned Lord, Lord Irvine, is in his place. As far as one can see, today and for ever, not only will the Lord Chancellor have no judicial function, but he or she is most unlikely to have any relevant experience of this particular area of work. In exercising his responsibilities, he will be dependent on his officials. You can almost sense the way the tariff is currently being proposed—it is still only a proposal—in that there is an understandable anxiety to limit fraudulent claims, and the error will be to reduce the tariff level to cover all claims, including the genuine ones. I respectfully suggest to the House that some form of judicial involvement in the fixing of the tariff for whiplash injuries is essential.
The Bill already acknowledges the value—I would say the need—of direct judicial input into the process, as set out in Clause 3(5). The proposed new section 2 specifically involves the Lord Chief Justice as a consultee in any processes for increasing the tariff. Perhaps I may say that it is absolutely obvious that the very least that should be provided is that the Lord Chief Justice of the day should be consulted about the level of the tariff. Of course he will take advice and make whatever recommendations he thinks right, and the ultimate decision will be for the Lord Chancellor, but it is fair to say that it would hardly be wise for a Lord Chancellor simply to take the judicial expertise on board, say that he has considered it, and then ignore it. If he were to do so, I suspect that either the other place or this House might actually awaken from our slumberous non-scrutiny of regulation making.
My Lords, I declare my interests as set out in the register, particularly those in respect of the insurance industry. The 2017 Conservative manifesto provides an interesting lens through which I feel one ought to consider various amendments in this group. It states the following in a section entitled, “Cutting the cost of living”:
“We will reduce insurance costs for ordinary motorists by cracking down on exaggerated and fraudulent whiplash claims”.
At a high level, the Bill seeks to do that principally by dictating how whiplash claims procedures will work in the future; that is, through the use of a tariff. Several amendments in this group seek to interfere with the principle of a tariff either by removing it or by making it rather more generous than market forces allow today. Both of these approaches seem to fly directly in the face of that express manifesto commitment. I remain very much of the view that any tariff should be set out in the Bill, just as the Delegated Powers and Regulatory Reform Committee has recommended.
We are in extraordinary and difficult circumstances here, with around 1% of the population of the UK annually successfully concluding a whiplash claim. I submit that a social and political necessity trumps jurisprudential purity, such as that advanced by my noble and learned friend Lord Woolf, even before considering the manifesto commitment point that I made earlier.
A tariff will bring benefits in terms of certainty and the potential for ordinary citizens to file claims online easily, without the need for external professional help. Any reduction in hassle and the costs of processing a claim will inevitably benefit everyone. Indeed, we heard at Second Reading how a tariff system seemed to work well in Spain. Deleting Clause 2 would deny those benefits. It would certainly deny the Government the ability to deliver on their manifesto commitment because the hugely unsatisfactory status quo would simply continue, with a numerous minority of our fellow citizens continuing to abuse the current environment to their financial advantage. Therefore, I strongly oppose Amendment 18.
Turning to the quantum in the tariff table, I accept that the issue is rather a Goldilocks one. If the quantum is too generous, the problem of exaggeration and fraud will persist. If it is not generous enough, the genuinely injured will be badly dealt with. The Government have attempted to walk this line in their draft statutory instrument; I make no comment on the numbers it contains. The structure of the Bill allows the Lord Chancellor to vary the tariff with suitable safeguards.
I fear that Amendments 10 and 17B are too generous because they depend on the Judicial College numbers, which are derived from cases heard. The numbers are actually above where the market—if I may call it that—is today because the cases that tend to get to court tend to have non-standard features, such as being more complex or involving psychological issues. Therefore, I fear that if either of these amendments were adopted, there would be no saving per the impact assessment—possibly even a negative saving—and thus they too defeat the Government’s manifesto commitment. Accordingly, I oppose them.
In turning to Amendment 30, I start by expressing my support for Amendment 12, which restores constitutional balance in a very elegant way. Indeed, I congratulate the noble and learned Lord, Lord Judge, on his excellent speech. Amendment 12 goes some way to addressing the issues that were set out well by the noble and learned Lord, Lord Woolf, in introducing Amendment 30. However, Clause 3 is not only a fully important part of a package to frustrate the designs of the claims industry but an important part of a strategy to deliver the manifesto commitment. On that basis, I feel that this amendment should also be resisted.
My noble friend Lord Kinnoull referred to “jurisprudential purity”. I would prefer to describe it as the essential role of the judiciary in deciding what compensation is appropriate. I would be very grateful if the Minister would tell the House whether there is any precedent for a Minister, rather than judges, deciding on the appropriate level of compensation for a civil claimant when that compensation is being paid not by the state—I recognise that that may be a different matter—but by a private wrongdoer or, more accurately, their insurance company. I suggest that either there is no precedent or this is rare, for a very good reason: put simply, judges, not Ministers—or their civil servants, more accurately—have expertise and independence in this area. For those reasons, I strongly support the speech made by my noble and learned friend Lord Woolf.
My Lords, I confess to having found this group of amendments rather difficult. As I observed in Committee, the real question as I see it in Part 1 is whether it is right to fix especially low awards for whiplash injuries suffered in road accidents, to deter the disproportionate number of false claims which undoubtedly are made following such accidents. That is what Clause 2 does: it seems to me impossible to escape that conclusion. Obviously and inevitably its effect, therefore, would be to penalise those who genuinely claim for such injuries sustained in that way. They are to pay the price of the policy underlying Clause 2, the policy of deterring the dishonest. Obviously, one regrets that.
Whether to pursue that policy and, if so, to what extent and how vigorously—in other words, how far to reduce the awards so as to make the making of a false claim less attractive—is, it seems to me, par excellence a political question. It is purely a political question and therefore I, for my part, see no particular point in involving the judiciary as Amendment 12 would do. We know what the judiciary regards as the appropriate level of damages for honest claims of this sort: the Judicial College guidelines clearly tell us that. Therefore I do not support Amendment 12.
To my mind, the real question is the altogether more fundamental question raised by my noble and learned friend Lord Woolf’s Amendment 18 and that is the one I confess that I find the more difficult. I flagged up my concerns about this and about the whole of the Part 1 policy in Committee. My noble and learned friend suggests that the proposal will create an undesirable precedent and introduce injustice into the system. Of course, I recognise the force of these criticisms and to a degree I share his doubts as to whether the incidence of false claims remains grave enough to justify this wholly exceptional measure. However, at the end of the day I am reluctantly persuaded that this provision is justified: it is surely intolerable that we are known as the whiplash capital of the world, so I have concluded that it is open to government, as a matter of policy, to seek to deter dishonest claims in this way.
I do not suggest that there are any exact analogies between the law of compensating injuries negligently caused and what is here proposed. I accept that the criminal injuries compensation scheme, to which in effect my noble friend Lord Pannick and the Minister referred—statutory awards for injuries criminally caused—is a very different creature, but it should be recognised that broad questions of policy can and on occasion do have a part to play in this area of our law. For example, the courts have held, under what lawyers here will recognise as the Caparo principle, that in certain circumstances claims are barred altogether, not just restricted. In short, there is no duty of care held to arise, even when injury follows on from what otherwise would be plain negligence, where it is held, for whatever reason, that it would not be fair, just and reasonable to compensate in those circumstances. For example, years ago in the case of the Yorkshire Ripper, the police were held exempt from claims despite their failure to apprehend the killer, which manifestly they should have done, and, as we all recall, a series of subsequent women died.
On balance, my conclusion is that there is a sufficient policy reason here for restricting damages in this case. With some hesitation, I shall not feel able to support the amendment tabled by the noble and learned Lord, Lord Woolf.
My Lords, this group contains 18 amendments, of varying importance. I declare my interest as having been a partner for 50 years—this year—in the global commercial law firm DAC Beachcroft LLP. I was so pleased to see the noble Lord, Lord Morris of Handsworth, in his place earlier because for many years I had the honour to act for the Transport and General Workers’ Union when, on the instructions of Mr Albert Blyghton, I went into battle to recover substantial damages where people had been seriously injured.
In supporting the words of the noble and learned Lord, Lord Brown of Eaton-under-Heywood, and the noble Earl, Lord Kinnoull, I remind the House that here we are dealing with a racket, as described by the noble Lord, Lord Blencathra, which has grown up in this country thanks to what is termed the compensation culture, encouraging not just fraudulent but spurious—I think that is a better description—claims, which have now made us the global whiplash capital. I greatly regret that.
After all, in this group of amendments we are talking about only minor injuries. As has been pointed out by the noble and learned Lord, Lord Brown, there has been a political decision. I remind noble Lords that in the Red Book in 2015, the then Chancellor of the Exchequer, Mr George Osborne, said:
“The government will bring forward measures to reduce the excessive costs arising from unnecessary whiplash claims … including by … removing the right to general damages for minor soft tissue injuries”.
I am not sure everyone here was present when we had a debate—and we have had a number of subsequent debates—about the need to tackle this whiplash culture.
Not everything George Osborne said in that Autumn Statement was received with universal acclamation but I well remember that that particular announcement was welcomed on all sides of the House. “At last”, we said, “we’re going to get rid of the whiplash culture”. There was a clear consensus in this House that the law and the courts had allowed a racket to flourish, leading to a manifest and substantial injustice—the injustice of millions of law-abiding insurance policyholders having to pay over the odds to fund this mass of bogus claims. We can point the finger at the insurance industry, perhaps, for allowing too many but we are talking not just about insurance-funded claims but about a whole range of minor claims, and we have to decide as a House whether we intend to fulfil what I understood we had agreed to do about this racket.
I congratulate my noble and learned friend the Minister on the determination he has shown to end this racket and to end the injustice. We have identified an injustice and we have promised to act to end it.
There is a judicious balance in the Bill, as one would expect, and those with genuine minor injuries have nothing at all to fear from it. The option of doing what George Osborne initially recommended, namely to remove general damages completely from soft tissue claims, has perhaps wisely been abandoned in favour of the proposed tariff. In Amendment 1, as we have already heard, the Government have further answered their critics in this House by putting a clearer definition into the Bill. It is not perfect but it is a lot better than the previous one in the draft regulations. It comes closer to capturing the scale of the problem.
I thought we had a consensus in this Chamber in July last year, when we debated the need to tackle the regulation of claims farmers during the passage of the then Financial Guidance and Claims Bill. I highlighted at the time the work of Carol Brady, in her excellent report in 2015, and the need to follow the money. Noble colleagues on all sides of the House agreed in that debate that these were important measures; now, we have to tackle the money itself, in the form of damages and solicitors’ fees, and we are of course suddenly beset by an enormous number of last-minute amendments. I must share with the House that, following the then Chancellor of the Exchequer’s announcement, I was told: “Don’t think for a moment that this will ever pass, because the jobs of thousands of those employed in the claims management industry will be lost. They will fight hard to stop the Government’s action”.
Why should the noble and learned Lord, Lord Woolf, of all people, be challenging the Government’s stated intent here? I have already heard the depressing rallying call of access to justice. In truth, I worry about some of the briefings that we have received in preparing for this debate. They really seek to delay what action the Government are taking. I know that the noble and learned Lord, together with many other Members of this House, has received instructions from me personally in the past and I have huge respect for him. We must surely recognise, as the noble Earl, Lord Kinnoull, reminded us, that the Government committed in the manifesto at the last election to tackle the rampant compensation culture around whiplash claims—the same culture which pays the bills for those who continually text and call us with offers of money for nothing. We must not allow our eye to be taken off that ball.
The noble and learned Lord, Lord Woolf, referred to the Judicial College guidelines. Amendments 11, 17A and 17B propose sagely that those guidelines are the cure of all ills, but they are really not the answer to the question we have to address. I do not know the guidelines off by heart but I know this particular section, because it reminds us that,
“the figures … merely represent what other judges have been awarding for similar injuries”.
That is all the guidelines do. They also say:
“The figures in this new edition recognise that … the general increase in RPI … since … 2015 has been 4.8%”.
With respect to the good work that the Judicial College does to make awards consistent, the guidelines simply record the numbers previously thought of by other judges over the years and then uprate them for inflation. These and other amendments proposed by the noble and learned Lord, Lord Woolf, in fact oppose the entire substance of Part 1. They ask us to agree to leave the problem to the judges to sort out.
I respectfully answer that the courts have had many years to contain the problem but I have yet to see any conspicuous success. The assessment of damages by judges is based on a ratchet effect; it can go up but it can never slip back, as the Judicial College guidelines themselves admit. Judges do not redress the balance at any time. On one recent occasion when they had the opportunity to do so—the noble and learned Lord may recall Heil v Rankin in 2000—the judges increased damages for all but minor injuries and left the damages for those alone, so the control effect is simply absent. That is why it is now up to Parliament to do what needs to be done.
I conclude by reminding colleagues that a graphic illustration of leaving such matters solely to the discretion of judges can be found in a High Court appeal case last month, Molodi v Aviva Insurance. A whiplash claim was initially accepted by the county court judge, even though Mr Molodi had lied on a number of aspects of his case. The High Court judge in Manchester, Mr Justice Spencer, threw the claim out and issued a salutary warning to the judiciary,
“it is also pertinent to recognise the problem that fraudulent or exaggerated whiplash claims have presented for the insurance industry and the courts. This was recognised in March 2018 when the Ministry of Justice published a Civil Liability Bill … proposing new, fixed caps on claims … The problem of fraudulent and
The need to issue such a general warning to fellow judges belies the suggestion that we can safely leave this issue for judges to control. The tariff is sorely needed. It applies the brake, which only the Government can apply, not the courts.
My Lords, I repeat my declaration of interests made at previous stages of the Bill. The noble and learned Lord, Lord Woolf, and others have advanced powerful arguments in favour of protecting the entitlement of those genuinely injured who seek compensation for whiplash. Coming from such a distinguished source, these arguments clearly demand a great deal of respect around the House. It is therefore—to adopt a phrase used by judges—my misfortune not to agree with the noble and learned Lord’s amendment. The noble and learned Lord, Lord Brown, referred to the fact that judges from time to time decide matters of policy and relied on the case of Caparo and the fair, just and reasonable test. It is of course for Parliament to decide fairness, justice and reasonableness, and it should approach this problem with that in mind.
It is undoubtedly true that some genuine claimants who have sustained whiplash injuries will be entitled to rather less than they would have been if the Bill becomes law, but we need to stand back and consider the policy driver behind these changes. At Second Reading, the Minister pointed out that there has been a 70% rise in 10 years in the number of road traffic accident-related personal injury claims. Of these, 85% are for whiplash-related injuries. In 2016-17, there were 670,000 whiplash claims—it is rather surprising that anybody gets into their car at all—yet we know that we have more of these injuries than any other European jurisdiction notwithstanding the considerable improvement in standards of road safety in this country and the adoption of neck restraints and the like. All this costs motorists and consumers a great deal, and the cost of premiums falls particularly harshly on those who live in rural communities and have to drive cars and on the young, who may find it difficult or impossible to pay premiums.
Some of your Lordships may have suffered a whiplash injury. I declare an interest as having done so, many years ago. A car ran into the back of mine—I assure noble Lords that I was not part of any cash-for-crash scam. It caused considerable damage to the back of my car and some pain and discomfort in my neck for a few weeks, together with a little jumpiness in cars for about a month, particularly when I was stationary. There may be other noble Lords who have suffered whiplash injuries, but I suspect that almost none has escaped an invitation to take part in a claim, even though they have not in fact been involved in an accident. Such cold calling, by telephone or text, is a source of real irritation and I know that the Government are trying their best to stop it. Can there be any real doubt that there has been a widespread abuse of the system?
My noble friend Lord Hunt referred to the Chancellor of the Exchequer, in an Autumn Statement, announcing the possibility of there being no damages at all for pain, suffering and loss of amenity in relation to whiplash. This Bill is more generous; it allows for a tariff. That is only for the conventional sum; there will still be compensation for loss of earnings and for any medical expenses. The intention behind the imposition of a tariff is to at least reduce the incentive for false claims, and increase the likelihood of settling these claims. As we will debate on subsequent amendments, insurance companies generally have welcomed these reforms and promised to reduce premiums. I agree that they should be kept to this promise. However, it would be wrong to regard the Bill simply as a sop to the insurance industry. It is frankly offensive to society as a whole that this sort of abuse is allowed to continue.
If there was to be a reduction for really serious injuries, I can imagine why noble Lords would baulk at the imposition of a tariff. However, we are for the most part talking about pain and discomfort of a relatively transient nature, such as might be occasioned in all sorts of sporting or domestic contexts without any compensation being involved at all. So these reforms—quite modest though they are—are a proper response to what I would describe as a racket. Simply to say that judges can sort these matters out and that some genuine claimants will be deprived of as much compensation as they would have got before does not take sufficient account of the nature and scale of the problem.
Is this an overreaction? Should the Government not have done more before proceeding to the tariff? These reforms do not come out of a clear blue sky. It was Jack Straw, of the party opposite, who first identified the problem with whiplash reforms. The LASPO Act, which the noble Lord, Lord McNally, will remember very well, attempted to get control of some aspects of the compensation culture. Then there was the fixing of the costs of whiplash medical reports and attempts to establish independence by the MedCo system. The Criminal Justice and Courts Act 2015 banned inducements and introduced the fundamental dishonesty test, which has been remarkably successful, although I remember that the noble Lord, Lord Beecham, disapproved of it at the time. We have heard the commitment in the Conservative manifesto to tackle fraudulent whiplash claims to reduce premiums.
These changes will not solve all the problems that exist in this unattractive field at a stroke. The Government have spoken of a response at a number of levels, including better regulation of claims management companies and further control of cold calling. However, if we exclude the bulk of the Bill, as these amendments will, we are not reflecting public disquiet. Insurance companies have done much more than they are given credit for, on fraud and following up fundamental dishonesty.
Other amendments in this group, particularly those suggested by the noble Lord, Lord Marks, seem, with great respect, to be the worst of all worlds. They seek to hard-wire the Judicial Studies Board guidelines into the Bill and then provide some exceptions. As the noble Earl, Lord Kinnoull, pointed out, they are not necessarily reflective of an average award, for the reasons that he gave. Indeed, they are guidelines—the clue is in the name—and they should not form the basis of a tariff.
Should we leave this to the judges? I have the greatest respect for judges—the noble and learned Lord, Lord Woolf cited what Lord Justice Jackson said about the role of judges—but one of the problems is that judges rarely see these cases. This is the murky world of grubby claims preyed on by a number of parasitic organisations which have created an industry. We can go on agreeing that there is a problem and restating the problem but these reforms will not drive it away—it will spring up elsewhere—but if we wreck this part of the Bill we will be failing to acknowledge the racket and walking by on the other side. Premiums for our children and grandchildren will continue to rise and our necks, collectively, will remain the weakest in Europe.
My Lords, I have some trepidation in speaking before a former Lord Chancellor does, but perhaps what I have to say will help. I am grateful to the noble Lord, Lord Faulks, for reminding the House that I was the Minister who took through the LASPO Bill and I have been watching the Labour Front Bench nodding in unison at every word that could possibly embarrass the Government. However, the origins of what we are doing now lie with the last Labour Government, who shared then the growing cross-party consensus that we were becoming a more litigious society, driven by a compensation culture and a determination to have our day in court—the noble Lord, Lord Faulks, referred to Jack Straw’s campaigning on whiplash—and the response to that was the setting up of the Jackson report under Sir Rupert Jackson.
It is interesting to note that one of the reasons for the setting up of the Jackson report under the Labour Government was that the costs in civil litigation were often disproportionate to the issues at stake. Lord Justice Jackson, who has just retired, spoke at the Cambridge law faculty on
“Almost everyone perceives the public interest as residing in a state of affairs which coincides with their own commercial interests”— he might have said professional interests as well.
My locus in this is not as a lawyer—I have told the House before that when I was a Minister I once said to a visiting distinguished American lawyer, “I must explain that I am not a lawyer”, and he said, “Then I shall speak very slowly”—and, given the array of legal advice and talent we have already heard, I tiptoe into this with trepidation. This is based partly on a family experience of a whiplash, which was clearly fraudulent but the insurers thought that the cost of defending was greater than simply settling. That left me with the experience of not only a fraudulent claim but a fraudulent claim which was sustained by the obvious collusion of both the solicitors and the doctor concerned. Therefore, the noble Lord, Lord Hunt, is right to talk about a racket in which many respectable professions are involved. Those overseeing those professions have a duty of care to root out those who are complicit in these frauds.
As I have said, there was a growing cross-party consensus that something must be done. I confess that seven years ago I answered a Question from the Dispatch Box assuring the House of the urgency with which the Government were dealing with the issue of whiplash. I say to my Front Bench and to the noble and learned Lord, Lord Woolf, for whom the affection and respect I have is overwhelming, that I worry his amendment is just another one kicking the problem down the road when everybody else who speaks on it recognises that there is a problem. This has been said on a number of occasions: we are dealing with not the kind of catastrophic life-changing injuries that the noble Lord, Lord Faulks, often refers to when we discuss medical negligence, but the very lowest level of claims where, as the noble Lord again said, many people would not even think of claiming if they were not spurred on by the claims management industry out of its own self-interest.
I fully endorse what my noble friend Lord Marks said about the need for others to take responsibility, not least the industry itself, for fighting fraud and making attempted fraud not worth while. I worry that the legislation says that we need a medical certificate. Somebody said, maybe in a private briefing, that there was one doctor who had a kind of Roneo of letters that he just signed. If you are going to have a medical check in this, you have to make sure that it is not part of the fraud because in the past it has been.
Nevertheless, it is rather sad that we have this collection of amendments. I look forward to the usual forensic dissection of them by the noble and learned Lord, Lord Keen. There are some good and some not so good ideas in there, but I do not want us to see something that becomes a wrecking amendment when we have waited for far too long for this. Perhaps because I am not a lawyer I do not share the fear from the noble and learned Lord, Lord Woolf, that we are setting some terrible precedent that will weaken the role of the judiciary. I do not see that at this very low end of the process. I hope that, in our usual way in this House, we can extract some of the good ideas that have been put forward but not lose the sense of urgency with which the Bill, at last, tries to address a real problem in a practical way.
My Lords, I will speak primarily about the amendments that my noble and learned friend Lord Woolf has proposed. This part of the Bill is concerned only with claims for pain and suffering. It has nothing to do with any other form of loss. Other forms of loss are easily quantifiable, but loss arising from pain and suffering is a development of the law that has very little in the way of structure.
When I was a junior at the Scottish Bar long ago these matters were often the subject of jury claims. Pain and suffering was an element in a jury claim. The judges were warned against suggesting a figure to the jury. You can imagine how difficult it was to provide a summing up that dealt with that. I remember well that one of the senior judges that I knew had a formula in which he said, “This is a sum to mark your sense of the pain and suffering that the claimant has suffered”. That was done by juries; it was before the time that judges were involved in this, and therefore it was a jury question. It has all the character of a jury question in the sense that there are no rules that I know of—none has so far been quoted—to determine the amount to be given. How has that been done? As my noble friend has just quoted from the judicial guidance, it has been done by collecting what others have decided in other cases. There is nothing specifically judicial about that. I think almost any of us could manage to deal with that; you do not need to be a very experienced judge to do that kind of calculation.
What the Bill does in this aspect is to make a system out of the situation in which there is a tariff to deal with this matter. The tariff is to be fixed by the Lord Chancellor. My noble and learned friend has suggested that this sort of thing is an innovation. In a sense it is an innovation, but it is an innovation that just works on the principle of the present system. The present system is one in which the judges look to what has been decided already in that particular type of case and try to make some kind of adjustment if that is seen to be necessary, because no two cases are absolutely the same. Therefore, in my submission to your Lordships, what is being proposed here is to have a system that reflects the nature of the award in a way that is derived from consultation, which of course includes the Judicial College’s findings.
So far as I understand the point, there is no suggestion that the awards need to be reduced beyond what is a reasonable figure for injuries of that type. The idea that judges fix these is really rather theoretical, because the number of cases that are involved is far beyond what the courts could accommodate. In fact, most of these cases are settled by negotiation. What is better to make a reasonably quick and cheap negotiation than to have a good sense of what the aim is? That is what the tariff does. In my submission, this is an excellent way of dealing with a practical problem that in no sense departs from the position that a judge should determine a matter that is really an issue when you realise how the judges do it.
We also have to think about the other aspects of this matter. One of the difficulties for insurance companies faced with fraudulent claims is that they require the assistance of the person insured to challenge the claim. People do not care to be required to do that, but it is required if you are going to contest the claim. I do not suggest for a minute that that should not continue. There is nothing in the Bill to prevent the insurance company, if it wants to, from contesting the claim altogether. This is only settling the quantum of the claim by a system that is very like the judicial system of doing it. I know of no better way of deciding this sort of pain and suffering claim than to see what has been done in other cases already. Therefore, in my submission to your Lordships, this is a perfectly reasonable way of dealing with a large problem—a very large number of cases at the same time—and I sincerely hope that your Lordships will support the principle of the Bill in the way that it has been set out.
My Lords, I have spoken at every stage of the Bill and I first thank the Minister for his time discussing matters with me.
For those who have been in your Lordships’ Chamber for the entirety of this debate, it is interesting to note how blame has been passed around like a squash ball. Is the fault that of the Government for not acting quickly enough, the insurance companies, those dastardly claims management companies or the judiciary for not getting a handle on this earlier?
While there is undoubtedly a problem with fraudulent claims, the one group not to blame is those people who are genuinely injured in this manner in an accident. Some of these cases indeed reach court: I have the privilege of representing those people.
Before I proceed, let me also comment on the matter of low-end claims or minor claims. I have met many a claimant for whom the difference in damages now proposed by the introduction of the tariff, taking some damages from four figures—£1,200 or £1,400—down to the likes of £470 is a significant matter for many peoples’ incomes up and down this country. I cannot have it portrayed that this might not make a great deal of difference to many ordinary people in the country.
From my experience in your Lordships’ House, we are in an unusual situation. We have so often spoken of the scrutiny of legislation needed here to avoid unintended consequences. But in this Bill, the intended consequence—whether that is the conscious intention of the judge or the virtually certain consequence of the legislation—will be to affect that group of people. Therefore, we are in the unusual situation where an amendment is laid on Report that is like a Second Reading point, because it is a point of principle about the Bill. It is also affects a point of principle that, as a law student, was the DNA of our justice system. It was taught to you from the moment you entered your lecture theatre—where, I have to say, I was taught by some amazing people.
I have thought much since Second Reading about how these genuine claimants might respond—the hundreds of folk who I have had the privilege of sitting with in waiting rooms on the northern circuit when I was a barrister—bearing in mind that they also, of course, care about their premiums and the societal implications of fraud, which is alleged to be so prevalent. It is these people to whom the justice system and the amount of compensation must be explained and make sense.
In my view, a genuine complainant might respond: “Her Majesty’s Government say that the insurance companies are to blame as well. Have you made them do everything possible before depriving me of my compensation?” In fact, we know that insurance companies have often made commercial decisions to pay out for possible claims just to get rid of a claim at an earlier stage because it is cheaper—even suggesting to people that they might have been injured although they themselves have not mentioned it. Her Majesty’s Government have not asked the insurance companies to stop this behaviour first. The insurance companies have paid out without medical reports, so would it not be fairer to genuine claimants to have a period with the medical reports that the legislation will make mandatory before reaching for such a drastic policy solution?
Secondly, a genuine claimant might respond: “Was this situation so dire for the insurance companies that insuring everybody was really at risk? How are their profits doing?” A report from Direct Line Group, the largest insurance group, shows profits for the financial year 2017 of £610.9 million—a leap of 51.4% on 2016. Dividends were up 40.2%. In its interim report in 2017, one of the reasons it gave was fewer than expected bodily injury claims. It is not the only insurance company to give this reason at the moment. I quote from the Insurance Times of
“Fewer whiplash claims have helped Sabre Insurance Group’s gross written premium return to 2017 levels”. Sabre said: ‘Pricing action was taken in early March to reflect the improving claims trends, specifically lower whiplash claims frequency’”.
Could the insurance companies not be asked to use perhaps a fraction of these profits to fight the fraud before genuine claimants have to be affected by such a policy decision? I could not help but notice that genuine claimants might actually see the flaw in the system: if, for example, Harry Kane were to get injured in a road traffic accident and was unable to captain England, that would probably merit more in compensation than my having a whiplash injury.
Genuine claimants might respond to the Government and ask, “With those enormous changes that you made as a result of the Jackson review and LAPSO, introduced in April 2013, what happened then to premiums and savings made”? I repeat the figures I outlined in Committee. Insurers have saved £8 billion in claims costs between 2010 and 2016. The figure to date is £11 billion. But premiums have gone up from £385 in the second quarter of 2013 to £493 in the last quarter of last year, according to the ABI’s own premium tracker—an increase of 28% since the LASPO changes. Would not a genuine claimant ask, “Can the Government just make sure that the premiums will actually come down so that my compensation that I should have got will in fact be reallocated in lower premiums to everybody else, and not in higher profits for the insurance companies”?
Unfortunately, the legislation at the moment is unable to ensure that. There is nothing wrong with higher profits. Pension funds need them—I recognise that. But this is genuine claimants’ compensation that we are asked to redistribute in this way. I agree with the principle mentioned by the noble and learned Lord, Lord Brown of Eaton-under-Heywood, that this is a policy decision. For the reasons I have outlined, I do not think that we have reached the point—although the time is fast approaching—to so affect genuine claimants and their understanding in the waiting rooms of our courts throughout this country of what a justice system should deliver. More can be done, so unfortunately, at this time, I cannot support the Government.
As this Bill has progressed, I have repeatedly pointed out that the tariff levels proposed by the Government lack any substantive justification. It remains entirely unclear why these specific amounts have been chosen. What is clear, of course, is that they are very substantially lower than the amounts currently awarded. What is also clear is that they require genuine claimants to suffer a very large reduction in damages in order to try to reduce the incidence of alleged fraud or unmeritorious claims. The incidence of such claims is highly contested and relies, in part, on data that unhelpfully categorises dropped claims as probably fraudulent.
The noble Lord, Lord Faulks, if I heard him correctly, asked if there can be any doubt about the incidence of whiplash claims. The answer is yes; such a doubt exists, for example, in the House of Commons. The House of Commons Justice Select Committee discussed the question in its report of
“we are troubled by the absence of … data on fraudulent claims and we find surprising the wide definition of suspected fraud that is used to collate the ABI’s statistics. In particular, the failure by the ABI to break down their figures by the nature and type of claim, and to isolate RTA PI claims broken down by type of road user, is a significant and regrettable omission that weakens their evidence base”.
The committee went on to recommend that,
“in the interests of accuracy, the Government work with the ABI to develop a more nuanced approach to avoid conflating innocent—if unexpected—consumer behaviour with fraudulent activity”.
It seems wrong in principle to look to genuine claimants to pay for what may reasonably be characterised as, at least partially, a failure of the insurance industry’s own practices. The long-standing practice of no-med settlements springs to mind here.
The Government’s proposals would also create serious anomalies, as mentioned at Second Reading and in Committee, and as the noble and learned Lord, Lord Woolf, has again mentioned today. A whiplash injury of 24 months’ duration suffered at work would attract damages of up to £6,500. Under the Government’s proposed tariff, that injury would attract £3,725 in a road traffic accident, which is obviously undesirable and unjust. Finally, as far as I can see, the Government’s forecast reduction in the cost of fraudulent claims takes no account of dishonest claimants trading up. The Government’s proposed tariff may well deter small claims, but it may equally encourage dishonest claimants to attempt to move up the duration ladder to compensate.
I believe that we should remove Clause 2, which would leave the determination of damages where it currently is, with the judiciary. It would give the Government and the insurance industry time to reflect further on how better to assess the level of fraud and time to work out how to reduce it without unreasonably burdening genuine claimants, creating unacceptable and unjust anomalies in awards and creating incentives for larger dishonest whiplash claims.
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
“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.
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.
As the noble and learned Lord, Lord Brown of Eaton-under-Heywood, pointed out, we are dealing here with a policy that requires deterrents and with a political question. The law is replete with policy reasons for excluding damages for negligence in particular cases, and the noble and learned Lord, Lord Brown of Eaton-under-Heywood, referred to the case of Caparo industries, where the court referred to the test of what is fair, just and reasonable in particular circumstances. So there is nothing exceptional about this.
At one point, the noble Lord, Lord Pannick, intervened on the noble Earl, Lord Kinnoull. He began by asking: is there any other area in which the Executive rather than the judiciary fix damages in a civil claim? Even as he asked the question, it obviously crossed his mind that there might be, and so he added the rider, “I expect they are really rather unusual”. The obvious example here is damages for bereavement. It is a very interesting analogy because, again, how do you fix damages for bereavement? It becomes a policy issue, just as when you are dealing with minor physical injuries and minor loss of amenities suffered by reason of a road traffic accident whiplash injury. There may be scope for a policy decision as to what damages should or should not be available. We are not taking damages away from Peter to pay Paul. We are essentially taking a policy decision that there should be a tariff for this form of injury to deal with a very real policy issue.
It is a policy issue which, as the noble Lord, Lord McNally, alluded to, has been under consideration for at least seven years—indeed longer, I believe, because it goes back to before 2010 and to the last Labour Government, who also felt that this matter had to be addressed. I stress, therefore, that we have not rushed at this matter. I notice that my noble friend Lady Berridge would like us to take it a little more slowly and one step at a time. But age is against me, and I feel we may have reached the point at which we have to move with the pace of a snail.
Let me go over the background for a moment. The Access to Justice Act 1998 was extremely well-intentioned but encouraged a proliferation of no-win no-fee conditional fee agreements. That fed large amounts of money into the personal injury claims market, with little or no risk, frankly. To bring back control, the Government, largely by implementing the Jackson reforms in Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, introduced a ban on referral fees and rebalanced no-win no-fee deals so that claimants had a financial stake in the costs involved in handling their claim. These reforms had an impact and insurance premiums went down, but an adaptable market found new ways to sustain high levels of claims and premiums rose again. Further reforms in subsequent years improved the independence and quality of medical evidence through the introduction of the MedCo system, which I believe is widely supported. Legislation also banned lawyers from offering gifts and cash to encourage whiplash claims and introduced a power for the court to strike a personal injury claim out in its entirety in cases of fundamental dishonesty. However, the case had to be taken to court, with evidence laid and considerable legal expense engaged in, before you could achieve that result in one case, let alone 600,000.
These measures have helped, but the number of whiplash claims remains too high. That is why the Queen’s Speech confirmed legislation to meet our manifesto commitment to reduce the cost of insurance for ordinary motorists by cracking down on exaggerated and fraudulent whiplash claims. It is why this Bill now provides for a tariff of predictable damages for pain, suffering and loss of amenity. In my respectful submission, it is the only reasonable way forward. The tariff applies to all whiplash claims with an injury duration of up to 24 months on an ascending scale. We believe that those levels are fair and proportionate to genuine claimants but should work to disincentivise unmeritorious claims and reduce the cost to the consumer. I emphasise that we are dealing with claims where pain and suffering and loss of amenity has a duration of less than 24 months. We are not dealing with major, catastrophic personal injury.
It is surely right that the levels of compensation should be set by the Lord Chancellor in circumstances where it clearly is a policy decision to deal with a very real problem. Having a tariff in regulations will provide a degree of flexibility to allow them to be reviewed. We have of course indicated that it would be our intention to look at the tariff regularly. The bottom line is this: this Government—and, frankly, previous Governments—have an obligation to ensure that there is real reform in this area. We cannot continue with the present situation. While previous action has attempted to tackle the problem of whiplash claims, the adaptive nature of the personal injury sector has meant that those reforms have not been nearly as effective as one might have hoped. The enduring scale of the problem justifies giving the role of setting the tariff to the Lord Chancellor. I suggest that that is a carefully targeted approach to deal with a specific and enduring problem. It is not a widespread challenge to the judicial role under the common law with regard to damages; it is focused.
The current system, which utilises the Judicial College guidelines, has in our view led to compensation levels that are out of step with the level of pain and suffering endured as a result of these injuries. That is why we consider that we should step in with a tariff system. The system is not unique. Variations on a tariff system have been deployed in Spain, France and Italy, with levels set by the Government. I have just mentioned the Judicial College guidelines, which are clearly based on reference to decisions by judges. But the Judicial College itself includes representatives of claimants’ lawyers and defendants’ lawyers. These are not the only guidelines used by lawyers involved in the settling of claims of this kind; other guidelines are referred to as well.
In addition to fixing the tariff, we have made provision for an uplift in exceptional cases. We consider an uplift of 20% appropriate and a reasonable increase where there are exceptional circumstances. Again, I notice that it is consistent with European jurisdictions such as Italy, where a similar tariff and uplift is in operation.
In referring to the uplift, I should also like to speak briefly to Amendment 25, which is a technical government amendment. It aims to tighten the drafting of the Bill to clarify our intent with regard to the circumstances that might be considered exceptional by the court when it determines whether to apply an uplift. It captures both where the injury itself is exceptionally severe or where the circumstances of the injured party increase the pain, suffering or loss of amenity caused by the injury, and where those circumstances are exceptional to the particular claimant.
Amendment 20 in the names of the noble Lords, Lord Marks and Lord Sharkey, and Amendment 29A, as proposed by the noble Lord, Lord Beecham, would provide the court with complete discretion in increasing the tariff payments in exceptional circumstances. Together with Amendment 10, in the names of the noble Lords, Lord Sharkey and Lord Marks, they aim to place the tariff amounts in the Bill, rather than in regulations. However, as I have indicated, we do not consider that the appropriate way forward. The Government are clear that the tariff must be fair and proportionate. However, we believe that these amendments and an uncapped uplift would only encourage more claimants routinely to request a hearing for an uplift, and would therefore remove the overall objective of this policy.
Noble Lords will be aware that we have tabled an amendment which proposes that a review of the tariff must be undertaken no later than three years after the date that it first comes into force and every three years thereafter. That will ensure that the Lord Chancellor is required to publish a report in respect of each review, which is to be laid before Parliament.
I want to touch on Amendment 12, spoken to by the noble and learned Lord, Lord Judge. We consider this amendment helpful. It seeks to introduce a requirement for the Lord Chancellor to consult the Lord Chief Justice before setting the tariff. Within the framework of the Lord Chancellor setting the tariff through regulations, the Government agree that introducing this requirement would be helpful to ensure that we can reflect the views of the judiciary and we therefore propose to bring forward at Third Reading an amendment to require the Lord Chancellor to consult the Lord Chief Justice before setting or amending the tariff.
Amendments 6, 7 and 8 restrict the scope of the tariff provisions by reducing the injury duration of affected claims from two years to 12 months. We are not in favour of such a reduction. We consider that the tariff should cover claims of up to two years’ duration. First, that will ensure that the majority of all whiplash claims are captured by the measures in the Bill. Secondly, if we do not do this, it would have the negative effect of encouraging unfair pressure on medical experts to inflate prognosis periods in claims to move a number of claims out of the tariff and into the more expensive fast-track process. In doing so, it would effectively remove the underlying policy reasons for the entire proposal. In addition, a duration of two years is consistent with the Judicial College guidelines, which indicate that minor orthopaedic neck injuries are those where full recovery is within three months and up to two years on an ascending scale. We consider it appropriate for the period of 24 months to remain.
Amendment 9, tabled by the noble Lords, Lord Sharkey and Lord Marks, is a simple provision aimed at further explaining the meaning the duration of the whiplash injury in Clause 2(1), but we believe that essentially this is covered already in Clause 2(1)(b).
Without delaying matters for too long, I hope noble Lords will understand the Government’s position on these issues. We cannot accept the amendments proposed, particularly those that seek to affect the reasonable and necessary aim of this whole policy. We are concerned that the amendment which would remove Clauses 2 and 3 from the Bill would in effect tear the bottom out of it; it would remove its raison d’être. It would frustrate our manifesto commitment to reduce the cost of insurance for ordinary motorists by cracking down on exaggerated and fraudulent whiplash claims. I hope that in those circumstances, while I intend later to move government Amendments 19 and 25, the noble and learned Lord, Lord Woolf, will withdraw his amendment.
My Lords, we have had a good debate and all the points have been explored, so I shall not detain your Lordships for long by seeking to review the evidence which has been given, in excellent speeches, on behalf of both sides of the argument. However, there is a serious point to make. I would suggest that the vital feature at the core of my case for deleting Clause 2 is very clear: it results in injustice and it is known to result in injustice. Indeed, no one can deny that it results in injustice. There has never been a case where legislation deliberately introduces injustice into our law. It may be that it is only in regard to small claims, but surely it is important that we pause before we do that.
If one is in any doubt about the consequences of the injustice, they were set out in the excellent speech of the noble Baroness, Lady Berridge. She described the people who will be affected by the injustice. The thing about justice is that it depends on the public supporting the courts. If the courts are required to take a course which involves doing the sort of thing that the noble Baroness has identified, we will regret that for a long time. It is fortunate that there is no precedent for deliberately introducing this sort of prejudicial situation to our justice system. For that reason, I will seek the opinion of the House.
As regards the point made about the manifesto, I must confess that I have not studied the document in question, but I feel confident in saying that what it does not set out is that there has to be legislation which does what I am complaining about; that is unique. I do not think that any party would want to put into their manifesto a situation where they would tackle an abuse in the way described, especially if it is a situation where various steps are being taken, as they are being taken in this Bill, which may reduce the dimension of the problem.
I believe that I have to say that I will seek to press Amendment 18 to a vote, but at this point I beg leave to withdraw Amendment 6.
Amendment 6 withdrawn.
Amendments 7 to 10 not moved.
If Amendment 10 had been agreed, I would not have been able to call Amendments 11 or 11A by reason of pre-emption.
If Amendment 11A had been agreed, I would not have been able to call Amendments 12 to 17A by reason of pre-emption.
Amendment 12 not moved.
Moved by Lord Keen of Elie
13: Clause 2, page 2, line 38, after “injury” insert “or injuries”
14: Clause 2, page 2, line 44, after “injury” insert “or injuries”
15: Clause 2, page 3, line 2, after “injury” insert “or injuries”
16: Clause 2, page 3, line 8, after “injury” insert “or injuries”
Amendments 13 to 16 agreed.
Amendments 17 to 17B not moved.
Division number 2
Moved by Lord Keen of Elie
19: After Clause 2, insert the following new Clause—“Review of regulations under section 2(1) The Lord Chancellor must carry out reviews of regulations made under section 2.(2) The first review must be completed before the end of the period of three years beginning with the day on which the first regulations under section 2 come into force.(3) Subsequent reviews must be completed before the end of the period of three years beginning with the day on which the previous review was completed.(4) The Lord Chancellor must prepare and publish a report of each review.(5) The Lord Chancellor must lay a copy of each report before Parliament.”
Amendment 19 agreed.
Clause 3: Uplift in exceptional circumstances
Amendment 20 not moved.
Moved by Lord Keen of Elie
21: Clause 3, page 3, line 31, leave out “a whiplash injury” and insert “one or more whiplash injuries”
22: Clause 3, page 3, line 32, after “injury” insert “or those injuries”
23: Clause 3, page 3, line 34, leave out “a whiplash injury” and insert “one or more whiplash injuries”
24: Clause 3, page 4, line 2, after “injury” insert “or injuries”
25: Clause 3, page 4, line 3, leave out paragraph (b) and insert—“(b) it is the case that—(i) the whiplash injury is, or one or more of the whiplash injuries are, exceptionally severe, or(ii) where the person’s circumstances increase the pain, suffering or loss of amenity caused by the injury or injuries, those circumstances are exceptional.”
Amendments 21 to 25 agreed.
Amendments 26 and 27 not moved.
Moved by Lord Keen of Elie
28: Clause 3, page 4, line 15, leave out “a whiplash injury” and insert “one or more whiplash injuries”
29: Clause 3, page 4, line 17, leave out “a whiplash injury” and insert “one or more whiplash injuries”
Amendments 28 and 29 agreed.
Amendments 29A and 30 not moved.
Amendment 31 had been renumbered as Amendment 29A.
Clause 4: Rules against settlement before medical report
My Lords, Amendments 32 and 39 return to the issue of cold calling, the problems of which we have debated on many occasions in this House. Our latest attempts to curb the menace of cold calling became law with the passing of the Financial Guidance and Claims Act, but, despite frequent debates and new laws, there remains significant uncertainty as to whether our current set of regulations is as effective as it should be. In particular, as we said in Committee, we are concerned at the extent to which cold calling will continue to drive fraudulent claims for RTA whiplash injuries. The Commons Justice Committee shares these concerns. Paragraph 133 of its
“We conclude that the Government’s current package of reforms creates a risk of increasing cold calling by, or on behalf of, CMCs; we welcome the restrictions on cold calling in the Financial Guidance and Claims Act, but believe they do not go far enough and that an outright ban should be introduced. In the meantime, we recommend that the Government monitor the effectiveness of the proposed restrictions, particularly on calls from overseas, and that technical remedies are urgently explored to tackle any loopholes that might be exploited by overseas operators to circumvent the restrictions; we ask that the Government report to us on progress with this within a year of the proposed restrictions being implemented”.
In Committee we discussed amendments that would require an assessment of the real-world effect of all the current regulations trying to prevent cold calling. We also discussed the possibility of trying to cut off the revenue streams of cold callers by banning the commercial use of data so collected. I think that the Minister understood our concerns: he acknowledged, as he did again this afternoon, what he referred to as, “the problem of regulating the unregulated”. He mentioned that the Government were seeking to approach this problem by regulating the use of material gathered by cold calling, and we entirely support this approach. There is a widespread unease that we have not really cracked this problem yet—and I believe that the Minister shares at least some of this unease.
Our Amendments 32 and 39 do two things. First, they give the Minister the opportunity to address the House once again on the issue of whiplash and cold calling. Secondly, they propose yet another method of coming at the problem of cutting off the revenue stream of cold callers. Clause 4 sets out new rules against settlement of whiplash claims before medical report. Amendments 32 and 39 extend these rules to cover whiplash claims arising from cold calling. Amendment 32 does this by making it a breach to settle without seeing appropriate evidence that the claim does not arise from cold calling. Amendment 39 allows the Lord Chancellor to specify the form of any evidence required to demonstrate that the claim does not in fact arise from cold calling. Both amendments mirror the provisions in the Bill to ban pre-med settlements.
I realise, as I think we all do, that clamping down on cold calling is a difficult and complex business—but it is also vital. I hope that Amendments 32 and 39 will suggest to the Government a way forward in their attempts to cut off revenue streams and I very much look forward to the Minister’s reply. I beg to move.
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.
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.
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.
“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”.
My Lords, the amendments in this group all relate to either the provision of medical reports in relation to the ban on pre-medical offers for whiplash claims or the cold-calling provisions.
I start by reassuring noble Lords that the cost of medical reports is already recoverable in personal injury claims where the defendant insurer has admitted any part of liability. They will continue to be recoverable following these reforms, including in the small claims track following the proposed increase of the limit to £5,000.
The amendments in the names of the noble Lord, Lord Beecham, and the noble Baroness, Lady Chakrabarti, place the requirement for medical reports to be,
“provided by an accredited medical expert selected via the MedCo Portal”, or other experts specified by the Lord Chancellor in regulations. Currently, the Civil Procedure Rules require any initial medical report in support of a whiplash claim to be sought through the MedCo IT portal, which, as noble Lords will be aware, was established to improve the independence and quality of medical reporting. The Civil Procedure Rules also require that all MedCo medical reports must be provided by an accredited medical expert.
These provisions were made through the Civil Procedure Rules for a reason. The Civil Procedure Rules are flexible and their use allows for rapid responses to changed circumstances. MedCo is an industry-owned and operated company, and it would be very unusual to enshrine the purposes of such an organisation in the rigid structure of primary legislation. MedCo was formed to take forward government policy in relation to medical reporting. However, circumstances may change, as could MedCo’s role. Alternative accreditation schemes may be added or it may become necessary to appoint another organisation to operate the current process. Were the use of the excellent MedCo process to be put in the Bill, the ability to respond to such changed circumstances would be lost, and genuine claimants could suffer as a result. I therefore urge the noble Lord, Lord Beecham, not to press his amendments.
Amendments 32 and 39, in the names of the noble Lords, Lord Sharkey and Lord Marks, seek to add a requirement relating to claims sourced through cold calling to the Government’s prohibition on the making or seeking of settling whiplash claims without medical evidence. While I fully understand the noble Lords’ motivations in tabling these amendments, I believe it would not be appropriate to widen the ban on seeking or offering to settle a whiplash claim without the claimant first seeking medical evidence to also include claims which may have been sourced via a cold call. This could discriminate against genuinely injured claimants.
Noble Lords will be aware that not all cold calls are illegal. The Financial Guidance and Claims Act 2018 introduced a ban on cold calling made by any person in which the call relates to claims management services, including personal injury, except where the customer has consented to such calls. This will reduce the number of uninvited nuisance calls received by consumers and will be enforced by the Information Commissioner’s Office. As well as government action to curb cold calling in relation to claims management services, lawyers are already banned by the Solicitors Regulation Authority’s code of conduct from undertaking cold calling.
The Government are of the view that these measures, taken together with the new rules imposed by the general data protection regulation and the Data Protection Act 2018, mean that consumers will receive far fewer unwanted calls from CMCs than they currently do. Although they are well meaning, these amendments could both impact on genuine claimants and place additional requirements and burdens on regulators, which will already be taking firm action to ensure compliance with government policy in this area. The 2018 Act also introduces a tougher regime for claims management companies, by transferring responsibility for their regulation to the FCA. The FCA has a wide range of enforcement powers, and I take this opportunity to point noble Lords towards a detailed consultation published just last week by the FCA, which spells out the rigorous steps it proposes to take in future in relation to regulating CMCs.
The Government agree that social nuisances such as cold calling must be curbed, but replicating actions already enshrined in other legislation is not the way to do it. While I appreciate noble Lords’ intent, I respectfully request that they withdraw or not move their amendments.
I thank the Minister for her reply about cold calling. It is a pity because, as I said in moving Amendment 32, there is a widespread feeling that things are not working. I hesitated to say this in the previous debate but I got three calls over the weekend—I thought it might be more appropriate to mention that now rather than earlier. There is a common unease, as my quoting the report from the House of Commons Justice Select Committee shows.
It may get better, and I hope it does, but, as I am sure the Minister knows, I was deeply involved—as was the whole House—in trying to craft regulations in the then Financial Guidance and Claims Bill, which were substantially watered down when they reached the Commons. When they left here, they were much stronger than they turned out to be after the other place had had its way with them. Again, that seems to reinforce the possibility that actually we have not yet got a grip on this. I ask the Government to reflect on whether or not the current package of regulations is going to work and exactly how we will monitor its working. In particular—addressing the point the noble and learned Lord, Lord Keen, made a moment ago—given that these factories in Pakistan can generate a million calls a day, then close down and reopen next door as another, separate legal entity, how are we going to deal with that if not by cutting off the revenue? I would welcome a conversation—perhaps not on the Floor of the House—about what progress we think we have made in the existing regulations in cutting off the flow of the revenue. In the meantime, and pending that kind of conversation, I beg leave to withdraw the amendment.
Amendment 32 withdrawn.
Moved by Lord Keen of Elie
40: Clause 4, page 5, line 6, leave out “a whiplash injury” and insert “one or more whiplash injuries”
41: Clause 4, page 5, line 6, after “person” insert “on a particular occasion”
42: Clause 4, page 5, line 8, after “injury” insert “or injuries”
43: Clause 4, page 5, line 8, after “(a)” insert “suffered by a person on a particular occasion”
44: Clause 4, page 5, line 10, after “injury” insert “or injuries”
Amendments 40 to 44 agreed.
Amendment 45 not moved.
Clause 6: Regulation by the Financial Conduct Authority
Moved by Lord Sharkey
46: Clause 6, page 6, line 2, at end insert—“(4A) The Treasury must, within one month of the passing of this Act, make further regulations specifying that the Financial Conduct Authority is to require all insurers holding a licence to offer UK motor insurance to publish a report—(a) on the loss cost savings achieved as a result of the provisions of Part 1 of this Act, and(b) how, and the extent to which, such savings have been applied to reduce motor insurance premiums.(4B) The first such report from insurers must cover the period of 12 months beginning with the first day of the month immediately after the commencement of Part 1 of this Act and must be sent to the Financial Conduct Authority by the end of the period of 15 months beginning with the commencement of Part 1 of this Act.(4C) The regulations must grant the Financial Conduct Authority the power to require further reports on an annual basis. (4D) The Financial Conduct Authority, within the period of 18 months after the commencement of Part 1 of this Act, must make and publish a reasoned assessment of whether it is satisfied that each such insurer is passing on to customers any cost benefits arising from Part 1 of this Act.(4E) The regulations under subsection (4A) must make provision for the Treasury to grant powers to the Financial Conduct Authority to enforce a requirement for insurers to pass on loss cost savings, achieved as a result of the provisions of Part 1, from insurers to consumers through a reduction in the cost of premiums if, after the period of 30 months following the commencement of this section, the Financial Conduct Authority advises the Treasury that such powers are necessary.”
My Lords, Amendment 46 is in my name and those of my noble friend Lord Marks, the noble Earl, Lord Kinnoull, and the noble Lord, Lord Beecham. I am grateful to them all for their support. The amendment addresses the question of pass-through. How much of the savings generated for insurance companies by whiplash reforms would in fact be passed on to motorists, in the form of reduced premiums?
Most of the insurance companies wrote to the Lord Chancellor in March. The penultimate paragraph of their letter said that,
“the signatories to this letter today publicly commit to passing on to customers cost benefits arising from Government action to tackle the extent of exaggerated low value personal injury claims and reform to the personal injury Discount Rate”.
There would obviously need to be clarity about: the definition of a cost benefit; whether all customers would share the promised distribution or just those with motor insurance; and how the savings would be passed on. This might be in lowered premiums or just the promise of lower than expected premiums in the future, for example.
“Potential savings to motor insurance customers are central to the policy justification for these reforms, but we conclude that the Government’s estimate of the pass-through rate may be over-optimistic, given the lack of robust evidence and the unenforceable nature of insurers’ promises to reduce premiums”.
The committee recommended that,
“if the reforms are implemented, the Government work with the ABI and either the Prudential Regulation Authority or the Financial Conduct Authority to monitor the extent to which any premium reductions can be attributed to these measures and report back to us after 12 months”.
Our amendment would require the Treasury to make regulations specifying that the FCA would require all motor insurers to publish a report on the savings made as a consequence of the whiplash reforms in the Bill, and how and to what extent these savings have been applied to reduce motor insurance premiums. It specifies the period to be covered by these reports as 12 months after commencement and how long the insurance companies would have to submit reports to the FCA, which would be three months. The FCA would then have a further three months to make and publish a reasoned assessment of whether the insurers have made the promised passed-on savings. The amendment also gives the FCA the power to request further reports from insurers annually as it sees fit. Finally, it would ensure that the FCA has the power to force the insurance companies to pass on savings if they have not done so, or done so sufficiently, within 30 months of commencement.
I think most if not all noble Lords would agree that the insurers should be held to their promise. To do that, we need to monitor and assess whether they have in fact held to their promise and, if they have not, to have the power to force them to do so. To do these things requires a tough and experienced regulator. Only the FCA has the resource, reputation, toughness and experience to be the regulator to do that, which is why this amendment gives it the job.
I know that the Minister feels strongly that insurers must be held to their promise and I realise that achieving this may be a rather complex matter. However, it is critical that we achieve it. It would be absolutely scandalous if savings made by insurers as a consequence of the Bill were retained by insurers. Amendment 46 sets out a method by which we can hold insurers to account for their promises. I beg to move.
My Lords, we have on several occasions referred to the savings under these measures, which will be passed on to consumers by motor insurers. I understand that a number of Peers clearly have concerns about ensuring that this actually occurs.
I should say that the Government hold firm that the highly competitive nature of the motor insurance sector will mean that insurers have little or no choice but to pass on savings to consumers or risk being priced out of the market. An in-depth investigation by the Competition and Markets Authority in 2012 found that the motor insurance market is highly price-sensitive, driven by low levels of market concentration and high levels of penetration by price comparison websites. Resulting estimates indicate that 85% of insurance savings from whiplash measures will be passed on to the consumer. Finally, as the noble Lord, Lord Sharkey, observed, motor insurers providing cover to 84% of the UK market have already written to the Lord Chancellor to make the welcome commitment that they will pass on any savings.
That said, the Government are not unsympathetic to the underlying intention of Amendment 46, as tabled by the noble Lord, Lord Sharkey. The point is that having made a firm commitment, insurers should be accountable for meeting it. It is, however, important that any amendment in this regard is drafted with care so that it is effective but does not also impose requirements that push beyond the recognised remit of regulators such as the Financial Conduct Authority. I also observe that we must ensure that any legislative requirement in this area does not infringe on the very important area of competition law.
I therefore confirm that the Government will accept the views of Peers and develop an amendment, to be tabled in the House of Commons, that meets these requirements and provides an effective means for reporting on the public commitment made by the insurance sector, showing that it results in savings being passed on to consumers and thereby holds insurers to account. This is quite a complex and delicate process and it is ongoing at present.
I add only one further matter. Requiring a report to be made within 12 months of commencement is not likely to be the best way forward because claimants have a three-year period in which to make claims. After the Bill receives Royal Assent, there will therefore be an overhang for up to three years of claims that fall outwith the requirements for the tariff to be applied. We will have to look carefully as well at what point it would be appropriate for a report to be made and laid before Parliament. However, that is under active consideration and, in light of that indication, I hope the noble Lord will consider it appropriate to withdraw his amendment.
My Lords, I am very grateful for the Minister’s answer and encouraged by it, too. I take the points about being careful on competition law and the period over which we assess the insurance companies’ return to the people they insure. I will follow with interest the progress of a government amendment as it goes through the House of Commons. Having said that, I beg leave to withdraw the amendment.
Amendment 46 withdrawn.
Moved by Baroness Hayter of Kentish Town
47: After Clause 7, insert the following new Clause—“Restriction on increase in small claims limit for relevant personal injuries(1) In this section, the “PI small claims limit” refers to the maximum value (currently £1,000) of a claim for damages for personal injuries for which, in accordance with Civil Procedure Rules, the small claims track is the normal track.(2) Civil Procedure Rules may not increase the PI small claims limit in respect of relevant injury claims to an amount above £1,000 for the first time unless—(a) the Lord Chancellor is satisfied, and has certified in writing, that on the day the rules are to come into force, the value of £1,000 on
My Lords, Amendment 47 stands in my name and those of my noble friends Lord Bassam, Lord Beecham and Lord Monks. We need this amendment because, on the back of wanting to take action on what are claimed to be fraudulent whiplash claims, the Government propose to remove legal help from a swathe of people with genuine personal injury claims. This is not simply unnecessary but wrong.
When the Government introduced fees in employment tribunals, the absence of legal advice and representation frightened many away from taking cases to court and we saw a drop-off of some 90%. In family courts, where legal aid was largely withdrawn, we have again seen the difficulties when people are unrepresented. Denying legal advice undermines the commonly held view—I thought it was commonly held—that justice should be open to all and not just to those able to pay.
The Government are proposing to double the tariff below which legal aid is recoverable, such that only claims officially above £2,000—or £5,000 for road traffic cases, which is a fourfold increase—will be taken under the fast-track procedure and thus be eligible for cost recovery. I say “officially” because the measure of whether a case falls within the small claims track is calculated only on the potential award for general damages or pain, whereas losses and expenses, the so-called special damages, are outwith the calculation. So, for example, if general damages are worth £900, the claim goes into the small claims track at the moment, even if wage losses were, say, £700, bringing the £1,600 total above the small claims limit. In future, any claim for general damages below £2,000, or £5,000 for RTAs, will have to be dealt with by the small claims procedure, even if the total is above that, with legal costs then not being recoverable. Yet for these sorts of amounts, paying privately for advice would never make economic sense. It would take too big a sum from whatever was awarded.
We have to ask why the Government are doing this. The £1,000 limit has been with us since 1999. Since then, using, say, the RPI index, there may be a case for uplifting to, say, £1,500, but no higher. Indeed, Lord Justice Jackson supported a £1,500 limit when inflation justified it. Last month, the Justice Committee concluded that,
“increasing the small claims limit for personal injury (PI) creates significant access to justice concerns”, and “risks falling short of” guaranteeing,
“unimpeded access to the courts”.
The Minister might not think that a £500 difference is very great, but it is for a nurse, a bus driver or a care worker and, indeed, it represents 50 hours’ work for those on the minimum wage, exactly the sort of people mentioned by the noble Baroness, Lady Berridge, on an earlier group. The Government are proposing that people with claims under £2,000—potentially substantially more with loss of earnings—take on insurers with no paid legal help. It is no good the Minister responding that they can always swap tracks if the case is perceived to be complex, as he said in Committee, because you only know if a case is perceived to be complex if a lawyer has told you that, and you will not have a lawyer at that point.
These cases are where the consumer—in case the Minister wonders why I am here, it is because I am in my consumer role, rather than my Brexit role; he might have thought there was a European aspect—is always the small guy up against the big one, with disparity of power, according to the Transport Committee, or an asymmetric relationship in Lord Justice Jackson’s words. That is why until now the limit has been kept deliberately low.
These changes will affect not simply whiplash claims. The increase in the small claims limit to £2,000 will affect cyclists and pedestrians, and I declare my interest as both, although the idea that I am likely to suffer whiplash is rather absurd. Not only does whiplash not affect such claimants, but there is no suggestion of false claims from such non-whiplash claimants.
Here we have a Bill to deal with whiplash, but the Government are taking action on the limits which flies in the face of advisers and is unrelated to whiplash or fraud, but will affect tens of thousands of people a year. Furthermore, the Government have offered no justification for increasing the small claims limit in all road traffic accidents, not just whiplash, to £5,000, which could capture perhaps nine in 10 of all RTAs, leaving them effectively without legal representation. The changes will also affect employment injury claims. Again, there is no suggestion of fraud or misuse of the courts, and the amounts are significant to low-paid workers, exactly those least able to pursue a claim without legal advice or representation.
Of the cases handled by trade unions—remember that many of the very low-paid are not even in trade unions, but they still need legal advice—of the half that were dealt with by Thompsons, nearly one in five were below £2,000. Some of those who are injured will try to pursue their own claim with no legal assistance, but even on the Government’s own figures we know that 133,000 cases will never proceed, just as we saw a 90% drop in ET cases after fees came into being. Yesterday’s MoJ figures show that personal injury claims in county courts fell by 7% in the first quarter, which confirms this trend, as does the DWP compensation recovery unit, where cases dropped 13% in 2017-18. These are serious fall-offs of people with genuine claims who are simply unable to pursue them themselves without legal aid.
Amendment 48, which is also in this group, would ensure that claimants can get advice so that they do not undersettle their claim because they have not fully understood the medical evidence or have been overpressured by insurers. As the noble and learned Lord, Lord Mackay, said, claimants who have to contest an offer by themselves find that very hard to do without legal advice. They simply do not know whether the offer is fair.
We should ask who would benefit from removing legal advice from a swathe of injured claimants. It is clearly not the injured themselves, nor the NHS, which will lose some £6 million a year, but it is possibly the insurers. The impact assessment suggests they could get an extra £1.3 billion, and there is no guarantee that it will be passed on to consumers, although in the light of what the Minister said on the previous amendment I feel some reassurance that that may now be looked at more closely. Perhaps we can see, if not at Third Reading certainly in the Commons, whether the undertakings he has just given would ensure that any such savings are passed on. If it is the insurers who win in these proposals, that hardly accords with the Prime Minister’s promise in Downing Street in July 2016 that her Government would,
“be driven not by the interests of the privileged few, but by yours ... When we pass new laws, we’ll listen not to the mighty, but to you”.
Perhaps that is why she is slipping this change through not in the Bill before us but behind the scenes by asking her Lord Chancellor to order the rule committee to make changes which would deny thousands of people legal help with their claims as a result of changes brought in by statutory instrument.
The Government’s proposed changes are not in consumers’ interests. They will deprive people of legal representation to obtain their rights, which is hardly what Lord Reed wants as he said people should have “unimpeded access” to courts as without that,
“laws are liable to become a dead letter”.
It is right that people who are injured get compensation, but they need to be able to do that with proper advice. We do not accept that reducing access to our courts should be done in this underhand way by this change in limits. This amendment will bring the issue into primary legislation, where it belongs. I beg to move.
My Lords, I rise to support my noble friend Lady Hayter and specifically to speak to Amendments 47 and 48. It is worth saying that we are trying to bring forward and implement part of the Jackson recommendations.
My noble friend Lady Hayter has covered most of the ground better than I could ever dream of doing in making her powerful and persuasive case from the Front Bench. If we could, we would have brought forward a different amendment and found a simpler way of inserting into the Bill a restriction to the Government’s ability to raise the small claims limit for personal injury to £1,500. This amendment, imperfect though it is, goes some way towards tackling that problem. It is our contention that, by raising the limit in the way they have, the Government intend to seriously disadvantage those with an entirely legitimate personal injury small claim and prevent them gaining access to justice and legal advice.
I have no doubt that most of us privileged enough to sit in this House, or in the other place, have little fear of taking on those in authority and power—some of us rather enjoy it. That is not the case if you are a nurse or a teacher, a farm or shop worker, or you work in a factory and have limited spare time, financial resources and ability to tackle issues of personal injury. This amendment seeks to protect those people. As has been said on numerous occasions, the Government are proposing to make changes to the small claims limit, not on the face of the Bill but by other, back-door means. This will impact on hundreds of thousands of people injured through no fault of their own. It will pitch the nurse, the teacher, the shop worker, the factory worker and the land worker against the insurer, on their own and in their own time. The insurers will be able to afford lawyers and wily negotiators, but the injured will be expected to take on these forces with no help whatever.
The Minister, who I am sure is a fair man, may say that the system that deals with this is simple, but it is not designed by those who have to confront it. We all know that there are many who cannot use portals and online means of tackling these issues because they do not have the training or expertise and feel uncomfortable in the online world. The Minister may say that insurers will not fight a case which they know they are going to lose but that does not stop them playing hardball because they choose to. Why would they not, faced with a claimant on their own? Insurers also have a duty to their clients. I trust that the Minister will not say—as he did before the Justice Committee—that claimants can get help from the CAB, because anyone who knows anything about the diminished state of free legal advice services in this country would be only too happy to take him to see how they are struggling and the queues, delays and frustration that are routine.
From this perch, I could recite case after case where insurers have fought injury claims to the bitter end for reasons that frankly perplex lawyers for the claimants. However, we have limited time so I will briefly quote just two of many cases provided to me by Thompsons. One claim involved a care assistant in her early 40s who injured her right elbow and upper arm when lifting a patient. She was using the correct technique but did not have the equipment required to complete the task properly. The employer denied liability throughout and fought the case for more than a year before it was eventually settled for a sum that would have fallen within the new proposed small claims limits. The other case, which would also fall within the new limits, involved a senior staff nurse who tripped over wires that had not been properly protected and covered. Her employers fought the claim right up to the point when the trial was due to begin. Our amendments seek to ensure that those who do not have a corporate lawyer behind them do not fall prey to another racket—the routine denial of claims by insurers, just because they can.
The amendment seeks to ensure that claimants always have advice on the value of their claim so that they do not undersettle. It also provides that, where insurers deny liability, the claimant has someone by their side to advise them and, if necessary, represent them in relation to the issue of liability. It does not propose that the costs recoverable by the lawyer for the claimant are open ended; they will be the same fixed costs that would be recoverable if this case were in the fast track.
As my noble friend Lady Hayter has outlined, the second amendment in this group is specifically aimed at ensuring that those injured can have access to medical advice in their case and recover the cost of medical reports that might be necessary. That is essential and will be a contribution towards ensuring that there is no significant undersettling, which is a major issue in these cases. These amendments are about fairness and equity in the legal process. They may not seem to the Minister to be vast in their extent, but they are numerous. Although they do not always involve large sums of money—which noble Lords may feel uncomfortable talking about—this House has a duty to try to ensure fairness and balance in the legal system. Even at this late stage, the Minister could make a commitment to retaining the limit in accordance with Lord Jackson’s recommendation.
My Lords, I will add briefly to the points that have been made by my noble friends on Amendment 47. I declare an interest: I am associated with Thompsons Solicitors, one of the largest trade union solicitors in the country. In its current form, the Bill will deter claims for personal injury for many vulnerable, low-paid people. The inequality of arms which exists when someone tries to bring a case will be overwhelming for many people. I note from UNISON’s brief—which most noble Lords got—that it did a survey of people it had helped to get compensation. This found that 63% would not have taken the case if they had not had a guarantee of legal support and an opportunity to recover costs. There is an absence of good information about the effects of these changes, so that is probably as good as any. There will be a deterrent effect on this sector of personal injury.
When speaking to an earlier amendment, the noble Lord, Lord Hunt, was rather dismissive of the access to justice argument, which a number of lobbyists have drawn to the attention of those who follow this subject. The information supplied by UNISON and others shows that there will be a lot of people who will not take cases who otherwise would have done under the present limit. On this side of the House, we are looking to temper that kind of approach by the Government. The noble Lord, Lord Hunt, will know from his experience with the Transport and General Workers’ Union—to which he referred—that for low-paid and vulnerable people a period off work for an injury or illness is a big deal. It is not to be assumed that employers will automatically cover the cost. These people experience the cost of illness more than those of us in comfortable jobs.
Amendment 47 seeks to tie the Government to the recommendations made by Lord Jackson in his review of civil litigation costs. These said, in effect, that there should be an increase in the small claims limit only when inflation justifies it. The Justice Committee in the other place very much agreed with that in its recent report. That is what leads to the figure of £1,500, an increase based on changes in the CPI, rather than the £2,000 which the Government are pressing for. I note that the Justice Committee was deeply unimpressed by the inability of the Ministry of Justice to quantify the impact of raising the small claims limit for employer liability and public liability claims to £2,000. That is the crux of the issue addressed by the amendment. I hope that in light of these points, and those made so ably by my colleagues, the Minister will soften a little bit and look at the plight of the people at the bottom, the most vulnerable, those who are struggling, those who lose money when they are ill and off work, and so on. Without labouring it too much, I hope that the Government can see our point rather more clearly than they have done so far.
Lord Justice Jackson’s report was a remarkable document. It exhaustively analysed the entire structure of our civil justice system. It would not have supported the present Government’s position. I would love to read out the Justice Committee’s report—but, if I did, we would be here awfully late and no one would want to hear it. However, can we briefly recognise that the Justice Committee report is not adverse to the Government’s proposal but deals a series of hammer blows, each one individually worth noting?
“We recommend the Government should not increase the small claims limit to … £5,000”.
“There is no policy justification for including vulnerable road users within the reforms proposed”.
“We recommend that they be excluded from any higher small claims limit that is imposed on other RTA PI claims”.
“We are deeply unimpressed by the inability of the Ministry of Justice to quantify”.
And so it goes on. This is not one of those reports with recommendations that obscure their meaning, and perhaps the Minister will consider that as an important feature of this debate.
My Lords, I will not begin with a bang but I will address the points that have been raised.
I begin by pointing out, with great respect, that the noble Baroness, Lady Hayter, may not be entirely correct in some of the propositions she advanced. She said that the £1,000 limit had been with us since 1999. It has been with us since 1991. The small claims limit in respect of claims other than personal injury and housing claims is now £10,000 and operates effectively and efficiently at that level. That has to be borne in mind as well.
The noble Baroness spoke with her consumer hat on and referred to the small guy. Reference was made to the worker with limited ability to deal with his claim. The noble Lord, Lord Bassam, referred to workers being pitched out on their own with no help and alluded to a number of examples given by Thompsons solicitors—I shall come back to that in a moment—of where they were perplexed by the way in which claims were dealt with by insurers. The noble Lord, Lord Monks, said rather modestly that Thompsons solicitors were one of the largest firms of trade union solicitors in the country. They must be the largest by quite a long way. They are well established and have been for many years. Why do we refer to them as trade union solicitors in this context? It is because one of the great benefits of union membership for workers is the availability to them of legal advice and assistance when they require it in respect of a claim, particularly one arising in the course of their employment—which is why legal aid is not available in those circumstances. So, far from the little guy, the worker, being pitched out on their own without any help, they almost invariably have the assistance of probably the largest and most established firm of trade union and personal injury solicitors in the country.
I do not decry that—it is an immediate and obvious benefit—but the disbenefit of increasing the small claims limit is that the extent to which the union will recover its legal costs will be more limited, and that will have an impact on trade unions. I understand that and one has to take it into account in the overall scheme of these provisions.
The noble and learned Lord will probably accept that somewhere in the region of 6 million people are members of trade unions. That leaves a rather larger workforce who are not represented by trade unions. Those employees are in a more vulnerable position than that faced by those who are represented by a union. My guess is—perhaps the noble and learned Lord can help me here—that the majority of people will not be able to access the support they would get if they were a trade union member. So most people who come up against this limit will be affected by that.
I note what the noble Lord says about national trade union membership, and no doubt the unions will try harder to recruit more widely. One of the obvious benefits they can hold out is the provision of legal advice and assistance for those who become members. I accept that there is a balance to be struck.
Amendments 47 and 48 seek to restrict the increase in the small claims track limit for whiplash injury claims to a maximum of £1,500, as opposed to the proposal that there should be an increase to £5,000. They also seek to restrict the ability of the Civil Procedure Rule Committee to make further amendments to the upper limit. As we have indicated before, motor insurance premium costs are increasing as insurers pass on the cost of dealing with the continuing high number and cost of whiplash claims. I referred earlier to the 2017 election manifesto provision that the Government were committed to cracking down on these claims and ensuring that the money saved was returned to consumers through lower premiums. These amendments would maintain the burden on ordinary motorists by restricting the flexibility of the Government to reduce the costs of civil litigation through changes to the Civil Procedure Rules.
Whiplash claims are generally straightforward and do not routinely require legal advice. The small claims track is suitable for such claims. It is designed to be accessible to litigants in person, and the Government are working closely with stakeholders to develop a comprehensive package of guidance and support for users.
The Government have chosen to increase the small claims limit for road traffic accident personal injury claims to £5,000 for good reason. This limit, as I said, has been set at £1,000 since 1991 and, as compensation levels have risen, the small claims track no longer covers the same breadth of claims as it once did. Following consultation, the Government believe that increasing the limit for RTA personal injury claims to £5,000 is a careful and proportionate increase, particularly having regard to the fact that the limit for other claims, with the exceptions I mentioned earlier, is now £10,000. A level of £5,000 will facilitate early and expedited settlement under the proposed tariff structure and will encourage insurers to challenge unmeritorious claims, many of which are not now challenged because of the potential legal costs.
A decision to tie such limits—currently, for good reasons, enshrined in secondary legislation—to a restrictive primary legislative process would be inflexible. The Civil Procedure Rule Committee, under the leadership of the Master of the Rolls, sets out the rules of procedure to ensure that the civil justice system is fair, open and effective. It is the body that sets the financial upper limits for the current three tracks of the civil justice system following consultation. That system has operated effectively for some time. It is flexible and it is appropriate that procedural changes should be made in this way to the civil justice system.
However, we listened to points made earlier about the position of those who are considered to be vulnerable road users. Noble Lords will be aware that they are already excluded from the provisions of Clause 1, and it is proposed that they may be exempted also from the £5,000 limit on the small claims track. We are giving further consideration to that at the present time.
Amendment 48 seeks assurances as to the recoverability of the cost of a medical report in respect of whiplash injury claims, notwithstanding the increase in the small claims track limit. That has been addressed already. The amendment also seeks to change the nature of the small claims track itself by permitting a claimant to recover their legal expenses. We consider that, given the nature of the small claims track for personal injury claims, it would be wholly inappropriate to introduce the recovery of legal expenses. The small claims track was designed to be a low-cost process accessible to litigants in person. The rules have been purposefully and carefully drafted to ensure that both parties share the financial burden of litigation and pay their own legal costs—or, in the case of a union member, have them met by the union. That is a key advantage of the process.
A number of noble Lords have questioned why insurers do not do more to challenge potentially inflated or fraudulent claims, particularly whiplash claims. Part of that answer lies in the cost of defending a claim in the fast track. Increasing the small claims limit so that more of these straightforward whiplash claims—where the insurance industry tells us that liability is admitted in around 90% of cases—are heard in a small claims court will encourage insurers to challenge unmeritorious claims. By contrast, challenging a claim in the fast track is an expensive process that insurers not unnaturally seek to avoid. So there are very clear cost advantages overall in increasing the limits for the small claims track. Where a case is considered to be of a degree of complexity such that it would not lend itself to the small claims track, clearly the court can direct that it should go on to the fast track.
Therefore, in respect of Amendment 48 in particular, the idea of having different cost rules in the small claims court based on the type of claim would create confusion, would undermine the whole purpose of the small claims track and would potentially be unfair to all users of the court system. In these circumstances I invite the noble Baroness, Lady Hayter, and the noble Lord, Lord Bassam, not to press their amendments.
I was very disappointed by the tone of the response. I stand here as the shadow Consumer Minister, talking about consumers, and we get a sort of suggestion that this is all about keeping trade unions happy. As my noble friend Lord Bassam said, sadly there are only 6 million people in trade unions—I wish it was more. It is exactly the low paid and the people who are most vulnerable to this who are not represented by trade unions—but, even if they were, I do not accept that that makes putting up the limit somehow acceptable.
I will not take up time. I acknowledge a movement on vulnerable passengers—for which, as a cyclist and a pedestrian, I am grateful—but I am afraid that the Government’s own figures show that, by their changes, one in four of the people compensated today would no longer be compensated. If on that basis the Minister thinks that we will save costs—in other words, it is injured people who will pay—I do not think that that is good enough. It should be done not behind the scenes but in Bill. I beg leave to test the opinion of the House.
Ayes 169, Noes 183.
Division number 3
Moved by Lord Hodgson of Astley Abbotts
49: Clause 8, page 7, line 31, at end insert—“( ) Rules of court under subsection (1) must draw attention to those aspects of orders for periodical payments which may make them more suitable in cases where individuals receive large sums of damages, have long-term injuries or are risk-averse.”
My Lords, we come to a matter that we discussed at some length in Committee, so I will cut to the chase. An award of damages that will be paid out over a long period—for example, to provide care to someone previously injured in their 20s—is based on two very important assumptions: how long the person will live and what rate of return can be expected from the sum awarded. If the damages are awarded in the form of a lump sum, these two factors assume a particular and increased importance. The first of these factors, the length of time that a person is expected to live, is inevitably based on averages, so if the injured person lives beyond the expected average then there is a risk that the individual will spend the last few years of their life in financially straitened circumstances. As regards the second factor, if the investment performance falls below that which is anticipated then a similar outcome will result.
As we have already discussed, there is a way for the individual to avoid both the longevity risk and the investment risk. He or she can do so by taking the award in the form not of a lump sum but of a periodical payment order, a PPO. Under a PPO, part or all of the award can be paid weekly, monthly, quarterly or whatever to suit the injured party, and paid normally on an inflation-proof basis for the rest of a person’s life. Sadly, though, we have discovered that PPOs appear to be the poor relation as regards the methods of awarding damages. We discussed in Committee the various structural reasons why this was so—the preference of insurance companies for a swift solution and the capital required to back a PPO, the potentially seductive nature of a very large lump sum compared with the more modest amount of a periodic payment and so on.
My amendment is designed to tip the balance more in favour of PPOs, so that in cases where lump-sum damages exceed, say, £1 million and/or the award will be paid out over more than 10 years and/or the individual is of a risk-averse nature, the court should press for the award to be made in the form of a PPO. To be clear, the court should not compel; that would be completely inappropriate. If a person is determined to have a lump sum, a lump sum they must have. However, the court should certainly encourage PPOs. None of this appears to run counter to the wishes of the House of Commons as expressed by the Justice Committee in its report on the discount rate, nor indeed the thinking of the Government as expressed in their response to that report.
So how to achieve this desired result? Giving the Minister the power to make regulations in this area might interfere with judicial independence, so it appears that the only avenue remaining is the use of the Civil Procedure Rules of court, and that may perhaps be a clumsy way to proceed. If my noble friend cannot accept my amendment, and I fear he may be unwilling to do so, I hope he will be able to make a clear and unequivocal statement that the Government favour the increased use of PPOs in the sorts of cases that I have described so that, with the views expressed in your Lordships’ House today and previously in Committee and, no doubt, in due course in the other place, courts can be in no doubt about the will of Parliament in this important matter.
It may be worth while undertaking a review at some future date of whether the use of PPOs is increasing. That might be along the lines of Amendment 89 in the name of the noble Lord, Lord Beecham, to which I have no doubt he will speak fruitfully in a minute or two. In the meantime, though, I beg to move.
My Lords, I should like to say a word in support of Amendment 50, which is in my name and builds on an amendment tabled in Committee by the noble Lord, Lord Faulks, to which I put my name but to which I was unable to speak because at the very moment he rose to speak I was taken out of the Chamber for a business meeting, so I never got to say what I should like to say now.
I have proposed for the noble and learned Lord’s consideration an expanded version of his amendment, and I should like to explain the background to it a little more so that the point is firmly before the House. On page 7, line 32, subsection (2) of proposed new Section A1 provides that proposed new subsection (1), which talks about the duty of the court to take into account the rate of return prescribed by order by the Lord Chancellor,
“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”.
At first sight, that is quite a reasonable provision which the courts might feel able to use from time to time, but, as case law has developed, the door has effectively been shut on any use of the provision in these terms in cases where it is most likely to be wanted, which is those of injury of maximum severity.
In Warriner v Warriner 2002, the Court of Appeal, drawing on points made in Wells v Wells, stressed that on policy grounds there was a need for negotiations to be conducted with reasonable certainty as to the result and to eliminate unnecessary costs and the leading of extensive evidence. Building on the principle stated in Wells, which I of course support, it refused to interfere with the rate of return prescribed. That point was repeated in subsequent cases and more recently in the Court of Session in Edinburgh, where the same principles apply. The Lord President, Lord Carloway, made it clear in the case of Tortolano v Ogilvie Construction Ltd in 2013—Court of Session Inner House Cases, page 10—that there must be something special or exceptional about the case and that the fact that the injuries were catastrophic, which puts the level very high indeed, was not a special or exceptional case factor that would justify departing from the specified rate.
My point is that the Bill repeats almost exactly the wording of the Damages Act 1996, on which the case law has been built. There is one tiny difference. The formula in the 1996 Act was “does not, however, prevent”. In the Bill, we find the slightly different words “shall not, however, prevent”. But the crucial wording, in particular the word “appropriate”, is still there. If the wording of the Bill remains as it is, my concern that it is effectively a dead letter because the courts, following established case law in the Courts of Appeal both north and south of the border, will feel that there is no case for interfering at all, even in the most extreme cases, where, as I have suggested, the need for even more precision and care in the rate of return is most compelling.
There is reason to be a little more generous at this stage. As the noble and learned Lord, is well aware, the basis on which the rate of return is to be struck is to be taken at a slightly different level from that on which Wells v Wells was based. In Wells, the House of Lords used a rate of return that was inflation-proof—adopting a relevant government bond which had that rate of return—to avoid any risk of losing touch with inflation. Now, instead of a very, very low level of risk, there is to be an assumption that more risk will be acceptable than a very low level of risk, although it is less risk than would ordinarily be accepted by a prudent and properly advised individual investor. So there is a change towards a slightly greater element of risk, although not that high. The point is that any change in the level of risk being contemplated raises the possibility that in these extreme cases, the level may fail to achieve what is needed to provide the injured party with what is necessary to compensate them fully for the loss and injury sustained.
Simply to repeat the same formula is unsatisfactory. I was grateful to the noble and learned Lord for agreeing to a meeting the other day at which I was able to explain the point. I think the meeting was left on the basis that an attempt would be made to find a form of words that would not undermine what the Government seek to do but would, at the same time, allow the courts to look afresh at the idea of departing from the rate—although one would of course not want them to do so as a matter of course or have any unnecessary delay or expense in going through these complicated cases just to achieve a different rate. It would have to be a case that really justified such attention.
Some points can be drawn from Wells that may be relevant to my point. First, I was looking at the award in the form of a capital sum—we are talking about that rather than what the noble Lord, Lord Hodgson, was talking about a moment ago—in which the income will not be reinvested. The ordinary investor would reinvest the income to keep the capital sum as inflation-proof as possible, but in our case the income would be used to meet the needs of the injured party. At the same time, the injured party would be drawing on the capital sum, because it is a diminishing fund, the idea being that at the end of the claimant’s lifetime, or when the injuries have finally resolved themselves, there will be nothing left. So we have the extraordinary situation of a sum of money where the income cannot be used to protect against inflation and, at the same time, the sum is reducing. As Lord Lloyd of Berwick pointed out in Wells, if you are having to draw on the capital to meet these costs because the income is not good enough, in a diminishing market, that runs the real risk that the market may not recover sufficiently to bring the award up to the level needed to sustain the injured party for the rest of the period during which that party needs to be sustained. There is a difficult area here: in some cases, particularly if you alter the level of risk, you run into the possibility of the injured party not being fully compensated.
I seek by the amendment to suggest for the noble and learned Lord’s consideration a slightly different formula of words in that critical proposed new subsection that would enable the court to escape from the straitjacket of existing case law in cases that justify a fresh approach. On that basis, I have expanded a little on the formula of the noble Lord, Lord Faulks, to draw attention to the need for this sum to be sufficiently large to meet the needs of the claimant for the rest of the period. It is in that context that I ask the noble and learned Lord to consider my amendment in deciding what best to do to avoid simply repeating a dead letter.
My Lords, I shall speak to my Amendment 73. It is an attempt not to change anything in the Bill, just to avoid some very unfortunate, superfluous wording. At the foot of page 9, it would delete the words,
“who has different financial aims”.
The effect of that deletion is to leave intact the wording cited just now—without what I would say are the offending last words—by the noble and learned Lord, Lord Hope. It leaves intact the wording that an,
“assumption that relevant damages are invested using an approach that involves … less risk than would ordinarily be accepted by a prudent and properly advised individual investor”.
At that point I would put the full stop, as it is clear and sufficient to achieve the intended purpose. Adding on that this prudent and properly advised individual investor “has different financial aims” at best adds nothing, and at worst contradicts the earlier provisions about the basis for the rate of return, which appear in new paragraph 3(2).
There is a whole universe of investors with different financial aims. Which ones are relevant? The Bill gives no indication. Does this mean an override of the basis laid out in new paragraph 3(2)(c) for example, especially that the damages are to be,
“exhausted at the end of the period for which they are awarded”?
Is it saying that the different aim could be capital preservation? It does not exclude that and it does not say that it cannot be, even though the Lord Chancellor may start out with the basis following the wording in new paragraph 3(2). The later wording may imply that it can be tweaked, changed and that it is not fixed.
We probably all understand that the intention is to say, broadly, that more prudence than the norm is necessary because of the vulnerability of recipients, but it is still odd to try and define that with reference to what it is not, and with the only qualification being that it is not this thing that is different. Furthermore, there are among the universe of non-recipients of damages other vulnerable people. Does that mean the assumption has to be that the investment is more prudent than would be accepted by a properly advised and really quite vulnerable person, because that would make a difference to the rate of return that would be decided?
I suppose we can try to hang something on the fact that the provision says “ordinarily” and that this individual investor may therefore be ordinary rather than vulnerable, although that is not what the Bill says. However, it still does not say anything about what their “different financial aims” might be, or are allowed to be, and it still sets up the possibility that the aims encompass difference from those specified in the earlier paragraph.
I will not elaborate any more possible confusions, but these are words that add nothing but uncertainty and are best left out. The rest of the sentence makes the only point needed:
“less risk than would ordinarily be accepted”.
I appreciate that the letter from the Minister after Committee cleared up which was the intended interpretation as between the Bill and the language in the Explanatory Notes. The letter says that it is the Bill’s wording that is intended. That is a regrettable clarification because I thought the wording of the Explanatory Notes, with the extra comma in it—which seems to be what caused the changed interpretation—was actually better.
I can barely suggest that leaving out these words would be a concession because I am not trying to change the outcome, but I hope that at the very least a statement could be made in the Chamber that these words do not provide an override of the conditions laid down in the earlier new paragraph 3(2), to which I made reference. I am sorry to be pedantic but 30 years as a patent attorney teaches me that, if in doubt, leave it out.
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.
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 that 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 to 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.
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.
Ultimately, the prescribed discount rate is an instrument that simplifies proceedings, adds certainty and exists for the overall benefit of all affected litigants—so we have to proceed with some care to ensure that, in so far as we meet concerns or seek to meet concerns raised by Warriner and Tortolano, we do not arrive at a place where parties will almost inevitably engage in litigation simply to see whether they can get a different discount rate. So there is a balancing act to be achieved—and I shall look at that.
Amendment 73 in the name of the noble Baroness, Lady Bowles, also addresses the question of risk, but in the context of the setting of the assumptions to be used in the setting of the rate. The amendment would change one of the assumptions that the Lord Chancellor is required to make in setting the rate about the assumed approach to risk of the hypothetical claimant. Paragraph 3(3) of the new Schedule A1 provides a range of approaches to risk, from which the Lord Chancellor may make a choice as to the appropriate level. The range is relatively broad, I accept. The lower end of the range is more risk than a very low level of risk; that is broadly the familiar level used under the present law. The upper limit is less risk than would ordinarily be accepted by a prudent and properly advised individual investor with different financial aims from those specified in paragraph 3(2). This amendment would remove the assumption that a prudent and properly advised individual investor has different financial aims than the assumed recipient of relevant damages. The effect of the amendment would therefore be to alter the current ceiling as to the approach to risk.
The Government consider that claimants are not ordinary investors. They are assumed in the Bill to be more cautious, and the Bill therefore provides for them to be assumed to take less risk than an ordinary prudent investor with different financial aims. Quite how much less risk will be a matter to be determined by the Lord Chancellor in his deliberations, assisted by the advice of the expert panel, based on the evidence that it gathers. I accept that an ordinary prudent investor could, in principle, have the same aims of a more cautious investor, albeit achieved by different approaches to risk. But it will be for the Lord Chancellor in setting the rate within the legal framework to weigh the evidence of investments and their returns and assess the expected consequences of choosing particular rates within the range against the legal framework. From those judgments, the Lord Chancellor will decide on the appropriate rate. We consider that we have taken the appropriate approach. We do not consider that these words are redundant, and I invite the noble Baroness to consider withdrawing her amendment.
Finally, I address Amendments 73A and 89 in the name of the noble Lord, Lord Beecham. Both look to the future and provide for reviews of how different aspects of the changes to the law relating to compensation for future loss in personal injury cases have worked in practice. As I understand it, Amendment 73A would require the Lord Chancellor to commission the expert panel to review the statutory assumptions on which the personal injury discount rate is to be based, and to review how investors of relevant damages are in fact investing such damages. The review would be commissioned within three years of Clause 8 coming into force and the panel would be required to make recommendations on whether the assumptions should be changed. Amendment 89, which is similar to Amendment 92B, tabled by the noble Lord and the noble Lord, Lord McKenzie, in Committee, would require a review of the impact of the reforms in Part 2 on the making of PPOs. Both amendments clearly have much in common, but I will deal with each in turn.
The Government’s aim is that the application of the assumptions in light of the evidence that has to be considered should produce a fair and evidence-based discount rate. However, we doubt whether the expert panel would be the best body to carry out a review of the appropriateness of the legal assumptions on which the rate is based. We also question whether a three-year deadline allows sufficient time for the effects of the new system to manifest themselves.
On the review of PPOs proposed by Amendment 89, of course we support the use— and the increased use—of PPOs, as I have set out. However, the CJC exists to provide advice to the Lord Chancellor, the judiciary and the Civil Procedure Rule Committee on the effectiveness of aspects of the civil justice system, and to make recommendations to test, review or conduct research into specific areas. It may well be an appropriate body to carry out an intended PPO review, if it is willing and able to do so. Another possibility might be the Law Commission. I also mention that the timing of the proposed review of PPOs—within 18 months of Royal Assent and a report made to Parliament within two years—may again be too soon to identify the real effect of the changes in the legislation, so there is a concern there.
However, I accept that these are matters of detail, and I do not wish to detract from the important concern underlying the amendments, which is that the result of the legislation should be assessed. I make the point that there is already a system for the reviewing of the working of legislation, which involves the gathering of evidence of its effect. The well-established procedure of post-legislative scrutiny will, in our opinion, provide a suitable and effective way to assess the outcome of legislation and to decide whether any further changes are necessary.
This scrutiny is normally carried out three to five years after the legislation in question comes into force. These reviews are carried out by government, which, in the case of legislation affecting general personal injury law, would prepare a report for the Justice Select Committee. Such a review of Part 2 would consider the effect of the legislation in the round rather than just in relation to the assumptions for the setting of the rate or the making of PPOs. The noble Lord will be aware, for example, that a post-legislative review of Part 2 of LASPO is going on. We therefore anticipate that form of review being carried out, but in the timeframe of three to five years, which we consider would be more effective in determining what the impact of these changes has been.
In light of these observations, I invite the noble Lord to consider withdrawing his amendment at this stage.
My Lords, I said that my amendment was designed to tilt the balance in favour of PPOs, and I am grateful to the Minister for his comments. It is good to know that guidance will be rewritten to draw attention to the PPO advantages, and to hear the news that the Lord Chancellor has written to the Master of the Rolls on using the Civil Justice Council to make improvements in that regard. Before I withdraw my amendment, can my noble and learned friend say how long he thinks it will be before the Civil Justice Council produces some results from that discussion and consultation?
I cannot at this stage answer that question. However, I will consider the point and write to my noble friend, and place a copy of the letter in the Library.