We need your support to keep TheyWorkForYou running and make sure people across the UK can continue to hold their elected representatives to account.

Donate to our crowdfunder

Clause 98 - Periodical payments

Courts Bill [Lords] – in a Public Bill Committee at 3:15 pm on 8th July 2003.

Alert me about debates like this

Amendment proposed: No. 155, in

clause 98, page 49, leave out lines 38 to 40 and insert—

'(9) But—

(a) an order linking the periodical payments to the retail prices index shall not be made in respect of damages for the cost of future care or medical expenses; and

(b) in any other case an order for periodical payments may include provision disapplying subsection (8) or modifying the effect of subsection (8).'.—[Norman Lamb.]

Photo of Mr Bill O'Brien Mr Bill O'Brien Labour, Normanton

With this it will be convenient to discuss the following:

Amendment No. 105, in

clause 98, page 50, leave out from beginning of line 20 to end of line 17 on page 51.

Amendment No. 106, in

clause 98, page 50, line 23, at end insert

'save that this provision does not apply to any case in which the injuries involved occurred prior to the date on which the provisions of this Part of the Act comes into force.'.

Amendment No. 108, in

clause 98, page 50, line 30, at end insert—

'( ) An order under this section shall apply only to cases in which it is admitted or proved to be a significant prospect of serious deterioration, or development of a serious further medical complication affecting the relevant party involved, which is admitted or proved to be consequent from the act or omission which gives rise to relevant cause of action, as identified by the medical evidence before the court.'.

Amendment No. 107, in

clause 98, page 50, leave out lines 42 and 43.

Photo of Mr Nick Hawkins Mr Nick Hawkins Conservative, Surrey Heath

I am delighted to have caught out the hon. Member for North Norfolk for once; he did not appear to be ready to speak to his amendment. I am sure that he is regretting the absence of the hon. Member for Somerton and Frome (Mr. Heath), because he had not appreciated that the selection list puts the Liberal Democrat amendment first in this group. If I may, I shall help him out somewhat, because I shall strongly oppose his amendment No. 155, and by the time I have finished opposing it, he will understand the basis of the argument—as, I hope, will the rest of the Committee.

There was a substantial debate on all these matters in another place. We are dealing with an enormously important part of the Bill.

I am indebted to Dr. Gerard Panting and Shelley McNichol from the Medical Protection Society, my noble Friend Lord Hunt of Wirral and others for providing me with briefing on these important issues. I am reasonably familiar with some of the issues because I dealt with a lot of medical negligence cases, not only when I was at the Bar, but in my subsequent career as a lawyer specialising in insurance issues. I continue to keep in touch with the subject, because I am deputy chairman of the all-party group on insurance and financial services. My noble Friend Lord Hunt is also actively involved in that very good all-party group.

We are always concerned when developments are proposed that could lead to the kind of defensive medicine where highly trained, skilful surgeons and other medical consultants feel unable to use their full skills because they are looking over their shoulder at what the insurance position might be. According to the Medical Protection Society and the National Health Service Litigation Authority, some of the things being proposed, which could be valuable provisions in general terms, would be terribly damaging. In particular, the Liberal Democrat amendment No. 155 could be damaging.

I shall first deal with the concerns of Lord Hunt and the NHS Litigation Authority. Clauses 98 and 99 will enable the courts to order periodical payments for future loss and care costs in appropriate cases. In calculating future loss in damages generally, the discount rate had been set at 2.5 per cent. Since then there have been a number of efforts on the part of solicitors for claimants to find a way around that discount rate.

I am aware that the Liberal Democrats in another place, and again today, were briefed by the knowledgeable and experienced QC Mr. David Kemp—I pay tribute to his knowledge of this field. He approached the Liberal Democrats to table an

amendment in another place to allow periodical payments for the cost of future care to be uprated according to what is referred to as a ''care index'', rather than the retail prices index, on the basis that far higher damages would be awarded. However, Lord Hunt, who led for the Conservatives in another place, was alerted by the NHS Litigation Authority to the fact that such a provision would substantially escalate the level of damages for future care in structured settlements. It would also read across into lump sum damages, making the figures that are awarded much higher. The assessment of the NHS Litigation Authority is that moving to a care index, or RPI plus an additional percentage, would add literally billions of pounds to the accrued claims reserves.

I refer any interested Committee members to what was said in another place on 19 May this year, which is recorded in columns 536 to 538 of the House of Lords Hansard. I am referring to an exchange between Lord Goodhart for the Liberal Democrats and Baroness Scotland for the Government. No doubt the Minister will repeat some of the issues that were raised by the Baroness. The debate was on a Government amendment, which was introduced following the Committee stage on Third Reading. In response to the clarification by Baroness Scotland of the reference to RPI and the meaning of proposed subsection (9), Lord Hunt was able to withdrawn his amendment, which limited the operation of an opt-out clause to exceptional circumstances, as was clearly intended.

The Government contend that the clauses will deal with the mechanism of payment, and were never intended to increase the level of damages awarded. When the Minister responds, I would be grateful if he would confirm that.

Liberal Democrat amendment No. 155, which we understand is also based on the work of David Kemp, QC, would cause

''periodical payments . . . in respect of damages for the cost of future care or medical expenses''

to be uprated by some index other than the RPI. That would virtually stop structured settlements in their tracks. It is difficult enough already to find any kind of insurance-based product that enables provision to be made for periodical payments, even increasing in accordance with the RPI. One insurance company has just closed its doors to new business of that kind in the past week, and another company is talking about limiting the range of products that it offers.

It is much more serious that continuing attempts are being made in the courts to persuade judges to allow future care costs at a much higher level. To date those attempts have not succeeded. There is also the anomaly, which was highlighted in the report made last week by no less a figure than the chief medical officer, Sir Liam Donaldson, that courts may not take into account treatment available under the NHS. That report received much coverage in respect of other issues.

There is a bar in section 2(4) of the Law Reform (Personal Injuries) Act 1948. In practice, one understands how that arises. One wants the best care available to be provided for those who have suffered

an injury that is somebody else's fault. That bar has enabled claimants to obtain, where it is appropriate, what is virtually private hospital care, including 24-hour nursing care in their own home. If the Liberal Democrats were to succeed with amendment No. 155, that would have an enormous impact not only on the NHS, which cannot stand many more substantial increases in costs, but also on premiums for liability insurance. We are conscious of the fact that when the Liberal Democrats tabled a similar amendment in another place it was not pursued, either to a Division or on Third Reading. I hope that, having moved the amendment formally, and having been taken somewhat by surprise, the hon. Member for North Norfolk, will not pursue it.

Although the Medical Protection Society generally welcomes a move away from lump sum settlements to providing periodical payments to patients in clinical negligence cases, it has identified serious problems. I have met people from the society and I share their concerns. It is important to recognise that the society is a not-for-profit organisation that provides a range of membership benefits, including a occurrence-based indemnity against adverse awards of costs and damages in clinical negligence cases brought against NHS general practitioner members and those working privately. The society represents doctors, dentists and other health professionals. It has more than 114,000 members in the UK alone, and more than 200,000 members throughout the world.

The Medical Protection Society has identified difficulties with the Government's proposals, including the fact that reviews would create a continuing uncertain liability that would be difficult to manage. The society would need to increase its reserves to meet the possibility of an order for increased payments some 10, 20, 30 or 40 years after the initial settlement. The society is a mutual organisation that offers indemnity on an occurrence basis. Each year it collects from its members—our doctors, dentists and the other health professionals who treat us and all our constituents—the subscriptions needed to meet the expected liabilities arising from that year.

Reviewable settlements would introduce a huge degree of uncertainty about future liabilities and the Medical Protection Society would never be able to close its book on a case. It would have to decide whether to set subscriptions at a level that might leave its members underfunded in future, or raise them to such an extent that they would be overfunded. Either way, it would be our doctors, the vast majority of whom are in the NHS, who would bear the burden.

Although the legislation that introduces reviewable periodic payments might not be intended to be retrospective, I know from my professional background that criminal negligence claims are frequently not intimated—so nobody knows that there is a potential claim there at all—let alone litigated, until years after the events that give rise to them. One in five claims made against members of the Medical Protection Society—doctors such as GPs, dentists and other health professionals—in the years from 1996 until and including 1999, where the claim

was valued at £0.5 million or more, related to incidents that occurred 10 or more years earlier. I hope that the Minister and other Committee members understand the point about the retrospective effect of what is being proposed.

The MPS provides indemnity on an occurrence basis: provided that the doctor was an MPS member at the time of the incident giving rise to the claim, they can apply for assistance, even if they have since left the society. For example, even if they have retired long before the claim is made, they are still covered. To ensure proper funding, it is essential that in each subscription year the MPS receives sufficient income to meet all the claims arising from that year, irrespective of when the claim is made. We do not want to have a situation where, as a result of well intentioned legislation, the Government are creating a medical negligence equivalent of the long-tail claims for things such as asbestosis that helped to cause all the problems in the Lloyd's market, which I am sure that the Minister and other Committee members remember.

I will now explain the background to our amendments in this group—amendments Nos. 105, 106, 108 and 107—by referring to a case that is well known to the professionals in this field. In 1995, Guy Parkes was awarded £1.25 million for severe brain damage that he had suffered as a baby in 1962, 33 years previously. When Guy Parkes was an infant, his mother had consulted her GP because of breast abscesses. Unfortunately, the GP failed to notice that Guy was dehydrated and the mother claimed that she was advised to continue breastfeeding. Guy became severely dehydrated; that led to brain damage, which resulted in spastic quadriplegia. Many years later, Guy broke his leg in a care home and his family took legal action over that accident. The solicitor instructed in connection with that much later incident also investigated the circumstances that had led to Guy's brain damage 25 years previously, which led to the fresh claim.

The Guy Parkes case demonstrates how long it can take, in certain circumstances, to bring and settle a claim. At the time of Guy's original injuries in 1962, the MPS subscription was only £2. A similar case brought in years to come, after the introduction of reviewable settlements, would present the society with the challenge not only of funding the settlement but of putting aside further funds for a possible future review despite the fact that a settlement review would not have been an eventuality that was anticipated when the subscriptions for the relevant year were set. The retrospective nature of the proposals threatens the whole basis of the way in which the burdens are set on the current generation of MPS members. Its current members would have to pay sums in addition to the subscription. The MPS would have to fund claims arising from current and future incidents and meet additional liabilities incurred by the imposition of retrospective settlements.

The claimant's perspective is central. I have talked a lot about protecting doctors and dentists and the

society that represents them, but we must always look carefully at, and remember, the claimant's perspective. Even from that perspective, the vast majority of patients who have received a settlement do not wish to continue an adversarial relationship with defendants. They normally want to have a clean break. When the court reaches a settlement, that should be it. That can be provided—and often is now—by structured settlements, but not by reviewable structured settlements. Most defendants would not have the resources to keep track of the changing circumstances of claimants whose financial needs may diminish or increase.

In practice, unless our amendments are accepted, the way in which the changes are being put forward will result in awards being increased, but seldom, if ever, decreased. Nevertheless, claimants would have a fear that they might be under the continuing observation of defendants, and that itself might create a disincentive to recovery.

Even if the conditions on which a review could take place are narrowly defined now, the opportunity to widen those conditions at a later stage could result in spiralling clinical negligence costs for the NHS. I should have thought that that would be of great concern to the Government, as well as to mutual organisations such as the Medical Protection Society or insurance companies.

For cases involving the NHS, which has to fund the payments on a pay-as-you-go basis, there is a real threat of spiralling expenditure in exactly the same way as we have seen in countries such as America, and that would erode the funds available to treat patients on the NHS. I hope that when the Minister responds, he will say that he will consider some of the measures that we are proposing and talk to the new Secretary of State for Health and his officials about them. The Minister will realise that we are raising a serious point, with wide implications for Government expenditure generally.

I want to outline briefly a couple of case studies, which I hope will help the Committee to understand the basis of our amendments. The two case studies will demonstrate the extent to which the lawyers acting for a claimant might argue for settlements to be reviewed. The first case study concerns failure to inform. Let us suppose that a patient with severe rheumatoid arthritis attends a specialist rheumatology clinic at her local hospital and is prescribed an anti-TNF drug, such as enbrel or remicade. The patient later develops a plastic anaemia and then takes action against her doctor for failing to inform her of the risk of developing the condition as a side effect of the prescribed drug. The claimant wins damages, paid by means of a structured settlement for continuing care costs.

So far so good, one might say. However, if the Bill is not amended, in settling the claim, the patient's solicitor is likely to argue that the settlement should be reviewable at a later stage, because the patient might develop other side effects of the drug. First, the patient might develop formation of autoimmune antibodies. Secondly, the patient might develop TB. Thirdly, the

patient might develop heart failure. Fourthly, the patient might develop infections. Fifthly, the patient might develop malignancies. If the Bill were not amended, such arguments would be—perfectly reasonably—put forward on behalf of the patient.

The second case study is that of the failure of a dentist extracting a tooth to provide antibiotic care for his patient who has a heart condition and is therefore vulnerable to infection. As a result of the oversight, the patient develops sub-acute bacterial endocarditis and suffers a small stroke, which affects his balance and his ability to work. Because of his loss of income and ongoing health problems, the patient would then take legal action against the dentist. In that scenario, the claimant's lawyer would argue for a review to take place in case there is a recurrence of the condition and the patient may require further treatment, heart surgery, or may suffer a stroke.

There is a need to ensure that the Government amend the Bill to take into account the risks that I have mentioned. Amendment No. 108 says:

''An order under this section shall apply only to cases in which it is admitted or proved to be a significant prospect of serious deterioration, or development of a serious further medical complication . . . consequent from the act or omission which gives rise to relevant cause of action, as identified by the medical evidence before the court.''

If the Government were to accept such an amendment, that would be helpful to the Bill, because it would provide some reassurance.

Amendment No. 106 would insert the words,

''save that this provision does not apply to any case in which the injuries involved occurred prior to the date on which the provisions of this Part of the Act comes into force.''

The Bill would then have a provision that ensured that the element of retrospectivity that I have talked about would not exist. For the reasons that I have set out, the Liberal Democrats are mistaken in their attempts to introduce amendment No. 155. Our amendments Nos. 105, 106, 107 and 108 would improve the Bill substantially because they would remove some retrospectivity and achieve what the Government want while reducing the risks to which I have referred.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury) 3:45 pm, 8th July 2003

I apologise to you, Mr. O'Brien, and to the Committee for being caught on the hop when it was time to move my amendment. It is important to state that, in a sense, our amendment and those tabled by Conservative Members reflect the balance of interests and the need to balance those of different competing parties. Our amendment reflects the worry that the retail prices index does not reflect the reality of the rising costs of care. If we are looking at the matter from the perspective of the injured party who has pursued a negligence action successfully, that individual will lose out in the future unless the amendment is accepted. We all know that the cost of care rises at higher rates than the RPI reflects.

I fully recognise the arguments of the Medical Protection Society and I understand its worries about retrospection. I am talking about the clause as a whole and commenting, in a sense, on the points made by the hon. Member for Surrey Heath. Genuine concern is felt about review payments and I accept that there is a strong case for as much certainty as possible.

Amendment No. 108 would at least restrict the basis on which a review could take place. The Government should seriously consider such matters.

Photo of Chris Leslie Chris Leslie Parliamentary Under-Secretary (Department for Constitutional Affairs)

The existing compensation system for future losses by way of lump sum payments is unsatisfactory. It can often lead to cases of undercompensation as well as to overcompensation. Therefore, a system of periodical payments can begin to ensure that the entitlement to compensation for a claimant can continue for as long as is needed and that it can better match the needs of the individual.

The amendments tabled by the hon. Member for Surrey Heath relate, in particular, to the variation of periodical payments. I shall try to answer in detail the points that he raised. I shall also deal with amendment No. 155 tabled by the hon. Member for North Norfolk. Amendment No. 105 would remove new section 2B of the Damages Act from the clause, the effect of which would be to stop any variation of a periodical payment. We cannot accept it.

In the consultation paper entitled ''Damages for Future Loss'', which formed the basis of the new system, we sought views on several options in respect of variation. The majority of consultees were in favour of some form of variation, with a significant number wanting something much wider than what we are now proposing. However, we understand the views expressed by the insurance industry and the organisations that were highlighted by the hon. Member for Surrey Heath. We accept that we need to take great care over such matters, which is why we are adopting a cautious approach,

As my noble Friend, Baroness Scotland, said in another place, we intend to provide limited scope for variation, which will be subject to robust controls. It is intended that the initial order will provide for variation only when there is significant medical deterioration or improvement in the claimant's condition. That must be foreseen at the time of the original court order, and when the possibility of variation is specifically provided for in the order. That will be no more than is already provided for by the existing system of provisional damages, except that it will allow for significant medical improvement as well as deterioration. It will also allow defendants to apply; at present, only claimants can do so.

There are built-in safeguards in our approach. The power to vary awards of periodical payments will be tightly drafted and carefully controlled, and include a requirement for the court's permission before any application for variation can be made. Any future exercise of the Lord Chancellor's powers to specify circumstances in which an order can be varied would be subject not only to consultation, but to the affirmative resolution procedure by Parliament, so there would be another opportunity should there be changes to the regulatory framework.

Defendants and insurers usually provide for such eventualities by contingency payments. However, those payments often compensate for the chance that a future need may arise, rather than the need itself. For example, if there were a 20 per cent. chance of a significant medical deterioration occurring, but it

never occurs, the defendant or insurer would have made an unnecessary payment. If the deterioration occurs, the claimant will be seriously undercompensated because he will have received only 20 per cent. of the compensation required to meet his needs.

In such cases a variable order would provide the best solution. Defendants and insurers would not have to make payments for events that do not occur. If they did, claimants would receive the full compensation to which they were entitled. That is an appropriate way forward, and that is one of the reasons why amendment No. 105 is not justified.

Amendment No. 108 would limit the provisions that may be included in an order made by the Lord Chancellor enabling variation of periodical payments. I am concerned that the circumstances in which variations would be allowed by the amendment are more restrictive than we intended. The amendment would restrict variation only to cases in which there is deterioration in the claimant's condition. It would not allow a variation if the claimant's condition improved, nor would it apply to the defendant.

Variable periodical payments should be available in those circumstances as well. Amendment No. 108 is too limited and restrictive in that sense. This is a developing area of the law, and we should keep open the option of altering the scope of variation, if necessary. The need for consultation and the affirmative resolution procedure provide necessary safeguards in that respect.

Amendment No. 107 would remove the Lord Chancellor's power to amend or apply legislation governing provisional or further damages—processes that are most closely akin to periodical payments in the current system. The amendment would wreck much of the provision of the new forms of periodical payment that we wish to put in place. The initial order for variation should operate on a similar basis to that on which provisional damages do at present.

It is practical that an order should have the power to apply legislation that covers and governs provisional damages, and that should also apply to periodical payments. Courts may wish to award a lump sum by the way of provisional damages in conjunction with a variable periodical payments order. If the power to amend provisional damages legislation were removed from the scope of the order-making power, any necessary amendments to ensure that the two regimes could operate in tandem would have to be made through primary legislation. That would be cumbersome and inefficient. In order to ensure consistency between the existing regime and the new periodical payments arrangements, we need the power to apply legislation governing the provisional or further damages arrangements as they currently exist.

Amendment No. 106 deals with the fascinating subject of retrospectivity, and raises the issue of whether we should limit the application of the order to allow variation to injuries that occurred after the date of commencement. I am concerned

about the approach suggested by the amendment. The benefits that we wish to put forward in periodical payments would be delayed if the amendment took effect, and benefits under the periodical payments might not be felt for many years. Claimants might have to continue to be undercompensated—or indeed overcompensated—for a substantial period should we accept it.

Nevertheless, I understand the significance of the issue raised by the hon. Member for Surrey Heath on the timings and retrospectives, and I would like to place on the record how we intend to implement those provisions. Clauses 98 and 99 will be implemented within 12 months of Royal Assent but not before April 2004. We intend that the power to order periodical payments will apply to all cases where orders or settlements have not been made before the date of implementation, as the provisions are simply an extension of existing practice. However, as the initial order that we propose for variation will introduce provisions that do not currently exist—that is, the possibility of variation for improvement and the right of defendants to apply—we intend that the initial order allowing variation would apply only to proceedings issued on or after the date of implementation.

I hope that that two-stage approach and the early notice of our intentions will go some way to placating some hon. Members and will assist defendants and insurers in planning accommodation of the detail.

Photo of Mr Nick Hawkins Mr Nick Hawkins Conservative, Surrey Heath 4:00 pm, 8th July 2003

What the Minister has just said is of assistance, but before he finishes his response to the group of amendments, can I press him to confirm that he will talk to his counterparts in the Department of Health and ensure that his officials sit down with officials in that Department to look in particular at the implications for the NHS that the NHS Litigation Authority has been raising with my noble Friend Lord Hunt of Wirral? If the Minister is prepared to give that undertaking while we are waiting for the provisions to come into force, the matter will be considered again. Could those discussions take place before the Bill finishes its passage, so that if further Government amendments were required they could be considered? That would be enormously helpful.

Photo of Chris Leslie Chris Leslie Parliamentary Under-Secretary (Department for Constitutional Affairs)

I can probably pre-empt many of the hon. Gentleman's concerns by assuring him that in the process of drawing up these provisions the Department has already had extensive discussions and consultations with the national health service and the Department of Health in particular, as this measure clearly has significant implications for it.

Photo of Mr Nick Hawkins Mr Nick Hawkins Conservative, Surrey Heath

I appreciate that but a body as important as the NHS Litigation Authority says via Mr. Stephen Walker that it has serious concerns and Mr. Walker is going to see my noble Friend Lord Hunt of Wirral. Clearly, some of those earlier discussions did not take account of some of the matters raised today. If those matters had all been dealt with satisfactorily, the NHS Litigation Authority would not be raising them with my noble Friend. Because the issue is still live and my noble Friend has

urged me to put those matters on the record, a further set of discussions is necessary.

Photo of Chris Leslie Chris Leslie Parliamentary Under-Secretary (Department for Constitutional Affairs)

Because one source in one organisation makes an allegation does not always make it absolutely true. My understanding from the Department of Health and the officials who have talked to my Department is that they are content and happy with these provisions. I accept that we need to take some level of cautious approach, particularly on how this developing area of law proceeds. I have already given a commitment that we will take a cautious approach in looking at further orders affecting this area of policy. Clearly, we must take a number of factors into account. If the hon. Gentleman is urging a prudent and cautious approach, I am more than happy to agree to that attitude, which I believe we have already taken in drawing up the provisions.

I turn to amendment No. 155, which would prevent periodical payment orders being linked to the retail prices index where the damages relate to future care and medical costs. In a similar way to, but not quite in the same vein as the hon. Member for Surrey Heath, I am wary about the amendment. For a start, it makes no provision for indexation, in which case the claimant would be worse off, but, more than that, the suggestion that there should be links to another inflation index raises the worry that insurers would be unable to provide a product; their financial regulations limit the index-linked products that they can provide. As a result, awards may have to be made by way of lump sums, which are effectively linked to the retail prices index. Therefore, the whole purpose of giving the courts greater powers to order periodical payments might be defeated.

We need to make sure that we have a sound, firm foundation for the indexation and the awarding process. There are arrangements in the clause for variations, and the periodical payments approach gives the claimant an end product that is much more tailored to their needs.

I believe that I have dealt amply with many of the concerns that hon. Members have raised. For reasons that I have given—and others—I do not believe that taking out the RPI link would be appropriate. I hope that the hon. Gentleman and the hon. Member for Surrey Heath will reconsider their amendments.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 98 ordered to stand part of the Bill.

Clause 99 ordered to stand part of the Bill.