§ Order for Second Reading read10.43 pm
§ The Solicitor-General (Sir Patrick Mayhew)
I beg to move, That the Bill be now read a Second time.
The Law Reform Committee has been in existence for 34 years. Its work is patient and constructive, and its valuable reports upon the matters referred to it by the Lord Chancellor recommend practical measures of law reform. It is a good thing. Accordingly, the world being what it is, not many people know about it.
The Bill seeks to enact the recommendations of the committee's 24th report, published in November 1984, on the subject of latent damage. It was asked to consider the law relating to the accrual of the cause of action and limitation in negligence cases involving latent defects, other than latent disease or injury to the person. Those cases can cause great distress. The law governing them must be practical, even-handed and just.
The character of the Bill is revealed by the words in which the committee expressed the first of its conclusions in its report:The present law is unjust to plaintiffs and defendants. In our view, it requires reform which will take care of the interests of both. Reform is, therefore, bound to be, in effect, a compromise between conflicting interests.That is exactly what the Bill comprises—a compromise between conflicting interests.
The Bill has three main objectives. The first is to amend the law relating to limitation of actions in negligence cases by providing potential plaintiffs with an extended period within which to commence proceedings of this nature. The second is to provide potential defendants with an overriding time limit, or a long stop, that will bar proceedings once 15 years have elapsed from the date of the defendant's original breach of duty. Thirdly, it gives a right of action to a person who acquired already damaged property when the fact of such damage was not already known and could not be known to him at the time when he acquired his interest.
In negligence cases it is the law that the cause of action accrues when damage occurs. The ordinary limitation period for negligence actions — apart from cases of personal injury with which the Bill is not concerned—is six years. Proceedings must be commenced within that time. Thereafter they will be time-barred.
In most cases of negligence the plaintiff is perfectly well able to discover within the normal six-year period of limitation that he has suffered damage. But in some cases, a defendant's negligence, or its effects, may lie hidden for years. For example, if a builder puts into a building defective foundations, the owner of the building may be quite unaware of the error. The property may pass through several hands before the damage becomes apparent. That can be many years after the initial lack of care.
In such cases, and they are multifarious in their circumstances, serious damage can result and real hardship may be caused. But the present law of limitation of actions often obstructs justice and is less than practical.
Under the present law, whose judicial development has been distinguished by some remarkable oscillations, for the victim of a negligent act or omission the starting date for reckoning the period of limitation is the date when the 444 damage actually occurs, and time will start to run against him even if' the damage is not discoverable. The result is that potential plaintiffs may find themselves barred from action before they knew, or could even be in a position to know, that they had suffered damage.
Potential defendants, too, are handicapped because they have no way of telling in advance for how long they may be at risk of legal proceedings. Where damage does not occur until long after the events giving rise to it, they are likely to be faced with the grave practical difficulties of contesting a very stale claim. Although the date of accrual is no longer—since the Pirelli case in the House of Lords — governed by discoverability, it still starts from the date of damage and it cannot be predicted when damage will occur.
The Law Reform Committee, in formulating its recommendations for reform, identified three principles which it described as being "of critical importance". They were, first, that plaintiffs must have a fair and sufficient opportunity of pursuing their remedy; secondly, that defendants are entitled to be protected against stale claims, although the sad truth is that no reform of the law can eliminate the factual uncertainties which are likely to arise in cases of latent damage; and, thirdly, that uncertainty in the law is to be avoided wherever possible.
The committee said that it would not find any proposal for reform of the law acceptable which failed in any significant respect to satisfy those criteria. Therefore, it recommended that the ordinary period of limitation of six years should be subject to a special extension which would allow the plaintiff three years from the date on which he discovered, or could reasonably have discovered, that he had suffered significant damage.
Secondly, the committee recommended that there should be a long stop which should operate to bar all negligence claims involving latent defects brought more than 15 years from the date of the defendant's breach of duty. The committee's remaining recommendations, although they are quite important, are essentially consequential upon its two principal recommendations.
§ Mr. Eric Forth (Mid-Worcestershire)
Will my hon. and learned Friend tell the House at some stage in his remarks whether he is satisfied that the interests of potential defendants in such cases will be sufficiently safeguarded by the proposals? I have in mind professional people, such as architects, one of whom has approached me about the matter. They are worried that their possibility of obtaining liability insurance will be minimised or even reduced to almost zero precisely because of the potentially open-ended nature of their liability under these proposals, as the 15-year limitation runs only from the date of discovery. Therefore, an architect may find that a fault is found many years after he has designed a building, and 15 years after that he will still be liable. Can my hon. and learned Friend satisfy my constituent and me that my constituent has any hope of obtaining effective professional liability insurance under these proposals?
§ The Solicitor-General
I acknowledge that there are genuine anxieties about obtaining insurance for liability for latent defect, and they were expressed to the Committee which gave them serious consideration. There is a problem. If I am asked whether the interests of architects are sufficiently well protected, my reply is yes, in the context of the necessity to balance the interests of 445 architects and others engaged in the construction industry on the one hand, and the interests of consumers on the other. As I said at the beginning the committee said that this was an exercise in balancing conflicting interests, and I believe that that exercise has been satisfactorily achieved.
The 15-year override represents a new element in the law. As my hon. Friend knows, delay can extend, perhaps for 20 years before damage occurs, but under existing law, the architect or defendant is liable. At least that uncertainty is terminated by the 15-year override.
§ Mr. James Couchman (Gillingham)
Is my hon. and learned Friend aware of the concern that has been expressed by a number of professional people that the 15 years can follow someone well into retirement and that even a widow may be saddled with the responsibility of her late professional husband within the 15 years?
§ The Solicitor-General
Indeed, I am aware of that and the committee expressly took that circumstance into account in its report. I should correct my hon. Friend the Member for Mid-Worcestershire (Mr. Forth), who said that the 15-year time bar derived from the date when the damage was discovered. That is not the case; it derives from the date of the defendant's breach of duty.
While insurance was not within the remit of the Law Reform Committee, it considered that the question of insurance should be considered by an appropriately qualified body. The Building Economic Development Committee is at present investigating the desirability and feasibility of latent defects protection insurance for non-residential buildings. Its work is taking fully into account the interests of building owners and producers, and we are awaiting its conclusions with the greatest of interest. Its work is being based on a report entitled: "Latent defects in buildings: An analysis of insurance possibilities" prepared by Atkins Planning. It is a substantial document.
§ Mr. Michael McNair-Wilson (Newbury)
There seems to be a certain inequity, since under the long-stop situation somebody who retires at 65 could still require professional indemnity insurance up to the age of 80, whereas a person who faces the same sort of problem but who still has several years of active working life ahead will be able to meet the indemnity more easily. Is the Solicitor-General satisfied that we should treat everybody the same, regardless of age? Perhaps in the case of those who are retired, we should limit the period to one more brief than 15 years.
§ The Solicitor-General
I can see an advantage in that from the practitioner's point of view. However, I can see no advantage at all for the customer or the client. I have no doubt that these matters will be taken into account in the course of the examination that I have mentioned. They are important and far from simple matters.
As I said, the committee's remaining recommendations are essentially consequential on its two principal recommendations. The committee concluded that its recommendations should be of general application and not confined to any specific area of activity, such as building, or class of litigant, such as house purchasers. I have explained in general terms the scope and scheme of this measure. It is confined to the tort of negligence. It does not attempt to deal with limitation under other heads of tortious liability, such as a breach of statutory duty or nuisance, nor is it concerned with matters, substantive or 446 procedural, arising out of contract. It is confined to what the Law Reform Committee referred to in paragraph 4.4 of its report as therelatively narrow band of 'negligence cases involving latent defects'".The scheme is as follows. Clause 1 inserts two new sections into the principal Act, the Limitation Act 1980. New section 14A is what might be called the plaintiffs provision. It provides a special time limit for negligence actions where facts relevant to the cause of action are not known at the date of the accrual. It provides for a period of six years from the actual occurrence of the damage, which is the normal rule, or three years from the date on which the plaintiff knew or ought to have known of facts about the damage if that period expires later, within which he can institute proceedings.
New section 14B is the main defendant's provision. It provides the long stop. It prevents the institution of proceedings after 15 years from the date of the defendant's original breach of duty. The effect of the long-stop is to bar the plaintiff's remedy. It does not extinguish his right of action. It vests a defendant with the right to rely on the defence of limitation even where the plaintiff still does not know that he has suffered damage. This is because there does come a time beyond which the Government and the Law Reform Committee consider it becomes unjustifiably onerous to require potential defendants to preserve their records and to remain exposed to the uncertainties and difficulties of responding to stale claims in respect of long-past incidents.
§ Mr. Forth
I crave the indulgence of my hon. and learned Friend. I am a layman in these matters, as some of my hon. Friends have been kind enough gently to point out to me. If an architect makes a fault in the design of a building and that fault is discovered 16 years later, does that absolve him from responsibility? Architecture is but one of the many professions involved in these cases. If the fault is discovered many years after the original design, does the 15 years run from that point or does the period start at the point where the faulty design work is carried out? I and my constituent would like to be reassured on that point.
§ The Solicitor-General
The period is taken from the date of the original breach of duty. The starting point for reckoning the 15 years, the overriding time limit, is from the date of the breach of duty and not from the date on which the damage is discovered. I hope that reassures my hon. Friend.
§ Mr. Simon Hughes (Southwark and Bermondsey)
I should like to raise a different point about the starting date. There is still general anxiety that the accrual date for a cause of action might be difficult to define in certain circumstances. For example, one might not know whether the defect related to foundations laid in year one or year two of the building project. This might ultimately manifest. itself in a defect in a building. Is it possible to consider at a later stage, or has such consideration already been rejected, a definition that relates, perhaps, to the certified completion date of the building so that one can have a more precise layman's understanding of the date from which the cause of action starts to accrue?
§ The Solicitor-General
It would be possible to use the completion date. That was considered by the Committee and rejected for reasons to which I shall come in about 45 seconds, if I do not give way again.
The length and date of the long-stop period follows precisely the recommendations of the Law Reform Committee. On the length of the long stop, the committee considered a number of periods of different duration. At paragraph 4.13 of its Report, it observed that the long-stop should not be so long that it had no useful effect, nor so short that it would cause injustice. It said:We have come to the conclusion that a period of 12 years, although it would probably work satisfactorily in most cases, might also bar some worthy claims. At the other extreme we think that a 20 year period might permit some very stale claims and expose many defendants to the risk of litigation for an unreasonable length of time. We have concluded that a 15-year period strikes the right balance between justice for plaintiffs and certainly for defendants".The Government believe that the committee, looking at the matter from an entirely independent point of view, struck the right balance. The Lord Chancellor's Department consulted on the committee's report, and received conflicting responses, notably from those concerned within the construction industry and the appropriate professional bodies. Some commentators thought that the period was too short to be fair to plaintiffs. They suggested that nothing less than a 20-year period would be sufficient. Others have argued that the court should be empowered to exercise a discretion to permit claims after the 15-year period has expired, basing their argument on the discretion available to the courts to set aside the statutory time limit in personal injury cases. Others, with the interest of potential defendants in mind, argued that the proposed 15-years is too long. Some have suggested 12 years, others 10 or even six years. One group even suggested three months, which would at least have been a gesture.
As the Law Reform Committee recognised, the interests of potential plaintiffs and defendants conflict. Its conclusion was that the law required reform that would take care of the interests of both, which is bound to result in a compromise. We consider that the 15 years provides potential plaintiffs with a sufficient opportunity to pursue their remedy, but also provides the potential defendants with proper protection against really stale claims. It provides both with certainty, which the present law demonstrably lacks. It is not restricted to any one area or industry and covers the full range of possible instances of latent damage.
The starting date for reckoning the long-stop period has also been the subject of much discussion. The Law Reform Committee concluded that it should start to run from the date of the defendant's breach of duty. That is the effect of subsection (1) of new section 14B. Some have criticised this approach for its alleged uncertainty. An alternative suggestion that has been put forward on behalf of the construction industry is the date of completion of the building. The Law Reform Committee considered several alternative dates of commencement. Of the "date of completion" approach it said:We are doubtful, though, whether this is really a satisfactory alternative and in particular we can see formidable difficulties in adapting the concept of completion to all the types of circumstances (other than personal injury) where latent damage might arise. There is also the possibility 448 of injustice to defendants where completion, on a very large project for instance, takes place many years after the relevant breach of duty.It came down in favour of breach of duty. I need not develop further the basis for that.
§ The Solicitor-General
I wish to get on, and I have given way several times.
Clause 2, which is consequential on clause 1, adds a new section 28A to the 1980 Act. Subsection (1) gives additional protection to those who are under a disability at the time of discoverability. Subsection (2) disapplies the special time limits in new section 14A, and the long-stop in new section 14B, in negligence cases where the defendant has deliberately concealed facts from the plaintiff.
Clause 3 creates a fresh cause of action for the successor in title — he may, for instance, be a purchaser — who does not know and could not be expected to have known that the relevant property was already damaged when he acquired his interest. Time will run in future as if no transfer had occurred, but it will be treated as having started on the date when the original cause of action accrued. The balance is thus maintained.
The remaining provisions of the Bill are purely supplementary and do not require any elaboration at this stage.
This short but highly technical Bill will make for fewer hard cases, although it will not eliminate them, and for better law. I commend it to the House.
§ Mr. John Morris (Aberavon)
I am sure that the thanks of the whole House go to the Solicitor-General for his careful exposition of the Bill. Our thanks also go — as did those of the Solicitor-General — to Lord Scarman and the distinguished members of the Law Reform Committee, upon whose 24th report the Bill is based.
Let me say immediately that I support the principles of the Bill, in the same spirit as Lord Silkin of Dulwich did in another place. The current mischief related by the Solicitor-General is dealt with by the Bill. Some may say that the Bill has gone too far, while others may say that it does not go far enough. However, the introduction of such proposals as are before us is not an exact science. To satisfy everyone would be simply wonderful, but, as the Solicitor-General said, this is a compromise Bill, with all the strengths and weaknesses of a compromise. That does not mean that necessarily I am satisfied with every proposal, and I shall return to some of them.
Although the Bill does not deal exclusively with causes of action in negligence arising from latent defects in buildings, it is in this area that the mischief primarily lay, and I prophesy that it is in this area that most advantage will be taken of it.
Defendants and their organisations are usually well organised, and there have been interventions in that vein. They are frequently insured and well able to take care of themselves. On the other hand, plaintiffs are one-off sufferers and frequently one-off litigants. I would have thought that Conservative Members would intervene on behalf of those who believe in a home-owning democracy. There has been none so far, but perhaps we shall hear interventions on behalf of greater and better protection for plaintiffs. I look forward to that.
449 The resources of plaintiffs are generally much more limited, and I shall not weep unduly if the balance is tilted more in favour of plaintiffs. On the other hand, as the Solicitor-General rightly said, the Bill brings certainty to defendants as well.
Nevertheless, I want to raise a real problem which I hope the Solicitor-General and the Lord Chancellor's Department will consider. It is a growing problem that will be considered more and more in due course, and it relates to the growth of claims for professional negligence. One is told that in some areas the practice of medicine is becoming increasingly more hazardous in the United States becaue of the substantial growth of negligence claims. Here in the last five years there has been a dramatic growth in personal claims for professional negligence, resulting in an increased cost of insurance premiums.
Where a claim is justified, every facility must be provided so that just claims brought in reasonable time are not denied justice, but we should be aware of the consequences, and the parallel that I shall pose has general application to the area with which we are now dealing.
If medicine ever became too expensive to practise because of the high cost of insurance, the bottom line of benefit to the public would be a minus figure. This is an extreme example. In the area with which we are now dealing — architecture in particular—claims running to millions of pounds can arise even after the death of the architect. Indeed, I understand that in one instance in Liverpool the widow of a notable architect was sued many years after his death. That is a matter that we must examine. The responsibility on accountants is becoming more onerous daily as one reads of the claims contemplated for huge amounts in litigation.
The repeal of the model Act in 1825, the passing of the Joint Stock Companies Act in 1844 and the eventual Limited Liability Act in 1855, were major milestones in the creation of modern society. I suspect that the concept of limited liability was not achieved without considerable growing pains. It certainly was the engine for the development of this country as an industrial nation and a world financial capital. If the principle of personal liability had been maintained — I am sure that there were good reasons—progress would have been stultified.
I raise this point now, against the background of the Bill. I believe that those who give professional advice should be responsible for that advice and should, in the case of negligence, be made to answer for it if damage is caused. Fortunately, well-ordered professions are insured. My profession certainly is and the costs can be recouped from a broad spread of clients. However, when a claim exceeds the insured amount, the result can break an individual's professional practice. Many professions, including mine, will not allow partnerships, let alone limited liability. Has not the time come to examine seriously limited liability for those who give professional advice?
As I said earlier, it is of no value to the public if professions become too hazardous to practise, or if because of one major claim dispensers of counsel are put out of business. It is of no benefit to the individual plaintiff if insufficient funds are available to meet his claim. It is of no benefit to him if the cost of insurance is so enormous that he has to pay through the nose for services. I believe strongly in taking responsibility for damage, wherever it occurs, but we must consider where we are going as regards quantum.
450 I endorse the principles behind the Bill. As the Solicitor-General said, plaintiffs must have a fair and sufficient opportunity to pursue their remedies. Secondly, defendants are entitled to protection against stale claims. Thirdly, uncertainty in the law is to be avoided where possible.
The countermanding of the wisdom in the cases of Sporham-Souter in 1976, Anns v. London Borough of Merton and similar cases by the Pirelli case, which was mentioned by the Solicitor-General, was not only a matter of great regret, but was little short of a catastrophe. The House of Lords in its judicial capacity, was right to say that it was time that this matter was looked into.
It needed this Bill to deal with that last decision, when it was held that the date of limitation arose when the cracks in the chimney first appeared, although no one had seen them, no one had been up the chimney and no one knew that they were there. This measure brings relief by adding to the provision that action may be brought. in addition to the present liability period, three years from the date on which the plaintiff knew, or should have known, about the damage—whichever is the later.
Of course, the Bill does not pretend to cover every case. Some will fall outside even this extension, but hopefully very few. A limitation in the 15-year long-stop period is now proposed. The case for that is the need for certainty. There must be some end—although it can be argued as to what should be the end — to the possibility of litigation. There is a dichotomy between the principle of certainty and the principle of fair and sufficient opportunity to bring an action.
I believe that the Committee has made a fair stab at the problem. However, I should have preferred it to examine, as has been done in other limitation areas, the possibility of some flexibility. This is a matter to which we may return in Standing Committee, to determine whether the proposed period is right, whether it is too comprehensive and whether some discretion should be exercised in the way in which it operates.
There were many important discussions — and we value them—in another place. Many amendments were tabled, especially by the noble Lord Hacking, who prosecuted many of them with great zeal. However. none of the total of 15 amendments moved in Committee or of the six on Report were accepted. It might be that we will not pursue all these matters in Committee, but we may wish to raise some of them especially the long-stop period.
At this hour of the night I do not propose to weary the House by going into any further details, save to repeat that while it is a compromise Bill, it is a fair attempt to put the law—certainly in one respect —where it was before and to bring certainty, which should be valued by defendants.
The noble Lord Denning said that this was a reforming Bill in a situation that was crying out for reform. I certainly support the spirit of the Bill.
§ Mr. Sydney Chapman (Chipping Barnet)
It may be helpful if I declare a possible interest. I am a non-practising architect, but I have been a member of the Royal Institute of British Architects for 26 years.
To judge from the remarks that have been made, it is. obvious that architects in particular and the construction industry in general are deeply affected by the provisions of the Bill. I welcome the principle of the Bill, which tries to strike a balance of fairness between — to use legal 451 jargon — potential plaintiffs, who, generally speaking, and in terms of the Bill, would be owners of buildings, and potential defendants, who could be not only architects, builders, subcontractors, specialists and civil engineers, but local authorities. They have responsibilities in the process of building, not least in inspecting the building works to ensure they are in accordance with the building regulations.
There is no doubt in my mind that there is a need for a change in the law on latent damage, because it is complex, obscure and uncertain, and has been for the past 10 years, principally as a result of a judicial decision known as Anns v. London Borough of Merton. Unfortunately, many people in the construction industry have concluded that the compromise solution—I accept that there must be a compromise — instigated by the Lord Chancellor's Law Reform Committee, whose proposals are clearly the basis for the Bill, leaves the law just as uncertain, complex and obscure, if not more so.
I shall say why I believe that to be the case. There are three themes to the measure. The first is that it is designed to retain the existing limitation of six years from the accrual of the cause of action, and it still leaves the courts to determine whether the cause of action accrues at common law. Secondly, the Bill decrees — this is my word — that there is a long-stop of 15 years from the date of the breach of duty. Thirdly, the plaintiff must bring his action within three years of what has been called "discoverability" — the word is not specifically mentioned in the Bill — of the latent damage. The Bill contains a lengthy and complicated definition of discoverability, which is taken from the law on damages for personal injury. I suggest that it is not helpful or relevant in respect of construction works.
§ Mr. Greg Knight (Derby, North)
I am listening with interest to what my hon. Friend is saying. What does he find uncertain about the long stop provisions? Surely an architect knows that after 15 years any action is statute barred.
§ Mr. Chapman
I shall try to explain exactly what I mean. There seems to be no statutory definition in the Bill of breach of duty. I suggest that it is not as certain as lawyers seem to think. My hon. Friend will want evidence of that—not merely an assertion. Surely it is borne out by the series of judicial decisions handed down from and since the Anns v. London Borough of Merton case in 1977, which have instigated the need for the Bill. I do not believe that the Bill cures the problems contained in that series of judicial decisions.
I shall give an example. I ask my hon. and learned Friend to comment on it when he replies to the debate. I suggest that if there is deliberate concealment, another law seems to operate. The Bill excludes the provisions of sections 14(a) and 14(b) of the Limitation Act 1980 where there has been deliberate concealment of any fact relative to the plaintiff's right of action. On the face of it that seems to be reasonable, but it is not reasonable when one realises that the phrase "deliberate concealment" is defined in section 32(2) of the 1980 Act thus: "deliberate concealment—"of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.452 With the greatest respect, in the context of construction works, with which the Bill is principally concerned, the majority of defect cases will fall into that category. That means that the criterion by which such cases will be decided will be that of discoverability, with all the uncertainty that that involves.
I want to persuade the House that I am not trying to make a special plea on behalf of my erstwhile profession, because I believe that it is just as much in the interests of prospective plaintiffs—the owners of buildings—that the law should be stated unequivocally, even if it involves rough justice on both sides. The one thing that an aggrieved plaintiff wants is a quick remedy at law, with compensation. I suggest that delay or legal arguments—which will be as great under the Bill's provisions as under present law—will not help plaintiffs in getting defects remedied quickly.
I should like to say also, because it is germane to the problem, that if the defendant—say, a builder—is not in business at the time the case comes up and the architect or civil engineer cannot afford the professional indemnity premium, the plaintiff does not receive damages. I stand to be corrected if I am wrong on that point. I understand that in recent years architects' premiums have soared. In many firms—I do not think that this is an exaggeration —those premiums exceed more than 10 per cent. of the gross fee income of the practice. That is the case, even for a firm which does not have a bad record or has had no claims laid against it. Hon. Members on both sides of the House will realise that, unlike in the motor insurance business, there is no such thing as a no-claims bonus being operable.
§ The Solicitor-General
I wonder whether it would help my hon. Friend if I dealt immediately with his point about concealment. He quoted section 32 of the 1980 Act, which is the relevant legislation, and argued that in the majority of cases the criterion will be discoverability. He said—I paraphrase his comments — that most of the matters complained of were unlikely to be discovered for a considerable time. The answer is that the key word in section 32(2) of the 1980 Act is "deliberate". The section states:For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment".Most of these cases amount to a breach of duty which is not deliberate. Where there is a deliberate commission of a breach of duty, it is justifiable that that should be categorised as deliberate concealment. I think my hon. Friend will find that that is not quite his point.
§ Mr. Chapman
I am immensely grateful to my hon. and learned Friend. I hope that he has reassured many people working in this field, at least on that matter. I have read the Lord Chancellor's Law Reform Committee report deeply and carefully. I realise that in paragraph 4.20 a number of points are advanced in relation to this matter. Equally, I know that my hon. and learned Friend will understand that I have been advised that the law would stand in the way that I have described. Perhaps that matter will be considered in more detail in Committee.
I apologise for keeping the House, but I should like to make a few more comments. A number of hon. Members have mentioned that an architect—or a civil engineer or any other design consultant—will face the prospect of 453 paying high premiums after retirement. Unlike other forms of insurance, one does not in this case insure the product for all time. The design consultant—whether he is the architect or the civil engineer or anyone else—can insure himself or his company only for a particular year. If a company has to pay more than 10 per cent. of its gross fee income, the penalty and financial obligation imposed on a person who has retired will be severe.
As I understand the operation of the law and judicial decisions, if a builder who is liable to have a claim made against him ceases business, that liability can and may be passed on to the architect. Therefore, the architect or perhaps the other design consultant seems to be liable, in the event of a builder going out of business, for the total liability and not just his possible part of it. I have to say, at the risk of meeting the opprobrium of the legal Members of this august Chamber, that statistics show that compensation finally paid to injured parties is substantially less than the income derived by the legal professon in dealing with a claim under these forms of latent damage.
The law must be a fair compromise in such cases. accept that absolutely, and it is in the interest of owners that it should be fair and reasonable to defendants. The British Property Federation, which of course cannot claim to speak on behalf of all owners of buildings, but can claim to speak on a substantial sector of ownership in the building industry, recognises that and states unequivocally that, above all, the law must be certain. Before 1977 and Anns v. London Borough of Merton, the accepted convention was a six-year liability from the completion of the job in contract or tort; unless the contract was under seal, when the liability under contract was for 12 years. Apart from the discrepancy between the 12 years and 15 years, which would leave matters undecided in at least certain contracts, I appreciate the endeavours of the Lord Chancellor's Law Reform Committee and the logic and propriety of the Government in presenting the Bill. However, I respectfully suggest to my hon. and learned Friend the Solicitor-General that the Bill should be amended in Committee.
I should like my hon. and learned Friend to confirm that, although he was right to point out the nuances and differences of the disparate parts of the construction industry—they could not initially agree on exactly how the law should be changed — there is now a consensus not only in the construction industry but it is shared by the British Property Federation. That view is that the most practical and fair solution to this difficult problem should be a long-stop, which is 15 years from the breach of duty, as provided in the Bill, or 12 years from the completion of the work. My hon. and learned Friend might say that the sting is in the tail because they recommend that it should either be the long-stop of 15 years or 12 years from the completion of the work, whichever expires first.
Many of us could argue that the long-stop should he reduced to 10 years, which, incidentally, is the proposal in the EEC document on product liability, or, for example —obviously I choose examples that are beneficial to the point I am trying to assert to the House — that the position should be 10 years as it is in France. The liability period, incidentally, is five years in Denmark. I believe that the consensus of the contruction industry and the British Property Federation should be the one that the Government earnestly and sympathetically consider.I 454 believe that it will cause fewer anomalies if that holds true, rather than the Government's proposals, and it is for that reason that I commend that proposal to the House.
§ Mr. Simon Hughes (Southwark and Bermondsey)
I am grateful for the opportunity to substitute for my hon. and learned Friend the Member for Montgomery (Mr. Carlile), who would normally he in his place to speak on behalf of my party on measures of this sort. I am pleased to act as his junior. We share the view of the Solicitor-General and the right hon. and learned Member for Aberavon (Mr. Morris), who spoke from the Opposition Front Bench, that the Bill is one to be welcomed. We welcome the principle and, in substantial measure, the details of the Bill.
I shall start where the hon. Member for Chipping Barnet (Mr. Chapman) finished. The hon. Gentleman suggested that in seeking to achieve the fair compromise, which should be the right test, we should look to the British Property Federation. That suggests immediately a degree of unfairness in definition. As the Solicitor-General rightly said, we are seeking to find a compromise between two groups, the consumer, who will normally be the plaintiff, and the industry, which will normally be the defendant. I understand many of the arguments that the hon. Member for Chipping Barnet advanced, but it is inevitable that the British Property Federation. as any group representing a part of the whole of the industry, would be likely to see matters primarily through its own eyes.
§ Mr. Chapman
I was saying that the British Property Federation is the consumer in this instance. It cannot claim to represent all consumers, that is all the owners, but some of its members are developers and owners who commission builders to erect buildings.
§ Mr. Hughes
That I understand. The greatest inequity, inevitably, as the Solicitor-General said, lies as between the person who is in most instances a one-off plaintiff—someone who finds only once in his life that there is a defect in the building, whether he is a house owner, a property owner or a possessor of another property — and those who work in property for a living. In most instances the construction industry will be involved. Only a minority will involve professional negligence. In cases of commercial activity, occupation, profession and income, there are normally more available remedies in the form of insurance, to which the Solicitor-General has referred. than for the person who, only once in a lifetime, finds himself needing to challenge something with which the Bill concerns itself.
The attempt to find a balance is something that is prima facie best done by a body such as the Law Reform Committee. I join those who have already paid tribute to the committee. It is always good to see proposals made by such committees coming before the House. By their very nature they are impartial assessments that have been made on the basis of practicality by those with experience of dealing with practicalities. Those who comprise the Law Reform Committee and seek to propose reforms act through the eyes of those who have seen how the law works and not on behalf of the consumer alone or of the industry alone.
It is clear that the law was not working. There were occasions when people were impeded in taking rightful 455 action because they discovered that something had been done negligently at too late a stage, through no fault of their own. The Bill properly addresses all the issues that are relevant within the areas of tort and negligence. That was the diet on which I was brought up in my earlier existence as a lawyer outside the House before I became a Member of this place. Cases such as Anns v. London Borough of Merton were important tests in which it was established, or thought to be established, that someone could take a party to court—in the case to which I have referred, a local authority — and succeed where that party, or someone down the line from him, had been negligent in his professional duty. The same test applies whether one is talking about the building industry, which was one of the areas in which I used to work as a member of the Bar, or in terms of professional negligence. The same test applies because one is seeking to find a method of protecting people who may not be able to discover that what they were given by way of advice, or what they secured by way of agreement, was negligent until much later. Clause 1 allows for certainty, which is something that I have heard called for by Conservative Members. It states—the deadline is not too long—that actions will not be allowed more than six years after the dateon which the cause of action accrued".It will be six years in some instances and three years in others. Those are certain and not very long periods. They will arise only when the facts relevant to the action were not known when the action accrued.
I must make the point to the Solicitor-General about the date and the definition of the course of action. He will appreciate that there is still some anxiety about that definition. Lawyers may be able to understand that definition easily, but it does not give certainty because, as the Solicitor-General will probably understand better than any other hon. Member, one of the purposes of the Bill is to achieve certainty throughout these matters. Although there may be long periods during a construction project when the period is sufficiently long to make another definition difficult, if we accept the suggestion that I made about the date set for completion there may be a possibility of dealing with that definition because there are often staged completion certificates in the larger building contracts. I hope that that question can be dealt with in Committee, to achieve certainty of definition as well as certainty of period, which I believe that the Bill has achieved.
The new section 14B causes some concern, as the hon. Member for Chipping Barnet made clear in his speech. It suggests a 15-year period overriding period. We properly have a duty to allay the fear of the lay community, which was expressed in the intervention of the hon. Member for Mid-Worcestershire (Mr. Forth). We are required to say that that is an absolute long-stop. It is important for people to know that if the period of 15 years passes, that is the limit and people may then sleep safely and soundly in their beds in the knowledge that they cannot be defendants after that period.
It is important that there should be a long-stop. If we are to consider guidance as to whether that long-stop should be 12, 15 or 20 years, we could probably best consider the advice of the committee that produced the proposals for the Bill. It is difficult and we are plucking a figure out of the air. There is no perfect figure. We are 456 trying to deal with the realities of experience. The Solicitor-General will know, and I recall from practical experience not just at the Bar, that there are often long delays before problems come to light.
Soon after I was elected, substantial defects were found on the Bonamy estate in my constituency. It was then too late for action to be taken through the courts against the architects, builders and developers by the local authority. That defect in procedure has cost the local authority a substantial sum of money. I pass no judgment as to whether the local authority should have discovered the problems before, but a period substantially less than the 15 years suggested in the Bill would not have been sufficient for the authority to act. Often if there are defects, especially in the foundations, it takes a long time for the evidence to come to light and for any one to be properly advised to take action. I urge the House to resist the suggestion to alter the period for a long-stop below 15 years before we have considered that and taken the independent, non-client-based advice of the Law Reform Committee.
When we consider the dates, we must also consider the practices in other countries. We should also consider the interlocking practicalities for the profession. One of these practicalities involves insurance and we have a duty to examine ways in which insurance can be provided properly. We should follow the Solicitor-General's suggestion that we should consult on the report that he mentioned and reach a conclusion.
It might also he useful to compare the growing practice of guarantees being given with buildings. I believe that I am correct to say the National House Building Council now has a 10-year guarantee period. If that is right, and the Bill goes through with a 15 year long-stop, the two ought to be married.
If someone deliberately conceals something, but not with the intention that it should be concealed for ever, that is sufficient mischief to come within the definition of deliberate concealment. We all know how things may be done when builders try to get around planning legislation. The mischief will come to light eventually. We must try to prevent that.
It is worrying that someone who retires at, for example, 60, should have to carry a liability into retirement, or have his estate or family carry one. The appropriate way around that is insurance. No doubt the right hon. and learned Member for Aberavon took out insurance in his chambers. That is now the norm for people who might be the recipients of a writ or legal action. There are mechanisms in trades and professions for picking up people who do not take out insurance. We should look to insurance to protect people who are not at fault, such as spouses. It should not be a sufficient argument against the principle that some people will not be in practice and therefore not earning enough to pay.
I hope that the Committee will examine the Bill carefully. I also hope that its principle, which comes from the independent proposal of the Law Reform Committee, will be accepted. That being so, we shall have achieved a fair compromise. I hope that the Government will give the proposal a trial period before giving in to any side's demands to compromise on a well-researched and sound proposal.
§ Mr. David Crouch (Canterbury)
This will be rather more of a question for my hon. and learned Friend the Solicitor-Genera] than a speech.
I have studied closely all the reports of the proceedings of the other place in the Bill. I was enormously impressed by the wisdom and depth of the investigation made by so many Members of another place and by the extremely helpful and thoughtful investigation carried out by the Law Reform Committee under the chairmanship of Lord Scarman.
My question concerns what comes outside the Bill. Paragraph 1.6 of the Law Reform Committee's report refers to,matters outside our terms of reference.In studying the reports of debates in another place, I noticed that their Lordships concentrated on the problems arising in the construction industry, and especially in domestic houses. I am anxious about the problems of latent damage in the construction of industrial plants, and I am talking of buildings costing £10 million, £20 million, £50 million, £100 million or even more.
The British Chemical Engineering Contractors Association, which gave evidence to Lord Scarman's committee, is a group of about nine vast contractors, which build chemical plants in Britain and elsewhere. Those plants are extremely expensive. The contracts already contain many provisos concerning responsibility. How far does the Bill go in defining the liabilities of the constructors and operators of such plants?
§ Mr. Crouch
That worries me, because it is an enormous responsibility. It is rather worrying for the industry that that should be so.
Their Lordships said much about the large-scale construction of dwelling houses, but nothing about the construction of steel or chemical plants. The contracts drawn up in those cases contain a clear division of responsibilities between contractors and operators of plants. A plant can go wrong because of maladministration by its management. That has been shown in famous cases, for example, in the nuclear industry. I do not mean Chernobyl, for we do not know what went wrong there; hut we know what went wrong at Three Mile Island. Not only the construction but the management of the plant was faulty. Where did the responsibility lie? How will this important Bill affect liability in this contentious area?
I do not wish to delay the House further, but this is an important point, and I hope that my hon. and learned Friend can give a clear assurance, if not now, in Committee, so that anxieties in the construction and operating sectors of the chemical industry can be allayed.
§ Mr. Neil Thorne (Ilford, South)
I declare an interest in this matter as a chartered surveyor and as a member of Lloyd's.
The right hon. and learned Member for Aberavon (Mr. Morris) asked Conservative Members to declare their interests in the plaintiff, and I wish to identify with the plaintiff in such matters. However, I am against greedy lawyers. We should not create another field day for them in this area. My hon. Friend the Member for Chipping Barnet (Mr. Chapman) was right to say that lawyers have 458 done well out of such claims. I was glad to hear that the right hon. and learned Gen tleman's branch of the legal profession has joined the rest of us by becoming liable for negligence in their sphere of activity.
The public must be properly protected. Nobody would disagree with the Government's aims in doing that. But it is also important that, in achieving that objective, they should not make it more difficult for the public to obtain professional advice at a resonable price. If, as the hon. Member for Southwark and Bermondsey (Mr. Hughes) mentioned, professional people are priced out of the market, they may try to recover their additional insurance premiums from their clients, which will add considerably to the cost, and also lead to fewer people being available to give advice.
I understand that in the United States, in some fields of medicine, doctors are having to withdraw their services completely because of the claims that are being made against them through the courts. That is a worrying situation and I hope that we shall not reach that stage in Britain.
§ Mr. Keith Best (Ynys Môn)
I am most grateful to my hon. and gallant Friend for giving way. Although the old maxim used to be justitia magnum emolumentum est, I would make one plea on behalf of the lawyers. When my hon. Friend compares the position in the United States and here, I am sure that he is aware of the contingency fee basis in the United States and the fact that damages are determined by juries. As a member of Lloyd's — I declare my own interest—he will know only too well that that is the principal cause for alarm about damages awarded in the United States, not the system that we have here.
§ Mr. Thorne
I fully accept what my hon. Friend says. I would hate British law to get into that position. Nevertheless, my hon. Friend the Member for Chipping Barnet mentioned that already half the damages seem to go to lawyers in Britain, so goodness knows what must go to those in the United States. We certainly want to avoid that.
If a building is constructed by a contractor who acts negligently and 25 years later a defect is found, as I understand it there would then be three years in which the occupier or owner could make a claim. If the contractor had by that time gone out of business, presumably the person against whom action would be taken would be the designer or the architect or some other engineer. That would mean that there would be a claim perhaps 28 years after a building had been constructed. If that is the case, that could be well after the designer's death. Would his widow then be expected to sell her possessions, including her house, in order to satisfy some claim which had originated through some defective work by a contractor 28 years before? I should be grateful if my hon. and learned Friend the Solicitor-General could reassure me on that when he replies. If that is what we are suggesting, we should think long and hard before we put that into effect.
I should also be grateful if my hon. and learned Friend could advise the House whether in view of the liability which I believe has recently come to rest on the shoulders of some local authorities—they have been found to be involved in negligence claims if it was thought that their building inspectors were not carrying out their work properly — they would also be similarly involved and have some commitment.
459 The point that has been made about the enormous cost to a retired person is important. Certainly, if 10 per cent. of the gross fees have to be laid out in insurance payments, and if that is to be continued for at least 15 years after retirement, I would also like an assurance that the architect or designer could get tax relief, if nothing else, upon that payment. I had heard that that was a source of great concern to professional people: that they could not offset their insurance payments for that reason.
In Committee I hope that it will be possible to consider the question whether or not, after 15 years, it would not seem more reasonable to place the matter on the shoulders of the insuring company of the builders. After such a period, it would be right and proper to expect insurance to be covered by building insurance, particularly in view of the complexity which is likely to arise and the hardship which could be caused, especially to individuals not practising under limited liability.
The right hon. and learned Member for Aberavon said that the professions should be moving towards limited liability. That has started in one or two professions and I am sure that the move will be extended in the coming years. It could smack of a desire to exonerate oneself from the liability that has traditionally rested on the shoulders of professional people. I would not wish the Government's action in this measure to force professional people in that direction. That would be a great mistake. I await my hon. and learned Friend's reply with interest.
§ 12.6 am
§ Mr. Greg Knight (Derby, North)
The right hon. and learned Member for Aberavon (Mr. Morris) was a little unkind when he implied that Conservative Members were concerned only about the interests of potential defendants. We are interested in ensuring that as far as possible justice is done.
During the debate it has become clear that the present law causes injustice both to potential defendants and to plaintiffs and that action is need to rectify the problem. Such action involves a balancing act between three points. First, the plaintiffs must have a fair opportunity to pursue their remedy. Secondly, the defendants are entitled to be protected against stale claims. Thirdly, as far as possible uncertainty in the law is to be avoided. By and large the Bill achieves that balance, so I support it.
However, I wish to express my disappointment that the Bill does nothing about the matter raised by Lord Hacking in another place in respect of the accrual point for the periods of limitation. One difficulty that exists for lawyers and potential litigants alike is that different actions have a different starting point for the limitation period. In other words, the clock starts to run at different points for different actions, even on the same set of facts.
I shall not enlarge upon all the differences because I sense that the House wishes to make progress. However, I refer my hon. and learned Friend to the comments of the Law Reform Committee. Paragraph 44 on page 16 states:In cases involving negligence, a plaintiff's cause of action might accrue at different dates depending upon whether the negligence was in the performance of a contractual duty, or a statutory duty or a duty of care at common law and this can lead to complications. Indeed a single set of facts could in theory give rise to claims for breach of duty under all three heads, with three limitation periods. This situation was criticised by a number of those who wrote to us. Our terms 460 of reference on the other hand are limited to the relatively narrow band of 'negligence cases involving latent defects' and we consider that it would he quite inappropriate for us to make general recommendations, applicable for instance in the contract field, in the context of the present review.That is a slight disappointment to me and I hope that, perhaps in Committee, some consideration can be given to rectifying this problem. Having said that, I welcome the measure and especially clause 3 which rectifies a longstanding problem and will enable successors in title of the original victim to inherit the cause of action. This rightly continues to be actionable only within the original limitation period and is still subject to the longstop provisions. Having expressed the minor disappointment that the Bill does not go further, I welcome the measure.
§ Mr. Roger Moate (Faversham)
I do not know if there can be such a thing as a lawyer's paradise, because that may be a contradiction in terms, but a lawyer's paradise is an apt description of the Bill. As the House might know, there was an earlier Parliament from which lawyers were banned. The legal profession rather rudely called it the unlearned Parliament and, I think, the fool's Parliament. The layman is a fool if he trespasses on such legalistic ground as this Bill. I prefer the term drunken Parliament. That referred to a Parliament which met for only about eight days and passed hardly any legislation. It met in Glasgow and perhaps that explains the title.
Despite the fact that laymen might look at the Bill with some trepidation, there is no doubt that it could have a widespread effect on consumers and producers alike and, indeed, upon the whole community. The effects of the legislation may be quite different from those envisaged by my hon. and learned Friend the Solicitor-General and the other Law Officers. This type of legislation has a widespread effect and will have some unexpected results over many years in commerce and in the construction industry and upon the way consumers will act. For that reason, I regret that we are debating the Bill at a rather extraordinary hour, a point with which my hon. and learned Friend the Solicitor-General might well sympathise. The speeches by hon. Members show the interest in this legislation.
I recognise the need to remove by statute uncertainties in the existing law. As many of us know, over the years some court cases have taken the law in one direction while others have taken it in the opposite direction. It must be difficult for practitioners in businesses associated with matters of this kind to know with any certainty what the law will be in the future and it must be right in principle to have clarification of the law and to improve it.
The present law can be grossly unfair to a claimant who might well find himself beyond the limitation period before he is even aware that he has an actionable claim. In that respect the law ought to be amended. The right hon. and learned Member for Aberavon (Mr. Morris) was a little unfair to Government Members when he said that we were simply supporting the case of the producer. That is certainly not correct. There is a recognition that the law needs to be remedied.
§ Mr. John Morris
I was not being unfair. I was merely passing judgment, perhaps with a measure of partisanship, on the interventions that had occurred up to that time.
§ Mr. Moate
The right hon. and learned Gentleman should have refrained from passing judgment until he had 461 heard the wise speeches from other hon. Members. The interests of the consumer and the producer are not as far apart as perhaps he suggests. Under these proposals, many years after fulfilling a contract or supplying a product a defendant might be the subject of a claim of which he has little or no knowledge, and about which he may have inadequate records. It is also probable that he will not have any insurance protection. Although I welcome certain principles in the Bill, I have to express serious doubts about whether the Government have got it right.
In essence, I can see the case for allowing the plaintiff the extension of the ordinary period of limitation of six years, with that additional three years from the date when he discovers, or could reasonably have discovered, that he has sustained a loss. I have not read or heard any disagreement with that proposition.
That extension in itself is dramatic. It imposes an immense burden on the producers of goods such as builders, manufacturers and any providers of any service, or upon the insurers. That is where I declare my interest. Even if it were just six years as at present, an additional three years, would he a major extension. For that reason, I argue strongly that the 15-year longstop is far too long. I dispute the contention of my hon. and learned Friend the Solicitor-General that, somehow, 15 years represents a proper balance between the producers and the consumers.
By extending the limitation period by the three years —I accept that that is an over-simplification—we are already substantially tilting the balance against the producer. By then putting in a longstop, we are going too far. That is not a balance, but simply a little less unbalanced. For my hon. and learned Friend to say that some suggested 10 years and some 20 years, and that the Government stuck at 15 is simply plucking figures out of the air. This is a matter of judgment, but to go from what was in the past understood to be a limitation of six years to 15 years will strain at the bounds of commercial reality.
I also question whether we are doing the consumer a favour. Obviously we shall be doing some individuals a favour, because some will be able to make claims that would otherwise be time-barred. However, are we doing the consumer in general a favour? Are we benefiting the community'? I doubt it. I can illustrate this point through the insurance profession, with which I have sonic connection. The problems of insurance are not just of some minor inconvenience or expense, or even of considerable expense to consumers. They have a profound affect on consumers, prices and employment. It is possible, by over-protecting the consumers, that we shall damage not only the community but those consumers.
Hon. Members have already referred to the malpractice suits in the United States, which are literally putting some doctors and dentists out of practice. More relevant to this country is that many British manufacturers cannot export their products to the United States because of the difficulty of getting liability insurance. It we encourage that trend here in the United Kingdom, which I suspect we are doing by opening the doors that bit wider, we are making it harder for manufacturers to manufacture, and builders to build.
§ Mr. Peter Thurnham (Bolton, North-East)
As I understand it, it would be relatively simple for the purchaser of a 10-year-old house to take out an insurance policy against there being some defect in it, whereas the burden to the contracting industry of provisions to cover 462 a 15-year period could add more to the cost of the house than taking out a simple insurance policy. Can my hon. Friend advise me on the initiative taken by the National Economic Development Office concerning such insurance? I have heard of this initiative, but not of any results.
§ Mr. Moate
I welcome the point made by my hon. Friend. If one is seeking to protect the home owner—I accept the genuineness of the points made by Labour Members — one does not necessarily do it in what I would call a rather naive way by simply extending the period of limitation to allow individuals, in theory, to be able to pursue a house builder, estate agent or solicitor who might, decades after the building of the house, no longer be around. Alternatively, if he is, it might be extremely difficult for the home owner to take action successfully.
Frankly, it sounds good but it is naive. If one is really trying to protect the home owner, one should not do it by widening the law in this way. Instead, one should look for specific remedies of the sort that have been referred to. I suspect that there is much better protection for the home owner through schemes such as the NHBRC and specific insurance than by this fairly unsatisfactory opening of the floodgates of the law.
§ Mr. Best
Is not the inevitable conclusion of my hon. Friend's remarks that there should be compulsory insurance? If so, in fairness he should state it. That must follow from his remarks unless there is to be some protection for a potential plaintiff. My hon. Friend should look more carefully, not at the 15-year longstop but at the fact that there is a three-year stop for a plaintiff once he knew, or ought reasonably to have known, of the defect.
§ Mr. Moate
I am certainly not arguing the case for compulsory insurance. I am saying that it is unrealistic to pretend that one is protecting home owners simply by extending the period of limitation. That is not a real argument in favour of the Bill. I am not sure whether I follow my hon. Friend's point In effect there will be an opportunity for an individual to claim after six years, as at present, but if he does not discover the loss he has sustained until the fifth or sixth year, he then has three years from that date up to a maximum of 15 years. I am simply saying that a shorter period than 15 years is realistic.
Let me emphasise further just how much insurance difficulties can impinge upon the value and quality of the goods and services enjoyed by the consumer. Today, many substantial practices seriously question their ability to survive in business, faced as they are with the enormously high insurance premiums that are now being quoted. None of us can really foresee the future, but if awards become substantially greater—that seems to be the trend in the Western world—premiums get higher, and the insurance market contracts, many substantial companies or partnerships will not be able to get insurance. We can already see the effect of that on commercial activities in the United States, even on British companies acting in the United States, and we do not want to see it happen here.
That relates only to the large practitioners, and hon. Members—particularly the hon. Member for Southwark and Bermondsey (Mr. Hughes)—have glibly dealt with the question of insurance. A large number of people are single practitioners, and there is virtually no way in which 463 they will carry on insurance for 15 years after they have retired, be they estate agents, architects, solicitors or surveyors. In reality they will not do it—nor, I suspect, will most barristers maintain a 15-year run-off insurance after they have ceased practice.
§ Mr. Simon Hughes
There is a very practical answer to that. During the time of professional work one should insure against claims in the period of 15 years after one ceases to work, and the payment can be made during one's professional life.
§ Mr. Moate
The hon. Gentleman misunderstands the nature of the business at the present time. Because of the examples that exist around the world, most insurers are trying to retreat from that long-tail type of business and to curtail their exposure during that period of time. Increasingly, great difficulties will arise.
I am not saying that there should not be a long period during which claimants can claim. We have already accepted that. But I am saying that 15 years is too long, and we have a better example that we should be considering. I do not often quote with favour examples from the European Economic Community but when I do it obviously proves a good point. The EEC directive on product liability sets out a ten-year limitation. I ask my hon. Friend seriously to consider that ten years is six, plus three, plus a little more. That is as good as any period, and better than most suggested. It is a considerable extension of the present law and gives a certainty that will be helpful to all involved. I urge the House not to gloss over the difficulties which the longer period would entail for many in industry. I do not think that the longer period would confer on the user the benefits in which my hon. Friend believes.
In principle I welcome the Bill. I hope that the House will treat it seriously and consider the many representations that it is likely to receive.
§ Mr. Andrew Hunter (Basingstoke)
The debate generated by this five-and-a-half page Bill is relatively confined. The salient points have already been made many times. Had I caught your eye earlier, Mr. Deputy Speaker, I should have tried to make many of the points covered so eloquently by my hon. Friend the Member for Chipping Barnet (Mr. Chapman). I endorse, applaud and support all his arguments.
The debate has concentrated on two simple factors. The right hon. and learned Member for Aberavon (Mr. Morris) said that we should remove uncertainty from the law. Of course we must. The question is whether the Bill will do that. When considering the time factor I support my hon. Friend the Member for Faversham (Mr. Moate). We should examine carefully the 10-year precedent established by the Common Market.
We have concentrated upon clauses 1 and 2. I want to discuss clause 3. Clause 3, according to the explanatory memorandum,enables a person acquiring real or personal property to bring an action for negligence where the property concerned is in fact (but unknown to him) already damaged when he acquires it.This might seem technical, but I wonder whether the clause will prove to be something of a minefield, 464 intentionally or unintentionally. It enables those owners of houses in the categories listed in the Housing Defects Act built privately, and therefore not covered, to seek redress. The negligence referred to in clause 3 may not extend to defective housing as defined by the Housing Defects Act. That might be significant.
The Committee on the Bill will have a lot of work to do. It is a worthwhile Bill, but fundamental questions will have to be explored.
§ Mr. Peter Thurnham (Bolton, North-East)
I hesitate to speak about such a legal matter, but I must declare an interest in that I am not a member of Lloyd's, I am not a lawyer, but in my limited spare time I am an engineer and I pay lawyers' fees. My hon. and learned Friends describe the Bill as a compromise and the right hon. and learned Member for Aberavon (Mr. Morris) said that he wanted to tip the balance towards the plaintiffs. I wonder whether it is in the interests of either potential defendants or plaintiffs if the balance is tipped towards lawyers.
As someone who has to run a business and decide what has to be done, I am anxious about the number of records that might have to be kept and stowed away for an excessive time from a starting point which is not at all clear.
I should declare a fuller interest in that I am a Fellow of the Institute of Mechanical Engineers, a member of the Electrical Contractors Association for many years and a recent adviser. My own business, which I founded in 1972, now employs 500 people in specialist engineering contracting. My company has had a long involvement with the committee dealing with specialist engineering contract law.
I was intrigued last week to find that my daughter, whom I am supporting while she studies law at King's college, had my company's case come up in her first-year examinations because an injustice that I had suffered had been put right by a change in the law. I was pleased to hear that. It cost £7,000 in legal fees to pursue a £1,500 contract without success in the Court of Appeal. I was told that I should go to a higher court, but I decided that I had had enough of the law.
We all agree that the present law is unjust — it is unfair to plaintiffs and defendants. The principles of the new law are much to be welcomed, and three years from discovery is obviously to the benefit of plaintiffs. I raise the practical question whether 15 years is not too excessive a period, because the breach of duty is a rather difficult period to determine for a practising contractor. Exactly what date should he put on his documents? I feel that 15 years is excessive, especially as the EEC is talking about 10 years.
I wonder whether the Solicitor-General can enlighten me as to who the members of the Law Reform Committee are. I suspect that they are all lawyers, but perhaps I am wrong. As lawyers, they say that 12 years might bar some worthy claims but would probably work satisfactorily in most cases. They say that a 15-year period probably strikes the right balance. They are seeking to strike a balance of legal niceties and are losing account of the practical realities of people who have to run businesses and decide how to deal with claims that go back such a long time.
I agree with many of the points made by my hon. Friend the Member for Faversham (Mr. Moate), who might be interested to know that I rang the British Insurers 465 Association today to discuss its view on this matter. It said that it welcomes the introduction of a long-stop, but thought that 10 years would be more practicable. If the insurers who will have to help contractors say that 10 years would he practicable, I question why the Government feel that they should go so far beyond 10 years in seeking to strike some nebulous balance in favour of the plaintiffs, who, one hon. Member said, were not organised and needed to be borne in mind. If we burden consumers with excessive costs to strike some nicety of legal balance, we will not do the people of this country a favour.
At a time when the Government say that they are cutting red tape, I earnestly ask them to reconsider whether a period as long as 15 years is in the interests of business, especially as we are seeking to find jobs for 3 million unemployed. Will it get more people back into the job market to impose a 15-year period when a lesser period has been advocated by so many who have spoken this evening, and when consumers can gain protection by taking out an insurance policy at, I suspect, a much lower cost?
§ Mr. Greg Knight
I know that the House wishes to make progress, and I hesitate to rise. Is my hon. Friend really suggesting that the House should encourage jerry-builders?
§ Mr. Thurnham
I think that my hon. Friend would agree that if a building has stayed up for 10 years it would not be too difficult for the owner or purchaser of that building to take out an insurance policy to indemnify himself against any defects that might arise. If no defects have occurred in the first 10 years, I cannot believe that it would be difficult for him to take out insurance to cover himself. To suggest that someone is not a jerry-builder if there is nothing wrong in 15 years, but is a jerry-builder if something goes wrong in 10 years is a rather silly distinction, if I may say so, without being disrespectful.
On the one hand, we are arguing about political judgments as to whether the period should be 10 or 15 years and, on the other, we are asking architects and others to keep massive records and access to those records for 50 per cent. longer. For what purpose should we burden the industry with those costs? It is for no purpose other than to satisfy a few lawyers that they were doing the right thing from a legal point of view, and perhaps some political judgments which were arrived at too quickly and without proper attention to the costs that would be incurred.
§ The Solicitor-General
I express my gratitude for the welcome that has been given by the right hon. and learned Member for Aberavon (Mr. Morris) to the Bill. I thank hon. Members for their kind remarks regarding the work of the Committee.
I think that the House has moved some distance from an understanding of the concept of negligence. We are talking about provisions to deal with the limitation of actions arising from negligence — negligence by those responsible for turning out a product containing a latent defect. Negligence means failure to take reasonable care in all the circumstances. For the consumer, who is the victim of negligence in those circumstances, that means not getting what he has paid for, not being able to recognise that at the time, and having to carry the can unless he can have a remedy in the courts.
466 Most hon. Members' constituents would wish to have a remedy in the courts in those circumstances. The law, as it stands, gives them a remedy, and it is a remedy without time, to the extent that they may bring an action provided they are within the statutory period of limitation starting from the date when the damage occurred. If a builder uses concrete which turns into Stilt on cheese after 20 years. it is only from 20 years that the statutory limitation period starts to run. The law at present makes a builder liable—this is the answer to the question by my hon. Friend the Member for Ilford, South (Mr. Thorne) — and vulnerable to an action for damages provided it is brought within six years from that date—20 years after he built the house which turns into Stilton cheese.
What the Bill does in the interests of the defendants —the builders—in those circumstances is to say, "In no circumstances may an action be brought 15 years after the date of your breach of duty, your negligence, your failure to take reasonable care." Those who have inveighed against the hardship occurring to defendants—if the Bill is enacted—have not fully understood that point, I feel. Perhaps we shall have an opportunity in Committee to demonstrate a little more clearly how that is actually a benefit to defendants in such circumstances.
The right hon. and learned Gentleman raised the issue of limited liability. I think that I should limit my own liability by informing him that I have noted his suggestions carefully and will bring them to the attention of my right hon. Friends, without any commitment whatsoever.
For many months and indeed years my hon. Friend the Member for Chipping Barnet (Mr. Chapman) has displayed great interest and knowledge in these issues. I am grateful for his welcome of the principle of the Bill. I was sorry that he found so much to criticise in it. When he said that it contained no statutory definition of breach of duty, he was seeing a tiger where no real difficulty exists. The concept of negligence is well understood. The definition of discoverability has occasioned no real difficulty. I dealt with my hon. Friend's anxieties at the time in connection with the concealment provision.
My hon. Friend the Member for Chipping Barnet apparently believes that the architect becomes liable if the builder who is a subcontractor goes out of business. I am able to reassure my hon. Friend and others who have raised that issue. It is not true to say that an architect will be responsible for the negligence of the builder where the latter becomes bankrupt. As a matter of general principle, a person who arranges for work to be done for him by an independent contractor is not liable for the negligence of the contractor in the course of carrying out the work, provided, of course, that he has taken reasonable care to choose someone who is suitable. But an architect who is held only partly to blame for a defective building cannot be held fully liable simply because another defendant has gone bust. Nor can an architect who would not otherwise be held liable be liable because someone has gone bust. That is also the answer to part of the question raised by my hon. Friend the Member for Ilford, South.
§ Mr. Chapman
Surely the point is that the role of an architect is not only to design the building but to a certain degree, to supervise and overlook its construction. If the plaintiff cannot sue—if that is the right legal word—the contractor, inevitably he sues the architect, as he is advised 467 to do, to try to make out a case that the architect did not supervise the job properly, even though there was a liability on the builder to construct the building properly.
§ The Solicitor-General
If the architect were liable at all, he would be liable whether or not the builder was also liable.
I say yes to the suggestion of the hon. Member for Southwark and Bermondsey (Mr. Hughes) that there is no special magic about 15 years. However, it represents, in the views of the Government and the Law Reform Committee, a reasonable compromise between those who want 20 years, such as the Consumers Association and many others, and those who would like 12 years or fewer. I agree; let us see how it works.
My hon. Friend the Member for Canterbury (Mr. Crouch) asked whether the Bill's provisions will apply to chemical works. The answer is yes. But we are dealing with latent defects, not with questions of management and with someone who sets the wrong temperature at Chernobyl, or whatever. We are talking about latent defects in the construction of premises. The Bill is not limited to the construction of housing.
In the rather elaborate illustration posed by my hon. Friend the Member for Ilford, South, a person discovers 28 years after work has been completed that there is something wrong. There would be a complete bar to his bringing any action, because such an action cannot be brought any later than 15 years after the breach of duty. I shall certainly not at this stage embark on questions of tax relief for insurance premiums. I expect that my hon. Friend knows more about it than I do.
I appreciate the welcome given to the Bill by my hon. Friend the Member for Derby, North (Mr. Knight). One will have a reasonable chance of successful law reform if 468 one limits one's objectives. It is not the point of the Bill to interfere with the law relating to accrual of a cause of action. My hon. Friend the Member for Faversham (Mr. Moate) thinks that that will have unsuspected results, although he recognises that the law is unfair to plaintiffs. I am grateful to him for his fair speech in that regard. I must say, with respect, that my hon. Friend confused questions of limitation with questions of liability. At present, the date of accrual is the date when the damage first occurred—15 years from the date of breach of duty is a restriction on the liability to which a building constructor may be subject.
§ The Solicitor-General
I should like to finish. Of course I shall give way if my hon. Friend insists, but we all want to proceed.
Those who say that this is bad for the consumer because insurance premiums will increase seem to be saying that it is easy for the consumer to take out an insurance policy to cover the risk. If it is easy for the consumer to do that, I do not see why it becomes impossible, in terms of price, for the contractor or architect to do so. All of these matters can be gone into in more detail in Committee. It will obviously be an interesting Committee.
This has been a Second Reading debate and I choose to get from this debate a general welcome for the effect of the Bill, which is to reduce the injustice of the present law and strike a fairer balance between the conflicting interests of the construction industry and those who buy its product. I commend the Bill to the House and I hope that it will get a Second Reading.
§ Question put and agreed to.
§ Bill read a Second time and committted to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).