University Hospital of Wales (Hansard, 12 February 1985)

The Earl of Caithness
My Lords, with the leave of the House, I shall repeat a Statement about the University Hospital of Wales which is now being made in another place by my right honourable friend the Secretary of State for Wales. The Statement is as follows:
"With permission, Mr. Speaker, I wish to make a Statement in view of a number of wild allegations that have been published on the subject of the defects at the University Hospital of Wales known as the Heath Hospital.
"The hospital was planned in the 1950s by the Board of Governors of the United Cardiff Hospitals. Messrs. S. W. Milburn and Partners were appointed architects and Messrs. W. S. Atkins and Partners engineers in 1961. F. G. Minter & Sons Ltd. were appointed principal contractors for the main works in 1966.
"The hospital was constructed between 1966 and 1972. Some faults, mainly arising from work carried out in the period 1966–1969, began to become apparent in December 1973, when the first piece of mosaic tile became detached, and in 1974. In the meantime the hospital had been handed over to the Welsh Hospital Board in October 1970 and became the responsibility of the new South Glamorgan Area Health Authority on reorganisation in 1974. The rights and liabilities of the Welsh Hospital Board passed to the Welsh Health Technical Services Organisation (WHTSO) at the same time. The architect signed the final certificate in November 1975.
"The issue of this certificate was an event of crucial significance as it precluded claims against the contractors in contract or in tort in respect of defects patent at the time. At that stage, WHTSO took no specific steps to protect its legal position and that of the taxpayer against the contractors, the architects, or any other party. Counsel notes that the AHA and WHTSO had become much concerned with the state of the concrete by 1976. In February 1977 a general property survey of the Heath complex by the South Glamorgan Health Authority also led to concern at the condition of the mosaic cladding. WHTSO commissioned Ove Arup & Partners to carry out a survey. While that report was awaited the only legal action that was in hand was the 120 defence by WHTSO of a claim by F. G. Minter Ltd. and subcontractors Drake & Scull Ltd. who were seeking to recover finance charges under the terms of their building agreements. Consideration was given to the inclusion of the mosaic defects as a counter-claim against Minters' finance charges claim, but counsel advised in July 1977 that such a counter-claim could not be sustained. Under the traditional conventions which have been strictly observed I have no means of knowing what consideration my predecessors gave to the problem of the Heath; but I have been informed that no other legal action was taken prior to 1979 to protect the interests of the taxpayer.
"Ove Arup's first report was received in November 1978, and having reported defects in the concrete during the course of their mosaic study they were further commissioned to carry out remedial and survey work on the concrete. The full extent of the mosaic defects having now been clearly identified, WHTSO commissioned Bickerdike Allen Partners in January 1979 to advise them on the specification, supervision and execution of mosaic and related works. Their first report in April 1979 was addressed to these matters.
"This report identified for the first time a possible claim against the architects (S. W. Milburn Partnership). The first reference to counsel was on 12th July 1979 when, among other matters, the question of limitations was considered. Following that meeting with counsel Bickerdike Allen prepared a further report which was received in November 1979 and was concerned with responsibilities and liabilities. Meanwhile, counsel had been instructed in October to settle a draft writ and statement of claim against the Milburn Partnership, and in the instruction to counsel the need for urgency was emphasised. Counsel settled notices of arbitration and an endorsement for the writ by telex on 17th December 1979 and the writ was issued the same day.
"Allegations have been made that the writ was out of time. The limitation period for a claim in contract was and is 12 years and the writ was clearly in time in this respect. The limitation period for a claim in negligence was and is six years. At the time of issue of the writ this six-year period was regarded as running from the date when damage was discovered or was reasonably discoverable by the plaintiff: and on this basis the writ was in time for the claim in negligence also. The Pirelli decision of December 1982 moved the commencement of the six-year period back in time from the date of occurrence of damage, regardless of the date of discovery, and on that basis the claim in negligence would have failed if it had been pursued.
"I turn now to the outcome of the legal action, details of which were given on 6th February in an answer to my honourable friend, the Member for Cardiff Central. I shall deal with the allegation that there has been some kind of cover-up and the suggestion that in settling the action at about £300,000 the taxpayer has been negligently left with a liability for work costing £4 million—or, as is further alleged, as much as £8 million. The total cost of remedial works is £4 million of which about £2.8 million was attributable to structural defects other 121 than the mosaic cladding. The department's Accounting Officer reported to the PAC as long ago as 14th November 1983 counsel's advice that legal action about this should not be pursued. He had previously been cross-examined in some detail about this matter by the PAC on 17th March 1982.
"The settlement that was finally reached on the mosaics will be reflected in the summary of losses and compensation that forms part of the summary accounts of health authorities that are published every year as a House of Commons paper, and it was always the position that the department's accounting officer would provide the PAC with any further information that it requires. There has therefore been no cover-up, nor indeed could there have been. But, in view of the outrageous statements that have been made on this subject in recent weeks, I have made available to the House, and my Permanent Secretary has passed to the PAC, a very great deal of material both about the settlement and about the events of the years that preceded it.
"I turn now to the relationship between the Secretary of State and WHTSO. WHTSO is a special health authority established under the NHS Acts. It is a body corporate with separate legal indentity; and it is entitled in the conduct of litigation to act, 'in all respects as if it were acting as a principal' It is not required to seek my approval to settlements of legal actions in which it may be engaged. It is perfectly normal for WHTSO and other health authorities to engage in litigation and to reach settlements without reference to Ministers but, given the public and parliamentary interest in this particular case and the particular terms of the non-disclosure clause, I think it would have been better had I personally been informed, particularly since one of my officials was a member of the WHTSO board. I regret that this was not done; and I am sure that in these exceptional circumstances I was right immediately to arrange that the fullest information should be given to Parliament.
"I will now deal with the suggestion that the cost of putting right the defects at the University Hospital of Wales may amount to as much as £8 million. As my honourable friend the Parliamentary Under-Secretary said in answer to a Question on 1st February this year, the total cost of the remedial work is expected to amount to a little under £4 million. Of this, £2.7 million has already been carried out and the remainder will be completed during the next two years. Once again, the accounting officer has already given evidence on this matter to the PAC and the information was also given to the House in a parliamentary Answer on 19th April 1982. A joint working party of the Welsh Office, WHTSO and the health authority agreed on the works that were necessary and did not accept all the recommendations of the Ove Arup report.
"I regret that the honourable Member for Pontypool who has been responsible for most of the wilder allegations made did not at any stage communicate with me or attempt to check the facts with my department.
"I have had to answer this afternoon for events 122 involving a hospital conceived in the 1940s, planned in the 1950s, largely built in the 1960s before I entered the House and completed under a previous Conservative Government. I have had to report on the absence of any protective legal measures during the whole period of the last Labour Government, on the outcome of complex legal actions that were initiated very soon after we came into Government and on measures to repair the damage that will be a burden on the health service for several years to come. I will accept such responsibility as is mine. I trust that others will accept theirs as well".
My Lords, that concludes my right honourable friend's Statement.

§ Lord Prys-Davies
My Lords, this Statement really discloses an outrageous state of affairs. It in no way allays one's anxieties about the events and about the role of WHTSO—the Welsh Health Technical Services Organisation. But we note that at least the Secretary of State accepts that the chapter of mistakes will place a burden on the health service for several years to come and that he also acknowledges that he accepts such responsibility as is his.
The Statement clarifies one or two issues. We now know that WHTSO and the area health authority became concerned with the state of the concrete at the hospital in 1976 and with the condition of the mosaic cladding by February 1977. But 20 months went by before WHTSO obtained expert professional advice from the well-known firm of Ove Arup and Partners. We have not seen that report. But does it not indicate that there were possible grounds for a breach of contract action or grounds for an action in negligence? Another eight months go by before counsel is asked to advise. So the writ is issued, eventually, in respect of the defective cladding, claiming about £1 million; and because the writ was issued out of time, it is settled for £300,000.
However, is it not true that if a writ had been issued in time, there would also have been a claim for £2.8 million in respect of the other defective works at the hospital? I should be grateful if the Minister would confirm my understanding of the position that a writ was issued in respect of defective cladding, claiming £1 million, and settled for £300,000 and that there are other defective works that will cost £2.8 million to remedy, but that no writs have been issued in respect of the other defective works.
There is also concern in the Principality that the settlement agreement was confidential to the parties, who were prohibited from publishing its provisions. There is considerable concern that the Secretary of State for Wales was kept in ignorance of this secret deal. I consider the Statement to be unsatisfactory where it deals with the relationship between WHTSO and the Secretary of State. Very well; I accept that it is a body corporate with separate legal identity and that in the conduct of litigation it is entitled to act in all respects as if acting as a principal. But is it not true that WHTSO is also an agent of the Secretary of State for Wales? Indeed, the Secretary of State for Wales appoints one of the directors of the WHTSO board from among the officials at the Welsh Office. The Statement is totally silent about the role of this representative at WHTSO board meetings.
123 I understand that, at the relevant time, there were three Welsh Office officials as members of the WHTSO board. What line did they take when the recommendation came before the WHTSO board that there be a settlement for £300,000? Did they report back to the Secretary of State? Indeed, were the terms of the proposed deal discussed in a conference of Welsh Office officials? Was there discussion in a joint conference of Welsh Office officials and WHTSO officials? We are left with a decision taken somewhere or other within the Welsh Office that the agreement should not land on the desk of the Welsh Secretary of State, that he should be shielded from this agreement. If that is so, we fear that the Welsh Office officials were, if I may say so, Mr. Pontings in reverse.
In the light of this costly experience which, in the words of the Minister, has placed on the NHS in Wales what will be a heavy burden for several years to come, we want to know what measures are being taken at WHTSO and the Welsh Office—WHTSO was looking to the legal department of the Welsh Office for advice—to ensure that writs are issued in time and to ensure, too, that a substantial claim against a third party will not be settled by WHTSO, will not be abandoned by WHTSO, without the Secretary of State for Wales being given an opportunity to object to the terms of the settlement or the abandonment of the claim.

§ Lord Hooson
My Lords, does the noble Earl appreciate that the Statement today, and the response that it has evoked, make a formidable case for devolution? Does not the lamentable state of affairs disclosed by the long Statement add up to this, shed of its verbiage: that the taxpayer has to find over £4 million for the results of the incompetence and neglect in the building of a new hospital, and that the story revealed by the Statement shows that there was incomplete control, negligence in issuing of writs, failure to call in specialist advisers, and so on?
In the end, it comes to this: there has been a writ issued and damages of £300,000, obtained by means of a settlement, which was not even referred to the Secretary of State. The important question for the House to consider is this: has WHTSO learnt its lesson? I ask that because there are reports reaching me that there are serious defects at the Royal Gwent Hospital and at the Gwynedd Hospital in North Wales, which have been built subsequent to this hospital, and a lamentable state of affairs is disclosed. What does the Secretary of State intend to do about it?

The Earl of Caithness
My Lords, I think that there are still a number of misconceptions in the minds of the two noble Lords who have responded to the Statement for the opposition parties. I should like to deal first with these two matters. The first is the question of the writ being out of time. The writ was not out of time. At the time the writ for negligence was issued the law was that it had to be done within six years of the date the damage was notified. The writ was put in by counsel within that six-year period. In regard to the other writ—that is, the one which can be issued 124 within 12 years—of course there was no question of its being out of the time limit if it could have been issued on counsel's opinion.
The second point on which I think there is a misconception in the minds of the noble Lords is that the problems faced by this hospital are unique to this building. This was a very bad period of building. I remember it well. I was being taught building at the time, and every day there seemed to be new ideas for stressed concrete or mosaic tiles which were going to solve the problems of builders. It was a bad design period. It was a very bad period of building in this country. Not only hospitals, but also office blocks and factories throughout the country are paying the price if they were built in that time. One of the reasons that the settlement was £300,000 rather than the £1 million or thereabouts claimed was that counsel's advice was that the mosaics were doomed, anyway. This was not known at the time the mosaics were used in construction, but it was found that it was going to be a defective building material and that in future there were going to be problems over the use of this building material. Therefore it could have applied not only to this hospital, but also to many other buildings which used it; in fact, it has applied to many other buildings.
Turning now to the question of confidentiality, I would point out that this was suggested by counsel for S. W. Milburn, as the solicitors, when they submitted the draft, claimed it contained a confidentiality clause. This was not resisted, but was amended by WHTSO to provide for the disclosure of information to the Welsh Office and, in confidence, to the PAC. This was a judgment made by WHTSO in order to obtain the best possible settlement. The value of such a clause was clearly limited, since it could not prevent the Public Accounts Committee from publishing it, if it so chose. When we are considering confidentiality clauses we have to take into account that a benefit of a confidentiality clause is that it enables the settling party to secure the best deal for the taxpayer. There was certainly not any negligence in issuing writs. All the necessary writs were issued, and advice was taken on counsel's opinion. They were submitted within the time limits.
As I have said, this problem, which has now raised its head again under this Government, stretches back to the previous Labour Government who were in power when the final certificate—that is the crucial date—was issued in 1975. That is the crucial point, as was said in the Statement. They were in power then, and I cannot tell the House what action they took at that time.

§ Lord Prys-Davies
My Lords, although the next business has been called, I should like to make this response to the noble Earl. The Statement—

§ The Lord President of the Council (Viscount Whitelaw)
My Lords, I apologise, but, with all respect to the noble Lord, I think that he really was out of time, unless there was something very important to pursue. I think he really was out of time, and I feel that I ought to stand by the rules of the House. I apologise to him.