HL Deb 13 May 1986 vol 474 cc1039-49

3.5 p.m.

The Lord Chancellor

My Lords, I beg to move that this Bill be now read a third time.

Moved, That the Bill be now read a third time.—(The Lord Chancellor.)

Lord Broxbourne

My Lords, perhaps I may venture to say a few words at this stage, having in effect given notice of my intention to do so at the Report stage of the Bill. I then respectfully requested that further consideration be given to various aspects of the Bill, in particular the two aspects in the amendments moved by the noble Lord, Lord Hacking, which were designed to take account of the special position of the construction industry in regard to the so-called long stop provision and the starting date thereof.

Nevertheless, the arguments failed to find favour at that stage, although there was, as noble Lords may recall, a responsible body of opinion—I think, informed opinion in the main—that was in favour of a revision of the Bill in accordance with the noble Lord's amendments. There being no amendments tabled for Third Reading, the Bill will now go to another place in its present state.

I hope that that will not prevent a further consideration by Ministers for which I asked at Report stage. I said on Report that there seemed to be a case for such consideration, and I also asked whether the noble and learned Lord on the Woolsack would be good enough to give further and better particulars of the list of supporters of the 15-year period that he cited at col. 128 of Hansard for 8th April, and give an indication of whether their support precluded an option of the 12-year period.

Following my intervention at Report stage, I have been favoured with several communications from organisations both in the construction industry and interested in the subject matter of the Bill. Among them was the Building Employers Confederation, who state inter alia in the letter that they wrote to me, that: In the list of bodies identified by the Lord Chancellor during the debate in Committee as supporting a 15-year long stop period, reference is made to the BEC. I do not know why this is the case because in all our communications with the Law Reform Committee we have always expressed our dislike for a 15-year period although subject to that, we have broadly expressed approval for the Lord Chancellor's proposals". Others who have been good enough to send me their views are the Royal Institute of British Architects, the Association of Consulting Engineers, the British Property Federation, and, through the RIBA, the Institution of Civil Engineers. Two points have impressed me in the communications that I have received. The first is the congruity of view between, on the one hand, those who represent the construction industry and, on the other, those who represent the building owner; that is to say, the potential plaintiff seeking remedies under the Bill. This, I would respectfully suggest, weakens the point made by the noble and learned Lord as to the assumed contrast between what he called extremely well organised, articulate bodies—meaning, thereby, the potential defendants—and unfortunate victims who are not an identifiable body.

I submit that this is at best an over-simplification since members of the professional bodies are the agents, possessing great skill, expertise and dedication, of the building owner or client; for example, the members of the Royal Institute of British Architects in building contract cases and the Institution of Civil Engineers in civil engineering contract cases. The British Property Federation also represents those who own property, either for occupation or for investment, and that organisation told me that it was the federation that obtained the agreement between the construction industry and the professional bodies for a 12-year compromise period specified in the amendment of the noble Lord, Lord Hacking.

Indeed, the Institution of Civil Engineers wrote to Ministers in the Department of the Environment expressing disappointment at the refusal to take matters further with the Lord Chancellor. Its disappointment was the keener because of an earlier indication that agreement would gain ministerial support. The agreement was reached with some difficulty and not without some sacrifice of the special interests of the parties arriving at the agreement. However, although agreement was reached, support for it was not forthcoming.

The second salient point which has impressed me following the communications which I have received since the Report stage is that the congruity of view to which I have referred derives from an acceptance of the practicalities of the situation. In particular it derives from the imperative necessity, as I submit it to be, of making the limitation period neither so long nor so imprecise as to make insurance impracticable. The absence of certainty has led to great difficulty in getting inurance cover in this sphere. Without insurance cover a successful plaintiff may well, in the end, whistle for his damages.

The problem of obtaining appropriate indemnity assurance for professional services has, I am informed, recently been brought to the attention of Ministers. Nevertheless, its implications for this Bill have apparently not been absorbed or taken into account. This is a flaw in the Bill. It is a patent rather than a latent defect in a Bill of good intent derived from a report of so distinguished a committee. It will go to the other place in its present form and there, it is to be hoped, it will be improved, because its present form is imperfect.

However, if it is to be improved in the other place, realistically one must accept that it can only be by Government amendment and with Government support. That is the effect of what has been called the elected dictatorship. The noble and learned Lord on the Woolsack may indeed recall the phrase which, in spite of the efforts of some, still is with us today. Therefore, I ask Ministers not at this stage to close their minds. I ask them to consider the matter afresh without obstinate precommitment. I ask them to have regard to the congruity of view obtaining among the informed and the concerned. Finally, I ask Ministers to introduce certainty and practicality for the benefit of all and to the detriment of none.

3.15 p.m.

Lord Hacking

My Lords, in rising to address the House on Third Reading of the Bill I willingly repeat the thanks that I gave to the noble and learned Lord on Second Reading. I willingly repeat my thanks to the noble and learned Lord for bringing this Bill before the House and I also willingly repeat my thanks to the noble and learned Lord for the courteous, conscientious and extensive consultations which were carried out by his officials. I thank too the Government for agreeing to take a short postponement of Third Reading to enable me to return from the United States of America to participate on Third Reading.

While repeating those thanks—and I should be happy to repeat them in more fulsome terms—I believe that these extensive consultations which have been carried out by the Government have had an unfortunate consequence. I believe that they have produced in the Government a belief that no further revisions to this wholly technical Bill were either necessary or desirable. Hence, the 15 amendments which were moved in Committee, in some of which I participated, and the six amendments which were moved on Report were—

Lord Lloyd of Kilgerran

My Lords, I am sorry to interrupt the noble Lord, but, having regard to the acoustics of this House, I find it difficult to hear at this distance what the noble Lord is saying.

Lord Hacking

My Lords, I do not think it would be the wish of this House for me to bellow but if I position myself in a location nearer to a microphone perhaps that will deal with the problem of the acoustics and with the problem of some noble Lords at the other end of the Chamber who are unable to hear me.

I was referring to the Committee and Report stages and reminding your Lordships that the 15 amendments which were moved in Committee and the six amendments moved on Report were all rejected by the Government, although several of them were only drafting amendments and although some were suggested by professional bodies, such as the Law Society, whose only desire was to improve the terms of the Bill and to clarify its intent. Indeed, these consultations—and the findings of the Law Reform Committee—were often used by the Government as a reason for this House not exercising, on this Bill, its right to act as a revising Chamber. I think that was regrettable because almost all who were consulted reached their position on the balance of argument. Indeed, that is how the Law Reform Committee reached many of its conclusions, having considered the arguments on one side and the arguments on the other side, it then, on balance, reached the recommendations that it did.

Thus, while it can be said that the principles of the Bill are supported by all those whom the Government consulted, I do not think it can be said that a uniform blessing has been given to the drafting of this Bill. I refer to consultations carried out with the Law Society, the Bar Council, the Official Referees and the Society of Construction Law. Each and every one of those bodies, while supporting the principles of the Bill and while supporting the Bill as a whole, had reservations in one place or another about the drafting of the Bill.

Out of our discussions and debates I believe one major defect has emerged. That defect was highlighted in the representations made by the construction and building industries. Indeed, the nonsense is that this Bill will have its greatest use in activities in the building and construction industries—as was recognised by the Law Reform Committee. Therefore in practical terms the Bill should be made to work for the building and construction industries.

Yet many—old and new—difficulties still exist. I refer to the uncertainties over the accrual of the cause of action—the uncertainties of the test of Pirelli of "significant damage" and the difficulties of actions accruing in tort and contract at different times. I refer to the "knowledge" tests in Section 14A and the activating event for the long stop period, which is to be found in Section 14B.

Already there is an enormous amount of litigation arising out of uncertainties in our law as applied to the building and construction industries. Your Lordships may remember that, as I mentioned in the debate we held on 10th February, there has been a doubling of the number of cases in the Official Referee's Court every five years. Indeed, for the period between 1976 and 1982, the number of cases taken by the Official Referee's Court doubled exactly. Again, as I mentioned in the debate on the 10th February, records of the Royal Institute of British Architects show that the number of claims in 1978 relating to the building industries was 200 and in 1982 there were 500, which, if my arithmetic is correct, is an increase of 125 per cent. Therefore, I think it should be a matter of considerable concern that all the major institutions in the building and construction industries have expressed dissatisfaction with the terms of the Bill.

Though the noble Lord, Lord Broxbourne, has already referred to some of these institutions, I should like to draw your Lordships' attention more precisely to those institutions which have expressly stated dissatisfaction with the drafting of this Bill. I refer to the Royal Institute of British Architects, the Royal Institute of Chartered Surveyors, the Institution of Civil Engineers, the Institution of Structural Engineers and, with those, the Institution of Mechanical Engineering, the Institution of Electrical Engineering and the Institution of Chemical Engineering. I refer to the Association of Consulting Engineers, to the Federation of Civil Engineering Contractors And the Building Employers' Confederation, which was one of the institutions mentioned by the noble Lord, Lord Broxbourne. Finally, as did the noble Lord, Lord Broxbourne, I refer to the British Property Federation, which is not on the side of the defendants but on the clients' side. I should like to quote from a recent letter that was written by the Director General of the British Property Federation to the Minister for Housing, Urban Affairs and Construction, where it is said: We are the clients. The British Property Federation represents the great majority of developers—property companies, banks, insurance companies, contractors, shopping chains and so on … Our fear is that the proposals in the Bill will involve litigation about whether a case is time-barred or not, in other words, litigation about whether litigation can start. This is nonsense". So it is on both sides of the industry that concern has been expressed and it has not simply come from the potential defendants as opposed to potential plaintiffs. I think it is right that your Lordships take note that these industries play a very important part in our economy. I take but one example, from the Association of Consulting Engineers, whose members are currently responsible for overseas currency earnings of £560 million per annum, which is about one third of the earning power of our banks. I believe that their voices should be heard in this Bill and in other measures. They should be heard when they speak of increasing exposure to liability, increasing exposure to litigation, loss of recruitment and the cost of insurance. Not long ago the noble and learned Lord, Lord Hailsham, gave a passionate address in which he referred to the eroding position of the professions. I can do no better than adopt the words that the noble and learned Lord used in his address at the Fourth Rivers Lecture to the Institute of Chartered Secretaries and Administrators. I referred to this at the Report stage, as your Lordships may remember. Referring to the professions, the noble and learned Lord said: we suffer a deliberate denigration of our ideals, and a continuous progressive and increasingly rapid diminution in our standards of life". Then the noble and learned Lord spoke of the dangers: There is the danger from government. There is the danger from corporations, private and public. There is the danger from organised labour. Each and all of these influences is gradually encroaching on the integrity and independence of the professions". He then summed up in this way: It is time that we came to look at one another and recognise in one another persons who are suffering from the same pressures, and who all need allies not simply to secure personal survival but to ensure the continuance of standards in society without which independent and honourable professions cannot continue to exist". That is the worry that the professions see over this Bill and that is why, if satisfaction cannot be achieved in this Bill, the professions in the building and construction industries will be seeking again the leave of your Lordships' House for their case to be heard.

Lord Lloyd of Kilgerran

My Lords, it is with great reluctance that I intervene at this stage, but to preface my short speech I should like to make an apology to the noble Lord, Lord Broxbourne, because I missed the first three or four minutes of his speech.

The Lord Chancellor

What a loss.

Lord Lloyd of Kilgerran

My Lords, I did not hear the aside from the noble and learned Lord, the Lord Chancellor, who is sitting on the Woolsack. But never in the history of your Lordships' House has a Member had such a good excuse as I have for being late. Contentedly reading the Latent Damage Bill, I was sitting in a stationary taxi on Waterloo Bridge when it was run into by a bus. I hope your Lordships will not suggest that there is some confusion in my mind as a result of that transport difficulty—although confusion developed afterwards on Waterloo Bridge in trying to decide where the fault lay. Fortunately, I had my card with me. I produced it and everyone almost knelt down, understanding that I should be a truthful witness.

I suppose it is inevitable that the noble Lord, Lord Broxbourne, in his splendid speech, which I support, should forget one matter, and that is that I wrote a letter to him. He referred to a number of letters but not to the letter in which I suggested something that could take place at Third Reading. He and I could not agree, however, on the right course to adopt.

In concluding my short but I hope sincere and very cogent observations at this stage, may I say that I agree with the noble Lord. If I may use the happy phraseology of the noble Lord, Lord Broxbourne, the congruity of view arises from the practicality of the situation. I do not want to waste your Lordships' time just now, but I myself have had a large number of letters from people who are dealing with the practicalities of the situation arising over the inadequacy of this Bill for the construction industry.

3.30 p.m.

Lord Howie of Troon

My Lords, I rise to support the noble Lord, Lord Broxbourne, and other noble Lords who have spoken in criticism of this Bill, as I did during its earlier stages. Noble Lords will remember that we had a considerable amount of discussion on the question of the long stop and on the difficulties which arise from determining the exact date of the breach of duty upon which the long stop depends. There was also a great deal of discussion on the uncertainty to which these problems gave rise.

Noble Lords may recall that at the Report stage I argued that the long stop provisions introduced under the Bill were no more certain than is the present law. My arguments are recorded in the Official Report for 28th April last, col. 23, so I shall not repeat them here in detail. But on that occasion I quoted the Law Reform Committee's criticism of the difficulty in fixing the time of damage under the present legal position and I quoted the committee's description of that task as being "time-consuming, expensive and sometimes impossible".

I then went on to say in reference to the proposed breach of duty (I am quoting now from col. 23): In fact, the breach of duty can only be determined if the courts are asked to perform time-consuming, expensive and sometimes impossible tasks of ascertaining exactly when it occurred. I suggest to your Lordships that if that could not be justified in connection with the time of actual damage, I do not see how it can be justified in terms of the breach of duty. The committee criticised the uncertainty in one case but the Bill keeps it in the other". Unfortunately those arguments were not replied to in the course of the Report stage debate. They still appear sound to me, and I should like to have the views of the noble and learned Lord the Lord Chancellor on them before we end the debate today.

There is one other matter that the noble and learned Lord the Lord Chancellor raised more than once during the earlier debates on the Bill, and that was the quite proper matter of the injustices that might be faced by clients under the proposed amendments which we moved and which were later withdrawn. I have a copy of the letter to John Patten, to which the noble Lord, Lord Hacking, referred earlier, and the important point in it is the one that he made: namely, that it came from the British Property Federation, which said, "We are the clients". He quoted part of the letter, and I do not intend to repeat that, but at the end of the letter the director general of the federation, writing to the Minister, says: If this means a slight reduction in the overall period within which claims can be made"— referring to the length of the long stop— then the client is prepared to accept that. His paramount aim is to obtain the greater certainty and reduction of litigation that would result from one unequivocable date". The client there is agreeing with the arguments which we put forward from the point of view of the builder who would be the defendant in any litigation.

The last matter to which I wish to refer today is this. During the discussion of one of the amendments of the noble Lord, Lord Hacking, at Report stage, the noble and learned Lord the Lord Chancellor (I thought rather chastising us) said that if we proceeded with the amendments that, might lead to the foundering of the whole Bill, and they might lose their long stop altogether"— suggesting to us that the other place might throw it out. That remark can be found in col. 33 of the Official Report for 28th April.

Since then I have discussed the matter with a number of people in the construction industry. Their response to that implied threat is interesting. "So what?", they say to me. "Since the provisions for the long stop are every bit as uncertain as the existing law is, why go to the bother of changing it?" I do not suggest to the noble and learned Lord the Lord Chancellor that he should throw out the Bill at Third Reading instead of sending it on to the other place, but that is what the people to whom I spoke suggested to me. If the Bill were to be dropped or thrown out in another place, architects, consultants and builders feel that they would be no worse off than if the Bill went through. Right or wrong, that is how they feel.

What arises from our lengthy discussions is that not quite enough consideration has yet been given to the spirit and the strength underlying the amendments that we put forward. I earnestly beg the noble and learned Lord to think carefully about this matter before the Bill goes to another place.

Lord Silkin of Dulwich

My Lords, I begin by expressing sympathy at least from this side of the House with the noble Lord, Lord Lloyd of Kilgerran, and the hope that no latent defect results from the unhappy events that took place on Waterloo Bridge.

In the speech that I made on the Bill on Second Reading I concluded by saying that it seemed to me that the Bill was extremely valuable and I commended it to the House. My understanding of the speeches that were made on that occasion was and remains that that was the view of Members of the House generally. I hardly knew the Bill—and it has been altered not at all—in the speeches today, although it is the same Bill that we debated on 17th March. I took the trouble a moment ago, for example, to look back at what the noble Lord, Lord Hacking, said: I welcome this Bill for several reasons. First of all, I welcome it because it produces justice for plaintiffs, whether inarticulate or articulate". He went on to say: I also welcome the Bill on behalf of defendants because it does fairness to them".—[Official Report, 17/3/86; col. 803.] I do not know why the same Bill has suddenly become so monstrously unfair in the meantime, as it is sought to persuade us.

I had the temerity to move an amendment which, had it been accepted, would have provided to the courts a power to extend the long stop. That is something that I do not think would have been done very often, but it seemed to me that there was something to be said for the power being provided. Although I did not pursue it on that occasion, I am bound to say that if there was any suggestion of the long stop being reduced in time, there would be a much stronger argument for the introduction in another place of some such qualification in similar terms to the power granted to the courts in relation to personal injuries—which I hope the noble Lord, Lord Lloyd of Kilgerran, will not need the benefit of in due course.

The points that have been made forcibly during the course of this afternoon were considered by the Law Reform Committee over the four years of its life. The question of insurance was considered. I have no doubt that all the bodies that were enumerated by the noble Lords, Lord Broxbourne and Lord Hacking, had, and doubtless took, the opportunity of giving their strong views on the sort of points that have been advanced today. As the noble and learned Lord the Lord Chancellor said in the Second Reading and in other debates, at the end of the day the committee reached what no doubt was a compromise hut one which was intended to produce the fairness to both sides of which the noble Lord, Lord Hacking, expressed appreciation in his speech on Second Reading.

Whatever may be the view—and one can understand it—of highly interested parties, such as the professions of architect and so on that have been referred to, one has to bear in mind that in this Bill we are dealing with the situation of a person who has suffered loss as the result of a wrong done to him by some other person. Prima facie, in that situation that person should be compensated, but that right to compensation has traditionally for all kinds of reasons been restricted by the necessity for some form of limitation. It should not be restricted too far or we deprive a person who should have a remedy of that particular remedy.

It is in that context that the Law Reform Committee sought to balance the various claims and reached the conclusions which until now have been accepted by the House. I hope that they will continue to be accepted even though they do not go so far as I should have liked to go, and hence I have put down the amendment. I believe that the compromise was a fair one. I hope that the noble and learned Lord the Lord Chancellor will continue to be firm against any derogation from it and earn the pair of white gloves which he has at the moment.

Lord Denning

My Lords, I wish to say a word of welcome to the Bill, which I feel is necessary given the state of the law before the Bill was introduced. It deals with cases where, for instance, a house has been built on rubbishy foundations and the owner or occupier does not get to know of the damage until years afterwards when the house begins to crack and fall down.

Before a case called Pirelli, which was decided in the House of Lords, the courts had been working on a good line—time did not run against the man who owned or occupied the house until he discovered the damage or could with reasonable diligence have discovered it. That good development was halted by a decision of your Lordships' House in the Pirelli case where it was said that that test was not correct and that we should go from the time that the damage occurred even though the person did not know of the damage or could not have discovered it. My noble and learned friend the Lord Chancellor said that that was a matter that should be considered by the Law Commission, and it was.

Under the chairmanship of the noble and learned Lord, Lord Scarman, the committee produced a first class report. I wish that it had gone wider. I wish that it had applied not only in actions of negligence but when a duty of care had been broken with regard to contract and a statutory duty. My noble and learned friend Lord Scarman thought that that would be too adventurous. I think perhaps he was right to limit the matter as it has been. Although we tried one or two amendments, I hope that the Bill will have a good passage through both Houses and come into law. It deals with a much-needed reform.

3.45 p.m.

The Lord Chancellor

My Lords, I am grateful to all those who have taken part in the Third Reading debate. I should be doing the House a disservice if I merely repeated the arguments that I put forward on Second Reading, in Committee and on Report, especially in the light of the two last speeches from the noble and learned Lord, Lord Silkin, and my noble and learned friend Lord Denning which summarised in a compendious form the case that I was trying to put. It is basically that this is a Law Reform Committee Bill. It is not, as it were, a main Government programme Bill. It is based upon the report of the noble and learned Lord, Lord Scarman, and his friends. After four years of deliberation, they dealt with the problem which my noble and learned friend on the Cross-Benches has just adumbrated.

The Bill does two things and two things only. The first is to give a plaintiff who may have suffered damage without his knowledge and which was beyond his power of discovery, a further period within which to obtain his rights and to bring an action for something which somebody else has done wrong or for negligence.

I have been in touch with the noble and learned Lord in the course of the Bill but for reasons which are probably understood by a number of your Lordships he was unable to attend after Second Reading. It was recognised by the noble and learned Lord, Lord Scarman, and his friends that under the existing law, as it is unaltered, an architect, a consulting engineer or whoever, could find himself liable for damages for negligence long after the period during which he could be expected to reply to the claim.

Various points of detail have been raised, but they are all Committee points which were dealt with in detail in Committee and on Report. In the end, it was recognised that the only way to deal with the matter was to fix a long stop, as it is called, beyond which the architect or whoever could not be sued, subject of course to the provision for fraud or deliberate concealment. Those are the only things that the Bill does. Some 140 organisations or individuals were consulted at length. There was a further consultation period by departments, including mine, during which I think about 74 comments were received. Those long stop figures were included.

I disagree with only one remark, which fell from the noble Lord, Lord Howie of Troon who described me as issuing a threat. I issued no threat at any stage. What I said was said by one of my predecessors, Lord Campbell, that law reform is by consent or not at all. What I have said is that I have a slot in the Government's programme for what is in effect the Bill of the noble and learned Lord, Lord Scarman, on the assurance, which I received from the Opposition and others, that this is an uncontroversial Bill. If it is to take a great deal of time, it will founder. That is not a threat. It is a statement of fact.

There has been a highly organised and concerted assault on the long stop provision basically by persons who want to shorten it in one way or another. It has also been extraordinarily misleading in some ways—for instance only last week or thereabouts, there was a letter in The Times from a responsible figure who said that the cost of insurance was spiralling rapidly in anticipation of the extended long stop period". In fact of course there is no extended long stop period. The long stop period is a protection which has never existed before.

That brings me to a remark made by my noble friend Lord Broxbourne, who said that a defect of the Bill was that it did not deal with insurance. I thought that I had made it plain on Second Reading that insurance is the subject of a separate initiative by the National Economic Development Office and therefore has no place in the Bill. In so far as the Bill affects the ability of a potential defendant to insure, it is assisted by the long stop which never existed before. If it does not affect the insurance premium it has neither effect for good or bad, but in so far as the Bill can affect it, the existence of a long stop must make it easier to insure.

I have said all that I have to say about the Bill. I solemnly say to those who have criticised the details of the Bill that law reform is either by consent or not at all. This is a Bill for which I have obtained Government time, and it therefore forms part of the Government programme. It is not a programme Bill in the ordinary sense. It is an attempt to improve the law in the respects brilliantly summarised by my noble and learned friend Lord Denning. I am glad to find that on the Opposition Benches, at least, there is comprehension of that fact.

On Question, Bill read a third time.

The Lord Chancellor

My Lords, I beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—(The Lord Chancellor.)

On Question, Bill passed, and sent to the Commons.