HL Deb 19 January 1987 vol 483 cc715-75

3.10 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Lucas of Chilworth.)

Lord Williams of Elvel

My Lords, before the Question is put, perhaps I may draw the attention of your Lordships to the fact that there has been no Motion to instruct the Committee on the order in which the Bill will be considered. In view of the fact that Schedule 1 clearly relates to Clause 6, Schedule 2 to Clause 13 and Schedules 3 and 4 to Clauses 36 and 48, it would have been for the convenience of the Committee if such a Motion had been made. I should be most grateful if the Minister could explain why no such instruction has been put forward by the Government.

Lord Lucas of Chilworth

My Lords, we have prepared ourselves for these debates on the basis that we would proceed through the Bill in the normal way, as it is printed, and accordingly we would not expect to come to amendments on Schedule 1 for some time. Even if Schedule 1 were to be grouped, for example, with Clause 6, parts of the Bill connected with Part I would still come up later; for example, the definition of "supply" in Clause 46 is important to Part I, as is Clause 50(6) which relates to liability for products produced before the Act comes into force. By taking schedules with their clauses we would not have achieved the aim of taking all connected matters together.

I should make one further point as it is my responsibility to propose a Motion to your Lordships' House giving instructions to the Committee. We did not feel that that was necessary for the reasons given, and neither was it put to us by any other noble Lord that it might be for the convenience of the House if it were so done. We therefore resorted to the usual practice.

Lord Williams of Elvel

My Lords, I got in touch with the noble Lord's private office on Friday to ask whether such an instruction had been prepared and was coming. It seemed to us that that could be for the convenience of the Opposition. I explained to the noble Lord's private office why it would be so; therefore I am not prepared to accept that criticism.

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 1 [Purpose and construction of Part I]:

The Chairman of Committees (Lord Aberdare)

I should point out that if Amendment No. 1 is agreed to I cannot call Amendment No. 2.

Lord Allen of Abbeydale moved Amendment No. 1: Page 1, leave out lines 7 and 8.

The noble Lord said: In rising to propose this amendment, I should like to speak also to Amendments Nos. 4 and 13, the first two being, as it were, preliminary to the substantive amendment contained in Amendment No. 13. It will be seen that this group of amendments has attracted some support from all parties.

The main purpose of Part I of the Bill, implementing as it does an EC directive, is to make producers strictly liable for injury arising from a defect in their product without the need to prove negligence. The EC directive allows, but does not require, an exception to be made from that main purpose in respect of agricultural products which have not undergone any initial processing. The Government have decided to adopt that exception. For some reason the Bill does not follow the directive's wording, and in the unlikely event of these amendments not commending themselves to the Committee we should no doubt be discussing the drafting a little later. Far and away the best course is to do away with any special exemption for agricultural products, and that is the purpose of this group of amendments.

The Royal Commission on Civil Liability and Compensation for Personal Injury, the Pearson Commission, of which I had the privilege of being a member (I think that I am the only surviving member of the commission in either House) considered this matter with some care, and with no dissentients came to the firm conclusion that there should be no departure from the doctrine of strict liability when it came to what we ate. Nothing I have so far seen or heard leads me to think that that conclusion was wrong. If a person suffers harm because there is something wrong with the food he has bought, why should not those who grew, farmed or caught it be in precisely the same position as suppliers of any product which causes harm to the individual because of some defect in the product? That is the general principle which is enough of itself to justify these amendments. If we are to have a Consumer Protection Bill let us protect all consumers.

In addition, some practical problems arise from the drafting of the Bill. Clause 2(4), the clause to which Amendment No. 13 relates, provides in effect that the exemption for agricultural produce does not apply if it has undergone an industrial process, but the Bill is silent on what constitutes an industrial process.

On Second Reading, one or two Members of this Chamber gave some examples and asked whether they involved an industrial process; but on that occasion, alas, answer came there none. Perhaps I may try again. What about slaughtering and butchering, the use of hormones, antibiotics and other additives in feedingstuffs, and the pasteurisation of milk? Do any of those amount to being an industrial process? Let us take fruit and vegetables. Does the use of pesticides and fertilisers, which can, I fear, occasionally hit the wrong target or be used in the wrong concentration, constitute an industrial process? Is the freezing of chickens and peas for the supermarket an industrial process? If it is not, what is it?

I suspect that there may be less argument about those activities being regarded as initial processes, as the directive has it, but we are at the moment considering what is in the Bill. I hope that the Minister will feel able to go rather further than he went on Second Reading and tell us what are the Government's views on those issues and how confident he feels that the courts will uphold those views, whatever they may be.

Only the other day the Court of Appeal had to form a view in a particular context about the meaning of the word "process" in the Factories Act 1961. If the lawyers are still arguing about the meaning of a word in an Act passed a quarter of a century ago, what a prospect is opened up for argument about the meaning of this provision in the present Bill. It would be much better to have it out.

On Second Reading, only two arguments were advanced for retaining those provisions. The first was put forward by the noble Lord, Lord Stanley of Alderley. He pointed out that there are numerous provisions requiring producers to maintain certain standards. In his disarming way he invited us to have a look at some of them. I have responded to that invitation. I have looked at them, and I am only confirmed in my view that they have very little to do with the provisions that we are now discussing. The various enactments which he cited provided in general that those who offended against them—to take just one example, leaving too much pesticide in a crop—are committing offences. However, the purpose of Part I of this Bill is entirely different. It is to give a civil remedy to persons suffering injury as a result of a defective product without their having to prove negligence. I am afraid that the enactments to which the noble Lord referred are simply not directed to the question of compensation for the individual who suffered damage.

The second argument was advanced by the Minister, who said that there were several reasons for the course on which the Government were set. However, the only one he vouchsafed to us was that he knew of no other member state which had indicated that it would include liability for primary agricultural products. It seems slightly odd that when in due course we come to development risks, we shall no doubt be told that we should ignore what is going on in other countries and stick to our own line, whereas in this context we are told that it is vital to keep in step with all the others. If all the other countries are set on going one way, one wonders why the provision for derogation in Article 15 of the directive was ever included. The truth, I suspect, is that not all the countries have made up their minds. We certainly know that food processors in some of the other countries are very unhappy about it. Perhaps, for once, it might not be a bad idea if we set an example.

I am not naive enough to think that the parliamentary draftsman—about whom we have already heard a good deal today—will accept that the amendments are correctly drafted. I am indeed conscious of a technical difficulty. However, I hope that the Minister will not make too much play with possible difficulties of drafting since, if need be, all these details can easily be sorted out at a later stage. The question that I invite the Committee to settle today is quite simple and straightforward. Do we want the remedies provided by the Bill for the consumer to apply to primary agricultural products, or do we not? I suggest that the arguments point clearly to the conclusion that they should apply. I beg to move.

Lord Morton of Shuna

As I hope was made clear on Second Reading, we on this side support the amendment. One of the main reasons given in the consultative document for excluding primary agricultural products was the potential difficulty in tracing the chain of suppliers in order that liability might attach to the original producer. This is not a sufficiently good reason for such an exclusion. Assuming that the retailer or "own brander" could not or would not identify the original producer, the consumer under Clause 2(3) would have few problems since he would bring his action against the retailer or the own brander.

The fact that producers and retailers might have difficulty in apportioning responsibility among themselves is of no concern to the consumer. The very difficulty in tracing the line of producers and suppliers renders it almost impossible for a consumer, as opposed to a party to a contract, to identify the negligent producer—quite apart from finding evidence of the negligence. The department's argument on the difficulty of tracing, far from supporting exclusion of agricultural product, militates against such an exclusion.

The department also argues that primary agricultural products are particularly prone to hidden defects caused by environmental factors. If that were a valid consideration, primary agricultural products would have been excluded from the Sale of Goods Act. But they are there—in the 1979 Sale of Goods Act. Why there should be a liability under the Sale of Goods Act but not under the product liability legislation seems entirely illogical. It means that if I buy something from a primary agricultural producer who has not subjected the article to a process, I can sue. But if I and my wife share it, my wife cannot sue for any damage. That seems totally illogical.

The provision of undergoing an industrial process adds to the confusion of this legislation. It will give rise to a terrible amount of litigation. I suppose that as a lawyer I should be in favour of that. But I should have thought that clarity is something we all want in legislation. For example, have peas picked by one of those large machines in a field been subjected to an industrial process? What is meant by "industry"? I would remind the Committee that the Question asked today by the noble Baroness. Lady Elliot, referred to deer farming as an industry—as it certainly is. Agriculture is an industry. Is that what is meant by "industrial processing", or does it mean something different? The animal that has been slaughtered for meat has certainly been subject to a "process". Is the idea that it is only the slaughterer and not the producer of the animal who is to be responsible?

The noble Lord, Lord Allen of Abbeydale, referred to a recent case on a definition of "process". If my recollection is correct, the Court of Appeal said that a process in a factory had to be a repetitive process. It may be that the last has not been heard of that decision. However, earlier decisions on the Factories Act relating to the word "process" merely defined it as "any activity". Assuming agriculture to be an industry and a process to be any activity, it is very difficult to see that the removal of any crop from the ground is not a process and an industrial process.

One of the difficulties is that the words "industrial process" appear only in the preamble which refers to processing of an industrial nature, whereas the directive in Article 2 refers to, products of the soil, of stock-farming and of fisheries, excluding products which have undergone initial processing". "Initial processing" is an equally difficult phrase to be interpreted. If we are to have this exception, it is necessary to consider Clause 1(2)(c) of the Bill which says: in the case of a product which has not been manufactured, won or abstracted but essential characteristics of which are attributable to an industrial or other process … (for example, in relation to agricultural produce)". As I understand that—and no doubt I can very easily be wrong—it means that the essential characteristics of the article subjected to a process has changed the product in some way. But I have looked in vain for any suggestion of this idea in the directive. The noble and learned Lord the Lord Advocate at Second Reading said that the purpose of this part of the Bill was no more and no less than to implement the directive. The essential characteristic in that phrase is certainly different from anything in the directive, and I should be very interested to see how it is justified.

This amendment, which leaves out the primary agricultural produce, has strong support from numerous organisations, many of which will have written to Members of the Committee and there is no point in listing them. However, the whole purpose of the Bill is to protect the consumer. Therefore it seems odd to exclude food from the protection. Obviously, in various senses of the word, food is one of the things which the consumer consumes.

3.30 p.m.

Baroness Robson of Kiddington

I rise to support this amendment, and I rise to support it as a farmer. Like all farmers, I am fully aware of the various Acts and regulations in existence to protect the consumer from the dangers of additives in the food chain. I am also fully aware that if I do not obey these regulations I can be subject to criminal proceedings. The farming community is no more and no less criminally inclined than the average person in this nation. Inevitably there will be the occasional farmer who tries to cheat the regulations. When discovered he is subject to criminal proceedings, but the person injured by his act has no redress unless we pass these amendments. That seems to me to be quite wrong.

The noble Lord, Lord Allen of Abbeydale, spoke about the lack of definition in the Bill as to what is meant by "an industrial process". I agree that it has to be defined much more clearly than it has been. I also believe that food has been excluded from the Bill because it is claimed that it is almost impossible to pin-point the culprit in the distribution chain of agricultural produce. In my view that therefore puts the whole responsibility for compensation on the processor of the product, and I believe that that is unfair.

There are regulations, for instance, preventing a farmer from harvesting any tomatoes, salads and fruit immediately after having sprayed them with insecticide. Why should a farmer who disregards these regulations be protected against prosecution for compensation? In that case the culprit could easily be pinpointed. I also claim that that kind of treatment of produce definitely constitutes an industrial process.

In animal husbandry we all know that farmers use various antibiotics to treat their animals. For instance, a farmer who happens to have cows suffering from mastitis will treat the udder with antibiotics. In law he is forced to pour away the milk from that animal for 48 hours because it is not good for human consumption. I am told by the trading standard officer in East Sussex that once a week, or at least once every 10 days, he goes round the farms and tests the milk from each farm. On approximately three of four occasions last year farmers were prosecuted for contravening the regulations. I was also told that on the first, or perhaps the second, occasion when this was discovered the farmer would be warned. It is estimated that over the country there are 50 or 60 prosecutions a year of farmers who have disobeyed the regulations on antibiotic treatment of the udder.

It is right that the farmer will be prosecuted, that he will face criminal prosecution. However, the consumer who happens to have consumed the milk with these antibiotics present in it, and who is therefore likely to have become resistant to antibiotics up to a point, may suffer when treated with antibiotics for some special illness, and that person has no claim against the culprit in the farming community. I believe that that is wrong.

I should also like to raise the question, which has not yet been raised, of irradiation of certain products to lengthen their fresh appearance. None of us as yet knows what effect this process has on the human food chain. All I know, and I am sure all that other Members of the Committee know, is that the things I have described are industrial processes. Therefore in my view agricultural produce should not be excluded from the present Consumer Protection Bill.

Lord Denning

Perhaps I may say a few words in support of this amendment. We are dealing with defects in products which are defined as follows: if the safety … is not such as persons generally are entitled to expect". Therefore if the product is in any way unsafe for people to consume, to eat or to use, there is a defect.

What is the responsibility of the producer, the person who puts that article out for consumption? Already in the law of contract as regards the sale of goods the person who sells such goods to the customer is himself liable, and strictly liable in contract, because the goods are not reasonably fit for the purpose. There is the strict liability in our law of contract. There is also the law of negligence. If the defect is there and the product is not reasonably safe to use, that is prima facie proof of negligence and there is at once a case. Already the law goes quite far in making the producer liable for the defects.

The Law Commission, under my good and dear friend Lord Pearson—and I am glad to see that my noble friend Lord Allen of Abbeydale is present—after full inquiry considered that there should be strict liability. Is this not right? Does this not apply to agricultural products as well as to any other product? If there is a defect and the product is not reasonably safe to use and a person is harmed by it, then he ought to recover damages. On principle I would say that agricultural produce should not be excluded.

However, I go further and turn to insurance. Surely all farmers and producers already insure against their liabilities, which I have already mentioned, in contract or in negligence. If they are further liable, then strictly I should imagine that the extra premium would be very small indeed, and when passed on to the consumer would be practically nothing. Insurance would be easily obtainable in respect of strict liability, and I should imagine that it would be only a fraction above the existing insurance premium. All those in favour of strict liability as provided should be subject to this exception. As a lawyer I must say that I can see this exception giving rise to no end of legal problems and uncertainties.

The whole question is whether or not the product is produced at a time when it is exempt, when it had not undergone an industrial process. I can see no end of argument about those cases. My noble friend Lord Allen gave a number of illustrations as to whether or not hormone injections and various treatments are an industrial process. The courts would have no end of cases to decide before a solution could be obtained. The present proposal to exempt agricultural products gives rise to far more legal difficulty. The simplest and best solution would be to include this amendment and put agricultural products on the same footing as products which have defects and which are not reasonably safe. I support the amendment.

Lord Peyton of Yeovil

I have managed to keep my enthusiasm for modern legislation under fairly strict control, and that applies to the attitude with which I face this Bill. It is so easy to suggest that protection of the consumer must be a good thing, and anything which can possibly be claimed to further the protection of the consumer is passed almost without question.

There is a grave danger that when such legislation is introduced people find it too easy to forget that the person who will ultimately pay for such protection is the consumer. The consumer could pay in two ways. He could pay either in terms of a higher price, or of non-availability of the commodity or product which he wishes to buy. I also note that when such proposals as we are considering now are put forward, there is a tendency to ignore, almost wholly, the provisions of the existing law. I very much hope that when my noble friend replies he will take a few moments of noble Lords' time to comment upon how far the consumer is already protected against the dangers which are envisaged by those who propose this amendment.

I hesitate to differ in any way from the noble and learned Lord, Lord Denning. The noble and learned Lord referred to the existing law, and I wondered whether he was suggesting that the existing law has shown itself or been shown to be unsatisfactory in any particular respect. With great respect, the noble and learned Lord referred rather lightly to the question of insurance. Not only here but particularly in the United States the very strict view which courts have recently taken about producers' liability has not just added to the costs of insurance in a minor way, but has multiplied the costs very considerably. In some cases the costs have simply made insurance unavailable. I am able without much difficulty to keep under very strict control my enthusiasm for measures such as we now have before us, and in particular for the amendment which we are now considering.

In those circumstances, I am further influenced by the the fact that, as I understand it, no other country in the Community is likely to go so far as to propose strict liability for unprocessed agricultural produce. I very much hope that noble Lords will not be swept away by comforting, seductive arguments of the kind which we are likely to hear in favour of any amendment such as this.

3.45 p.m.

Baroness White

I have been most interested to listen to some of the legalistic difficulties which this Bill and the amendment present. I am not a lawyer but I am a housewife. I have tried to translate the provisions of the Bill, and what would happen with the amendment, to my position as someone who goes to mid-Wales whenever possible and buys fruit and vegetables from market stalls, roadside stalls, Women's Institute stalls and small shops in the small market towns of mid-Wales, Machynlleth, Llanidloes, Brecon, or Crickhowell—I could almost sing the names!

I wonder to what degree we have to go in protecting all consumers from everything. I am entirely in favour of strict regulation and more stringent inspection of the innumerable provisions which we already have. I did not have the pleasure of listening to the noble Lord, Lord Stanley of Alderley, on Second Reading but I have been provided with a list of regulations. We have regulations for egg standards, honey, cream, butter, cheese, bread and flour, meat, milk and dairies, drinking milk, fruit juices and fruit nectars as well as the more broadly based major legislation to which I believe the noble Lord then referred.

As I have said, I buy my fruit and vegetables from roadside stalls and in small shops in market towns. I wash the lettuce. Is there anything really wrong in that? We may reach a stage under privatisation of water when it will be so expensive that washing a lettuce will be a luxury. Until we reach that point, in any well regulated household salad vegetables are washed. That is not entirely a foolish suggestion to make. An example of what might happen has been passed round to some of your Lordships: that if lettuce is not washed some unlucky person might consume a small quantity of slug pellet. That indeed is very undesirable. Of course, the alternative might be to swallow the live slug, which would be disagreeable.

Caveat emptor surely still has some meaning. When one deals with game, which, rather curiously, is included in the Bill, what would be the position concerning lead pellets? If one is prepared to eat some bird or other creature which has been shot—and I am afraid a good deal of game suffers that fate—and one then breaks or even chips a tooth on a pellet, what does one do about that? I should have thought that would give the lawyers plenty to think about.

I cannot help feeling that we are raising difficulties for what I might call the small, informal producer. I am thinking of some of the small shops in Machynlleth. Several people who I used to know when I lived in that area would bring in a net of sprouts, and then another net of sprouts would come from somebody else, and they would all be mixed up in the shop. One can have reductio ad absurdum in this matter.

When it comes to really serious matters, I have a great deal of sympathy with what the noble Baroness, Lady Robson, said about the possible risks of antibiotics in cases of mastitis and so on. But by the time that has happened the milk gets all mixed up, even though the bottling will probably be an industrial process anyway. Is that a situation which a consumer could, no doubt on medical advice, trace back to a particular action, a particular cow, and decide whether it was Daisy or Rose? On the practicalities of the situation, are we not going perhaps unnecessarily far, in view of the fact that we have other regulations which could, and I believe should, be more stringently applied? Attaching strict liability to absolutely everything in life seems to me to going rather far.

Lord Stanley of Alderley

The noble Baroness makes me break cover over slugs. I have often eaten them and I am still alive, although it might affect my appearance.

To be serious, this amendment, as the noble Lord, Lord Allen, brought out, would mean that primary producers would have strict liability for their produce, much of which is highly perishable. I tried to explain at Second Reading why such an arrangement was (a) impractical, (b) unnecessary, and (c) unfair to British producers, but obviously I have failed so to do. Indeed, the noble Baroness, Lady Nicol, said that I should come armed with details to defend my case—and I quote. She asked for it and other Members of the Committee will have to listen.

The amendment is impractical because, to take up two points made by the Law Commission and the Scottish Law Commission, primary producers are not in the best position to exercise control over the quality of their product. It would be better to try the Almighty. Secondly, primary producers cannot conveniently insure against liability. This was a point made by my noble friend Lord Peyton a moment ago and it is reinforced by the paperwork I have here from the Association of British Insurers, as I think it calls itself. The noble and learned Lord, Lord Denning, said that we could insure. If he can persuade the insurers to do it cheaply, he will be as good a man as I know him to be, and I hope he will take it up with the Americans at the same time.

It is also impractical because, as I said, our products are highly perishable. For instance, in the last few days I suspect many potatoes will have been frosted through no fault of the merchants or shopkeepers. This amendment—and this is the crunch of it—would put the blame on the producer and it would be up to the producer to prove that his product was sound when it went there. Indeed, I call this French law. I should be guilty until I proved myself innocent, and it would be very difficult to do so in this case.

The amendment is impractical because most agricultural produce is delivered in bulk. Under existing contract law—and the noble and learned Lord, Lord Denning, made this point—I accept responsibility for my produce when it arrives, but once it has been bulked up, surely the Committee must see that any liability to be proved aginst me will be an absolute lawyer's paradise—one of the reasons why I have sent my youngest son into the law!

The amendment is totally unnecessary. Farmers are littered with legislation, as I said at Second Reading and as the noble Lord, Lord Allen, was kind enough to point out. There are 22 statutes, if not more, which protect the public. I say one thing about this to the noble Lord, Lord Allen, and indeed the noble Lord, Lord Morton, as far as industrial processes are concerned. First of all, he brought up the question of slaughter, and I come back to contract law. My responsibility is to the slaughterhouse. After that it is up to the processors. I think that answers that question.

What is an industrial process? That will be decided by the European Court. It is not just a question of what an industrial process is as far as agriculture is concerned. The legislation will apply across the board, as I understand it, so it is for the European Court to decide that. The noble Lord, Lord Morton, mentioned the Sale of Goods Act. If I may say so, yes, of course we were included under that Act because in that instance it would be a direct case against me, the producer. Under this amendment, however, there will have to be an individual to trace, and I suggest that that is very difficult. As far as redress for criminal action is concerned, I thought that if I committed a criminal act under common law I should be very much to blame.

I am sorry to go on longer than I normally do, but I shall quote just one Act, as I did last time, because it is an important one, the Food and Environment Protection Act. We discussed this at length in 1985. I fully appreciate that many noble Lords here today, including the noble Baroness, took part in that debate, and they will have carefully studied the Act and its provisions. But perhaps the Committee will allow me to give two examples of where it has worked extremely efficiently within the last six months or so.

First—and I am speaking personally here—I and many other sheep producers were stopped this year from selling lamb in order to protect the public because of the Chernobyl disaster. Those restrictions were brought into force instantly; they were accepted and rigidly enforced. I suggest that such action was 100 per cent. more effective than the amendments facing the Committee today. Anyway, why double-legislate? That is what this amendment would do. I have heard many noble Lords, including my noble friend Lord Mottistone who supports this amendment, say that we have too much legislation, and here he is bringing in more and double-legislating.

The other matter covered by the Food and Environment Protection Act is the control of pesticides. Members of the Committee who have received the brief of the Consumers' Association containing a little story about a husband and wife will realise that the association in that instance was incorrect because it failed to appreciate the powers given to the Minister under the Act.

Finally, this amendment would be unfair to the British producer. As has already been said by my noble friend Lord Peyton, we shall be the only EC country not to derogate. The effect will be to create difficulties of movement between member states. It will add to British producer costs and it will give our Continental neighbours an undue competitive advantage. I am proud to be British. Even though I have no particular edge against my French cousins—because I came from there when the Conquerer came over—I wish to be British first and I do not wish them to have an edge over you.

I beg this Committee to appreciate the desperate situation that faces British agriculture and the rural economy today. This amendment will add yet another straw onto our backs, another straw I do not wish to have. If Members of the Committee support this amendment, they will, albeit in an indirect and they may think minor way, be aiding and abetting more rural unemployment, more closing of village schools and more closing of village churches. I hope the Committee will not accept these amendments.

Lord Airedale

If the noble Lord has put his eldest son to the law, he ought to be arguing in favour of this amendment.

4 p.m.

Baroness Elliot of Harwood

I speak also as a farmer. We have had the noble Baroness, Lady Robson, speaking as a farmer in favour of these amendments and I speak as a farmer against them. I agree with everything my noble friend Lord Stanley of Alderley has said. When you are thinking about producing and industry, agriculture is quite different from any other industry such as gas, electricity, mining and so on. We produce an animal. I produce sheep. I sell them in the market, and they are bought by the butcher, who then takes them to the abattoir. They are then turned into mutton. I am only responsible for the fact that I send my sheep to market. The buyer does not need to buy them if he does not want to. If he does buy them—and I would sell them only if they were in good condition—then he is responsible thereafter. I am responsible for the beginning of this agricultural effort, but I am not responsible for what happens afterwards.

You could say the same about vegetables. In fact, you could say the same about almost everything. We are responsible for seeing that what we send to the market or sell to the shops is in excellent condition. After that, if the shop mismanages, or if the butcher mismanages, or if something happens, we are no longer responsible. We cannot be. Therefore, I cannot see how anybody could support this amendment because it does not make any sense at all if you are a producer in the farming world.

I also agree with what the noble Lord, Lord Stanley of Alderley, said: that if we passed this amendment we would then be the only member state in the EC applying strict liability to unprocessed agricultural produce. Our farmers would thereby be placed at a disadvantage in comparison with other European farmers. Surely we do not want that to happen. It is also a fact that there is a tremendous amount of legislation already to protect consumers against defects in food. In addition to the many Acts and regulations related specifically to food, agricultural and horticultural produce, the Sale of Goods Act conditions as to fitness and merchantable quality apply to protect the purchaser.

The produce of the land is not of course manufactured; it is grown or reared. To extend the farmer's liability to strict liability where no processing has taken place would be inappropriate for agricultural produce and game. It would be nothing short of a disaster if this amendment were passed. I strongly oppose it, and I hope that everyone else will join me and support the Government on this matter.

Lord Donaldson of Kingsbridge

I should like to follow the noble Baroness because, like her, I was a farmer—and I educated three children in the most expensive way entirely on what I made out of farming—and subsequently found myself the noble Baroness's successor as chairman of the Consumer Council, which was so improperly abolished by the Tory Government almost as soon as I had left it.

As a farmer I always insured against outside liabilities. If my cattle were to damage somebody on the road, or anything of that sort, I was always covered. I never thought of insuring against my produce being accused of hurting somebody because I did not see how that could happen, and I still do not. If a farmer does use dangerous pesticides, then washing them off (as the noble Baroness knows very well) is entirely inadequate in the case of a number of them, and there is a real danger.

On the other hand, if a manufacturer using farm goods does something which makes them in some way dangerous, surely the courts are capable—I am sure the noble and learned Lord, Lord Denning, thinks they are, and I agree with him—of sorting out who is to blame. It cannot be said that if somebody dies or is seriously injured through buying something that I have produced then I am going to sit down and say, "It is nothing to do with me". I am going to try to find out whether there has been anything in my produce which makes me guilty, and if there is then one bears the penalty. If, as I hope, it was somebody else, then they bear the penalty.

I think that what we have heard from the noble Lord opposite about the rural population being damaged is absolute fantasy of the most extreme kind. If you grow things and sell them you expect them to be eaten by people if you are a farmer, and you expect to produce things which are healthy and decent to eat. If you fail for some reason which you do not understand, then you should put it right. I cannot see anything against this amendment at all, and I am astonished that my old colleague Lady Elliot should take the view that she does.

Viscount Bledisloe

I am somewhat surprised that the noble and learned Lord, Lord Denning, who spoke immediately after the noble Baroness, Lady Robson, did not correct what I venture to suggest was a serious legal fallacy in her thesis. As I understood it, her thesis was that a farmer who breaks the regulations—for example, by selling milk which has come from a cow which has just had antibiotics for mastitis—can be prosecuted but is not liable to the individual who consumes that milk and becomes ill. With the greatest respect to the noble Baroness, that is legal rubbish. There is the law of negligence. If a farmer has broken regulations designed for the safety of the public, that is the clearest possible evidence of negligence, and that farmer would go down and have to pay compensation under the law as it now stands.

The only question that the Committee is considering is whether farmers who are not at fault should pay compensation to people who are injured. I venture to suggest that in that respect those who suggest that it can all be done by insurance are wrong. I venture to suggest that the noble Baroness, Lady White, is right in suggesting that the lady who sells a few free-range eggs from the front of her house is hardly likely to be covered at all by insurance. But if she is, I am afraid the noble and learned Lord, Lord Denning, is out of date in suggesting that it is easy and cheap to get: and one of the reasons why it is no longer easy and cheap to get is because the noble and learned Lord, Lord Denning, has imposed so many liabilities on people that insurance is now very expensive.

Not only is it expensive, but what is even more difficult to get is unlimited insurance. It is difficult to get insurance which does not have a very low limit.

When you impose absolute liability in tort, as opposed to liability in contract, you are opening yourself up to liability to the world, and that is the moment when you need very high insurance which you either cannot get or have to pay a great deal for. I respectfully suggest to the Committee that the insurance argument does not wash.

The Earl of Radnor

I think that towards the end of this long debate it should be noted that those noble Lords and noble Baronesses who have supported this amendment have not once cited a specific case in which something has gone wrong. We have not had our eye drawn to one ill that has to be rectified. The whole argument seems to have been rather hypothetical—what might happen if there is too much antibiotic in the milk, and so on.

To me, that seems to be indicative of the fact that there is no necessity whatsoever to put agriculture into this Bill. If examples were brought forward of an ill which had befallen people, then I might think differently; but this seems to be interesting in law but totally unnecessary so far as any practicality of life is concerned. So far as agricultural produce is concerned, the consumer is perfectly well protected already. If in print he is not perfectly well protected he is in fact because he is not suffering much ill. I think that such extra legislation would be both burdensome and unnecessary.

The only other point I should like to make—and it has been made already by one or two noble Lords—is that the other countries of the EC are not, it seems, going to bring agriculture into their consumer protection area. Since we are trying to harmonise various parts of the Common Market by 1992, it would seem a great pity suddenly to branch off in this particular way. I am against the amendment.

Lord Mottistone

I must start by declaring an interest as the adviser to a trade association which deals with the business of manufacturers of biscuits, cakes, confectionary and chocolate. To take my noble friend's immediate point, if, of course, there are no examples of the present regulations having allowed harm to ordinary people to slip through, as it were, there really is not much worry on the part of farmers in having this in the Bill. Why should they worry if they are well protected at the moment?

There are two or three points I should like to make. I shall try not to be too long. Sadly, I was unable to attend the Second Reading. I wrote to my noble friend the Minister and he came back with a helpful letter. I have answers to that. I shall not bore the Committee with that matter now but I shall try to give him something on paper in the course of this stage of the Bill. That may lead to something at Report stage.

Many Members of the Committee, my noble friend Lord Peyton and the noble Baroness, Lady White, were slightly off beam in the sense that they were comparing product liability with regulations. The regulations we apply to protect the consumer from being maltreated by food are straightforward protection which we have built up over many years and they provide a background in which people can be sued in the ordinary course through the courts. But the regulations do not make people automatically responsible or liable for their product being faulty.

I agree with my noble friend Lord Stanley in that I do not like more legislation. I do not like this legislation. The noble Lord, Lord Allen of Abbeydale, is very pleased to have Part I of this Bill. He has been pressing for it for a long time. I fought, so far as I was able, not to have the directive. Now we have the directive so we have the legislation. Now we have to consider what has to be done about that legislation in applying it to the British.

It is unfair in the sense that the potential responsibility or liability for the product is loaded on to later stages of what we call the food chain—that is, the food processor, the retailer and the wholesaler—but not on to the people who began it. It has been suggested that some products are not processed, in which case that would not be relevant. But there are all sorts of processing that farmers do, such as cleaning, washing, trimming, sorting, treating with agricultural chemicals, and so on. One might even include specific practices such as pasteurising milk, threshing wheat, milling grain, crushing olives to express oil, filleting fish, packaging apples, packaging beans in modified atmosphere containers—simple farmers do not do that, but the more sophisticated ones do—and packed meat stored at chill temperatures. All those come at the primary stage and they are as much processing as producing a biscuit.

Much has been made of the fact that if we were to pass this amendment we should be the only nation in the Community to take up this derogation. I suggest to the Committee—and I think it was suggested by the noble Lord, Lord Allen of Abbeydale; but it might have been someone else—that this is an area in which it would not be inappropriate for us to set an example.

I know through the various European trade associations that food processors in Belgium, Denmark, Germany and the Netherlands, to mention but four, would all be right behind it. Over many years of dealing with fellow food processors in Europe and sitting on the various committees for most of the past 10 years, it has become obvious to me that they are ridiculously more subservient to their governments, and more especially their officials who support the governments, their civil servants, than happily we are in this country. I do not think that is a joke, but I believe, from having observed for some time, that the influence of Napoleon—who after all introduced all the bureaucracies for all the countries I have mentioned—is still with them and they still have this rather ridiculous special respect for ministers and civil servants which happily we in this Parliament spend most of our time trying to avoid.

I think the Committee might find that if we were to adopt this amendment that would lead to added strength being given to those who produce much the same arguments in the countries in Europe I have mentioned, and in many cases they are the most important because they are those who compete the most with us. I do not suppose the French would do it, but they are absolutely hag-ridden by their civil servants—poor things. That takes that point.

There are one or two other more complicated matters that I do not think it would be appropriate to go into now, though there may be an occasion later. I suggest to the Committee that the most important point about this is that is does not add to the regulations. It creates a new situation for product liability. Product liability needs to be shared equally among all the people who contributed to producing the product. To take away one chunk of this process, one group of people, just because there may be difficulties in identifying their contribution to the product—which may be overcome if special methods to do so are introduced; that is not nearly so difficult as the farmers would like us to think—would be unfair.

In another sense, though, the farmers say that they will suffer miserably and will all go broke; at least that is what my noble friend Lord Stanley was saying. My noble friend Lord Radnor pointed out that that would not happen to farmers because they never make a mistake and do not get caught up in this matter. On the other hand, if in the event some chemically-treated primary product was part of a biscuit which poisoned somebody and they caught some filthy disease and we traced it all back, the biscuit manufacturer would have to take the rub. That is not right if—I do not say it will be the case—it all came from the chemical in the agricultural product in the first place. I am sure that there are all sorts of protections to prevent that happening.

The point of the amendment is to provide for the rare occasions when this point is relevant to our food products. We should not forget that our food products are so well regulated that the number of occasions when there is any poisoning from processed food is few, though sadly there is some poisoning from cooking; but that is another issue. The products we eat, even what people sometimes call junk food, are very wholesome. In some cases it is more wholesome than the stuff dug out of the ground. It is really a matter of making sure that the level of product liability falls right across the board, so that on the rare occasions when the liability genuinely came from the primary product end it should lie there and should be part of the resultant processes that that requires.

Lord Burton

One hears in this day and age of the scandals in the City, over which the Opposition never cease attacking the Government. Now one hears these amendments being supported by the Opposition, though they could produce the biggest scandal of the lot—the diversion of large sums of money from the rural community into the insurance market. This amendment will hit not only farming but also forestry.

On Second Reading, when questioned about where this insurance money was to come from, various speakers said that it would be passed on to the consumer. How is agriculture to pass on this expenditure, and for that matter how is forestry to pass on such expenditure? Both those industries are already in very strict straightjackets. I have mature timber which I cannot sell because one cannot get enough for it. As regards agriculture, the 1985 cropping year was disastrous and many farmers would now be bankrupt if it had not been for the drop in oil prices which not only reduced the price of fuel but also had a very marked effect on fertilisers. The weather was also kind to us last summer. Farmers in the more remote areas, the areas most wanted by the conservationists and where the areas of recreation exist, may well be devastated.

The outlook is indeed bleak. With further milk cutbacks, it is estimated that quotas will have taken £40 million out of Scottish agriculture alone. Grain is severely threatened and bound to have retrictions placed upon it. Beef has already suffered cuts of about £50 per animal. Over the last year the market has been undercut by the Irish who with extra benefits secured from the Common Market, have been able to increase their supplies to this country by 40 per cent.

It is now suggested that we should have restrictions placed upon us which none of our EC competitors will have to suffer. I recall helping to make hay in France and being amazed at the simplicity of the machinery. As the French did not have to comply with our safety regulations, their machinery was very much cheaper and provided farmers with a considerable financial benefit.

Further costs and restrictions on agriculture may well be the final straw which breaks the camel's back. This morning I spoke to my bank manager in Inverness and we discussed the situation of farmers generally. He pointed out that many were on the borderline and that quite a large number had only just been saved by last year's comparatively—I stress "comparatively"—good year in farming.

I am absolutely convinced that in moving this amendment, the noble Lord is looking at the consumers' interests through blinkers, and narrow ones at that. He cannot have appreciated the enormous damage that this amendment would cause to the rural areas. Only on Saturday I received a leaflet restricting various pesticides, and quite rightly. However, I was a little concerned because, from an initial reading, it appears that if you store or put down mouse poison you are breaking the law unless you are a professional. But that is a small imposition which most of us, I believe, would be prepared to tolerate.

These sorts of impositions which are not necessary must not be allowed to pass through the Committee. I have yet to hear of one instance where the consumer would have been compensated other than by means of the sort of compensation that can already be secured, even if perhaps by a slightly more devious route. I can think of perhaps one instance. If a pheasant was sold to an hotel one of whose customers then broke a tooth on a pellet, that could be charged back to the person who sold the pheasant. It makes a complete nonesense of the law if we introduce this amendment.

Lord Monk Bretton

I should like to say a word at this stage. Of course I have a vested interest in farming, but I am emboldened to speak because I believe this to be a very important matter. To refer to what my noble friend Lord Mottistone said a moment or two ago, when he said that he felt everybody should be involved in insuring this strict liability risk——

Lord Mottistone

I must interrupt my noble friend. I did not say "in insuring". I said "in sharing".

Lord Monk Bretton

I stand corrected. I do not agree with the thinking of my noble friend on that matter. The Law Commission and the Scottish Law Commission, agreed on the main axiom that it is desirable to impose liability on those in the chain of manufacture and distribution who are in the best position to exercise control over the quality and safety of the product. That is, I believe, of very great importance.

The difficulty for the farmer and grower is to exercise control over the quality and safety of the product as it moves along the channels of trade towards the consumer. Most produce, as has already been said, is highly perishable. A great deal more gets bulked, and there are considerable problems, therefore. A good watchword would be: do not apply strict liability upon those not in a position to apply strict control to the product before it reaches the consumer. I believe that to be the real issue.

In a historical context, there was, in the early days of the foundation of the NFU, a case somewhat along these lines when the Central Chamber of the Agriculture and Meat Trades Federation wanted to obtain a warranty from producers on the health of all cattle sold. This was fought off by the farmers (whose organisation was not what it is today) with considerable difficulty. The battle was one of the catalysts in the growth of the NFU, and it took place back in 1908. I should like to quote from a report at the time, which said: The dilemma in which farmers and the trade alike were placed arose solely from the fact that a beast having every appearance of being healthy when sold might show evidence of disease when slaughtered. These warranties would have saddled the farmers with total responsibility for … any disease detected in the carcass up to 10 days after purchase. During that time the animal might change hands more than once, and anythng might happen to its state of health". This is the kind of problem that we shall encounter if we depart from what my right honourable friend the Minister has decided in the Bill. For that reason, I believe, we should not support the amendment which is before us.

Lord Walston

I must admit to a past interest in agriculture although I have no interest, in the official sense of the word, at the present time. For all that, the Committee might expect me to be taking the side of farmers in this debate. I have a lot of sympathy with them, although I must say that having heard some of the speeches, that sympathy is not quite so strong as it was. I do not believe that farmers should be treated differently from other producers. The fact that they are shortly to go through a difficult time, and may be going through a difficult time at present, has no bearing whatever on the problem we are now discussing.

It is the question of to what extent farmers should be liable if they sell dangerous products and how far it is possible to trace the product back, after quite a long period of time in certain instances, to one specific farmer. I suffer—although, there are perhaps some benefits—from not being a lawyer. I would guess, however—and lawyers will correct me if I am wrong—that if a motor car manufacturer sells a car which is later found to contain flawed metal which leads to an accident, one does not have to trace it back to the actual provider of that piece of metal, but that, normally, the liability will rest with the manufacturer. Surely common sense dictates that the manufacturer of a motor car is expected by the consumer to take the necessary precautions to ensure that the raw materials which he puts into the motor car are in fact sound and do not contain flaws.

I suggest to the noble Lord, Lord Mottistone, that it is the responsibility of the maker of biscuits to ensure that the wheat put into those biscuits is sound and is not, for instance, contaminated with ergot. Some of your Lordships may recall the famous case of several years ago in a remote district in France where a large part of the population of that community suffered and, in some cases, died from ergot poisoning which was traced to a particular baker who had used flour made from ergotised wheat. I suggest that the responsibility lies with the miller and the baker to make certain that the produce that they buy is healthy produce. They can certainly sue a farmer who sells them wheat which they later discover to be dangerous, through ergot or for any other reason.

To believe that it is possible to trace from the grower of the wheat or possibly even the provider of the seed of the wheat, through the first and second merchant, the miller, the baker and the distributor seems to me to make a nonsense of any form of realistic legislation. For that reason, rather than for the hardship which it might bring to the sad, penurious and nervous farming community, I suggest that the Bill as it stands is preferable to what it would be if this amendment were accepted.

4.30 p.m.

The Earl of Halsbury

Before the noble Lord, Lord Walston, got up I was contemplating making an intervention, not with regard to ergotised wheat, but with reference to a possible mutant strain of rust producing ergot alkaloids, which are abortifacients with all sorts of other properties. Is it right to penalise those who are up against a new phenomenon? I have in mind what the noble Lord, Lord Stanley of Alderley, said about the possibility of foodstuffs being contaminated by radioactive fallout through the Government's inspection machinery not being on its toes and the contaminated mutton, or whatever it might be, getting loose into the market. That might happen not as a result of any negligence or breach of duty by the farmer but rather by a failure of communication by another party.

In the food chain, as in any other sequential manufacturing process, there are always two lots of inspectors. Whoever is producing something inspects it to make sure it is right to sell it, and the person receiving it inspects it to make sure that it is a good starting point for his own process. However, if one is up against an unknown phenomenon or something that has never happened before, it seems to me to be against justice to fix liability on the producer, who is being afflicted by it just as much as the person receiving it. In those terms, I do not think that we ought to allow this amendment to go through.

Lord Mottistone

May I pick up that point? As a result of the Chernobyl affair, the Singapore Government refused to accept any biscuits from Europe. That has done great harm to our trade in that product in that part of the world. The whole weight has been borne by the manufacturer.

In the instance mentioned earlier, suggesting that the Government might have been slow off the mark, the whole weight of the problem will not fall upon the farmer whose product is perhaps proven to be over-radiated. It will be shared, because it will fall on the manufacturer as well. However, it seems wrong that is should fall only upon the manufacturer.

The Earl of Halsbury

In the case of an unknown phenomenon it should be borne by the community at large, in the same way that earthquakes and volcanic eruptions are borne. They are not due to any negligence by human beings.

Lord Lucas of Chilworth

We have had a good debate on this important subject of which notice was given to us at Second Reading. However, I think that the fundamental point is to establish what might be called the onus of proof in this case. I am not at all sure that the onus should be upon the Government to justify the exclusion of primary agricultural products; rather I think the onus should be upon those supporting the amendment to justify their inclusion. I do not think that that case has been made before now, either inside or outside this Chamber. I think that the way that the directive is framed and was agreed by the member states tends to support my view. Such products are excluded, and member states may only add them by derogation.

I remind the Committee of the remarks made by my noble and learned friend the Lord Advocate at Second Reading. He said then that our intention had always been to implement the directive as the directive was—no more, no less. The intention was neither to add to it nor to detract from it.

It is no accident that the directive is cast in those terms. The whole genesis of this directive on product liability—indeed, the whole development of the law on product liability—has been a response to the greater mechanisation and industrialisation of the production of goods. Because of this, negligence has become a less relevant test as to whether or not a producer should be liable for defects in his products. Accordingly, we have to move—in our case through the medium of the Community directive and this Bill—towards a system of strict liability.

I am not going to argue that there have not been great changes in the methods used to grow agricultural produce; nor would I argue that food processing is not a largely industrial process. However, it remains the case that the production of agricultural produce has distinctive features that industrial processes do not have. It depends largely on uncontrollable environmental factors such as soil, air, sunlight and indeed water. I was rather surprised that no noble Lord mentioned the fact that we have before us the matter of fisheries as well. Fish are drawn from an element which is no less uncertain than the soil.

It is because of those uncontrollable environmental factors that I believe we have the preamble of the directive. My noble friend Lord Monk Bretton drew our attention to the preamble which says, in effect, that strict liability cannot be applied when production cannot be strictly controlled. An unforeseeable combination of these factors to which I referred would be unfortunate. Products are by no means uniform or stamped with the design of an individual producer. I suggest that their production is altogether very much less under the producer's control.

I make these points only to establish the burden of proof. The directive and the concepts within it were intended for industrial products and it is for proponents of the inclusion of agricultural products to show that it is necessary and appropriate. I do not think that this has been done.

I should like to draw attention to one of the other main purposes of the directive. That purpose is to harmonise, so far as possible, the law in the Community on liability for defective products. We understand that no other member state plans to derogate from the directive and thereby include primary agricultural produce. The noble Lord, Lord Allen of Abbeydale, said that the fact that other member states were not proposing so to do was no good reason why we should not. I have to say that if we do so alone we shall be needlessly erecting an unnecessary barrier to trade. By doing so we shall place United Kingdom farmers at a distinct disadvantage when exporting to other Community countries since they will face potential liabilities in our courts that a consumer in another member state will not be able to pursue against a producer in his own country. We shall also deprive United Kingdom consumers of the produce of some Community exporters if the United Kingdom becomes a less attractive market place.

I touched quite briefly on the ways in which I see the process of producing agricultural products as being different from industrial production. But these features of agricultural production also create real practical impediments to covering agricultural produce in the Bill. The first important feature of primary agricultural products is that they are prone to defects caused by environmental factors beyond the control of the producer. Such defects may be hidden ones, not easily revealed without complicated and expensive testing. It is by no means obvious that it is right to place the burden upon a blameless producer.

Two other important characteristics of agricultural products have considerable effects upon their distribution. My noble friend Lady Elliot of Harwood referred to the chain. First, agricultural products are normally far more prone to deterioration due to overlong or improper storage than industrial products. Secondly, agricultural produce from many sources is often mixed together at different stages in the distribution chain. My noble friend Lord Stanley of Alderley described that at some length.

These two factors have important implications for the working of the system of product liability set out in the directive. Suppose, for example, that a consumer buys a defective apple. The whole point of the directive, if it were applied, would be to make the producer—the grower of the apple—liable for damage caused by defects in that apple. What are the problems? First, the consumer has to find the producer. Unlike an industrial product, it is not normally stamped on the apple. The consumer's only practical course is to go and ask the greengrocer from whom he bought the apple who the producer was.

Because of the mixing of bulk supplies in the distribution process it is very unlikely that the greengrocer will be able to tell the consumer—and then, of course, the greengrocer or possibly his supplier becomes liable himself under subsection (3) of Clause 2.

So because of the mixing of bulk supplies, and the provisions in the directive, which we cannot change, for the liability of suppliers, the practical effect of including primary agricultural produce will be to place the liability not on the producer but on others in the distribution chain, often at the retail end. This was the point so well put to the Committee by the noble Lord, Lord Walston.

This is not consistent with the main purpose of the directive, which is to make the producer liable for defects in his product. One can speculate that retailers and others in the distribution chain will want increasingly to be in a position to be able to say who the producers of agricultural products are, but that can be achieved only at the cost of very considerable bureaucracy, record keeping, restrictions and so on. At the end of the day, the result could be a restriction in choice and an increase in costs to the consumer. I do not believe that that is what the consumer really wants. The balance of advantage lies in not distorting the present efficient and economical system of distribution of primary agricultural products.

I turn now to the contribution made at Second Reading by my noble friend Lord Stanley of Alderley. Indeed, my noble friend Lord Peyton of Yeovil added his contribution to much the same argument adduced by the noble Lord, Lord Stanley. My noble friend Lord Stanley said that there is already an important way in which consumers are protected from defective agricultural produce. It is analogous to Part II of the present Bill, and it is to prevent so far as possible, by the criminal law, defects being introduced into products put into circulation in the first place. There is, as all noble Lords are well aware, a comprehensive regime of law in this country to ensure that defective products are not circulated. At the forefront is the Food and Environment Protection Act 1985 and numerous regulations made under it which are there to protect consumers against food which is unfit or unsound. Among other things, regulations made under the Food and Environment Protection Act provide specific controls over additives, contaminants and how food should be handled hygienically. This answers several of the points put forward by a number of the proponents of the amendment this afternoon.

The noble Lord, Lord Allen, and others, mentioned the risk of the misuse of pesticides on crops. Perhaps I should draw their attention to the Control of Pesticides Regulations 1986 (Statutory Instrument 1510) which control the supply to the user and the way that those chemicals may be used. Noble Lords have also mentioned drugs used in the rearing of livestock. But we should note that the European Community has now banned the use of hormones for fattening animals, on which there was so much publicity. There are other directives which lay down the enforcement procedures on the use of hormones generally and other veterinary substances. Furthermore, there is the Medicines Act 1968, which sets out a system of licensing, and all veterinary medicines are controlled under those terms.

I should be less sanguine in drawing attention to this comprehensive regime if there was any evidence that consumers were seriously at risk from damage by unprocessed primary agricultural produce. But there is no such evidence. The existing regime of regulation works well. It would be unfortunate to add a regime designed for industrial goods in quite different circumstances and which leads to bizarre and unusual effects when applied to a situation for which it was never intended.

Many noble Lords have suggested that the line dividing agricultural products which are covered from those which are not is vague, and that this very vagueness makes the clause unnacceptable. The noble Lord, Lord Allen of Abbeydale, asked me to talk about slaughtering and butchering, pasteurisation, the freezing of peas, the freezing of chickens and so on. We could of course have sought to define industrial processing of industrial products exhaustively. For each type of product—and there are very many—we could have listed the processes that are exempt for the purposes of the directive and those that bring the produce within the scope of Part I. Had we done so we should have had to lay before Parliament a Bill with a further and very lengthy and complex schedule. And it would almost certainly be the case that there would be processes which we had not covered in that schedule, still leaving areas of uncertainty.

Rather than burden the community, and particularly the farming community, with complex legislation of this type—the apparent certainty of which must always, anyway be open to challenge in the European Court—we feel it is better to rely on ordinary words, "industrial processing", and, as the noble Baroness, Lady White, said, just a little common sense. With the application of common sense I do not think it is too difficult to see what is meant.

The test is twofold. First, there must have been processing, and for processing to take place some essential characteristic of the product must have been altered. Simply cutting sprouts from a sprout plant or harvesting potatoes does not constitute a process. Those processes do not change the essential characteristic of the product. Moreover, the process must be an industrial one—that is, it must be carried on on a large and continuing scale and with the intervention of machinery. I have in mind the processes that turn peas into frozen peas or potatoes into frozen chips. But what is important is that we should not completely destroy the value of the exemption for primary agricultural produce by making suspect all those processes which necessarily and traditionally have been carried out on farms—harvesting, washing, and sometimes packaging—and which do not interfere with the inherent nature of the product.

I hope I have shown that the onus is upon those mostly opposite, and my noble friend Lord Mottistone, to show that primary agricultural produce should be covered. I do not believe that they have done so. I believe that in fact I have shown that the production of primary agricultural produce is quite different from the industrial products to which this directive is directed and that its application to primary agricultural products in some cases might produce unusual results. I believe I have shown that given the existing comprehensive body of legislation in this area little would be achieved by the extension and yet consumers would lose because of the extra costs it would create. I have argued that we would be needlessly departing from the position taken by other member states in the Community. Finally I have tried to show that the dividing line we have drawn is workable within the main spirit of the directive. I urge the Committee to reject the amendments that we have been discussing.

Lord Allen of Abbeydale

We have been discussing this matter for a long time and I do not propose to inflict a lengthy speech on the Committee. The official handout from the department stated that the arguments were finely balanced, but one would hardly gather that from the Minister's summing up. We all realised when we started on this amendment that taking on the farming community in this place is a formidable undertaking, and that there would be a strong body of opinion that farmers must be treated quite unlike any other producers.

Many of the comments have gone a little astray. There has been a great deal of discussion to the effect that the whole of fanning produce ought to be exempted from the Bill. That is not so. The directive applies to produce which has undergone an initial process or an industrial process—call it what one will—and I am afraid that the explanation just given by the Minister on what is a process for this purpose falls short of removing all doubt. One can see an interesting series of cases, not only in our own courts but in the European Court. I can understand the Minister's reluctance to produce a long list of definitions of processes which might itself not find acceptance in the European Court. Those are not matters entirely within our own control.

I must say that the suggestion from the noble Viscount, Lord Bledisloe, that it is still open to the consumer to have resort to the existing law of negligence is not a great comfort when we are discussing a Bill which removes that particular argument from all other produce. I do not want to go in detail through all the arguments put forward but I just wonder what the noble Baroness, Lady White, would think if in company with her washed lettuce she ate a fish which had been poisoned by mercury.

As regards the points raised by the noble Baroness, Lady Elliot, if she had gone on to read the defences allowed by the Bill she would have realised that she is not in jeopardy. On the argument advanced by the noble Lord, Lord Stanley, that these proposals are unnecessary because of the many regulations prescribing how much pesticide one may use, and so on, I thought that I and others had made it clear that that has very little to do with the provisions we are now discussing. The noble Lord says that we should not go into more legislation, but perhaps I may point out that what we are proposing is to shorten the present Bill; that is, less legislation.

Having said all that, I remain in doubt as to why on earth this power of derogation was ever put in the directive. Everyone is saying that there will be great certainty and that no other member state is going to make use of the power of derogation. I wonder how we know. We have had indications from here and there. We also know, as the noble Lord, Lord Mottistone, said in his admirable speech, that there is a great deal of opposition in other member states on the lines I have been advocating and we have not been all that reluctant to criticise the agricultural policy of the Community. I still see no particular reason why we should not go for the course which these amendments suggest.

4.56 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 96; Not-Contents, 127.

DIVISION NO. 1
CONTENTS
Airedale, L. Jacques, L.
Allen of Abbeydale, L. [Teller. ] Jeger, B.
Jenkins of Putney, L.
Amherst, E. John-Mackie, L.
Ardwick, L. Kearton, L.
Attlee, E. Kennet, L.
Aylestone, L. Kilbracken, L.
Banks, L. Kilmarnock, L.
Beaumont of Whitley, L. Kirkhill, L.
Bonham-Carter, L. Lawrence, L.
Bottomley, L. Listowel, E.
Brockway, L. Lockwood, B.
Bruce of Donington, L. Longford, E.
Burton of Coventry, B. Lovell-Davis, L.
Carmichael of Kelvingrove, L. McNair, L.
Chitnis, L. Molloy, L.
Cledwyn of Penrhos, L. Morton of Shuna, L.
Craigavon, V. Mottistone, L.
David, B. Mulley, L.
Dean of Beswick, L. Nicol, B.
Denington, B. Northfield, L.
Denning, L. Oram, L.
Diamond, L. Perry of Walton, L.
Donaldson of Kingsbridge, L. Phillips, B.
Dowding, L. Pitt of Hampstead, L.
Elwyn-Jones, L. Ponsonby of Shulbrede, L. [Teller]
Ennals, L.
Ewart-Biggs, B. Porritt, L.
Ezra, L. Robson of Kiddington, B.
Falkender, B. Rochester, L.
Falkland, V. Rugby, L.
Fitt, L. Seear, B.
Flowers, L. Seebohm, L.
Gallacher, L. Serota, B.
Galpern, L. Shackleton, L.
Gladwyn, L. Shaughnessy, L.
Graham of Edmonton, L. Silkin of Dulwich, L.
Grey, E. Somers, L.
Grimond, L. Stallard, L.
Hampton, L. Stedman, B.
Hanworth, V. Strabolgi, L.
Harris of Greenwich, L. Tordoff, L.
Hayter, L. Turner of Camden, B.
Hooson, L. Underhill, L.
Hughes, L. Wedderburn of Charlton, L.
Hunt, L. Whaddon, L.
Hutchinson of Lullington, L. Wigoder, L.
Hylton-Foster, B. Williams of Elvel, L.
Irving of Dartford, L. Wilson of Rievaulx, L.
NOT CONTENTS
Alexander of Tunis, E. Belstead, L.
Ampthill, L. Bessborough, E.
Auckland, L. Bledisloe, V.
Beaverbrook, L. Blyth, L.
Belhaven and Stenton, L. Boardman, L.
Bellwin, L. Boyd-Carpenter, L.
Brabazon of Tara, L. Lucas of Chilworth, L.
Brougham and Vaux, L. Lyell, L.
Bruce-Gardyne, L. Macleod of Borve, B.
Burton, L. Manton, L.
Butterworth, L. Margadale, L.
Caithness, E. Marley, L.
Cameron of Lochbroom, L. Maude of Stratford-upon-Avon, L.
Campbell of Alloway, L.
Carnegy of Lour, B. Merrivale, L.
Camock, L. Mersey, V.
Cathcart, E. Middleton, L.
Cawley, L. Monk Bretton, L.
Chelwood, L. Mountgarret, V.
Clitheroe, L. Nathan, L.
Coleraine, L. Norfolk, D.
Colville of Culross, V. Nugent of Guildford, L.
Cornwallis, L. O'Brien of Lothbury, L.
Cowley, E. Onslow, E.
Cox, B. Orkney, E.
Cranbrook, E. Orr Ewing, L.
Cullen of Ashbourne, L. Pender, L.
Davidson, V. [Teller.] Penrhyn, L.
De La Warr, E. Peyton of Yeovil, L.
Deedes, L. Plummer of St. Marylebone, L.
Derwent, L.
Digby, L. Portland, D.
Elliot of Harwood, B. Radnor, E.
Elliott of Morpeth, L. Renton, L.
Elphinstone, L. Rodney, L.
Elton, L. Saltoun of Abernethy, Ly.
Faithfull, B. Sanderson of Bowden, L.
Fortescue, E. Sandford, L.
Fraser of Kilmorack, L. Selborne, E.
Gainford, L. Selkirk, E.
Gardner of Parkes, B. Shannon, E.
Glanusk, L. Shrewsbury, E.
Gowrie, E. Simon of Glaisdale, L.
Gray of Contin, L. Skelmersdale, L.
Gridley, L. Stanley of Alderley, L.
Grimthorpe, L. Stodart of Leaston, L.
Hacking, L. Strange, B.
Haig, E. Strathcarron, L.
Hailsham of Saint Marylebone, L. Strathspey, L.
Sudeley, L.
Halsbury, E. Swansea, L.
Hampden, V. Terrington, L.
Harris of High Cross, L. Teviot, L.
Henderson of Brompton, L. Teynham, L.
Hesketh, L. Thorneycroft, L.
Hives, L. Torrington, V.
Hood, V. Trefgarne, L.
Hooper, B. Trumpington, B.
Kaberry of Adel, L. Ullswater, V.
Killearn, L. Vaux of Harrowden, L.
Kinloss, Ly. Westbury, L.
Lane-Fox, B. Whitelaw, V.
Lauderdale, E. Wilberforce, L.
Layton, L. Wolfson, L.
Long, V. [Teller.] Ypres, E.

Resolved in the negative, and amendment disagreed to accordingly.

5.5 p.m.

The Earl of Radnor moved Amendment No. 2: Page 1, line 7, after ("soil") insert ("of hydroponic culture").

The noble Earl said: Since agriculture will now be left out, it is obviously important to ensure that agricultural produce is defined properly. Although the definition in the Bill rolls off the tongue very nicely indeed, I felt that it did not quite fit the whole position. As your Lordships are probably aware, many vegetables, particularly cucumbers, tomatoes, lettuces and such, are grown by a process known as hydroponics, where the one thing that is not involved is soil.

Therefore I thought that the ugly word "hydroponic" should come into the Bill. A ridiculous situation would be produced if two cucumbers were exposed for sale and one fell outside the scope of the Bill and one inside. That would be almost too ridiculous to contemplate. I feel sure that my noble friend on the Front Bench has an answer to this problem.

Some years ago I rose to my feet and in reply was told that in the context of such and such a Bill (I think it related to fish farming) "water" meant land and "land" meant water, and so perhaps there is an adequate answer. If not, I think it is very important indeed that hydroponic culture should be brought into the Bill. I beg to move.

Lord Morton of Shuna

I think that this amendment shows the difficulty of having agriculture in the Bill but I do not wish to return to that point. I suggest that the answer is that the Bill must fit the directive. Article 2 of the directive states: 'Primary agricultural products' means the products of the soil"— and the noble Earl has shown that this does not involve a product of the soil— of stock-farming and of fisheries". Those are all the products that are to be excluded. I think that we should be acting contrary to the directive if we include hydroponic culture. Therefore I oppose this amendment.

The Earl of Radnor

I understand that one is allowed to speak twice on amendments. I thought it possible that "of the soil" could be interpreted as meaning something that could be grown in soil rather than actually grown in soil. That would get round the difficulty mentioned by the noble Lord, Lord Morton of Shuna. It seems to be a matter of definition. However, I think the matter should be clarified.

Lord Donaldson of Kingsbridge

I support the amendment. Whatever the directive says, this suggestion is only common sense and it is never a bad thing to use common sense.

Lord Lucas of Chilworth

I am most grateful to my noble friend for explaining his amendment. I confess that it is not something that I had considered until I saw the amendment on the Marshalled List.

We must first turn to the directive to see exactly what we can do in relation to the produce of hydroponic culture. We have followed very carefully the definition of "agricultural products" in the directive. The question now is, if the matter were to come before the European court, whether produce produced by hydroponic culture would constitute "agricultural produce".

I regret to tell my noble friend and the Committee that I cannot definitively answer that question this afternoon. We believe that, given the purpose of the agricultural exemption from the directive and the way in which the directive is likely to be construed, the balance of the argument is that produce from this culture should be considered agricultural produce for the purpose.

Having said that, the next question that probably arises is whether we should make that explicit in the Bill. If my noble friend agrees, I should like a little longer to think about the implications of that matter, since among other things by including hydroponic culture we may cast doubt upon the provision of agricultural produce produced by other novel—I say that with great respect to my noble friends—methods. I hope that my noble friend will be satisfied if I say that I should like to give the matter further consideration and return to it at a later stage. Perhaps he will accept my assurance that I will do that and will withdraw his amendment.

The Earl of Radnor

With that assurance I shall withdraw the amendment. I shall leave my noble friend with the thought that I think we have the rights of the matter here. It may be better if the directive were somehow altered rather than our thoughts upon the subject.

Amendment, by leave, withdrawn.

Lord Morton of Shuna moved Amendment No. 3: Page 1, line 16, leave out ("an industrial or other") and insert ("a").

The noble Lord said: Essentially this has nothing to do with agriculture; it is merely a matter of drafting. The words referred to are in the last two lines of page 1: in the case of a product which has not been manufactured, won or abstracted but essential characteristics of which are attributable to an industrial or other process having been carried out". All I suggest is that it would make just as much sense, be easier to understand and would save some difficulty in interpretation if the sentence were merely: of which are attributable to the process having been carried out. It makes the matter simpler. It makes, "an industrial or other", as in my view they are, totally unnecessary words. The amendment is a mere drafting amendment, and I beg to move.

Lord Lucas of Chilworth

I wish the matter were as simple as the noble Lord, Lord Morton, has suggested to the Committee. I should say a little about the purposes of the Clause 1(2)(c). The basic proposition of Part I is that the producer shall be liable for damage caused by defects in his product. It is therefore critical to define who is the producer of a product. That is set out in Clause 1(2).

The main case is of course that where a producer is the manufacturer in the normal sense. That situation is covered by paragraph(a). A second case arises in relation to products which are not manufactured but which, for example, are mined. Paragraph (b) is designed to cover those who mine ore, or obtain natural gas or something of that nature.

There is a third category that we must cover, one which often falls between those two. Many products are treated in ways which fall short of manufacture in the normal sense of the word. I am thinking of the processing of iron ore before it is put into a blast furnace, the refining of petroleum or the processing of food. It seems to be clear that the person who carried out such a process should be treated as its producer for the purposes of the directive. However, he may not be a manufacturer in the normal way in which that word is used in this country. Accordingly, and to be sure that the Bill covers those persons who carry out those activities, we have included paragraph (c).

We have referred within the paragraph to "an industrial or other process" to give some indication as to what we are talking about. We are inclined to think that the amendment proposed by the noble Lord, Lord Morton of Shuna, would not change the effect of paragraph (c) as any process is of course included in the phrase: an industrial or other process. However, we think that our formulation is a little clearer and indicates more explicitly the area of activity that we have in mind. In particular, it will prevent the provision being interpreted to cover large-scale industrial operations only. Accordingly, we should like to keep the words as set down in the Bill, and I invite the noble Lord to withdraw his amendment.

Lord Morton of Shuna

That is interesting. I understand what this provision is about. It is about a product the essential characteristics of which have been changed by a process. Nothing the noble Lord has said has made it any clearer why "an industrial or other" makes the meaning clearer. I do not wish to divide the Committee on the adding of three unnecessary words if the Government insist on doing so. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 4 not moved.]

5.15 p.m.

Lord Morton of Shuna moved Amendment No. 5: Page 2, line 6, after ("otherwise") insert ("and includes a product which has been incorporated into an immovable or real or heritable property.").

The noble Lord said: This is an attempt to include in the definition of "a product" what the directive says it must include. It appears to us that it has been excluded. It is clear that the directive covers bricks, wood, cement and other things, even though they become part of a house. Therefore, to use Scottish Legal terminology, they become heritable. In the Bill, "product" as defined in the first few lines on page 2 of the Bill does not make that clear. The amendment is an attempt to make it clear. It may well be that the wording of my amendment will not suit the parliamentary draftsman. If that is the Government's view and they want to take the amendments away and think about it, I shall be delighted. I beg to move.

Lord Lucas of Chilworth

I accept the reading of the directive by the noble Lord, Lord Morton of Shuna. He is right. I do not think that there is any necessity for me to take away this amendment and consider it because I believe the amendment to be unnecessary. Article 2 of the directive, which is implemented by Clause 1(2), provides: Product means all movables, even though incorporated into another movable or into an immovable. The definition in Clause 1(2) provides: 'Product' means any goods … and includes a product which is comprised in another product, whether by virtue of being a component part of raw material or otherwise". If we look at the definition of "goods" contained in Clause 45(1), we will see that it includes among other things: things comprised in land by virtue of being attached to it". That part of the definition has been drawn from Section 9(4)(a) of the Consumer Safety Act 1978 and it applies for the purposes of all Parts of this Bill. There can be no doubt that the words: things comprised in land by virtue of being attached to it catch everything that would be caught by the amendment moved by the noble Lord, Lord Morton of Shuna. I see no reason why we should use different words in Part I. That would complicate the Bill and may invite readers of the Bill to worry as to whether any difference in meaning were intended.

There is a further point which is not directly addressed by the amendment but which arises out of it. There is a distinction to be drawn under the directive between the components of a building and the building itself. While there is liability for defects in components, the directive does not seek to impose liability for defects in the building itself: that is, a defect arising from the assembly or construction of the building. The definition in Clause 45(1) does not make that distinction and neither does the noble Lord's amendment.

If, again, we look at Clause 46(3), we see that under that provision references in the Bill to supplying goods do not include references to supplying goods comprised in land where the supply is effected by the creation or disposal of an interest in the land". This needs to be read with Clause 4(1)(b). This gives a defence to any producer that he did not at any time supply the product to another person. The result is to give a defence to the building contractor, for example, in respect of defects in buildings put on the market by him. The reason for providing this defence is that the liability of building contractors is dealt with in some detail by other legislation, notably by the Defective Premises Act 1972.

I admit that I have digressed a little from the original amendment. I am not entirely clear that what is proposed would affect the substance of Clause 46(3) although some minor verbal changes might be required. Perhaps it will assure Members of the Committee if I say this. At first sight this may have looked like a gap in Clause 1, but it is adequately filled by the later provisions which I have mentioned.

I hope that the noble Lord will be able to accept this explanation notwithstanding that he has had to refer quite quickly across the breadth of the Bill. I hope that he will find the explanation acceptable and will be able to withdraw the amendment.

Baroness Phillips

Before the noble Lord responds, may I ask whether the Minister can answer what may seem to him a silly question. He referred to a substance that was won or abstracted. He mentioned gas, I believe. I should like a direct answer. If a gas fire blows up, who is responsible? Is it the person who has mined the gas or he who has manufactured the gas fire?

Lord Lucas of Chilworth

I would think that it would be a manufacturing or an operating defect in the appliance. There is no simple, straight answer to that question, I fear.

Lord Morton of Shuna

I am very much obliged for the tour. I assure the noble Lord, Lord Lucas, that I have read the Bill. I shall study what he says. We were discussing earlier the clarity of legislation. It is remarkable that in order to find out whether a brick put into a house is or is not covered one has to go through Clause 1 to Clause 45, to Clause 46, and back to Clause 4, instead of putting it in fairly simple English in the two lines I have suggested in Amendment No. 5. However, I shall study what the noble Lord has said and, if satisfied with it, I shall not put down another amendment. Otherwise I may do so. I beg leave to withdraw the amendment.

Amendment, by leave withdrawn.

Lord Morton of Shuna moved Amendment No. 6:

Page 2, line 11, at end insert— ("( ) For convenience of reference there is set out in Schedule [Directive of the Council of the European Communities dated 25 July 1985 (No. 85/374/EEC.)] to this Act the English text of the Directive.").

The noble Lord said: This part of the Bill is to give effect to the directive. However, the directive is not printed with the Bill and is not easily available. The directive is specifically referred to in Clauses 1 and 8. It is not easily obtained by the layman. At Second Reading I had the temerity to refer to the directive. I read out a part of it, and was requested by Hansard to give them a copy because they could not find one. If that shows us the ease of getting hold of the directive it shows us the point of having the directive as a schedule to the Bill.

The form of the amendment is taken from the Civil Jurisdiction and Judgements Act 1982, which adopted not a directive but a protocol. One of the points which the directive makes clear, but is nowhere in the Bill, is what the consumer, the injured person, has to prove. Article 4 says specifically in very clear English: The injured person shall be required to prove the damage, the defect and the causal relationship between the defect and damage". There is not one word of that in this part of the Bill. It can no doubt be inferred once one has legal training and has read the whole of Part I and the definitions in Clauses 45 and 46. But it becomes much clearer if the directive is there. I beg to move.

Lord Denning

I should like very warmly to support this amendment. It is time that we all understood what these directives are. When they are issued by the Council of Ministers in Brussels they become part of our law. Not only that, but if we do anything or pass anything that is inconsistent or in conflict with it the directive governs. That was shown very clearly by the case of the Southampton nurse in an action she brought against the health authority. The directive is the governing instrument. But where is it to be found? How many Members of the Committee have seen it? Like the noble Lord, Lord Morton, I had to ask for it in the Library; they had to send down to the basement; they had to get it copied.

How many Members of the Committee have seen this directive? Yet it is the most important document in this case. It is just as important as those conventions which we often add to an Act such as the civil judgments Act which has been mentioned. When an international convention is made part of our law we put it into or append it to the Act. This part of the Bill gives effect to this directive. The directive is far clearer than Part I of our Bill. The preliminary recitals tell us exactly what the principles are at which the directive is aimed. There are none in our Bill. There are important principles. Article 4 states; The unjured person shall be required to prove the damage, the defect and the casual relationship between defect and damage. How very important it is to have that definitively stated as it is in the directive. Furthermore, when we consider other parts of the Bill the definitions are far more clearly stated in the directive than in the Bill.

As a matter of principle I say that this directive ought to be before us. It ought to be readily accessible. I do not suppose any Members of the Committee except the noble Lord, Lord Morton, myself and one or two others, have had the directive before them. But we have had all trouble in getting it. It is not published in the legal text books. These directives are very important, affecting all our law. Yet we have to search around and have copies made in the basement, and so on.

To save all that trouble I would heartily support the amendment. Those who have to consider the Bill, and the courts which have to consider the Act when it is passed, ought to have before them the directive on which it is based. For convenience of reference the directive should be set out in the schedule. It ought to be there. We ought not to have to search around all the libraries and so on to obtain it. I support the amendment.

5.30 p.m.

Lord Airedale

Both noble Lords have referred to what the injured person has to prove. Supposing that the injured person dies and is in no position to prove anything, does the burden of proof automatically pass to his personal representative, or is it necessary to have an amendment in the Bill to say "the injured person or, in the event of his death, his personal representative"?

Lord Denning

I should not have thought that that was necessary. In the European Court of Justice we interpret these directives quite liberally, and generally we are not defeated by technicalities.

The Lord Advocate (Lord Cameron of Lochbroom)

Perhaps I may make it clear at the outset that this directive is undoubtedly the source for Part I of the Bill. I remind noble Lords that not all parts of the directive are applicable. Articles 19 and 20 state that: Member States shall bring into force, not later than three years from the date of notification of this Directive, the laws, regulations and administrative provisions necessary to comply with this Directive". The directive makes it quite clear that it will be complied with by the normal ways in which a particular member state may seek to set it out in its laws, regulations and administrative provisions. Furthermore, Article 20 provides that: Member States shall communicate to the Commission the texts of the main provisions of national law which they subsequently adopt in the field governed by this Directive". Noble Lords will know far better than I that in relation to international agreements we have been accustomed to adopt two approaches. The first is by means of a schedule setting out the international agreement to incorporate that in our general law. Indeed, that has been done and the noble and learned Lord spoke of one of them, and the noble Lord opposite of another. In those cases Parliament was giving the force of law to the instrument concerned.

The other approach which has been adopted, and one which has in a sense been heralded by Articles 19 and 20 of the directive, is that the member state may, as it were, synthesise, by setting out in terms which may be familiar to the national courts, to parties who may be litigants and to others, the force of what is within the directive itself.

That is the way in which we have chosen to go in this Bill. The law on product liability is set out within the confines of the Bill itself. We have taken considerable trouble to set out the law in a way that will be familiar to the courts and parties, and others, and we hope that it will be relatively easy to understand. By following the provisions of this Bill it is our intention that our national courts will arrive at a result which is the same as that to which the European Court would come in interpreting the directive in its way.

Accordingly, the provision in subsection (1) of Clause 1 is to be construed according to the directive. It is there in part (and it is an important part) to remind the court that in any case before it the directive—which is, of course, the source of this part of the Bill—must, if a question arises, be considered if that is thought by the court to be relevant. Of course the court will give effect to the construction which is more in accordance with the provisions of the directive; an alternative, as the noble Lord will know, if it is thought appropriate is to refer the matter to the European Court.

Thus, the legislation is essentially derived from the directive. That is acknowledged in Clause 1 but it is intended that this part of the Bill should stand on its own and there should be no need to refer to the directive direct because what is being done is to synthesise this for the purpose of national law, as Article 19 obviously has in mind.

There is one other matter which leads me to advise the Committee not to accept this amendment. Noble Lords will be aware that all directives of the Community are published in the Official Journal of the European Communities. By virtue of Section 3(2) of the European Communities Act, that publication is admissible evidence of any such directive. It at least suggests that Parliament, in enacting that provision, must have had in mind the need to remove the necessity for republication of the directive in our domestic legislation, more especially, it seems to me with good reason, where we have within a Bill, as we have here, a synthesis of the directive or its pertinent parts. I notice the noble Lord opposite nodding. One would accept, I believe, that there are parts which are not at all relevant and would not be required to be given the force of law.

I note that the noble Lord's amendment is only to the English text of the directive. As noble Lords will know, the directive is drawn up in all the official languages of the Communities, and these are all equally authoritative. All that anyone likely to want to look at the directive—this is where there might be suggested to be a difficulty in construing Part I—would get from the schedule is that I might term "the English language version". Nor would he be safe in assuming that the English text is exactly reflected by the others. I am bound to say that I am not aware of any particular differences at this stage, but where issues of interpretation arise, noble Lords will be well aware from Community jurisprudence that even minor differences of phrase can, at the end of the day, turn out to be quite significant.

I hope that I have said enough to persuade the noble Lord opposite that in this respect the previous statutory precedent should be adhered to, and that the directive should not be scheduled to this Bill. In the Bill we have given our own nationals a clear indication of what the directive aims to do in relation to all member states and we have given a clear indicator that, at the end of the day, the directive is there to determine the matter should there be any ambiguity. However, for the reasons I have set out, I cannot suggest that it would assist to include the English version of the directive as a schedule to this Bill.

Lord Denning

I should like to ask one question. If the English court is faced with a difficulty in the interpretation of this Bill when it becomes an Act, is it permissible for the judges of England to refer to that Council directive for elucidation of any difficult points?

Lord Cameron of Lochbroom

I am grateful to the noble and learned Lord. Indeed, that is the purpose of subsection (1) which states: This Part shall have effect for the purpose of making such provision as is necessary in order to comply with the product liability Directive and shall be construed accordingly".

Lord Denning

Thank you very much. It means that they will have to get copies from somewhere in order to do so.

Lord Morton of Shuna

I am grateful for the support of the noble and learned Lord, Lord Denning. At times it appears to me that government Ministers and government departments forget that ordinary people exist. Somebody who wants to look up consumer protection will receive a copy of this Bill. Perhaps he will then have a case in the sheriff court at Fort William and want to get the Directive of the Council of the European Communities No. 85/374/EEC. Will that be readily available in any solicitor's office or shop in Fort William? It was not readily available in this House until I put down this amendment and the Public Bill Office arranged for copies of the directive to be placed in the Printed Paper Office. Surely, for convenience, the directive should be available.

I am interested that we should not have simply the English translation of the Common Market legislation. No doubt the noble and learned Lord will tell us why the Civil Jurisdiction and Judgments Acts in which I am sure he is interested, and which his Government passed, included as a schedule the English translation, and the English translation only, of the various protocols. This would seem to be helpful for the convenience of the public, for the convenience of anybody appearing before court, and for the court itself. I have no wish to divide the House on this matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (The Earl of Listowel)

Before I call the next amendment, I should point out to the Committee that if Amendment No. 7 is agreed to, I cannot call Amendments Nos. 8 or 9.

5.45 p.m.

Lord Morton of Shuna moved Amendment No. 7. Page 2, line 12, leave out subsection (3).

The noble Lord said: I should like along with this amendment, to deal with Amendment No. 12. As I understand the Bill, Clause 1 is a definition clause as to what various things are—agricultural produce, a producer, a product and the product liability directive. We go on to something quite different in Clause 2. That clause deals with who is liable for defect in a product. Subsection (3) of Clause 1 has not the faintest connection with the definition clause. It states: For the purpose of this Part a person who supplies any product in which products are comprised … shall not be treated by reason only of his supply of that product as supplying any of the products so comprised".

That subsection belongs in Clause 2 which deals with the supply of products. Clause 2 (1) states: where any damage is caused … by a defect in a product every person to whom subsection (2) below applies shall be liable for the damage".

Subsection (2) applies to the producer, a person who puts his name on the product and a person who has imported it.

Subsection (3) reads: where any damage is caused wholly or partly by a defect in a product, any person who supplied". That is the first time we get the provision of supply in any form of logic. Subsection (3) of Clause 1 belongs after that, in the position where I have endeavoured to put it, at line 43. I think the wording is exactly the same.

As framed, Clause 1 (3) is contrary to the directive. The fourth paragraph beginning "Whereas" in the preamble to the directive states: Whereas the protection of the consumer requires that all producers involved in the production process should be made liable, in so far as their finished product, component part or any raw material supplied by them was defective". It is said there that both the producer of the finished product and the producer of the defective raw material or defective component should be liable.

Article 3 of the directive states: Producer means the manufacturer of a finished product, the producer of any raw material or the manufacturer of a component part".

Article 7(f) makes the point even clearer. The producer is not liable, in the case of a manufacturer of a component, that the defect is attributable to the design of the product in which the component has been fitted or to the instructions given by the manufacturer of the product". It is clear that the purpose of the directive is to say that if there is a defect in a product which is an amalgam of components, or is made up of various components and raw materials, there is a defective product as a whole. There is a chance of going against that producer and also a chance of going against the producer of the particular defective material or component. My purpose is to try and achieve the aim of the directive which we were assured at Second Reading was the aim of the Government.

Another problem is whether or not, in the case of a product such as a car which has a defective component, namely a brake lining, a tyre or a windscreen wiper, the defective component always means that the total product, the assembled product, is a defective product. The law is far from clear. We should have clarification on the matter because it is going to be very important. I raise again the question of whether or not, if I buy a car and it crashes because of a defective tyre or defective battery, I can recover for the damage to the car. The whole question arises of what the defective product is. I beg to move.

Lord Cameron of Lochbroom

I am grateful to the noble Lord for setting out the reasons for moving the amendment. The noble Lord has obviously touched on matters which I think we will debate in due course and with which I would not wish to deal at the moment.

I should like to remind noble Lords that Clause 2(3) deals with the liability of suppliers of defective products in that any person who supplied the product shall be liable for the damage caused by that product if that supplier fails to identify the person who supplied the product to him, thereby going up the chain of supply to the ultimate producer who, as is intended, should bear the liability for the defect. That is the way in which Clause 2(3) is concerned. It is possible that the provisions in Clause 1(3) have been misunderstood and interpreted in the narrow sense that they apply to the supplier of a product rather than to the producer and that they would be more conveniently situated therefore in Clause 2.

In so far as it goes, this is correct because of the wide definition of product in Clause 1(2). A finished product would usually consist of a large number of separate products or components and those components may even have components within themselves. The intention of the provisions of Clause 2(3) is that the liability of the supplier should only extend to identifying the producer of the finished product and not to all the producers or all the components of that finished product. Accordingly, the provisions of Clause 1(3) make it clear that a supplier of a finished product does not supply a component part by reason only of the fact that the component part forms part of the finished product.

May I put it in a slightly different way? If I take the car, I am supplied with a car. It may be that some part of the car fails, but the product which was supplied and which was defective was the car. Accordingly, the retailer who, through his showroom, has supplied the car is only bound to tell you who actually made the car. He is not bound to tell you who made the defective part which has been, in the manufacturing process, comprised in the car and ultimately forms part of the finished product which is then sold.

However, I have to say that Clause 1(3) also has an effect which goes a little wider than Clause 2 and its relation to the supplier of products. For example, there is a defence in Clause 4(1)(d) that the defect did not exist in the product at the relevant time. In the case of a manufacturer or importer of a finished product, that time must obviously be the time when he supplied the finished product to another person, and Clause 4(2)(a) so provides. But if the defect is in the component part, then the relevant time must be the time when the component part itself was supplied. If Clause 1(3) were removed, the effect would be that the relevant time so far as the manufacturer or importer is concerned would be the time when he supplied the product rather than when it was supplied by the component manufacturer. So one would have two different dates for determining whether there was a defect in a component, depending on who was sued. That cannot make any sense at all.

The noble Lord may also have had in mind a concern which has been expressed to us that Part I may not, as it should, impose liability on the manufacturer of a finished product for defects attributable to a component. I do not think there is in fact any doubt about the matter, but I have to say to the Committee that consideration is being given to this point and if necessary an amendment will be brought forward to deal with the matter. But the doubt, if it is one, stems more from the structure of the directive than from Clause 1(3) itself and would not, I believe, be assisted by the noble Lord's amendment.

I appreciate that this is an explanation which is very technical in the sense that one has to go to different parts of the Bill to comprehend it. I suggest to the noble Lord that he may like to consider what I have said in immediate response to his amendment, and more particularly perhaps to see on the other matter whether any amendment which is brought forward later may not make the matter slightly clearer than hitherto. I request the noble Lord to consider the position in the light of what I have said.

Lord Morton of Shuna

I shall certainly follow that invitation. I failed at least to comprehend, from what the noble and learned Lord said, any reason why Clause 1(3) should not become a subsection of Clause 2 without altering the sense at all. I shall study with great care what he has said to see whether or not that is so. Subject to that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Airedale moved Amendment No. 8: Page 2, line 13, after ("which") insert ("other"). The noble Lord said: I think some Members of the Committee may be in possession of a document entitled Consumer Protection Bill: Groupings referring to amendments. I was handed one as I entered the Chamber this afternoon. The Committee will see that no fewer than 16 amendments, all in my name and many of them drafting but dealing with different clauses and quite different subjects, have been grouped together. I thought that it was rather more than the Committee should be asked to bear to listen to 16 speeches from me rolled into one, followed by 16 replies from the Minister rolled into one. I am glad to be able to say that the Government have readily agreed largely to abandon that particular grouping.

I do not think any of my amendments will take very long and I shall be able to group some of them together, as will become apparent as we go along. Indeed, Amendments Nos. 8, 9 and 10 can conveniently be taken together. The only point here is that in each case the clause deals with two separate sets of products, and it occurs to me that by introducing the word "other" into the appropriate place it is made easier for the reader to appreciate that two separate sets of products are being referred to. I beg to move.

Lord Beaverbrook

I am most grateful to the noble Lord, Lord Airedale. The noble Lord's Amendments Nos. 8, 9 and 10 appear similar in that they cause an obvious distinction to be made between the different occurrences of the word "product" in each subsection. One could argue that at line 30 we are referring to the producer of any product in which the product in question is comprised. That surely cannot be the same product. In Clause 1, however, I am not so opposed to the intention of the noble Lord, Lord Airedale, to clarify subsection (3). I ask the noble Lord to withdraw these amendments on the understanding that the Government will consider how that clarity may best be achieved.

Lord Airedale

On that undertaking, I am very pleased to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 9 not moved.]

On Question, Whether Clause 1 shall stand part of the Bill?

Lord Williams Elvel

Before we leave Clause 1, perhaps I may raise one matter for clarification on the interpretation of the expression "producer"? May I put my question in the form of an example? Suppose ABC company either develops a new product or has a product which already exists. It manufactures that product and it markets it. Suppose, furthermore, that ABC company vests in a subsidiary its patent, its trademark and its manufacturing facility of either the new product or the existing product. Suppose the subsidiary is capitalised at £100 and suppose the rest of the financing for the subsidiary, the manufacturing and all the rest of it are guaranteed by the parent company but are obviously not in the capital base of the subsidiary.

In those circumstances—and this is the simple case; I have not yet got to the foreign cases and licence cases—who is the producer? Is it the subsidiary? In that case, is the liability of the subsidiary limited by the normal limitation of liability of companies, so that the maximum penalty that may be suffered by such a subsidiary—indeed, the parent company—would be restricted to the amount of capital in the subsidiary; namely, £100? Perhaps the noble and learned Lord the Lord Advocate or the noble Lord, Lord Beaverbrook, could clarify that point before we get on to a slightly more complicated issue.

Lord Airedale

I have a rather less technical and difficult matter to raise on the Questions, Whether Clause 1 shall stand part? It is this. Perhaps I may briefly refer to the Long Title, which begins: An Act to make provision with respect to the liability of persons for damage caused by defective products". I should have thought that the first question the reader might ask himself is: what is meant by "damage" in this connection? I should have thought that when he sees that Clause 1 contains a list of definitions he would be surprised not to find a definition of "damage" in Clause 1, but it is not there.

It is true that when he comes to Clause 3 he will find an explanation of the meaning of "damage", but the side note to Clause 3 is, "Meaning of 'defect'". He would not be likely to look there for the definition of "damage". When he gets to Clause 5 he is getting much warmer because the side note there is, "Damages", but of course "damages" is not the plural of "damage". Damages are what you hope to get after suffering the damage, so the reader would not expect to find the definition of "damage" in Clause 5, but it is there.

The trouble is that it does not correspond to the meaning of "damage" in Clause 3, because in Clause 5 at the end of subsection (1) we have in brackets the words "(including land)", which do not appear in Clause 3. Incidentally, I see no reason for having brackets round the words "including land". Do they have any significance? If they do not, let us get rid of them. Otherwise people will argue that the brackets must mean something or else they would not be there.

I call this unsatisfactory. Surely what the reader is entitled to is a definition of "damage" among the definitions in Clause 1, and if that definition needs to be qualified for the purpose of any other clause then the qualification should be spelt out in the particular clause.

6 p.m.

Lord Lucas of Chilworth

I shall certainly try to answer the point of the noble Lord, Lord Williams. My interpretation is that it is irrespective of the subsidiary company or its shareholding. The point at issue here is: who in fact assembles the article in question? If one takes a complicated piece of machinery which basically is produced by one person and put together by another, then it is the other person who is responsible irrespective of their standing one with the other. If, however, the assembly is something comparatively minor—two parts of a thousand—then of course it would be the originator.

Lord Williams of Elvel

I am sorry to interrupt the noble Lord, but I do not want to go off at a tangent. The point I put was that the assembly, the manufacture, the patent, the trademark, the licence, all the rest of it—the whole ball of wax—is vested in a subsidiary of a company which has £100 capital. There is a simple process. There is no question of joint assembly or anything like that. The whole operation is vested in a subsidiary.

If that product causes damage, against whom can the person who is damaged have recourse under the product liability provisions of the Bill? It would seem to me to be against the subsidiary. If that is the case, and if the subsidiary is only capitalised at £100 and if, say, the damages were assessed at £1 million, then the parent company can simply put its subsidiary into bankruptcy and the doctrine of limited liability does not give the parent company any responsibility at all for the subsequent debts of the bankrupt subsidiary. Am I right or am I wrong?

Lord Lucas of Chilworth

I believe that the noble Lord is right. That is the question the noble Lord asked me. Does the noble Lord want to ask another?

Lord Williams of Elvel

I am grateful to the noble Lord, Does not this render the whole of Part I, the product liability, relatively nugatory, because any company can, and indeed will in practice, put their operations for difficult products into subsidiaries, particularly developing new products? That is a question to which the Government have to respond seriously. If companies can isolate themselves by this financial mechanism, if you like, it renders the Bill ineffective.

Lord Lucas of Chilworth

I do not believe for one moment that that situation is likely to arise, because I think it would be too difficult practically to do that. However, the noble Lord will of course appreciate it when I say that I shall look carefully at what he has said.

In looking at it, as I shall, I hope that the noble Lord opposite will also think of these points. Perhaps the liability that we foresee—or perhaps it is more true to say that we do not foresee; but suppose there was a liability arising under Part I—would be only very occasionally large enough to justify, certainly in commercial terms, the sacrifice of a subsidiary. Even then, I suggest, the question would arise only if the liability implicit in what the noble Lord said has not been adequately insured.

If a group of companies is large enough to be able to sacrifice a subsidiary, surely it is much more likely that it would be able to either bear the financial loss or to have secured adquate insurance in the first place. I do not think that it would want to sacrifice a subsidiary, in the kind of scenario that the noble Lord painted, with the consequences for the reputation of the whole group. We should also remember that there are other statutes which would inhibit it so doing. The noble Lord himself will clearly remember, as I remember, the provisions of the Insolvency Act, which impose duties on the directors. They are not ones that they can easily walk away from purely by taking the course of action that the noble Lord poses that they might take.

Surely there are, and must be, a number of considerations other than avoiding one's proper legal and, as I suppose I may put it, moral responsibilities. There are many considerations of that nature involved in deciding the structure of a group of companies. While I said that I would look at the point the noble Lord made, I find rather surprising the suggestion that potential liability under Part I of the Bill is likely to be a predominant factor.

Lord Williams of Elvel

I am grateful to the noble Lord. What we are now down to is whether a parent company considers its reputation sufficiently important to it not to abandon its subsidiary, or whether the directors of that subsidiary happen to be people who are covered under the Insolvency Act. I can invent all sorts of scenarios for the noble Lord, and I am sure any noble Lord can do so. We can put it in a trust company; we can vest it in a trust company in Gibraltar, or in the Cayman Islands; we can do all sorts of things, and people do this.

The point of the Bill, as I understand it, is to make it a strict legal product liability. If we are down to the question of whether a parent company would sacrifice a subsidiary we are down to the question of whether a parent company believes its reputation would be harmed, and that is a quite different issue from the question of making it legally liable.

Lord Lucas of Chilworth

I find it very difficult to believe—because perhaps I am a naive man—that companies will engage in a number of those practices which the noble Lord opposite thinks may happen. I dare say that a number of noble Lords could paint a variety of scenarios, all to the detriment of some producer who wants to escape his moral as well as his legal responsibilites. I do not believe that business is conducted in that way. I believe that the provisions of the Bill are sufficient to persuade him to a proper course of action.

Having said that, I again repeat that I am quite happy to look at the points the noble Lord made. I shall communicate with him as soon as I have taken advice. Does he want to come back on that? I have to respond to the noble Lord, Lord Airedale.

Lord Williams of Elvel

I am grateful to the noble Lord for saying that he will look at this point, because it is important. Either we are trying to impose some kind of a legal liability or we are relying on the reputation of companies to do their bit. May I ask a further question? What about licensing? Let us suppose company A has developed a product and it licenses company B to manufacture that product. Company B accepts the licence. I assume from what has been said that company B has the legal liability under Part I. Am I right, or is there some mechanism whereby the developer of the product, himself the licensor—who is after all responsible for the technology and any defects that may exist in a product—can become liable? Can the noble Lord answer that question?

Lord Lucas of Chilworth

I have a suspicion that whatever way I answer that question there will be a further question as to exactly what I mean. Why does the noble Lord not put his point more succinctly and then I may be able to answer him in full?

Lord Williams of Elvel

That point was, I hope, put as succinctly as I could put it.

Earl De La Warr

With respect, I think the noble Lord has put it succinctly and he is also very practical. We know that much of this Bill is to catch the rascals there are. To say that one can rely on the conscience of a company is no answer, certainly no answer in law. It is not a legalistic question because when the chips are down it is and will be very practical.

Lord Lucas of Chilworth

I am not sure whether my noble friend Lord De La Warr was going back on the earlier point that the noble Lord, Lord Williams, made. My noble friend knows, because he has been in business a long time, that in practice the reputable industrial, commercial and manufacturing companies do not seek to avoid their risks. Having said to the noble Lord, Lord Williams, that I shall look at these points I do not think that I can go further than my noble friend.

The second point the noble Lord addressed was whether the principal or a licensee would be responsible under Part I. It is the licensee who would be responsible. I am not a legal man, but no doubt he would enjoin the principal and so a chain would evolve. But essentially one would go for the licensee. Will the noble Lord, Lord Williams, allow me to move to the noble Lord, Lord Airedale, or does he want to stay with this matter? I am quite happy as it is Committee stage.

Lord Williams of Elvel

I am grateful to the noble Lord for, as he rightly points out, I have a number of other possible scenarios I should like to explore. I do not want to hold up the Committee because these are matters which perhaps we could discuss. I wonder whether any other Members of the Committee have points to raise on the two matters that I raised—the question of the subsidiary and the question of the licence. I shall drop the rest for a moment.

Lord Denning

This is not a point only concerned with product liability. It is concerned with all the liabilities of companies throughout our field of tort. It involves general company law and so many things outside the Bill. I believe it is better not to pursue it at this stage.

6.15 p.m.

Lord Lucas of Chilworth

I am grateful to the noble and learned Lord, Lord Denning, for underlining what I said earlier. I suggested to the noble Lord, Lord Williams, that there were other statutes. I remember, because he and I dealt with the matter not so long ago, the Insolvency Act. There are other Acts of Parliament that the noble and learned Lord mentioned to us—the Companies Act and so on. It is not just a question of a company seeking an out through this Bill. However, we have agreed that we shall consider this and any other scenario that the noble Lord likes to put to me. It might be more useful if he put it to me rather than to the entire Committee.

I thank the noble Lord, Lord Airedale, because he told me that he would put the point he raised. The Committee will appreciate that I have had rather more time to consider my response and perhaps to give it in more clear and exact terms than my response to the earlier point to me. There are four considerations that I believe are relevant to the question asked by the noble Lord, Lord Airedale. First, the directive provides in Article 9 a restriction on the right to recover under the directive in respect of damage to property. We have to reflect on that, but it means introducing some rather lengthy provisions about the matters in Clause 5.

Secondly, the directive does not deal with a particular problem under our law concerning the time when a cause of action in respect of latent damage to property accrues. We have dealt with that in Clause 5 also. Thirdly, we have followed the general structure of the directive so far as is possible. Those who wish to draw comparisons—they may wish to do so in frankly contentious cases—can readily see the derivation of our provisions.

Fourthly—and this is perhaps the most important point—I do not think we should weigh down Clause 1 with extensive provisions such as we have made in Clause 5 unless it really is necessary for the purpose of understanding the following provisions in Part I. The definitions given in Clause 1 are confined to those which are necessary for that purpose: in particular the definitions of "producer" and "product".

If this had been a particularly lengthy part of the Bill there might have been a case for cross-referencing Clause 5 in Clause 1(1). But it seems to me that anyone affected by the Bill would pick up the reference to damage very readily, either by reading the arrangements or by reading to the end of Part I. I do not think that that is unreasonable.

There are two points on Clause 3. First, the purpose of the reference to damage to property is simply to counter any suggestion that "safety" must be taken to mean only personal safety. I do not think we then need make too much of a meal of what is meant by "damage to property" in this connection. Secondly, again I do not think that in the context of Clause 3 we need to make a distinction between property intended for private use or consumption and property used for business purposes. The nature of the risk seems to us to be the same in both cases.

I suppose it is barely arguable that the definition of "damage" in Clause 5 is attracted to Clause 3(1), but I do not think it matters one way or the other. Frankly, I should be reluctant to add further complications to Part I purely for the purpose of disposing of that point.

Lord Airedale

I still think it is bad luck on the reader who, if he wants to know what "damage" means in Part I, has to dig it out of Clause 3 against the side-note, "Meaning of 'defect'", and out of Clause 5, whose side-note is, "Damages recoverable under Part I". That is pretty hard luck on the reader; but there it is.

Lord Lucas of Chilworth

I had already made up my mind, before the noble Lord, Lord Airedale, said "there it is", and sat down, to say to him that I appreciated what he says about "hard luck". Let me give an undertaking to him that I shall see whether I can remove some element of this hard luck. I do not promise but I offer to do that and, if I am successful, I shall tell him what it is. If I cannot, I shall also tell him.

Clause I agreed to.

Clause 2 [Liability for defective products]:

[Amendment No. 10 not moved. ]

Lord Morton of Shuna moved Amendment No. 11: Page 2, line 33, after ("damage") insert ("or his representative")

The noble Lord said: This is a very simple amendment, as I had thought were most of the amendments to which I have been speaking. It is difficult to see how the person who suffers the damage can request the supplier to be identified if the person who has suffered the damage is dead or incapable. That is the purpose of putting in the words, "or his representative". It seems to be something that has just been left out. Surely the representative of somebody who is incapable or dead should have the same rights. I beg to move.

Lord Cameron of Lochbroom

I am grateful to the noble Lord. I see a possible difficulty arising in this case. I am not sure that the form of words which he has used is necessarily the happiest way to deal with it, but I should like to reflect further on the matter and, if judged proper, deal with it at Report stage. On that undertaking, perhaps the noble Lord might like to withdraw the amendment.

Lord Morton of Shuna

I am willing to bow to the ability of the draftsman to put in something which is probably of six lines rather than of three words. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 12 and 13 not moved.]

Lord Morton of Shuna moved Amendment No. 14: Page 2, line 47, leave out ("industrial") and insert ("initial").

The noble Lord said: This again is an attempt to get this part of the Bill to comply with the directive. The directive quite firmly states in Article 2, "initial processing", and of course it is the directive and not the preamble which is preferred if there is any dispute between the two as to what is meant. The preamble uses the words, "industrial processing", but Article 2 of the directive says: For the purpose of this Directive 'product' means all movables, with the exception of primary agricultural products and game, even though incorporated into another movable or into an immovable. 'Primary agricultural products' means the products of the soil, of stock-farming and of fisheries, excluding products which have undergone initial processing". It would be quite easy, as my amendment does, to put into subsection (4) at a time when it had not undergone an initial process". That is what the directive says. I have great difficulty in understanding why "industrial" should be preferred to "initial". I have even more difficulty in considering that they could mean the same, because they could not in ordinary English. I beg to move.

Lord Ezra

I should like to support this amendment. When this aspect was being discussed earlier there was grave concern about the meaning of the term "industrial process", as applied to agricultural products. The directive is clear. We are talking here about an initial process. There may be subsequent processes to which these products can be subjected. Therefore I feel that if the word "initial" is not retained in the legislation we ought to be clear as to why the change has been introduced.

Lord Lucas of Chilworth

I again remind the Committee that when my noble and learned friend the Lord Advocate introduced the Bill he said that the purpose was to implement the directive. A number of questions have been raised, particularly where we have departed—and these general points come up a little later as well—from the words of the directive.

There are a number of occasions where we have done so, and for particular reasons. Here we have made the change for two reasons. First and foremost, we think it more nearly expresses in English the true intent of the directive. Secondly, we think it produces greater clarity and ease in understanding the dividing line in what we frankly admit is a difficult area. We touched upon the dividing line earlier in our deliberations this afternoon.

It may be thought that the easiest way to ensure that we have implemented the directive would be to copy out its exact words, but I think the Committee will accept that things are not quite as simple as that. Expressions used in the directive may, despite Clause 1(1), have a different meaning when used in the context of our own legislation. In the present case it is true that Article 2 of the directive speaks of the exclusion for primary agricultural produce being available only for produce that has not undergone initial processing. But if we were to use that phrase it could be taken to have a different sense from the expression "industrial process" in Clause 1(2). On the contrary, the preamble to the directive speaks of how it is appropriate to exclude liability for agricultural products and game, except where they have undergone processing of an industrial nature which could cause a defect in these products.

We have also to recall the origin and fundamental purpose of the directive (that is, to provide for a system of strict liability for manufactured goods) and the reasons that lay behind making the exclusion for primary agricultural products in the first place. It seems to us that when these factors are given due weight it is the industrial nature of the process that is important and not where in the sequence of production the process concerned occurs. We believe that the intentions of the directive can best be translated into English law by making the exclusion work for agricultural produce which has not undergone industrial processing.

This approach has another advantage. It is certainly clearer. The words in the directive contain the implication that, while initial processing may disqualify goods from the exemption, processing which comes after that initial processing is somehow all right. That, I suggest, was never the intention of the directive, but it can be argued on the strict wording of Article 2, and it would not be a wholly fanciful argument within the context of the usual rules of English construction.

We would rather avoid setting such hares running. It seems to us to be clearer, but I admit that is something of a relative statement. I believe it is clearer to say what an industrial process is rather than an initial one. After all, the initial process to which potatoes are subjected is harvesting. Here, as I said in my earlier example, the important process which turns them into frozen chips (so that they are covered by Part I) is the industrial one in what might be called an industrial plant, using machinery on a regular, formal, mechanised basis. That is the reason for changing the words. It is an improvement on the wording of Article 2 and I believe that it fully complies with the overall intent of the directive.

6.30 p.m.

Baroness Phillips

Can the Minister put that in simple words? This Act will be so framed that no ordinary customer is ever going to take an action; it is going to be very complicated. As regards frozen chips, surely that is not an industrial process. It is simply freezing. Can that be an industrial process?

Lord Lucas of Chilworth

Would that it were only freezing! If one suggests that to the chip makers of the United Kingdom, they will say it is a good deal more than that. I myself am not involved in food processing but it seems to me that, having accepted some potatoes from the wholesaler or the farmer or whoever I buy them from, there are a number of things which I, as a potato processor, should like to do. I should probably want to grade, which we have discussed earlier and which is not an industrial process. I should perhaps want to wash. We have discussed that and decided that if it happens inside the farm it is not an industrial process. I should want to peel; I should want to cut; I may want to regrade; I then may want to freeze and package. We thus have a number of processes which I should describe and which could quite reasonably be seen and accepted as industrial processes.

Lord Denning

May I suggest to the Committee that the directive itself is of the first importance? Further-more, I suggest that the English translation as given to us should be what we go by. We do not know enough about the other languages and we ought to go by the meaning of the directive in its English sense. It is plain to me that "initial" processing is very different from "industrial" processing. The initial process is the beginning process; the words "industrial process" mean all sorts of industrial operations. That may be a very important provision in the directive in that people will be exempted from strict liability for agricultural products and the like. In other words, this word "initial" in the directive may be of the first importance and I very much doubt whether it is open even to this Government to alter the directive in this way. I myself feel that there is a strong case for saying that the Government have to implement the directive. It can be expanded and explained, if you like, but not altered; and that may save a lot of trouble hereafter, because the word "initial" can go before the European Court of Justice for interpretation. It would be very unfortunate if our courts, in interpreting the word "industrial", came to a different conclusion. I should have thought it was much the safer course to follow the directive and to keep the word "initial".

Lord Lucas of Chilworth

I always listen carefully to the noble and learned Lord, Lord Denning. Normally I like to agree with him. However, in looking at the interpretation of the directive, while it may be quite clear what is meant, that must be translated into a common usage or common understanding in the English language. We have taken Paragraph 3 of the preamble into consideration. The preamble states: Whereas liability without fault should apply only to moveables which have been industrially produced; whereas, as a result, it is appropriate to exclude liability of agricultural products and game, except where they have undergone a processing of an industrial nature which could cause a defect in these products; whereas the liability… and so on. It is surely abundantly clear what is meant by the directive. We have attempted, and I believe successfully, in this modest measure to put into common usage that which is commonly understood in describing the industrial process as distinct from the initial process.

Lord Morton of Shuna

I find the explanations of the noble Lord, Lord Lucas, quite extraordinary. In the first place, he says that the words in Article 2, have undergone initial processing, depend on the translation. Is he saying that in German, French, Italian, Spanish or whatever other languages are now the approved languages of the Community, "industrial" is the same word as "initial"? If so, perhaps he can tell us the foreign languages in which "industrial" equals "initial". I do not think he will find them.

Secondly, the noble Lord has referred to Clause 1(2)(c). That clause has nothing whatever to do with agricultural produce; agricultural produce is only used as an example. It consists of a product which has essential characteristics attributable to a process which is industrial or some other process. That is not necessarily anything to do with agricultural produce.

Thirdly, if the noble Lord looks at the directive, it contains four sentences beginning: Having regard to the Treaty, or having regard to various other things. It then has "Whereas" 13 times. It then states: HAS ADOPTED THIS DIRECTIVE: Article 1… and so on. Now what comes after the word "directive" in the official version? It may be possible to go to the preamble to interpret what is meant if there is a doubt as to what an article may mean. But if there is no doubt about what the article means, we cannot go back to the preamble and say: "No, the article did not mean what it said and we must look at the preamble". That is like looking at the clauses of this Bill and saying: "The Bill does not mean what it says and we must look at the Explanatory and Financial Memorandum". Surely we cannot do that. "Initial processing" means initial processing and it does not equal industrial processing. The directive says it and we should stick to it. I regret that I cannot withdraw this amendment.

Lord Stanley of Alderley

Perhaps I may add a word of support for my noble friend on the Front Bench. Earlier this afternoon at Question Time there was an interchange as regards simple language which would enable us all to understand legislation. As a potato producer, it is clear to me that when my process finishes industrial processes start. As my noble friend has said, the potato comes into the store and I sort it out. It is clear to me that that is not an industrial process. However, if we put the word "initial" in, I may have to think again. At the end of the day, I must interpret this legislation; we have been told that earlier this afternoon. I hope that my noble friend on the Front Bench will resist this amendment.

Lord Morton of Shuna

With the leave of the Committee, perhaps I may come back on that. If the noble Lord looks at the definition of the word "factory" in the Factories Act, it is defined as being premises in which manual labour is employed on a process which includes sorting. Therefore, if one has a situation in which potatoes are brought into a shed and then cleaned and sorted by manual labour and put in bags (possibly by machine), one may well have the Factories Act applying to that farm shed. I do not withdraw the amendment, and I beg to move.

Lord Lucas of Chilworth

The noble Lord is obviously going to ask the Committee for its decision on the amendment. To be quite honest, I think the noble Lord is being rather pedantic. At the end of the day, whatever word is put in will be determined by the European Court. Our job is to make the interpretation of that into English law as clear as we can. It is an absolute red herring to draw the German, Spanish and Italian language across the path of the Committee. No doubt the Germans, the Spanish and the Italians are having the same difficulties as we are having in writing the directive into their domestic laws. I believe it is quite clear within the context of this Part of the Bill what is an initial process and what is an industrial process. I hope that noble Lords will support me in that belief by rejecting the amendment.

Lord Morton of Shuna

If I may be pedantic and come back again, this is the Parliament of Great Britain. I object to the noble Lord referring totally to English law; Scots law comes into it, too.

6.41 p.m.

On Question, Whether the said amendment (No. 14) shall be agreed to?

Their Lordships divided; Contents, 61; Not-Contents, 104.

DIVISION NO. 2
CONTENTS
Airedale, L. Hughes, L.
Allen of Abbeydale, L. Irving of Dartford, L.
Amherst, E. Jacques, L.
Ardwick, L. Jenkins of Putney, L.
Aylestone, L. John-Mackie, L.
Broadbridge, L. Kennet, L.
Brockway, L. Kilbracken, L.
Burton of Coventry, B. Kilmarnock, L.
Carmichael of Kelvingrove, L. Kirkhill, L.
David, B. [Teller.] Lloyd of Kilgerran, L.
Denning, L. Lockwood, B.
Diamond, L. Lovell-Davis, L.
Elwyn-Jones, L. McIntosh of Haringey, L.
Ewart-Biggs, B. McNair, L.
Ezra, L. Milner of Leeds, L.
Falkender, B. Morton of Shuna, L.
Gallacher, L. Nicol, B.
Galpern, L. Northfield, L.
Gladwyn, L. Oram, L.
Graham of Edmonton, L. Perry of Walton, L.
Grey, E. Phillips, B.
Hampton, L. Pitt of Hampstead, L.
Hanworth, V. Ponsonby of Shulbrede, L. [Teller.]
Harris of Greenwich, L.
Howie of Troon, L. Prys-Davies, L.
Robson of Kiddington, B. Taylor of Blackburn, L.
Rochester, L. Turner of Camden, B.
Seear, B. Underhill, L.
Shackleton, L. Whaddon, L.
Stedman, B. Williams of Elvel, L.
Strabolgi, L. Wilson of Rievaulx, L.
NOT CONTENTS
Ampthill, L. Hives, L.
Auckland, L. Hooper, B.
Beaverbrook, L. Hylton-Foster, B.
Belhaven and Stenton, L. Kaberry of Adel, L.
Belstead, L. Kinloss, Ly.
Bessborough, E. Lane-Fox, B.
Birdwood, L. Lauderdale, E.
Bledisloe, V. Lawrence, L.
Boston, L. Lindsey and Abingdon, E.
Boyd-Carpenter, L. Long, V. [Teller.]
Brabazon of Tara, L. Lucas of Chilworth, L.
Brougham and Vaux, L. Lyell, L.
Broxbourne, L. Macleod of Borve, B.
Bruce-Gardyne, L. Margadale, L.
Burton, L. Marley, L.
Butterworth, L. Marshall of Leeds, L.
Caithness, E. Merrivale, L.
Cameron of Lochbroom, L. Mersey, V.
Campbell of Alloway, L. Monk Bretton, L.
Camegy of Lour, B. Monson, L.
Camock, L. Mottistone, L.
Cathcart, E. Moyola, L.
Clitheroe, L. Munster, E.
Coleraine, L. Newall, L.
Colville of Culross, V. Norfolk, D.
Cowley, E. Onslow, E.
Cox, B. Orr-Ewing, L.
Craigavon, V. Pender, L.
Davidson, V. [Teller.] Penrhyn, L.
De La Warr, E. Peyton of Yeovil, L.
Derwent, L. Portland, D.
Dilhorne, V. Renton, L.
Eden of Winton, L. Rodney, L.
Elliot of Harwood, B. Russell of Liverpool, L.
Elliott of Morpeth, L. Sanderson of Bowden, L.
Elton, L. Selborne, E.
Fairfax of Cameron, L. Shannon, E.
Faithfull, B. Sherfield, L.
Forte, L. Shrewsbury, E.
Fortescue, E. Skelmersdale, L.
Fraser of Kilmorack, L. Stanley of Alderley, L.
Gardner of Parkes, B. Strange, B.
Glanusk, L. Strathclyde, L.
Gowrie, E. Sudeley, L.
Gray of Contin, L. Swinfen, L.
Greenway, L. Torrington, V.
Gridley, L. Trumpington, B.
Haig, E. Ullswater, V.
Halsbury, E. Vaux of Harrowden, L.
Harris of High Cross, L. Whitelaw, V.
Henderson of Brompton, L. Windlesham, L.
Hesketh, L. Wise, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.49 p.m.

Lord Bruce-Gardyne moved Amendment No. 15:

Page 2, line 49, at end insert— ("( ) This section shall come into force on such day as the Secretary of State may by order made by statutory instrument appoint, and such order shall not be laid before Parliament until the Secretary of State is satisfied that insurance against the liabilities imposed in this section is available to the persons mentioned in subsection (2) above at acceptable commercial rates.").

The noble Lord said: I beg to move the amendment standing on the Marshalled List in my name and that of the noble Lord, Lord Clitheroe. The Committee will appreciate that the purpose of this amendment is to suggest that Clause 2 of the Bill should not be brought into effect unless and until the Government have satisfied themselves that insurance at acceptable commercial rates is available to suppliers who fall to incur liability under the terms of the clause.

I was unable to attend the Second Reading and perhaps that is just as well because it would be fair to say that the Bill was given a fairly enthusiastic reception on all sides. It might have been painful to enter a mildly dissenting note. I confess that I have always had a faint suspicion that when one reads a proposal for consumer protection legislation one is well advised to look out for the interests of the consumer. I have always believed that consumerism and consumers are, as King Charles I said of monarch and people, clear, different things. Indeed, I sometimes wonder whether consumerism and the consumer are not totally opposed to each other's interests and concerns.

Usually, when one examines these matters one tends to find that the effect of consumer protection action is to raise the price to the consumer or perhaps, as my noble friend Lord Peyton said on the first group of amendments, to deprive the consumer of supply altogether. I think that there is a real danger of that happening as a result of this Bill.

We have heard much this afternoon, particularly on the first group of amendments, about availability of insurance for this purpose. Therefore, I felt that it was desirable that we should probe the proposition a little more closely. I am particularly aware that on Second Reading my noble friend Lord Clitheroe raised some measured doubts about this matter and I therefore apologise to him for stealing the launching of his fox. I am not sure if that is the correct technical term, not being a hunting man myself, but I hope that the sense of my proposition will be understood. At any rate, I am delighted that my noble friend has joined me in this amendment and I am sure we look forward to his comments from his position of considerable experience.

As I said, we have heard a lot about the availability of insurance cover for this purpose. The first thing that has to be said is that even if insurance cover is available it will be expensive. One of the interesting aspects of those in the consumer protection lobby is that they seem to be the last surviving believers in the concept of a free lunch. They seem to believe that if additional responsibilities and burdens are loaded upon providers of goods and services those additional costs will somehow be absorbed and will vanish. The reality, of course, is that they must and will be passed on to the customer.

In that context I want to draw attention to the comments of the Association of Insurance and Risk Managers in Industry and Commerce which have been highlighted by the CBI. I know that the noble Lord, Lord Williams, made it quite clear that any information coming from that source must be treated on the Benches opposite with deep disapprobation. But I hope that, by now, that momentary passion has passed. I quote what the association said in a letter dated 23rd December to my honourable friend the Minister for Consumer Affairs: While manufacturers and suppliers are prepared to accept responsibility for their products they cannot realistically fund these liabilities without insurance protection". The association goes on to point out that high risk and high-tech research and development-based industries in this country are already having real difficulties in getting appropriate cover for product liability at any price.

The CBI also quotes the example of one large, unidentified company in the high technology field which has apparently informed the CBI that two years ago it could obtain £100 million of product and public liability cover for all its business except aerospace. This year it hopes to obtain £30 million for three times the premiums and that on terms which are worse in several respects, although I shall not delay the Committee by giving them. That is the situation we now face before the passage of this Bill in which we have, for better or for worse, chosen not to absorb the possible derogation to limit damage in any particular instance to £40 million. Therefore, we could be talking of very large liabilities.

There was some discussion on Second Reading about experience in the United States. Here again, I think it is perhaps relevant to give some of the instances produced by the CBI. One that particularly concerns me, because I have a personal interest in the problems of deaf children, is the fact that consequent upon the cost of product liability insurance—and it is a crippling cost in the United States—only one manufacturer in the United States now manufactures the combined measles-mumps and rubella vaccine. That is an example of how access for the consumer is being constrained.

Of course, various noble Lords said on Second Reading, "Yes, but we do not and, thank God, never will be faced with the way in which the so-called contingent fee system operates in the United States." This is where the lawyers themselves often have a vested interest in promoting exaggerated claims. I was very interested to hear what the noble Lord, Lord Williams, had to say on that point, reported in col. 1008 of Hansard on 8th December. He said, referring to the Government: I am somewhat less sanguine than others—and I have to say this—on their ability to prevent the contingent-fee system"— or what I believe is referred to in the trade as "ambulance chasing"— under which entrepreneurial lawyers seek business on the basis of a success fee, from encroaching here.

That is possibly a wise note of reservation. All that one can say with confidence is that what is happening in the United States—and we can see it all the time—is that because of the enormous premiums which are now required to obtain insurance cover against such propositions as product liability, and in some cases the inability to obtain insurance cover at all, costs escalate dramatically to consumers and many products are liable to disappear from the market place completely.

I do not want to go on to the impact which might be expected to occur in this context if we were to remove the development risk derogation. We shall come to that later and I do not want to encroach on those debates. However, I want to suggest to the Committee that we shall be doing the consumer no service at all if, as a result of this legislation, we oblige manufacturers and suppliers of service to undertake huge additional premiums to cover possibly unspecifiable risks in the future.

By way of conclusion, may I say that I notice that during the Second Reading debate my noble friend the Minister said, reported at col. 1058 of Hansard, that, there will be no excessive rise in the cost of insurance as a direct result of the directive being implemented". I say to the Committee that if that is indeed the case, and if the Government are confident that it is indeed the case, perhaps they should have no difficulty in accepting my amendment. I beg to move.

7 p.m.

Lord Denning

I am afraid that this amendment goes against the whole trend of our law. In recent years we have extended beyond question the liability for negligence.

In the case of many injured people, in particular those with brain damage, those who have been termed "Sleeping Beauties" and the like, damages can rise to half a million pounds or more. Those cases—and Members of the Committee will have seen them in the papers—attract enormously high damages. There is also professional liability, whereby solicitors and accountants, for instance, insure against their liability for negligence, which may run into millions of pounds. In all such cases, in assessing damages the law has always said that it does not take into account the question of insurance. Indeed, when I was young and practising at the Bar one could not even mention to a jury whether or not the defendant was insured. Of course that is possible now, if need be. On the other hand, the law has said that in assessing damages the fact of insurance is irrelevant and not to be taken into account.

In a way I can see very well the argument on the other side. There is no doubt whatever that in the United States and elsewhere it has meant an increase in premiums and therefore an increase in charges to the consumer. I can see that argument entirely. However, Lord Pearson's committee rejected it and I must say that in conformity with the general principles of the law we ought not to consider this amendment unless it is in the wider context of the assessment of damages for negligence in other cases. I sympathise with the objective but I am afraid that I cannot support amendment.

Lord Airedale

I was pleased to hear the noble and learned Lord, Lord Denning, say that there is an argument on the other side. Indeed there is. This Bill imposes no maximum limit on liability and it is impossible to obtain unlimited insurance. I made that point in my Second Reading speech. I particularly urged the Government, if it were necessary, to commission an underwriting broker to go round Lloyd's to see whether he could find anywhere unlimited liability insurance. It is impossible. No underwriter, whether in Lloyd's or in an insurance company, will subject his principal to unlimited liability. To do so would be bad business.

In some outlandish event such as occurred in the famous Polemis case that is mentioned in the law books, where the burning down of a ship led to the burning down of the dock and the subsequent burning of a number of other ships at that dock, tremendous liability can occur. No underwriter will underwrite unlimited liability when such an event may occur. He would bankrupt his company, or his syndicate, as the case may be, and the injured party would not receive his compensation. Because of that circumstance it remains a fact that at some time some company or producer will be faced with a liability against which he was not able to insure at all. He will be made bankrupt. If it is a small company his employees will be put out of employment, the injured person will not get his compensation and there will be tears all round.

In my speech at Second Reading, which I promise not to repeat at this juncture, I pointed out that the enormous cost of insurance will be met by the consumer from an increase in the price of the goods that he buys, and it does not matter to him whether he pays for it in that way or by a modest increase in his national insurance contribution. If one deals with the matter in that way and says that these damages are to come out of national insurance, one sweeps away all the difficulties about proving who is responsible, whether it is the product or a component that is at fault, and how the manufacturer is to be traced. All those difficulties go out the window if one says that where accidental damage occurs liability comes out of national insurance. I strongly support this amendment despite what has been said by the noble and learned Lord, Lord Denning.

Lord Peyton of Yeovil

I, too, should like to support the amendment. I want to start by saying that I have never lacked admiration for my noble friend Lord Bruce-Gardyne for his daring and courage, but I never knew until this evening that he took those admirable qualities to the length of stealing the launching of someone else's fox, which is a most peculiar thing to do. Obviously, in achieving such a feat he has won for himself a place in history.

Perhaps of more merit is the amendment that he has moved and to which I hope my noble friend will give serious attention. Even if he does not accept it immediately tonight perhaps he will take it away and give it some very sympathetic consideration. I fear in this Bill the assumption that to protect the consumer is a good and praiseworthy action, and so there is a danger that the proposals contained in the Bill will be added to and increased during its passage through this Chamber.

I think we have to ask ourselves two questions. The first is: how does one protect the consumer effectively against a danger which is literally not only unknown but unknowable at the material time? The second is: who will pay and how much? As I pointed out in an earlier debate—I apologise for repeating it—in the end the consumer will be the person who suffers. It is he who has to pay for the end product, and he will do so by paying more or alternatively he will be denied goods or services which he would otherwise have liked to obtain.

I know the respect with which the noble and learned Lord, Lord Denning, is regarded in this assembly, but when he dismisses, albeit with some sympathy, the question of insurance costs and the burden that they represent upon producers, industry, and those who wish to apply their skills and assets to badly needed innovation, I must confess to some surprise and some disappointment, because in this particular context sympathy is of very little value, however deep and sincere and from however learned a source it may come. Certainly it does not compare with the kind of burden that the law could so easily and lightly place upon industry without beginning intelligently to count the cost.

In this country we are constantly expressing our disappointment with industrial performance and lamenting the lack of innovation. Hardly have we ceased doing so than we apply our minds to the question of how we can make matters more difficult, more onerous and more risky. I have a great deal of sympathy with my noble friend's amendment.

Lord Clitheroe

I should like to thank my noble friend Lord Bruce-Gardyne for his felicitous introduction. I was not chasing any particular fox; I am interested in the specific issue of insurance. I became worried about it before I spoke on Second Reading, and further research has not eased my anxiety. I wrote to my noble friend the Minister and he kindly replied to me and tried to put my worries to rest. However, the further information I have obtained on this matter confirms a geat deal of what worried me.

A recent survey was carried out by the Chemical Industries Association. Over 50 per cent. of the respondents, all the significant companies producing chemicals in this country, large and small, were experiencing difficulties with their insurance. The problems involved not just the premium but the level of cover being offered, the terms and conditions specified by the insurers, and in particular the policy wordings of the claims-made basis.

I am not an insurance person, but I am slowly becoming one. The claims-made basis is a current trend which will not provide adequate protection for claims which may only become manifest after a considerable latent period; in other words, a tremendous amount of the insurance that is, understandably, being sold on the market will not cover people down the road when some of these potential worries fall upon them.

The Association of British Insurers, which has been kind enough to write to me, for the most part represents primary underwriters. They rely on significant support from major European re-insurers which are the ultimate carriers of much of the risk. Those re-insurers may not support the Association of British Insurers, however helpful or welcoming they may be. The Association of British Insurers is confident that insurance cover will be forthcoming, but under the Bill it carries no responsibility for its members' actions and under the law no free insurance market is required to underwrite any risk that it wishes to avoid. In particular, even though the ABI is more sanguine than I am about the effects of the Bill, it agrees, as was said by one of the members of the Committee, that in the absence of a development risk defence the amount of capacity would be reduced for those industries which have a heavy development risk.

I am speaking as a consumer of the insurance industry's services. If I cannot obtain the product, I cannot pass it on to my customers. The ultimate effect of the absence of capacity for insuring products of perceived high risks such as chemicals may be that the product would be put on the market either without any cover or with inadequate cover. In such cases, the ultimate consumer suffering damage would be the loser.

I do not want to labour the point, but I must repeat that there is a shortage of capacity now. The shortage after the legislation is in place will be greater. The only mitigating factor, which may go some way to avoiding disaster, is the inclusion of the development risk defence. I must commend the Government once again on the fact that that provision is in the Bill.

On Second Reading, I suggested that Part I should be implemented to coincide with the requirement of the directive; that is, at the end of July 1988. When summing up my noble friend the Minister said that the proposals had been around for some 10 years and that there should be no surprises in store for industry. He implied that six months would be adequate. I wish it were so simple. We must get this legislation through, apparently, to be law at the end of July 1988, but it was only in recent months that the insurance world's lack of capacity developed. I believe that it would be the height of folly to implement Part I until we can all be confident that capacity is available, will in the future be available and that the insurance industry can cope with the new dimensions of the problem. I hope that that can be achieved by July 1988. I am sure that it cannot be achieved within six months.

7.15 p.m.

Viscount Bledisloe

The noble and learned Lord, Lord Denning, sought to discourage the Committee from accepting the amendment on the grounds that it was contrary to some principle of English law to have a look at insurance on a matter of this kind. He said that English law had never had regard to insurance in any question of assessment of damages. With the greatest of respect to the noble and learned Lord, for whom I have also the greatest affection, it is not a question of assessment of damages; it is a question of the imposition of a new form of liability.

If one looks through the judgments of the noble and learned Lord himself, one will see that he has been the protagonist of the theory that in deciding in common law whether we impose a liability on someone, it is a question of public policy; and that in deciding a question of public policy, we should look to see who can best bear the risk and whether he can insure. Had I known about this point I am sure that I could have cited passages where the noble and learned Lord had said that. In my profession, it has been well known that if one were fighting a case before the noble and learned Lord and had the insurer behind one, one stood jolly little chance.

I hope that the Government will make it plain where they stand on this insurance point. Are they in the camp of the noble and learned Lord, Lord Denning, that all insurance is available readily, cheaply and with unlimited liability, or do they take the view expressed by the noble Lord, Lord Clitheroe, that if that were ever so it is certainly no longer so, and that insurance is now difficult and expensive to obtain and almost certainly limited in the extent of the risk covered? I hope the Government will make abundantly clear which of those views they hold. If they hold the latter, which I would suggest to them is the real position, and they believe that it will be difficult for people to insure, what do they expect the reasonable middle-sized manufacturer to do? Is he to continue trading at the risk of being bankrupted by this type of liability? What else is he expected to do?

The noble Lord, Lord Williams of Elvel, put the point that people would all get out of complying with this provision by doing all their trading through subsidiaries. I confess that I was a little puzzled as to how a subsidiary was to have no assets if it were doing the manufacturing. If anything is likely to induce people to put their business into subsidiaries, it is the risk of unlimited liability imposed upon them in circumstances where they cannot obtain insurance.

I hope that if the Government will not accept the amendment or commend it to the Committee, they will make plain what they say is the position on insurance.

Lord Harris of High Cross

I find it difficult to see how we can approach this issue without rehearsing many of the arguments that will come up under Clause 4. I want to add my support to the noble Lord, Lord Bruce-Gardyne. I am unhappy to find myself in total opposition to my noble and learned friend Lord Denning. It would be attractive if we could follow the noble Lord, Lord Airedale, along the lines of no-fault cover and in a sense collectivise or generalise the risk. My anxiety about that as an economist is that at the same time as we suppress the cost we remove the incentive to minimise the risk and take due care. However, the attraction of that is that by removing any consideration about negligence one would do the lawyers out of a good deal of profitable business, of which I would approve, and also reduce the toll of insurance upon the cost of production.

I was unable to attend the Second Reading, but if one reads that debate, it was a splendid pre-Christmas binge in which speaker after speaker almost competed in offering the benefit of protection for the consumer. It was Santa Clause: this is such a good thing we cannot have too much of it. One speaker used almost those words. The basic logic of economics is that there is nothing so good that one cannot have too much of it because one is involved in costs.

The whole issue in this amendment is whether these costs in some way are convertible into a fixed insurance charge that is manageable to the producer of products, or whether there is unlimited liability which threatens the continuance of the existence of the supplier, perhaps through no fault of his own. There is clearly a difference of opinion on this matter. We had a number of speakers at Second Reading, notably the noble Lord, Lord Graham of Edmonton, who argued that there were grounds for confidence that the risks were coverable by insurance.

The noble Lord was talking about Clause 4. He quoted the British Insurance Association. I do not want to be too cynical, but the British Insurance Association may have a good reason to advertise the availablility of cover. It would be good business for them and the increase in premium will be judged to be sufficient to keep them out of trouble although the cover they provide may not be sufficient to keep the manufacturer out of trouble.

I was impressed with the passage that the noble Lord, Lord Bruce-Gardyne, quoted. That was not the insurance industry recommending its products but the association of insurance and risk managers in industry and commerce. It was the customers of insurance. We have here the insurance industry saying, "We shall provide cover. Premiums may go up and costs may rise but we can provide cover". Members of the Committee take comfort from that pledge. However, those who are concerned to pay for cover and to specify the terms on which compensation will be payable are apprehensive.

I have in my hand the example quoted by the noble Lord, Lord Bruce-Gardyne, which indicates that, in some cases by an increase in premium and a reduction in the sum covered, there has been on this reckoning a ten-fold increase in costs: a third of the cover available for three times the premium. As the noble Lord said, that is before this Act comes into force. It seems to me that there is a genuine conflict of view. It is difficult to be dogmatic about it. We are moving into uncharted waters. We cannot be certain what effect this Bill will have on liability and the availability of insurance cover.

This amendment asks that the Bill should not be impeded in this matter. It simply says that the Bill should not come into force until the Secretary of State is satisfied that insurance against liabilities imposed in this section is available to the persons mentioned. If the noble Lords who spoke at Second Reading with confidence about the availability of insurance are correct, then this can come into operation at short order. However, as companies continue to try to buy cover against the heightened provisions of this Bill, if it is discovered that that is not so, then it would be a reason to pause.

Perhaps I may say in anticipation of the noble Lord, Lord Williams of Elvel, that I see no reason to resist the amendment. The delay will not occur unless the Minister discovers, against the expectations of many Members of the Committee, that there is real difficulty in acquiring cover against these new, so far unlimited, degrees of risk. There is therefore a minimum risk to us in passing the amendment if we assume that insurance provision will be available. It is no good accepting promises from the British Insurance Association before risks are brought to them and the cover and premium levels begin to be negotiated. That will take place very soon after this Bill looks like becoming law.

Lord Williams of Elvel

I have no wish to enter deeply into this discussion. I am very sorry that the noble Lord, Lord Bruce-Gardyne, was not here at Second Reading because a lot of his points were properly Second Reading points. I wish to reserve what I have to say about insurance to a later stage in our debate. However, I must agree with Members of the Committee who have spoken, that there is an insurance problem. This is a matter which we shall be debating later.

Nevertheless the amendment moved by the noble Lord, Lord Bruce-Gardyne, is objectionable in a number of respects. First, if the amendment is accepted, the Secretary of State has discretion as to when he may bring this Act into force. There is an appointed day. There is a directive and the national legislation corresponding to the directive has to be in place by a certain day. If the conditions specified in this amendment are not met then the Secretary of State has a problem.

Secondly, it has been said that the insurance against the liabilities imposed in this section is available. As many noble Lords pointed out, this appears to be a moving target. At some point insurers will say that there is availability of cover; at other points insurers will say that there is not. One could have a situation where at one point the appropriate insurance authorities say that here is cover and three weeks later that cover disappears. The Secretary of State is therefore put in rather a difficult position.

Thirdly, on the question of acceptable commercial rates, the Secretary of State would be in a position of having to judge what was an acceptable commercial rate. I believe that this is a burden the Secretary of State would go a long way to avoid. My major points about the insurance problem will come at a later stage. I do not wish to go further at this stage.

Lord Lucas of Chilworth

What an interesting discussion this has been! Using the analogy that the noble Lord, Lord Airedale, used of a burning ship, a dock, and other ships, I hope that my noble friend Lord Bruce-Gardyne has not taken the opportunity this evening by virtue of his amendment (and I quote his article) of putting the Minister on a burning deck.

I fear that I shall not be able to accept his amendment. However, it has been useful not only for the Government but for the insurance industry to hear the various expressions of view. I am not able to accept this amendment, first, because it runs contrary to our obligations under the directive; and, secondly, because I do not believe that the insurance situation is as bad or as serious as my noble friend and others have suggested.

The question of the availability and cost of insurance has been raised frequently. It has been raised during our earlier discussions on the Bill, and certainly at very great length during the consultative period which preceded the introduction of the Bill. There have been some in industry who have told us that insurance will not be available. Indeed, they say that it is not available already to meet some of their needs. On the other hand, consumers and their organisations assure us that insurance is available and will continue to be available.

The consumer organisations remind us to distinguish in particular between the effects of this Bill and the very genuine problems concerning product liability and product liability insurance in the United States market. My noble friend drew attention to this point. There was some substance in the point made by the noble and learned Lord, Lord Denning, on this matter. I think that the noble Lord would be the first to recognise in the American legal system the extent to which they go to law and the damages that are given under the jury system as distinct from the judge system here. The contingency fees and a whole range of matters that occur in the United States are quite different from the situation which obtains in this country, and all have an effect on insurance.

I turn to the one authoritative statement that we have on the matter from the people who should know, the Association of British Insurers. It says: By and large insurance companies are confident that insurance cover for liabilities under the new legislation will be available for current limits of indemnity at premium levels which will have only a marginal effect on the cost of production". That is in its briefing which was sent to many people, including noble Lords, for the Second Reading of the Bill. It went on to express doubts about the amount of insurance capacity available should the development risks defence not be included. I think that this is the point which was made by the noble Lord, Lord Airedale, when he said that it is impossible to get unlimited liability insurance, and he went on to talk about bankruptcy.

The ABI said that it was confident of cover for liabilities under the new legislation, the new legislation being that legislation which is before the Committee. I say this only as a prelude to later debates we shall have on Amendment No. 39, the noble Baroness's amendment, and Amendment No. 54, the noble Lord's amendment. Like the noble Lord and others, I do not want to go into that debate tonight. It may well be that there is a problem, but it is one which I have no doubt at all in my mind the insurance industry will overcome. I do not find any difficulty in being persuaded that the Bill will create a general crisis of insurance availability, or indeed cost.

The amendment is unnecessary and is not consistent with our Community obligations, as the noble Lord, Lord Williams of Elvel, reminded us, we are obliged by the directive to bring our legislation into force by July 1988. We cannot decide not to do so because there are problems with the availability and the cost of insurance. I should like to remind Members of the Committee that my honourable friend the Minister for Corporate and Consumer Affairs said in July that it was the intention of the Government not to bring this part of the Bill into force for at least six months after Royal Assent. That should give both the buyers and the sellers of insurance time, if I may use the term, to get their act together. We think that this is a reasonable balance between the industry's need to prepare itself and the desire of consumers to see early implementation.

My noble friend Lord Clitheroe raised the question of the trend of insurance policies to be made on a claims-made basis. This is largely a reflection of difficulties which the insurance market as a whole has had with existing long-term product liability business, most particularly in the United States. I have described the differences, which I think he accepts. It is a problem, but there is little evidence that the Bill will exacerbate it any more than it would any other current insurance business.

The noble Viscount, Lord Bledisloe, asked me to make clear the Government's position with regard to insurance. He asked me to anticipate what I might very well want to say later during the Committee stage of this Bill. I do not think that it is any secret to the noble Lord, Lord Williams. The Government's position is quite simply that we are not in the insurance broking business and we cannot offer a professional opinion. However, we should listen to what the insurance companies are saying. The noble Lord, Lord Harris, said that in his view this was good business for them. I also ask that industry why it does not want to take on that good business. I fall back upon what it said in its brief to us. There is no reason to suppose that insurance would not be available at premium levels which will have only a marginal effect on the cost.

That is my explanation and therefore I ask my noble friend not to press his amendment. I hope that he will withdraw it.

7.30 p.m.

Lord Bruce-Gardyne

I thank all Members of the Committee from all sides of the House who have taken part in this debate. I think it would be fair to say that, apart from the lone objections of the noble and learned Lord, Lord Denning, and the noble Lord, Lord Williams, all other noble Lords were speaking in support of the proposition which I advanced.

As regards the objection of the noble and learned Lord, like the noble Viscount, Lord Bledisloe, quite honestly I could not follow the connection between the proposition that the law does not take account of the cost of insurance premiums in arranging damages and the purposes of this amendment. I hope that the noble Lord, Lord Airedale, will not take it amiss if, in thanking him for his support for the amendment, like my noble friend Lord Harris of High Cross, I also add some reservations about the notion that we should take it to the national insurance account—in other words, the taxpayer should foot the bill. That is also a fairly horrendous proposition.

In the end the objection as advanced by the noble Lord, Lord Williams, and by my noble friend Lord Lucas is that this amendment would conflict with our obligations under the directive. As my noble friend Lord Clitheroe pointed out, I think that the straight-forward answer is that the directive is not due to come into effect until July, 1988, that being the final chopper date. We still have time and, I submit that we may need it, to see whether it is true that cover will be available at acceptable cost on the scale required.

In conclusion, all I can say is that my noble friend put an idea in my head. He pointed out that my honourable friend the Minister for Corporate and Consumer Affairs said that this section would not come into effect for six months after Royal Assent. Perhaps we may put in a provision at a later stage to stretch that to 12 months rather than six. With that thought in the mind of Members of the Committee, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Beaverbrook

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

Lord Ponsonby of Shulbrede

My Lords, before the next item of business it taken, I wonder whether the noble Lord can indicate that we shall not return to a consideration in Committee of the Consumer Protection Bill until 20 to nine.

Lord Beaverbrook

My Lords, we were intending to deal with this after we had taken the Second Reading of the Gaming (Amendment) Bill. I suggest that we should not come back to the Committee stage until half-past eight, if that would be acceptable.