§ 5.34 p.m.
§ Lord Hacking rose to call attention to the case for curbing the increasing exposure of the professions to Civil liability: and to move for Papers.
§ The noble Lord said: My Lords, I beg leave to move the Motion standing in my name in the Order Paper. My Motion draws attention to a problem facing, without exception, all professions in the United Kingdom. The problem is concerned with the ever-increasing exposure of the professions to Civil liability. It affects doctors, dentists and veterinary surgeons; it affects architects, engineers and surveyors; it affects accountants, actuaries and other professions and it even affects—and seriously too—lawyers.
§ It is, therefore, most welcome that many members of these professions will be participating in this second debate of this afternoon. The noble Lord, Lord Pitt, is of course a doctor; the noble Lord, Lord Colwyn, is a dentist; the noble Viscount, Lord Caldecote is an engineer. The noble Viscount, Lord Bledisloe is a member of the Bar; the noble Lord, Lord Chorley is an accountant; the noble Lord, Lord Kimball, as many of your Lordships may not be aware, is an honorary veterinary surgeon.
§ In saying these words of welcome and thanks for participation in this debate, I would also make reference to the two noble Lords who will be speaking from the Front Benches, to the two noble and learned Lords who are participating; to the noble Lord, Lord Allen of Abbeydale, who will be assisting, no doubt, from his experience particularly with the Pearson 1464 Commission. Finally, I refer to the noble Lord, Lord Grimond, who, presumably, will be giving a political viewpoint upon this Motion.
§ In expressing this appreciation of support, I should like to extend a special welcome to the architect in our House today, the noble Duke, the Duke of Gloucester. Since the noble Duke made his maiden speech he has, for a little time shown a close interest in the work of your Lordships' House. Indeed, he offered support to me when I felt beleaguered by the mighty power of the noble and learned Lord, the Lord Chancellor, and his department during the passage of the Latent Damage Bill.
§ Since some concern was expressed in some quarters then that I might have attempted to lead the noble Duke astray in inviting him to speak on behalf of one of the many unsuccessful amendments that I moved, or even inviting him to vote for one of my unsuccessful amendments, I wish to assure him and your Lordships that it is not my intention to divide the House this afternoon nor, in the end, even to move for Papers.
§ My purpose in moving this Motion is to draw attention to this problem which I have described to your Lordships. I do not at this stage intend to proffer a solution to this problem. My Lords, what is the problem? In a sentence, it is that the professions are increasingly finding themselves as defendants in more Civil suits, in ever-widening areas of responsibility for higher and higher—sometimes crippling—claims. In the result, members of the professions, in seeking insurance cover—so that resources are available to meet justifiable claims against them—are not only finding themselves compelled to pay high and escalating premiums but they are also finding that the insurance market has not the capacity to provide cover for the higher claims.
For reasons which I will later develop, the professions assert that this trend of ever-increasing exposure to liability militates against their interests and against the interests of the Society that they seek to serve. How has this state of affairs come about? There are several reasons. The judiciary, particularly during the last 20 years, has immensely widened the scope of the law of negligence. The noble and learned Lord, Lord Denning, who will be participating in this debate, said in 1972, in the case of Dutton v. Bognor Regis:
In recent years the law of negligence has been transformed out of all recognition.
The noble and learned Lord, during his long judicial career, was seldom given to understatement. In the result, claims can now be brought separately from the law of contract: in other words, the professional man owes a duty of care in tort independent of the duty owed in contract—I refer to the Midland Bank v. Hett, Stubbs and Kemp case. Claims can now be made for pure economic loss not associated with physical damage—and I refer to the Esso Petroleum case.
The duty of care is now owed to a wider range of parties; not only, for example, is duty owed by a solicitor to his client but also to the beneficiary in a client's will. I refer to the case of Ross v. Counters. The standard of care, too, in medical, negligence and other cases has been raised with the increase in scientific knowledge. In the words of the noble and learned Lord, Lord Edmund-Davies:
The law requires even pioneers to be prudent.
I refer to the case concerning a very high television mast in Yorkshire between the IBA, EMI Electronics and BICC.
§ All this is part of a shift of public policy. Perhaps I may illustrate it by taking your Lordships through a series of cases which start in 1901 and concern the right to recover damages for nervous shock. In 1901 it was held that recovery for nervous shock was not possible unless the plaintiff feared for his own safety. In 1925 it was decided that the estate of a mother who died from nervous shock could recover even though her health was not in danger. In that case the driver of a lorry had allowed his vehicle to travel out of control, and driverless, around a corner and down a steep street where she had watched her children go.
§ In 1967 the court then held that there was a duty of care owed to a man who went to rescue victims after a train collision and who, from the horrific sights which he saw, became psycho-neurotic. In 1982—and your Lordships can see how this progression is going—a plaintiff who was nowhere near the accident in which one of her children was killed, and her husband and two other children injured, succeeded against the defendant in her claim for damages for nervous shock, distress and injury to health resulting from her hearing the grim news and seeing her family in hospital. Those cases have developed in a compassionate Society. I trace them through only to illustrate how the law of negligence has progressively changed.
There was, in the last case, a telling judgment of the noble and learned Lord, Lord Griffiths, as he now is, in the Court of Appeal, a decision which the House of Lords reversed. The noble and learned Lord said:
If the plaintiff's argument is right it will certainly have far reaching consequences, for it will not only apply to road traffic accidents. Whenever anybody is injured it is foreseeable that relatives will he told and will visit them in hospital, and it is further foreseeable that in cases of grave injury and death some of those relatives are likely to have a severe reaction causing illness … Every system of law must set some hounds to the consequences for which a wrongdoer must make reparation. If the burden is too great it cannot and will not he met. the law will fall into disrepute and it will be a disservice to those victims who might reasonably have expected compensation. In any state of Society it is ultimately a question of policy to decide the limits of liability".
That is a matter to which I will come back later in my speech.
§ All these progressions in the law of negligence have been coupled with increasingly high levels of awards. I will Cite one example out of many that would simply have never succeeded a decade or two ago. There have been three recent cases in which mothers have success-fully brought actions against doctors resulting from the failure of sterilisation. The consequence of that failure was that each of these mothers gave birth to a healthy child. In the case of one of the mothers she gave birth five years later to another healthy child, although that was not treated as aggravated damage!
§ A decade ago it simply would not have fallen into the confines of public policy for mothers to be awarded damages when the damage was the birth of a healthy child. even though obviously there was cost and hardship to the mother—hardship in the sense that her career may have been restricted and, of course, the cost of bringing up the extra unexpected child.1466
§ One could Cite other cases but let me take just one in the field of architecture. A successful case was brought against an architect—although it is right to tell your Lordships that it was upturned on appeal—who failed to warn a client that a local planning consent, already granted, might be invalid. We have done better than in the United States of America but since I wish to restrict my speech to 15 minutes I will move on with the problem in our own country.
§ The causes of this increasing liability do not simply rest—and it is right to record this—with extensions to the law of negligence by judicial decision. They also rest on increased liability imposed by Parliament; for example, to Cite one recent Act—the Financial Services Act—the increased duties placed on auditors and accountants. Then there is a new concept coming through with which, no doubt, the noble Lord, Lord Allen, will help us—that of absolute liability coming from the Consumer Protection Bill, which is now before your Lordships.
§ As I recognised just now, these developments come out of a more compassionate Society and that is to be welcomed; but they also come out of a Society where there is a greater availability and use of money for providing compensation. In my submission, that is not so welcome. Therefore, the spiral has gone on—more claims, more insurance; more insurance, more claims. In all of this there are special reasons why the professions are more exposed. Although this is changing, they practise as individuals—albeit in partnerships—and not in companies with limited liability. Therefore, they often end up to be the only available defendants with assets for the plaintiffs to sue, long after the other defendants have ceased to exist.
§ Professionals often have wider responsibility. An architect or an engineer is responsible for the whole building and all losses stemming from it if he is under a duty to supervise its structure. He is not, for example, just responsible for the central heating in the building. Auditors, in certifying in annual reports that the financial statements of the company "are true and fair", are responsible to every reader of that annual report who has an interest, whether that reader be a shareholder, a banker or lender. Hence, I have been told, there is one claim against a firm of accountants, arising from the PCW insurance difficulty, which is to the tune of no less than £237 million. There is another claim which, I am told, has been brought by the Northern Ireland Office—the Government prudently choosing the United States of America for the forum—where the claim is against a firm of accountants and is for 260 million dollars arising out of the De Lorean venture.
§ Professional men and women also owe a duty to a wider number of persons. Moreover, the projects in which professionals are involved are often of immense value and massive compared to their own wealth. All this militates against the professional and the Society he seeks to serve. It does so because of the increased cost of those services arising, for example, out of the heavy insurance premiums. It militates against Society because there is a temptation for the professional to drop the level of his responsibility. Instead of giving clear and forthright advice to his clients he feels it necessary to give defensive advice and conduct his 1467 professional practice defensively—for example, to practise defensive medicine. While all these events are not so much a deterrent to the young—they boldly go into their chosen profession—it is beginning to result in practitioners, long before their valuable time to Society has been spent, being driven out of practice.
§ I said to your Lordships that I would not be proferring any solutions but I should like to make just two comments. For the professional man much of the difficulty that I have illustrated arises out of the joint tortfeasor rule, which is a rule whereby the plaintiff is allowed to sue for the entirety of his loss against one defendant even though that defendant may have been responsible for only a small part—say, 5 per cent. The operation of that rule is manifestly unfair. The fair approach is for each man and woman to be responsible for what he or she has done wrong to the extent of that wrong. If someone has been responsible for a 5 per cent. share then fairness calls for the degree of culpability and the amount of damages to be of the same order.
§ I wish to finish at the end of the 15 minutes period allocated to me, so I shall be very brief on the second comment I make to your Lordships. In short, the solution to this problem cannot lie purely with law reform. During the passage of the Latent Damage Bill, the noble and learned Lord the Lord Chancellor said more than once that "law reform has to be by consent or not at all". If I have correctly understood the position of his department, there are three tests which are applied for law reform. The first is: is there a need for law reform? The second test is: is the law reform controversial and in particular politically controversial? The third test requires there to be a consensus; in other words, will the reform be capable of a wide measure of agreement?
§ As I have tried to illustrate, the problem that I am seeking to put before your Lordships is one that relates to current commercial and consumer policy. For that reason I venture to suggest that pure law reform will not provide the answer. I hope therefore that the noble and learned Lord, the Lord Advocate, when he responds on behalf of Her Majesty's Government, will be able to give a fuller response than simply that of law reform; otherwise, in the future, I may well attempt to lead the noble Duke astray in our Division Lobbies. I beg to move for Papers.
§ 5.52 p.m.
§ Viscount Caldecote
My Lords, I am sure that we are all most grateful to the noble Lord, Lord Hacking, for bringing so clearly this important matter to the attention of the House. It is a very complex and difficult problem but he set it out very well indeed, if I may say so.
I speak from an engineering background but I am no expert in this specialised field. I am very sorry that the noble Lord, Lord Howie, who is an expert on this matter, cannot be here today. He asked me to apologise to the House for not being able to attend owing to a previous engagement.
The problem that we are discussing today applies to all professions, each of which has its special facet, and of course the law affects all professions similarly. No one wants to protect or encourage negligence or low 1468 standards. That is certainly not in the interests either of the professions, their clients or the public at large. Nor do we want to perpetuate the increasing tendency toward more and more expensive litigation. It will only deter innovation and progress in the service of the community. There will be rising costs of insurance, if indeed adequate insurance can be obtained.
In the United States there are some horrific examples of this problem in the medical field, not only in costs but in care. I am told that if a person is involved in a street accident and lies unconscious, it is quite likely that nobody will attend to him because he cannot sign a blood chit stating that he will not hold the doctor liable for any further damage that occurs. That is obviously against the public interest. I believe it is very clear that there is a grave risk in taking no action. The problem will not go away. On the contrary, it will grow.
If nothing is done, inevitably there will be pressure to form limited liability project companies with a tendency to lower the ethical standards which are now so high in the professions. It is a particular problem for consultants. Consultancy is a people's business. It does not involve large assets and so there is only a small degree of backing to cover big financial risks. It is very different from manufacturing or contracting. Therefore consultants have little capacity for self-insurance, particularly in view of the squeeze on margins produced by the current competition.
Engineering involves the application of scientific knowledge for useful purposes, and innovation is a common feature of that application. Often new materials are involved, new methods of construction and new ways of making calculations, if the advances in knowledge are to be used for the public good. It is very difficult precisely to determine the natural environment in which large projects operate or to envisage the changes that will occur over the years. Factors of safety are matters of judgment and are influenced by statistical analysis of past experience, and that is not at all an exact science.
Particularly in Civil engineering structures it is not possible to test full-scale prototypes in order to increase knowledge and improve the reliability of forecasts and assessment of risk. Even for enormously expensive projects such as aircraft it is possible, but it is not possible for one-off construction projects. Similar considerations apply to complex systems where in many cases faults take a very long time to develop.
I emphasise that in the consultancy business there is a very large measure of judgment. Professional people have a powerful incentive to do their best to take every possible factor into account before making a judgment and experience shows that they do so with good effect in the vast majority of cases.
However, occasionally judgment is at fault and if the risk of penalty is too great there will be three consequences. First, legal devices will be invented which are damaging to the relationship of trust and confidence between the consultant and his client, such as the formation of limited liability project companies. Secondly, there will be a tendency to play safe, and innovation will be deterred. Again that is something which is damaging to the public interest. Thirdly, large 1469 strong organisations will grow at the expense of smaller specialist ones which are less able to carry risk. Yet very often smaller specialist organisations are more innovative and can adapt more quickly to changing Circumstances. I suggest that all those factors and maybe others too that other noble Lords may identify are against the public interest.
What are the possible solutions? I have great hesitation in putting suggestions forward, particularly as the noble Lord, Lord Hacking, with his great legal experience, did not feel able to do so, and also because I am trespassing partly into the lawyer's field. But perhaps I may make two suggestions. First, perhaps a tighter definition of "negligence" would help; one which was tied more closely to the question of whether existing knowledge was or was not properly applied. It would not be easy to define, but it might be worth a try.
Secondly, perhaps we should look at the possibility of restricting damages to a multiple of fees. That would certainly be reasonable. It seems absurd that if fees amount to, say, £50,000 it should nevertheless be possible to sue for many millions of pounds. That measure would encourage clients to look around for consultants of the very highest reputation and with very good past experience. I am sure that other noble Lords will have other suggestions to put forward, and I do not want to say anything further on that score.
I should like to make two final points. I believe that the professions must do everything possible to raise standards even higher by sensible co-operation, by better education and training, including a better understanding of the liability issue, by peer review and through professional institutions. Secondly, and lastly, I implore the Government to take this problem seriously. The longer it is left the more difficult it will become to find a solution. I beg them not to allow this issue to pass backwards and forwards between different government departments simply because it covers a wide range of issues. The immediate requirement is to define the problem more closely. The best immediate action may be to set up a committee of inquiry to look into the problem, to see what the various alternatives are, to balance the issues and to make recommendations.
§ 6 p.m.
§ Lord Pitt of Hampstead
My Lords, I should like to thank the noble Lord, Lord Hacking, for giving us the opportunity to discuss this important matter and for the way he introduced the debate. This problem affects the medical profession as much as any other. For the few minutes at my disposal, I should like to express the increasing concern felt within the medical profession, the health service and by the public about recent trends in medical litigation.
The position has worsened rather than improved since in 1978 the Pearson Commission declared that the tort system was to easy, too costly, too cumbersome, too prone to delay and too capricious in its operation to be defensible. I am glad that the noble Lord, Lord Allen of Abbeydale, who was a member of that commission, will be addressing the House later.
Increasing delays and escalating costs come at a time when doctors have much more to offer their patients in 1470 terms of technical expertise and therapy than ever before. Many conditions are now treatable and relievable to an extent formerly unknown. That improvement has taken place when professional standards are high and the doctor faces more checks and balances from his peers. The British Medical Association has been and is concerned about this matter. It felt so strongly about the issue that it established a working party to examine the feasibility of introducing a no-fault compensation scheme for medical accidents and to explore the advantages of such a scheme for patients.
It would be a compensation system for death or personal injury, based upon need and the establishment of a causal connection between the accident and the harm suffered, but without the need to prove fault or blame, because there is often no fault or blame. The BMA came to the conclusion that it supported the principle of a non-statutory scheme, within defined limits, which would provide compensation for medical accidents without apportioning blame.
I am told that the BMA wishes to interest those concerned, in particular the Government, in a pilot scheme to provide adequate compensation and support for those in need. I hope that the Government will take that point seriously. However, I must stress that the BMA does not want to take away from an aggrieved individual the right of access to the courts and the right of appeal.
The new scheme would provide benefit to people who at present have none. As a caring profession, we wish to see adequate arrangements to provide compensation and support to those who suffer personal injury, given according to need, as I said, and not according to cause. It is clear that under current provisions patients with similar disabilities may receive different benefits; for example, a child may remain brain damaged for three different reasons—encephalitis, vaccine inoculation or traumatic birth delivery. The needs of those three children will be similar and yet the compensation that they receive will range from nothing through to hundreds of thousands of pounds. That cannot be logical, fair or even sensible.
There are gaps in our present health and social services systems, particularly in the care of the young chronic sick. The provision of adequate recompense and support is at present a major financial and social undertaking. The rise in medical litigation, which parallels the increase in the challenges to other professions, of which we have already heard and shall hear a great deal more before this evening is out, is not an isolated phenomenon.
There is no evidence of greater negligence now than previously. Standards of medical practice have risen, and today the doctor works under greater scrutiny than ever before. We live in a Society which increasingly expects a perfect outcome from encounters with professionals. That is part of the explanation. In medicine, that view can lead to disappointment for some patients, because the natural history of many diseases—for example ageing, from which we all suffer—is a downhill process. Unwarranted optimism about outcome may in some instances result in patients seeking compensation from those people who are most involved in helping them.
1471 Further, doctors' costs in court cases have risen considerably. Even when judgment is given in their favour, costs are unlikely to be recovered from a legally-aided patient. Patients' costs have risen correspondingly, and unless the patient is legally aided or wealthy, legal costs can preclude recourse to law. The amounts currently awarded by courts are increasing. There is growing concern about that. The situation in the United States was mentioned by the noble Viscount, Lord Caldecote. There, between 1983 and 1985 the costs of medical litigation increased by 100 per cent. for doctors and by 57 per cent. for hospitals. During that same period, the United States consumer prices index rose by 8 per cent. and the medical care index by 13 per cent.
I remember that when I was touring the United States in 1985 and spoke at several medical schools I never spoke to any audience which did not ask me as one of its first questions what we did about medical litigation in this country. It was the primary concern of most doctors in the United States.
Conditions in the United States are in some respects different from those in the United Kingdom, but in recent years—let us be honest —the United Kingdom has followed the American pattern in many fields. There is a possibility—I would not put it any higher than that—that this country may follow the United States in this field also. The British Medical Association is already aware that solicitors are advertising for dissatisfied or disappointed patients and relatives to consult them on a no-fee basis for the initial interview. That is the first stage in the move towards the United States pattern.
Delays which are inherent in our current legal system in reaching a settlement are a further cause of frustration to the patient and a prolonged source of worry to the defendant doctor. Four years is the average delay time between the date of an incident and settlement of the claim. Some major cases may not be settled for seven years or even longer. In the case of children damaged at birth. 20 years is the time allowed for the legal process to begin.
The protracted legal process is therefore of considerable concern not only to the doctor but possibly to his heirs. There is dissatisfaction at the delay and the uncertain outcome of these Civil proceedings where proof is based on the balance of probabilities—because that is the test in Civil cases—rather than the more stringent test of beyond reasonable doubt which exists in criminal proceedings.
There is a case for giving serious consideration to introducting a system of no-fault compensation. I hope that the Government will take this matter very seriously.
§ 6.12 p.m.
§ Lord Grimond
My Lords, I am most grateful to the noble Lord, Lord Hacking, for introducing this Motion. I assure him that I do not speak from any political point of view. On the contrary, I have ventured to enter the arena with so many distinguished lawyers, doctors and professional people of all kinds, first, because I have been following to some extent what has been going on in America, and, secondly, 1472 because two cases of friends known to me are very much in point. A friend of mine wanted to have new treatment for his eyes. He was told by the doctor or surgeon to whom he went that he would require a very large insurance policy. It was so large that he went abroad and had the operation. In another case a friend of mine was severely damaged in an operation. I very much suspect that had he chosen to sue the doctor he might have received very large damages. He did not do so but the state in which he emerged from the operation could only be accounted for by some mistake. These examples make one think about the whole matter.
It seems to me that there are two distinct points at issue, one of which is very much raised in the document of the General Medical Council to which the noble Lord, Lord Pitt, referred. That is the point as to whether, in cases of tort, we should now ignore blameworthiness, so that people who suffer accidents receive some compensation whoever is at fault. That, I understand, is a Swedish scheme and the one rather favoured by the General Medical Council. The noble Lord. Lord Pitt, agrees with me. There seem to be two points. First, it has nothing to do with professions. It would apply to any injury. Secondly, I should have thought that it would be extremely expensive and so difficult to enforce as to make it very doubtful. For instance, if it is said that whatever caused the injury one is entitled to compensation, then the man who falls off a tree branch which turns out to be rotten is entitled to claim. The other alternative seems to be that one has some scheme confined to the professions. But what are the professions? Is stockbroking a profession? If a stockbroker gives you bad advice is he to be covered by some scheme? Take the law of libel, my Lords. There is a very widespread feeling that the law of libel interferes with expressions of opinion which are in the public interest. Are journalists a profession? Are editors a profession? I believe that there are difficulties here. Nevertheless, we should confine ourselves to the professions so far as we can.
If the professions are to be put in any privileged position we travel still further down the road—we have already gone some way—of putting people in privileged positions. The old idea of equality under the law is rapidly disappearing. I notice now, for instance, that when a Government Minister brings a libel action he is supported by the whole weight of the taxpayers behind him. He has a guarantee that, if he loses, his costs will be paid; what happens if he wins I do not know. The former was certainly the case when the Home Secretary brought a case against Private Eye. We should think twice about abandoning the principle of equality under the law.
Nevertheless, the justification for special measures is because of public interest. I refer to what the noble Viscount has already pointed out and what is apparent from my friends' cases. If, for example, the medical profession is to be liable for enormous damages because something goes wrong in an operation, then either it will not operate, should the method be untried, or it will demand enormous insurance. That is no doubt true of engineers, architects and anyone else. If so, new methods in all the professions would be very difficult to introduce.
1473 Do we accept that the professions, however we define them, are in a special category? What can be done? It lies first with the lawyers. I am very glad to sec that the debate is to he wound up by two Scottish lawyers of the greatest eminence. In my experience Scottish law is much cheaper than English law. One of the difficulties of the whole matter is the cost of the law. This is pointed out in the memorandum of the General Medical Council. In many cases the costs of these actions are greater than the damages awarded.
Scottish law has roots in Roman law. There is something to be said about looking at an inquisitorial rather than adversarial system in dealing with some of these cases. I merely mention that. The proposals put forward by the noble Viscount, Lord Caldecote, certainly merit consideration: changes in the law of negligence and so forth. There is also the question of insurance. At the moment I imagine that most professions have insurance policies of their own. Advocates and barristers, with their usual astuteness, have put themselves in a position where they cannot be sued, but the other professions are lagging behind in that regard. Some professions have insurances, paid for entirely by themselves. Is there a case for some national contribution by the taxpayer to such insurance policies? There is a public interest that new methods and so forth should not be excluded.
Finally, can anything he done to stop this country being invaded by the American habit of widespread litigation, some of it on a contingency basis—which I believe is still illegal in this country—and of class actions which have not yet come here. I am not sure whether they would be legal here or not. Anything that can be done to expedite actions and reduce the cost of the law will be widely welcomed.
§ 6.18 p.m.
§ The Duke of Gloucester
My Lords, I am here today in support of the profession for which I was trained and indeed briefly practised. Since that time a number of factors have altered to place an additional burden on my fellow architects. No doubt we shall hear today of many different professions and the way the rising tide of litigation is affecting not only their pockets but also their methods of practice. I can only speak for the profession of which I have personal experience because I believe that they in particular are unnecessarily and unjustifiably handicapped by reinterpretations of old laws and the application of new laws formulated here in this House.
In theory the negligent should compensate for their malpractice and insurance should ensure that sufficient funds are available to cover all eventualities. In practice, this does not happen because the negligent may not be easy to identify. They may have disappeared or they may prove to be uninsured and unable to compensate. Similarly, the distinction between negligence and error of judgment has all but disappeared.
The system that we have at the present is too haphazard and open to too much uncertainty to benefit either the insurer or the insured or those who have suffered from the negligence. But yet the profession is collectively paying through the nose for a system that satisfies no one.
1474 Together the architectural profession is paying this year roughly £40 million in insurance premiums. Of that, I am told, 20 per cent. goes on administration, a further 20 per cent. is put by for future claims, leaving 60 per cent. for claims and their legal costs—which themselves are 60 per cent.—leaving a mere 24 per cent. (or roughly £10 million) that is actually paid in compensation.
The reason why such a small proportion actually arrives at its intended destination is the huge amount of legal advice and administrative complication that covers several areas of uncertainty left exposed by the legislation. It is true that the Latent Damage Bill has removed one area of uncertainty by reducing the period of liability from infinity to 15 years, but it has left open many other areas for insurance companies and their legal advisers to argue over.
There is a further factor that exposes architects in particular, even when the legal niceties have, at great diligence and expense, apportioned blame 50 per cent. there, another percentage here and maybe 5 per cent. to someone else when the plaintiff seeks his redress. If the other defendants prove to have no assets, then they settle on the one who has. Architects are much more likely to be insured than builders, they are also more likely to be around and visible—for building firms, as limited companies, are more likely to wind up and restart in some different form.
I know of one case where the architect was apportioned legally a symbolic 1 per cent. of the blame, but because he was insured and the others were not he had to pay 100 per cent. of the claim. If I know this, you can be sure that the insurance companies know it and the effect is to push insurance rates particularly high.
If I may take, for example, my own practice, which I left some years ago, in 1984 they paid 2.69 per cent. of their turnover for professional indemnity; in 1985 it doubled to 6.6 per cent. As a result of the new understanding of the liability, in 1986 it doubled again to 13 per cent. and I suspect it would have doubled again this year if the Latent Damage Bill had not provided the 15-year longstop. In fact, this year it has come down to 10.6 per cent. of turnover. This figure is higher than average for architectural practices because my old firm is very involved in local authority housing and as all government organisations have ingrained in them the bureaucratic principle of "heads I win, tails you lose", the architect must pay for high professional indemnity if he wants the job, or they will find another architect who will accept such terms. The theory that the architect can get these fees back from his client is laughable. It is, in effect, a tax on creative endeavour as real as if designed by the Treasury.
I have heard of architects paying as high as 15 per cent. of turnover for their insurance, and please do not forget that when an architect retires he must pay insurance for a further 15 years or lose his cover. I would point out that my old firm never had a single claim in 18 years of practice. There is no such thing as a no-claims bonus. Consistently negligent architects find they cannot get insurance cover at all.
The essence of the problem is that architects design very expensive projects. If a part of the project fails it is hugely expensive to replace it. An architect receives 1475 one-sixteenth of the value of the project to cover his expenses in creating it. A large proportion is set aside to cover insurance for the cost of the whole project, plus inflation for the next 15 to 20 years. To quote a typical claim, an architect had to pay for £80,000 of repair and £60,000 of legal costs on a building for which his original design fee was only £1,700.
The problem is further compounded by the fact that insurance companies value their confidentiality and no claims or compensations are ever published. No one knows whether he is over- or under-insured because all details are concealed. To aim for an effective cover for the next 20 years requires a crystal ball that anticipates both inflation and the generosity (if that is the right word) of the courts, not that building claims ever, in fact. get to the courts because of the breathtaking expense of such complicated issues.
I am sure many of you suspect that this is just special pleading for a small group of professionals who have had their own way for many years and who do not like to see their clients benefit from improved cover at their personal expense. But, these insurance rates, which in many cases exceed the profits of the practices concerned, are a severe blow to their viability.
As president of the British Consultants Bureau, whose role is to help them get work abroad, I am well aware of the collective value of this country's professionals to our export record. The collective effect is building work worth in excess of £1.2 billion net, earned with considerable sweat by the expertise of British consultants—mostly engineers, but a few architects and town planners—against considerable international competition. That is only possible if we have a buoyant and viable home market. Tax that market in this way, and there is a valuable baby to lose with the bathwater.
I do not expect this House to produce a miracle cure for this problem overnight, but in due course when proposals are brought forward to try to solve these problems by other methods, I hope that noble Lords will remember my comments.
I understand that the Economic Development Council is considering working up a scheme for building project insurance shared between client, architect and builder which will cover the repair of defects on a "no blame" basis, saving a vast amount of time and money. When such proposals arrive in your Lordships' House I hope noble Lords will recall that the present system does not fulfil the ends of justice—natural or contrived—does not protect anyone totally from personal loss and works on the principal of Russian roulette that the destruction of the occasional individual will scare the hell out of everyone who might be put in the same position at any time in the next 15 years.
We cannot look to the insurance companies to invent a viable system; we cannot expect the political parties to take an interest in something so unlikely to move the electorate. Government in the shape of their different Ministries have had their cake and eaten it, and enjoyed the taste all the more for having the architects to pay for it from their own pocket. It can only be for the interested parties to come together and create a viable alternative, which will, I hope, appeal to this House's sense of justice.
§ 6.28 p.m.
§ Lord Colwyn
My Lords, before making the few brief remarks I intend to make this evening, I must apologise to the noble Lord, Lord Hacking, for missing some of his opening remarks but I was held up by a patient who I feel sure would have pressed a very expensive claim for negligence had I left him in the chair with the work undone.
I am delighted to be able to follow the noble Duke, the Duke of Gloucester. I enjoyed his speech and regret that I will not directly follow his line of thought concerning the architects. I must declare an interest, being a member of the dental profession, where the prospect of litigation is an ever-increasing problem of work in the surgery.
When I qualified for my dental degree in 1965 it was stressed (as it still is) that membership of one of the societies providing professional indemnity was the first action any of us should take. The Medical Protection Society, the Medical and Dental Defence Union of Scotland and the Medical Defence Union among them provide advice, assistance and indemnity to over a quarter of a million doctors and dentists practising throughout the English-speaking world. They are concerned on behalf of their United Kingdom members about the rise in personal injury litigation against members of the medical and dental professions.
It has always seemed unreasonable to me that every time a professional man practises his profession to the best of his ability he risks the loss of most of his personal assets built up over a lifetime's work. This can now include his home as well as his continued career should an expensive claim be successful. Usually a doctor or dentist will have adequate insurance cover, but with increasing public awareness of the prospect of litigation and the pressure from some members of the legal profession, the risk of exposure to bankruptcy is now a routine part of the practice of the medical and dental professions.
The risk of litigation is such that if a similar situation were to arise in this country, as has happened over the last 20 years in the United States, where litigation is commonplace, it is the patients who will eventually suffer. Many American medical and dental professionals are having difficulty obtaining professional indemnity cover and, as a result, are much more selective about the sort of work that they take on.
An example of this has existed for many years in this country with my profession. Dental surgeons are generally very experienced in resuscitation and life support techniques. However, we are continually advised that it is most unwise to offer help at serious road traffic accidents where members of the public are injured for fear of making an error of judgment and risking the possibility of future litigation.
This ever-increasing exposure to risk closely reflects the level of premium that an individual practitioner has to pay. The idea of suing the professional has now become popular in this country and I am sure that the insurance position will not improve. My subscription rate has increased by more than 100 per cent. this year, from a modest £12 a year in 1966, although it is still very reasonable by American standards, and indeed by 1477 those of the architects. Although I am sure that the public would not look favourably on any change in the system that might benefit the professional, it is important that some limitation of liability for the professions in negligence actions against professional advisers be considered.
The report of the sub-committee of the United Kingdom inter-professional group on limitation of liability in 1986 unanimously agreed that it was of:outstanding importance to the professions generally",that legislation be introduced authorising individual professions to formulate schemes for limitation of liability for breach of contract or other Civil liability of any description incurred in connection with professional practice except in the case of liability for death or personal injury or for liability for conduct involving fraud or dishonesty.
The report also recommended that it should be compulsory for each member of the profession to insure up to the applicable maximum limit of liability. Although these recommendations have not yet been acted on by any of the professional bodies, I know that the Medical Protection Society would welcome an inquiry into limited liability for the professions, or possibly the introduction of a scheme to provide compensation without proof of fault. This is something that the British Medical Association has recently considered, and I was interested in the comments of the noble Lord. Lord Pitt of Hampstead, in his speech earlier and indeed those of the noble Lord, Lord Grimond, who spoke on this subject.
In conclusion, I hope that the Government will encourage the professions to follow the firm lead of the legal profession and give this matter urgent attention. I am grateful to the noble Lord, Lord Hacking, for bringing this matter to our attention this evening.
§ 6.35 p.m.
§ Lord Edmund-Davies
My Lords, partaking of ginger beer can prove a perilous pastime, or so it proved at least in the case of one young lady some 60 years ago in Paisley on, unusually, a hot and sunny day. As Miss Donoghue walked along with her friend Miss Hamilton, she remarked that she was very thirsty, whereupon Miss Hamilton recklessly said, "I will buy you a ginger beer". Without more ado they turned into a cafè—it was not called a "caff' in those days—and Miss Hamilton ordered a bottle of ginger beer. A dark, opaque bottle was brought, with one glass.
Miss Donoghue poured some of the contents into the glass and drank them, and still being a little thirsty and desiring to avail herself in full of her friend's generosity, she poured out the remainder. Not only ginger beer flowed into the glass but a snail in a state of bad decomposition. The sight of that was too much for Miss Donoghue and in the moving words of the law report we are told that:As a result of the nauseating sight and in consequence of the impurities in the ginger beer she had already consumed, Miss Donoghue suffered from shock and severe gastro-enteritis".She wisely sued somebody; she sued the manufacturer of the ginger beer, in effect saying, "Well, you ought to take care that snails do not get into a bottle, because when a person orders a drink he does not also want 1478 meat as well, and furthermore, you should not serve drink of that contaminated kind in a bottle so opaque that nobody can detect that the contents contain any impurities". The matter ended up here in the House of Lords, where Lord Atkin in a famous and immortal speech. which has long been in the minds and written on the hearts of all law students in this country ever since, said:I do not think a more important question [of law] has [ever] occupied your Lordships in your judicial capacity".In the course of his speech, which makes the most delightful reading, even for a layman, he recalled the parable of the good Samaritan; then he continued, and I ask your Lordships to forgive me for quoting but the words are so fine:The rule that you are to love your neighbour becomes [in law] you must not injure your neighbour. Who, then, in law is my neighbour? The answer seems to be—persons who arc so closely and directly affected by my act that I ought reasonably to have them in contemplation … when I am directing my mind to the acts or omissions which are called in question".That homely tale has proved to be the basis and the foundation of a whole field of tortious liability; it is an absolutely new field. It has, for example, as we have been told spread to the area of economic and business losses. It has spread to bankers who give recklessly the commendation of the creditworthiness of one of their customers. It has been applied to solicitors, to medics, to accountants, to insurance brokers, to estate agents, to surveyors and valuers and, as the noble Duke, the Duke of Gloucester, has just been telling us, to architects and engineers.
Attempts have been made from time to time to cut down liability for a breach of an act that was not reasonably carefully executed. There was a case a couple of years ago where a gynaecological surgeon was sued for malpractice in the use of forceps in a baby's delivery. A member of the lower court said:We must say. and say firmly, that, in a professional man, an error of judgment is not negligent".The matter came to us in the House of Lords and those words were relied upon, very understandably by counsel for the surgeon. He persisted in submitting that his client should be completely exculpated where the answer to the question of lack of reasonable care was at most that he was guilty of an error of clinical judgment. If that were so, there was no liability. We thought that that was sullying the clear stream of authority and that it was positively calculated to mislead. One of our number said this (and I like the words for they are my own):To say that a surgeon committed an error of clinical judgment is wholly ambiguous, for, while some such errors may be completely consistent with the due exercise of professional skill, other acts or omissions in the cause of clinical judgment may be so glaringly below proper standards as to make a finding of negligence inevitable".To a degree, that was an attempt to ensure immunity. An attempt to secure immunity is the kind of exercise which in these days is disliked. We dislike it and we are very jealous of it. In many cases we do not like Crown immunity and there are other cases where an attempt is made to secure protection from legal liability.
I am not without sympathy in one respect at least. The awards made in this country and even more so in 1479 America, have become so immense, as the noble Lord said, that in some cases it is impossible to obtain insurance. I should like to say, with respect, how percipient of that very danger the noble and learned Lord, Lord Denning, has been over the years. He has constantly warned us that if awards reached Titanic levels it would be impossible to obtain insurance cover, and that is a very real difficulty.
What does one do about that? I do not know. The only point which has occurred to me, and it has occurred to others before me, is that something such as a no-fault liability should be substituted for the outcome of cases being dependent upon proof of negligence. The noble Lord, Lord Allen of Abbeydale, was a member of the Pearson Committee where some such solution was proffered. However, as with most of the recommendations of that distinguished committee. it has been utterly ignored. I venture to think that it is time that they were resurrected and given further consideration.
The noble Lord, Lord Hacking, enunciated the immunity of the professional classes in framing his Motion. We have heard of much more than the professional classes: we have heard the noble Lord, Lord Hacking, Citing cases of work people. It is right that there should be no difference in the test of liability among the classes, whether they are professional or non-professional. The testing of what constitutes negligent conduct is at present both moral and, I hope, abiding, and it ought not to be cut down. For as long as it is retained, it is the test which should apply to all men, whatever their occupation.
§ 6.45 p.m.
My Lords, having heard the exposition of the noble and learned Lord, Lord Edmund-Davies, of Donoghue v. Stevenson, I cannot forebear from saying that I was brought up on the story that after this House had pronounced on the state of the law, the courts in Scotland then discovered that there had never been a snail in the bottle at all. However, I see the noble and learned Lord the Lord Advocate shaking his head: so clearly I was brought up wrongly in that respect.
I speak as a barrister, a considerable part of whose work consists of pursuing and defending claims against other professions. As such, I can say with certainty that the exposure of professional men to Civil liability has increased and is increasing. I submit to your Lordships that it ought to be diminished. It is increasing in the number and the nature of the claims being brought, and in their size in absolute money terms. There are now in progress claims against accountants, two of which were mentioned by the noble Lord, Lord Hacking. The amounts exceed any reasonable insurance limit so that every partner at risk in those firms is at risk for the whole of his fortune. In saying that, I have no knowledge of the limits of insurance of any particular firm in question. But claims of that size are above the insurance that any firm can be carrying.
Even when claims are not as large as those mentioned, the rates of premiums are steadily rising, as has been so cogently pointed out by the noble Duke. It is increasingly difficult to obtain cover of the size or the breadth that is needed. The largest of the claims tend to be claims for financial loss or for injury to 1480 property, as in the case of an architect, rather than claims for personal injury where a particular individual has suffered grievous harm.
I suggest that serious public disadvantages result. First, there is the position of individuals who are exposed to that liability for the whole of their fortune. Nowadays, it is surely the only sphere in which a man can be ruined for both the past and the future by one mistake. The mistake may not even be his own but that of some partner. If his own, it may be of a quality which would not justify his dismissal were he an employed person.
The position of professional men is much to be contrasted with that of employed people, who nowadays are virtually always given a second chance, and of' those convicted of criminal offences, where again the philosophy is that a first offender should not suffer dire consequences. Those principles are in no way reflected in the position of the professional man.
The second public disadvantage is that inevitably higher premiums mean higher costs to the public. Thirdly, once the danger of professional liability begins to work on the minds of people as they conduct their practices, they affect the way in which people carry out their daily job. Nowadays everyone is tempted to hedge around their advices with, "Well, on the one hand" and, "Well, on the other hand". Therefore, by the end of the day, some advices resemble little more than ministerial replies on points where the Government do not wish to commit themselves. That is not the kind of advice which clients want to receive from professional people.
This can lead to the state where people will not practice in certain fields. The noble Lord, Lord Colwyn, gave as an example the fact that he had been advised never to resuscitate a victim of a motor accident. I understand that in many states of America, lawyers' wives find it impossible to get gynaecologists to attend upon them. If lawyers' wives breed young lawyers, some people may think that that is not such a bad idea. However, it is an example of the situation which arises when liability starts wagging the way in which people conduct themselves.
Fourthly, a firm with a massive claim against it that is unlikely to be resolved for a number of years during which the future of that firm is cloaked in doubt cannot develop properly. I have been told, though I do not know for certain, that some large accountancy firms have difficulty recruiting young men because it is known that such a firm faces a claim which, if pursued to the limit, would ruin it and drive it out of business.
The right answer to this problem may be difficult. The basis, 1 venture to suggest, must be some system of compulsory insurance and a coterminous limit of liability. One cannot suggest that the concept of negligence be put back and the duty varied. What one can sensibly suggest is that the limit of liability should be within the scope of reasonable and not too expensive insurance.
I should like to deal briefly with several non-solutions that have been suggested in the past. First, it would be no solution for professional men to incorporate into limited companies, even if they were allowed to do so. The individual who was at fault would still himself he liable, although his partners would not, and 1481 because the companies into which they might incorporate would be very small companies with limited assets, the public would not have adequate protection. That was a fear expressed by some Members in this House in relation to the Consumer Protection Bill. At the other end of the scale, a big firm would not want to run the risk of being liquidated and therefore would still have to carry the same insurance.
Secondly, it is no solution to suggest that the professional man can contract out by arrangement with his client. That, in the first place, does not solve the question of tort liability. It is also no way to open a professional relationship with one's client to say, "Before I give you any advice, we have to deal with the position between us if it turns out that my advice is no good". That is hardly an inspiring start to the bedside manner.
Thirdly, whatever may be the position of the medical profession, and personal injuries resulting from it. a no-fault system combined with a limitation of liability is no answer to the problems of architects, accountants, solicitors and others advising on financial matters. One cannot have a system whereby every person who has had erected a building that does not function perfectly or who has taken out an investment which fails to yield a profit can have compensation on a no-fault basis.
Fourthly, the answer to this problem does not lie in a reference to the Law Commission or a suggestion that this matter can be dealt with purely by lawyers. This is a problem of policy, not of lawyers' law. I venture to support the suggestion that what is required is a government decision, presumably based on some commission of inquiry, which can look into the problem and devise a system. I recognise that there are considerable practical difficulties to be overcome in any system.
In the past. the customer of a professional man used to look to the resources of the individual, or perhaps his partners, to compensate him if things went wrong. Now that customer expects there to be insurance, and he reasonably so expects. What he cannot reasonably expect is that there should be both insurance and, on top of that, the assets of the individual and his partners to compensate him as well. I hope we shall hear from the Government that they will set up a commission to investigate and report on this matter.
§ 6.54 p.m.
§ Lord Kimball
My Lords, in agreeing with the Motion perhaps I may declare an interest as a Council member of Lloyd's of London and say that in anticipating some of the comments that might be made in this debate I took the precaution of checking most carefully with the market exactly what the position is. At this moment there is no shortage of capacity within the Lloyd's market for professional people to get all the insurance they need and to get all the cover they need in every form they need it. In fact, as has already been said, the insurance premiums are now beginning to fall substantially and they will fall substantially over the next two years. Market forces are coming into play in this market. The difficulties which the noble Lord, Lord Hacking, mentioned earlier that were experienced in this market are behind us. The undercapitalised and inexperienced underwriters have been put out of business.
1482 Since we last debated this matter in the debate on the Latent Damage Act, it has so far escaped your Lordships' notice that in the Financial Services Act we actually extended the liability to accountants and many other professions with their responsibility towards supervisory authorities. It is worth recalling that 20 years ago if you were a professional person the chances of being sued for negligence were one in twenty. Last year the odds of being sued as a professional person were one in five. I think your Lordships will agree that is a severe increase in the odds.
Of course this idea of suing professional people is all part of a wider movement for protecting the consumer. The noble Lord, Lord Hacking, put it another way. He said it was part of the compassionate Society. I am sorry, and I think many of your Lordships will be sorry, to see the passing of the old-fashioned idea of caveat emptor. That seems to be very much in decline today. If I had ever bought a "pup" I would have been so ashamed that the last thing I would have wanted to do would have been to admit it and sue somebody. I dread to think what would happen if every horse-dealer in this country could be sued for not being (how shall I put it?) completely accurate about the product he was selling. All the fun would go out of that sort of trading.
But seriously, following from that point, there is very grave concern within the veterinary profession on this matter. What the veterinary profession sees and is very concerned about is the whittling away, as it is described, of the normal safeguard of proving professional negligence over and above errors of judgment. The position is being reached where an error or a misjudgment is now regarded as negligent.
Let us suppose that one wants to buy a horse. It is perfectly possible to have a large range of acceptable "ifs". You will say to the veterinary surgeon, "All right, I know that horse has string-halt, but I want your opinion as to whether or not it will develop into being a wobbler". That is a perfectly fair question to ask a professional man. But what we now see happening is that if a vet were to say, "I do not think it will develop into a wobbler and therefore be a useless horse", there are those today who would sue a professional person for giving wrong advice even though veterinary practice could not be described as an exact science. This is just one of the many problems with this idea that one can always sue professional people if they make a mistake. It is not very attractive, but it is something which has grown up in a very big way in the past few years. We have been saved from the worst of it by our lawyers because of the system in this country. I do not believe the law will allow the problem to get as bad as it has become in America.
There are two other points that we ought to try to clear up or put on record during this debate. We have to realise that accountants, lawyers, architects and other professional people are not only liable for the advice they give but they are now being made liable for the advice that third parties act upon when they have taken that advice. I also think there is a very definite need for sonic clarification of the limitation of periods over which one can be sued for certain things. As I understand it, personal injury runs for three years and economic loss and property damage run for six years. 1483 But the difficulty is to decide from what point the period begins to run. The market would welcome clarification about when the liabilities begin and end.
There can be no doubt from the debate today that there is a great deal of concern in this matter. It is all very well to say, "It's all right; the insurance is there and the market can provide", but what has come over quite clearly from this debate is that there still is a great deal of concern, particularly among the professions.
§ 7 p.m.
§ Lord Chorley
My Lords, I too should like to thank the noble Lord, Lord Hacking, for giving us this opportunity to discuss the problem of Civil liability in the professions and for the comprehensive way in wich he introduced the subject.
I shall not attempt to enlarge upon the legal issues. Several of your Lordships have already touched on them and we have had a galaxy of talent exhibited. I certainly cannot hope to match their expertise in finding my way through this difficult terrain. But the subject is of the greatest importance to my profession—I am a practising chartered accountant —and I should therefore like to say a few words both to reflect the experience of my profession in this matter and to record its efforts to achieve some solutions to the current difficulties.
The way in which the liability crisis has made itself felt most immediately to my profession in this country is through the professional indemnity insurance market. Two things have happened over the past three years or so. and we have already heard about them. The first is the cost of indemnity insurance, which has increased astronomically. Secondly, at the top end of the market insurance cover has simply ceased to be available at any price.
Here I must say that I find myself in some difficulty over what the noble Lord, Lord Kimball, has just said, because frankly I speak from personal experience at the top end. Cover is not available. Perhaps he could tell me where to go for cover. I think I should add that we are talking about very large sums indeed, as several speakers have said. It is not just hundreds of millions of pounds: it is much more than that. So there we are. A massive increase in claims has been experienced by underwriters, both in number and in size. It has all become, as the noble Lord who has just spoken has said, a very high-risk business.
At this stage I suppose it is natural for the sceptical onlooker to ask two questions. The first is: what has given rise to this situation? Has there, for example, been a deterioration in professional standards? I am speaking about all the professions we have been discussing this afternoon. The second question is: why especially should the professions be protected? As to the first question, there has not in general been any deterioration in the skill and diligence exercised by practitioners. If anything, in my profession the reverse is the case. And so also with standards of entry: if anything, my profession is criticised for setting too high standards of entry.
In my view—and this view seems to be shared by every noble Lord who has spoken in the debate—the causes lie in how the law, and particularly the law of tort, has developed, coupled with the increasingly litigious climate that we live in. The last has some 1484 interesting facets, particularly in the development of the "joint and several" principle, where there are several defendants, and where some of those defendants may be men of straw—for example, the directors of a bankrupt company or, as the noble Duke has said, a bankrupt building firm—while others are not men of straw because they have professional cover. So you go to the insurance company. I am told it is known as the deep-pocket syndrome. It is a good hunting ground, clearly.
On the second question as to why the professions should be protected, I must first stress that the need for corrective measures—and again this point has been made already—arises not merely to benefit the professions. They do not wish to be cosseted, though it would be foolish to deny that they would not benefit from any limitation of liability. But the only valid test here—and I think this seems to be generally agreed—is the public interest; namely the consumer.
Experience in the United States shows us that several things are liable to happen if the balance is tilted too far against the professional. In the extreme case some services will simply cease to be available. That has already been mentioned. Alternatively, professional advice would become so hedged with qualifications that the benefit of clear and forthright opinion would be lost. Then again, some professionals may deliberately and publicly practise without insurance in order to deter litigation. In these Circumstances the protection of the consumer is clearly minimal. And of course the cost of services increases. Nor do I think it serves the public interest to bankrupt, or effectively bankrupt, a large professional firm, as has happened in Australia.
None of the developments that I have described can in any sense be regarded as being in the consumers' interest; yet I fear they are inevitable in this country unless the Government take steps to alleviate the problem. The issue is not one of the professions' interests as against the consumers'. It is a question of establishing a fair balance.
What measures could be taken to get a better balance? In February 1986 the three institutes of chartered accountants submitted a detailed memorandum to the Secretary of State for Trade and Industry, as sponsoring Minister, setting out the current difficulties, analysing the legal background and examining possible measures that could be taken. The memorandum examined the case for incorporation with limited liability which some professions allow; but it pointed out that this was at best only a partial solution.
It also examined the notion of capping; that is to say, creating some form of statutory limitation of liability. Capping can take various forms. The noble Viscount, Lord Caldecote, talked about the multiple fee liability concept. It is adopted elsewhere and undoubtedly has something to be said for it. But, again, it is easy to see the difficulties and the disadvantages. The memorandum discussed insurance, which I have already touched on. I do not think that compulsory insurance would be much help if cover were not available, and I cannot see that the state would wish to enter the market to provide cover.
The memorandum also examined possible legal solutions: measures to limit liability in tort and the 1485 need to move away from the joint and several principle to one of limiting damages to each defendant's degree of responsibility. Again, that has been touched on by numerous speakers.
The complexity of all the various possible solutions led the three institutes to recommend—and no doubt the noble Viscount, Lord Caldecote, and the noble Viscount, Lord Bledisloe, would be interested here—an inquiry to look into the whole problem. That was a recommendation, Incidentally, which had already been made by the Royal Commission on Legal Services some eight years ago.
That memorandum was submitted in February 1986 and last August the Parliamentary Under-Secretary of State replied to the institutes. I think it was a most understanding letter and showed a lively appreciation of the practical and legal issues. However, the central recommendation—that there should be an inquiry—was rejected, though the Minister conceded (I quote from the letter),that there might be a case for re-examining the current state of the law of tort",and,the operation of the principle of joint and several liability and the concept of contribution in negligence".In "Yes, Minister" parlance, to me that meant that we had a very good case indeed, and everything other people have said this afternoon tends to confirm that. And so the problem, or perhaps I should say part of the problem, has been passed to the Lord Chancellor's Department.
I think that half a loaf is better than no loaf at all, especially if it is the more important part of the loaf, because I suspect that the real problem concerns the legal issues. Nevertheless, it is eight years since the Benson Royal Commission on Legal Services reported and it is a year since my profession wrote to the DTI. In the meantime the problem has become more serious, and if American experience is anything to go by it will get more serious still. I therefore look forward with hope and keen anticipation to what the noble and learned Lord the Lord Advocate has to say about the actions the Government are going to take.
§ 7.10 p.m.
§ Lord Denning
My Lords, in the last 50 years I have been involved in many of the cases that have come before the courts about the liability of professional men. Before that time, in the early days of this century there was no difficulty. In 1911, a man went into St. Bartholomew's hospital for an operation, and while under the anaesthetic his arm touched a hot water bottle through negligence and he was scalded. He brought an action for damages against the hospital, but the judges said that neither a hospital, nor its doctors, nor its servants were liable for damages for negligence. St. Bartholomew's was a charitable hospital dependent upon voluntary contributions, and of course the judges were right. In those days, a barrister could be as negligent as he liked. There was no liability in negligence, the judges said. That was those days.
I look upon the leading case in 1932 of Donoghue v. Stevenson and Headley v. Byrne in 1964 and goodness knows what. We have extended the liability for negligence to an altogether excessive degree. 1486 Negligence was said to depend on what a reasonable, prudent man would or would not do. A reasonable, prudent man has been transformed by the law into the perfect man who never makes an error of judgment, who never looks on one side and who never forgets anything he has learned in the past. It has come to the situation where, even if there has been an error of judgment or any little mistake or mischance, the law holds the professional man negligent.
My noble and learned friend Lord Edmund-Davies did not mention me, but it was 1 who said that we should say firmly that a medical man should not be liable for mere errors of judgment. I am afraid that a committee of your Lordships' House said that that was not right. If the judge thinks so, he is liable for errors of judgment as well as for anything else. So there we are. That is the extent to which the law of negligence against professional men has gone, and how it has been elaborated and taken advantage of by legal aid!
We have had numerous cases of women, and other people, going into hospital. A woman had a baby which happened to be deformed because, she said, the surgeon pulled too hard and too long. The baby was injured, so she said, "There must be an action. Get legal aid. I shall not have to pay the other side's costs. I shall get all the experts on my side", and she did. She brought an action against the hospital and went right up to the House of Lords on legal aid. We have had many cases of people on legal aid suing a hospital for negligence and the health service, the Medical Defence Union or whatever it is has had to pay enormous damages. Colossal sums of a quarter of a million or half a million pounds are becoming common nowadays. That is where the law of negligence has taken us.
It is even worse in the United States, where they have contingency fees and the lawyers get 40 per cent. of the damages. They also have juries. The cases of medical malpractice, as it is called, are a blot on Society and on the whole medical profession. Premiums soar beyond all bounds and medical malpractice cases arc one of the worst worries in the United States now. It is not quite so bad here, but it is bad enough.
What is to be done? I cannot see the courts or the legislature interfering with our law of negligence as it has developed over the past 70 years. The law of negligence will remain and it means that accountants, architects, medical men and all the other professional people are liable to be sued.
I now come to whether the damages ought to be limited, which was mentioned by my noble friend Lord Bledisloe. I can show how the Government have not done their duty in this regard. Incidentally, in many branches of the law limitation of liability for damages is well known. In the Merchant Shipping Acts there has always been a limitation of liability according to the tonnage of the ship involved. For all those people who lost their lives or were injured in the ferry disaster the other day, there is a limitation of liability. It has always been so. In air accidents under the Warsaw Convention there is a limitation of liability under a named amount. Ought we not to have a limitation of liability in cases of professional negligence?
I should like now to come to the case of Miss Lin Poh Choo. She was a surgeon herself and at the age of 1487 37 she had a minor operation in hospital. Unfortunately, by some mistake there was cardiac arrest and she suffered brain damage. Thereafter, for the rest of her life—and medical science put it at another 37 years—she was to lie on a bed with no sense of mind or smell. She was to be a mere vegetable, knowing nothing. What damages was she to get? In the Court of Appeal I suggested that to cover all the nursing care, housing and everything else for her wellbeing she should get £125,000. The case went to the House of Lords, which said, "No, her loss of future earnings must also be taken into account", and she received £250,000.
The point of that case is that in the Court of Appeal I suggested that the law on damages should be looked at again. The noble and learned Lord, Lord Scarman, on behalf of all the House, which was unanimous, said—the reports were in 1980, but the case was 1979—Lord Denning in the Court of Appeal declared that a radical reappraisal of the law is needed. I agree".He went on:The Master of the Rolls believes it can be done by the judges, whereas I would suggest to your Lordships that such a reappraisal calls for social, financial. economic and administrative decisions which only the legislature can take. The perplexities of the present case, following upon the Pearson Report, emphasise the need for reform of the law".That was said eight years ago by the House of Lords sitting judicially, with everyone agreeing that there needs to be a radical reappraisal of the law. No one has taken any notice of it.
I value the suggestion which has been made. When professional men are involved, let them insure as best they can. Do not make them liable beyond the limits of what any reasonable insurance can cover. Surely that is fair, both to the injured person and to the professional person.
When I was in charge of solicitors as Master of the Rolls and had to deal with them, I found that they had a master policy to which all solicitors subscribe. They pay their premiums according to the state of their practice, the number of partners and so on. They pay premiums under that master policy which covers them up to a certain amount. It does not cover them to infinity but it covers a reasonable amount.
I suggest that with professionals there should be a limitation of liability to the full amount for which they can reasonably be expected to insure against, as laid down by their professional societies. Surely that would be fair to injured persons and also to professional persons who are responsible not only for their own errors of judgment but for staff.
I should like to take up the point made by the noble Duke, the Duke of Gloucester, concerning the person who is one-tenth or one-hundredth per cent. liable. Either the master ought to be liable for the whole amount or each person ought to be liable for his proportion of the damages. That is another thought on the way in which the law could be reformed. There is ample room for reconsideration of such matters. As my noble friend Lord Bledisloe said, these elements of the law should be considered. However, I do not think it is possible to rewrite the whole of the law of negligence.
1488 This has been a most valuable debate and I thank my noble friend Lord Hacking for introducing it. I look forward greatly to what will be said by other noble Lords.
§ 7.25 p.m.
§ Lord Allen of Abbeydale
My Lords, as one who has sat on two Royal Commissions and one tribunal of inquiry, the reports of which the Government almost totally ignored, I confess to having some slight mental reservations about the suggestion of setting up a committee, however strong the argument for doing so. The noble and learned Lord, Lord Edmund-Davies, has tempted me to expatiate this evening on the Pearson Royal Commission Report. However, I think that at this stage of the evening I had better content myself with saying just a few words about the medical profession, underlining in the main the points so eloquently made by the noble Lord, Lord Pitt of Hampstead.
The special difficulties of this profession were considered in some depth by the Pearson Commission and I am conscious that the noble and learned Lord the Lord Advocate is specially well placed to have access to the thinking behind some of the findings of that commission.
The disadvantages which apply in general to actions over tort and actions for negligence naturally apply to those against doctors: the delays, the unwelcome publicity, the costs and so on. But there are some rather special problems. The increase in the number of medical negligence claims and the increase in the amount of damages have resulted in the increasing use of defensive medicine or the taking of tests, X-rays and so on which a doctor may not think are absolutely essential but which he carries out in case, in later proceedings for negligence, it is alleged that necessary precautions were omitted.
It is inevitable that insurance premiums have rocketed up. We are still a long way behind the USA. where the premiums paid by a neurosurgeon in California would make even a whizz-kid in the City wonder if he could still afford to run his Porsche. The Circumstances in the United States, as my noble and learned friend Lord Denning has mentioned, are different from those here. However, we are on a slippery slope and there is no ground for complacency.
The Pearson Commission considered a number of possible courses in this context, including the possibility of going for strict liability, and also including the possibility of a no-fault system which the noble Lord, Lord Pitt, mentioned earlier. Perhaps I ought to say that by "no-fault", I mean a system of compensation obtainable without proving fault, and provided from a fund outside the tort system and not as a result of proceeding against the person responsible for the injury.
That is not a novelty in this country. We have a no-fault system in industrial injuries and the Pearson Commission recommended that we should have a no-fault system for road traffic injuries. Perhaps in a few more years the Government may be able to tell us their reaction to that recommendation.
In the event, we came to the conclusion that the system is not appropriate for medical accidents. By that phrase. I mean the impairment of a person by a 1489 mental or physical condition arising in the course of his medical care not as a foreseeable outcome of the necessary treatment but as a result of accident, whether or not is it caused by professional negligence. I think that it is worthwhile setting that out in full detail because it leaps to the eye that a major problem in any such no-fault scheme—and one which we on the commission felt unable to meet with any confidence—was that of establishing causation or distinguishing medical accident from the natural progression of a disease or injury and from the foreseeable side effects of treatment. It could be extremely difficult to determine such issues, and it is not very clear who will do it.
There is also the question of where the money for any compensation fund will be found. If one says it will come from the National Health Service, what about medical accidents in private practice? What about the paramedical professions and practices such as osteopathy? The difficulties, as we realised, are not all on one side. The victims, if I can so describe them, often have problems in getting information and in getting expert medical witnesses who are prepared to testify against their fellow doctors. We are also well aware of the point that has been made that in many medical accidents there is no fault. Under the present law, there is no question, therefore, of getting any compensation at all, apart from the £20,000 which is now payable to the victims of vaccine damage.
In spite of all this, we came to the conclusion that the action for negligence should remain in this context. However, we did urge the Government to assess and keep under review the no-fault schemes already operating in New Zealand and in Sweden. In both those countries, and in Finland as well, there is a no-fault scheme based on providing compensation for loss of earnings to the victim of medical injury. The New Zealand scheme is part of the general accident compensation scheme involving the abolition of tort altogether in this context. I think that that may be a bit too much for this country to swallow.
The Swedish scheme is a voluntary arrangement between local authorities and insurance companies. I believe it is running into some problems of causation and that the New Zealand scheme is running into problems of finance. The BMA committee, to which the noble Lord, Lord Pitt, referred, has been studying the various schemes, and the no-fault proposal which I believe it is recommending on a voluntary experimental basis is to be based on the Swedish experiment. Whether it has solved all the other problems which the Pearson Commission found so baffling must, I fear, be open to some doubt.
However, baffling though these problems are, there is no denying that the present position gives cause for grave disquiet both to doctors and to patients. The Pearson Commission put the Government on notice in 1978 of the hazards involved but whether the Government have taken any notice of what we said, and whether they have, as suggested, been watching schemes elsewhere, I have not the slightest idea. I hope that the noble and learned Lord will be able to tell us. The plain fact is that, if nothing is done and we just go drifting on, things are bound to get worse and the prospect is pretty bleak.
§ 7.30 p.m.
§ Lord Morton of Shuna
My Lords, we have had a very interesting debate and we are all most grateful to the noble Lord, Lord Hacking, for initiating it. It is an interesting and difficult subject. One of the difficulties is the phrase "error of judgment" and its relationship with negligence. My difficulty—and I do not wish to enter into a dispute between the noble and learned Lords, Lord Edmund-Davies and Lord Denning—is that if a surgeon or a lawyer drives his car on to a crossing and makes an error of judgment, he is negligent. It is difficult to see why—when the concept of negligence, at least to a Scottish lawyer, is a failure to take care—the same standard should not be applied to the professional in his professional duty. There is a difficulty and a danger if we—if I may speak as a member of a profession—apply a different and especially from a lawyer's point of view, a lower standard of care than we expect from the rest of the population. That would be highly dangerous and highly divisive.
In regard to legal aid, we have always been proud, especially in Scotland, that in theory everybody is equal before the court. I should have thought that the great achievement of legal aid is to make that more possible for people who cannot afford litigation. Speaking as a Scot, and I think that the noble and learned Lord the Lord Advocate is almost fed up of me speaking as a Scot, the arrival of the case of Donoghue v. Stevenson in this House for judicial decision is a tribute to the Faculty of Advocates. The case was financed before legal aid by the advocates who were in practice. This form of provision of aid to people who could not afford it was provided by the legal profession in Scotland for something like 500 years. I think it is unfortunate if we do not accept that the law should treat people equally.
For many years it has been one of the hallmarks of the professions that its members accept personal responsibility for the services they provide; and largely as a consequence of that attitude the professionals have refused to sanction any form of limited liability arrangement. This practice was much easier to maintain when the law of negligence disallowed claims for financial loss suffered by people who had no contractual relationship with the professional person. The change started by Headley v. Byrne has widened the areas in which loss is foreseeable, and this is widening further. It is a matter which the courts tell us they decide on considerations of public policy.
It is perhaps a matter of comment that public policy in this field has been decided over the past 30, 40 or 50 years by judicial decision and not by Parliament. Whether that is right or wrong is a matter worth looking at. One would almost say that juries were better than judges at deciding what public policy should be, but perhaps not.
I suggest also that there are two separable problems. The problem of a personal injury claim is different from the claim for financial or property damage. The scale is wholly different and what is foreseeable is wholly different. For the professions concerned in potential claims that are purely financial, the difficulties are the scale of the potential claim and the impossibility rather than the cost of either obtaining 1491 insurance or meeting the claim. The impossibility is not unknown and is dealt with in different spheres in different ways. It is not something that is peculiar to the professions.
If one looks at the problem of towing a ship such as the QE2, there would be no prospect of being able to recover from the towage fee the potential damage of sinking a ship of that size. So you have the standard towage conditions, and nobody considers that to be unfair. Insurance continues to be covered by the ship. That is perhaps where the profession should think of going; but it certainly does not deal with the sphere of third party damage by the negligent act and would possibly cause complication to the sharing of fault between—if I can pronounce this Englishism—joint tortfeasors.
In my view, a very strong public interest is involved, not necessarily different from the interests of the profession. The public interest is vital if standards. especially in matters such as the design of public buildings and standards of auditing and accounting, are to remain high and perhaps even be enhanced. What we, as a Society, should be seeking is an ever higher standard of ability, accuracy and professional integrity. It is at least doubtful whether this is best achieved by making the adviser constantly worried about the threat of litigation. This is a very obvious problem and I do not suggest that there is a very obvious answer.
Perhaps I may turn now to the personal injury aspect. This principally concerns the medical profession, and it is wholly different. The risk is at levels where it is still possible to insure, even if it is expensive. The difficulties are different. They include an unease. if not a doubt about whether the very high awards that are being made for catastrophic disabilities are really the best method of dealing with them, even from the point of view of the sufferer.
The second difficulty is the unfairness, to which my noble friend Lord Pitt referred, of the accidental issue and whether or not one can pin negligence on an accident. It can happen that one disabled person gets nothing and a similarly disabled person gets £500,000. The third difficulty—this is a serious matter on which I, as a member of the legal profession, have to accept some responsibility—is the grossly high cost of litigation. This is something that we must look at as a Society. We need to look at it very much more than we have done. It is quite ridiculous that the costs of litigation should so closely relate to the level of the sums at issue. There must be a simpler method of dealing with the matter. It is not enough simply to say "We are doing what we can". We really have to look at this more seriously.
Amid all the attention paid to personal injury claims over many years, the idea put forward by the Faculty of Advocates to the Pearson Commission—and, of course, the Pearson report disappeared into some cupboard—was that we should be moving towards a case of impersonal injury compensation for disability rather than compensation for fault. It is, I would suggest, on that line of personal injury that Society is moving and perhaps we should look more closely at New Zealand, Sweden and Finland.
§ 7.41 p.m.
§ The Lord Advocate (Lord Cameron of Lochbroom)
My Lords, I think I can confidently say that all those who spoke have very properly—and I would join them in doing so—thanked the noble Lord, Lord Hacking, for providing us with this opportunity to discuss what the debate has shown as being a number of wide-ranging issues of absorbing interest and of genuine concern to all the professions and to the wider community which they serve.
The noble Lord, Lord Morton, reminded us of what is one of the hallmarks of a fully developed profession; namely, that its members undertake to accept responsibility for those whom they serve, including full legal liability for loss caused by any failure. That was the view of the Law Society in the evidence which it gave to the Royal Commission on Legal Services chaired by the noble Lord, Lord Benson. The commission's report was published in 1979 and yet not so many years later the president of the Law Society, in common with others, urged the Government to consider setting up a limitation of liability for negligence claims against the professions.
This call comes in response to what the noble Lord, Lord Chorley, called a liability crisis. We have heard today that the evidence of this crisis is plain for all to see. There has been an increase in the number and the size of claims against professional people, coupled with a few instances of claims on a really massive scale. There is a risk of catastrophic failure and businesses going to the wall and individuals suffering personal ruin. We have also heard of the lack of capacity in what insurers regard as a decidedly less attractive market. In this matter I take note of what my noble friend Lord Kimball has said and I am also conscious of what the noble Lord, Lord Chorley, said in reply.
There has been a significant increase in the cost of professional indemnity insurance. It is said that professionals are more likely to be inhibited in the advice they give. I think those who spoke for the medical and dental profession—namely, the noble Lord, Lord Pitt, and my noble friend Lord Colwyn—and the noble Viscount, Lord Bledisloe, for the legal profession, said that able people are being deterred in this regard from giving, I do not think they put it as uninhibited advice, but more direct advice than they might otherwise do. There was also the suggestion that able people were being deterred from embarking upon careers in which there is a significant element of personal risk. I think in particular the noble Duke, the Duke of Gloucester, referred to this. I accept that all of this is detrimental both to the professions and to those whom they serve.
It is not difficult to identify the problems which the professions are currently experiencing. If one could only readily point to the cause of these difficulties, then the task of prescribing a solution would be altogether easier. It is undeniable that increasing specialisation of activity has resulted in ever more sophisticated and interdependent relationships. This has been accompanied by a corresponding increase in the level of expectation of consumers—those who use the services. They are less willing to accept a disappointment philosophically and to write it off to experience. More than ever before, they wish to vindicate their rights.
1493 Reference was made by the noble and learned Lord, Lord Edmund-Davies, to the case of what has been described as the intruding gastropod. I discovered by research very recently that, unfortunately, we shall never know whether the snail was in the bottle because when the case was remitted to Court of Session it was there settled. I think the plaintiff received a small sum for her holiday outing. It was never proved, either one way or the other, but out of such small things great things grow.
I wish to remind your Lordships that in that case the majority in the House of Lords who set down the principle of law did so on the basis of what they understood to be principles which were already common to both English and Scottish jurisprudence. I remind noble Lords of what was said by another of their Lordships in his speech in that case, and that was Lord Macmillan, one of the two Scottish judges who spoke. He said:The law takes no cognisance of carelessness in the abstract. It concerns itself with carelessness only where there is a duty to take care and where failure in that duty has caused damage. In such Circumstances carelessness assumes the legal quality of negligence and entails the consequences in law of negligence".He goes on to say this:In the daily contacts of social and business life human beings are thrown into or place themselves in an infinite variety of relations with their fellows".He then refers to the standards of the reasonable man in determining whether any particular relation gives rise to a duty to take care. He then goes on to say this, and it is important in view of what has been said about the extension of case law:The grounds of action may be as various and manifold as human errancy and the conception of legal responsibility may develop in adaptation to altering social conditions and standards. The criterion of judgment must adjust and adapt itself to the changing Circumstances of life".And then the famous phrase:The categories of negligence are never closed".He was stating there a very general principle which makes it quite clear that fundamentally the law that we have seen, the so-called development, has been based upon the very kind of moral and abiding law that the noble and learned Lord, Lord Edmund-Davies, mentioned. I say no more than that I would be with the noble and learned Lord in what he said about the aptitude of that test and in particular what he said so far as error of judgment is concerned.
Professionals are not more vulnerable than others, such as manufacturers or retailers, whose activities may expose them to the risk of Civil proceedings. Your Lordships will be aware of the tendency in recent years to impose duties of strict liability. I refer of course to the Consumer Protection Bill which is presently going through your Lordships' House. On the other hand the law permits a professional a margin of appreciation in the recognition it gives to the exercise of professional skill and judgment which would be inapplicable, for example, in the case of a manufacturer's failure of duty.
Today's short debate has focused attention on the need to ensure that there is a proper balance between protection for the injured party—I think the noble Lord, Lord Allen of Abbeydale, called him the victim—and for the professional person who, in some cases, runs the risk of being ruined even when he alleges he has been doing his best.
1494 The obligations of a professional person are regulated under Civil law in two main ways. In contract between the professional and his client, the parties will generally take care to stipulate their respective rights and obligations. Subject to considerations of public policy and to the use of standard form contracts in specific cases, the parties are free to allocate the risks they incur in the way they choose. The content of contractual duties is primarily fixed by the parties themselves. They may (and, in practice, they very often do) agree to modify their obligations. The law already permits a broad measure of limitation of liability, by way of exclusion or restriction of liability, subject to certain statutory safeguards, of which the most general is the Unfair Contract Terms Act 1977. For example, if a professional firm takes out the maximum insurance cover which is available (or which is reasonable in the Circumstances) arid then seeks to limit its liability in contract to that sum, it would seem difficult to argue that such a limitation between the parties to the agreement could not satisfy the "requirement of reasonableness" as laid down in the Act.
The noble Lord, Lord Hacking, referred to auditors. I recognise that they do not enjoy this degree of freedom of contract with their clients. Section 310 of the Companies Act 1985 prohibits an auditor from limiting his liability in contract: but the operation of this section is being looked at by the Department of Trade and Industry.
The other way in which the obligations of the professional are regulated is under the law of tort, or in Scotland in delict—what one might refer to as under the common law duty of care. Such obligations are primarily fixed by the law rather than by the parties themselves. Furthermore, this duty is owed to persons generally whereas in contract it is owed to a specific person or class of persons. The risk of liability in negligence arises independently of liability in contract—as was said by at least one noble Lord—and the scope of the duty of care owed by professional people and others extends beyond their immediate clients. For example, a solicitor may owe a contractual duty of care to his client when he draws up a will but he may also owe a common law duty of care both to his client and to intended beneficiaries under the will.
The remedies available in both contract and negligence should provide victims with full and sufficient compensation for damage suffered as the result of breach of duty. Any attempt to limit liability between the professional and his client, or between professionals and others engaged in a common enterprise, must operate to the detriment of victims, who are, generally speaking, in greater need of protection. Our task is to ensure so far as possible that the law and other mechanisms such as insurance are capable of providing an acceptable balance between the different and conflicting interests of victims and defendants or defenders.
Attention has been directed to the problems which may arise where negligence is alleged against a person who may have been only one of several parties engaged in a complex project involving a whole range of interdependent skills including professional skills. The problems are not confined to professional people. For example, such cases are common in the construction 1495 sector. The owner of a building with defective foundations may institute proceedings against a formidable array of persons, including the architect, structural engineer and a host of building and other contractors. If his claim succeeds, he may be able to look to each for a share of the damages.
However, the victim is not obliged by law to join all these persons in his action. Indeed, he may have insufficient evidence himself on which to base a claim against some of them. He might proceed against the architect alone, alleging defective design. If the victim successfully proves his allegation of negligence, the architect may be liable for the whole of the damage even though others may in fact be responsible as well. But the architect could, and in practice frequently would, seek to join the others as third parties in the original proceedings. If the architect was found liable he could seek a contribution from the other wrongdoers. Similar problems arise in relation to accountants.
The noble Lord, Lord Hacking, referred to joint tortfeasors. The principles on which joint wrongdoers may claim a contribution have been considered by Parliament on three occasions in the recent past on the basis of a thorough examination by the Law Commission; and a similar examination is now being conducted by the Scottish Law Commission. The principles on which the law spreads the burden between joint delinquents are thus reasonably well-established. In the main they work well. However, I recognise that if only one person is left to bear the full loss (or a large proportion of it) because no other co-delinquent can be traced there is a risk, in the absence of satisfactory insurance arrangements, of severe hardship resulting to the delinquent who pays. I think the noble Duke made specific reference to that.
Responsible professions already encourage their members to take out professional indemnity insurance. Many are now reguired to do so. It is encouraging to note the efforts which the professions themselves are making to reduce the problems that some of their members currently face in seeking to obtain proper cover at reasonable cost.
Mention was made of the construction sector and what is being done in this regard by the Royal Institute of British Architects and the Architects Professional Indemnity Agency. Other responsible initiatives are being taken in this and other sectors. These include the establishment of self-insurance schemes. The Law Society in England and Wales, for example, which has its own compulsory indemnity insurance scheme, is establishing a professional indemnity mutual insurance company for solicitors. Similar insurance arrangements have been established by the Law Society of Scotland.
I am sure your Lordships will agree that some at least of these developments are positive and imaginative steps by responsible professions who are concerned to provide proper compensation in the event of a failure. In this way losses are spread rather than restricted. The one thing that would be intolerable would be for the victim of negligence to bear the loss himself. That is why the Government do not view proposals to set an arbitrary limit or "cap" on liability with favour. Indeed, I note that the noble Lord, Lord 1496 Chorley, also took that view. In a leading article last week The Times suggested that a prescription of limits would be, "both damaging and dangerous". I am bound to say it would raise substantial practical problems. The noble and learned Lord, Lord Denning, referred to such a suggestion. But may I put it this way? If there were a limit, what would happen if there were in any one year more than one claim and the first claim took the whole of the limit and left the other victim with no recourse at all? Those are the problems which can arise.
I should like to mention a contribution which the Government have recently made in this area. This was referred to by the noble Duke. I refer to the passing of the Latent Damage Act 1986. I was pleased to hear the effect that has had on insurance premiums. The Scottish Law Commission is also examining the problems of latent damage. We believe that the introduction of the long stop should ease the problems faced by the professions and others in obtaining appropriate insurance cover.
While fully appreciating the special problems of the professions, such as the difficulties of achieving limited liability, we must also bear in mind the fundamental difficulty for the interests of the victim of any proposal to treat professionals differently from other potential wrongdoers. The noble Lord, Lord Grimond, and the noble and learned Lord, Lord Edmund-Davies, posed that question.
I am grateful to noble Lords for the various points that have been raised in the course of their speeches. I shall endeavour briefly to deal with certain of them. The noble Viscount, Lord Caldecote, referred to the definition of negligence and the restriction of damages to a multiple of fees. I think that follows, in a sense, what was said by the noble Lord, Lord Hacking. I believe I have already referred to the form of capping and the difficulties that can arise. The noble Lord. Lord Morton, dealt with the question of restriction of fees.
The noble Lord, Lord Pitt, referred to the medical profession. He raised the general matter of delays and costs incurred in the courts. Indeed, this was echoed by the noble Lords, Lord Grimond and Lord Morton. The question of costs and delays in personal injury litigation is one of a number of matters which is currently under consideration by the Lord Chancellor's Civil justice review. That was initiated, among other things, to speed up and increase efficiency in the courts handling Civil matters. A similar inquiry was recently instituted and has been completed in regard to the Supreme Court in Scotland. I believe I mentioned that in the recent debate on the Criminal Justice (Scotland) Bill.
Another point raised was on no-fault compensation. This is a matter which was raised by the Pearson Commission. The noble Lord, Lord Allen, has already dealt with that and it would be otiose for me to add to what he said. However, I note what he said about watching the situation.
Much was made of the problems of insurance. So far as doctors' and dentists' remuneration is concerned, for example, the cost of subscription is taken into account when one comes to deal with recommendations about salary scales.
1497 Other noble Lords, and in particular the noble Lord, Lord Chorley, dealt with the question of competence so far as the professions are concerned. He makes a very important point. I noticed recently an article which appeared in the Scottish Law Commission's Law Talk, No.1, in which the necessity for training and competence is made absolutely clear in order to avoid what it calls the careless error syndrome. I think that that underlies the importance of training.
The noble Viscount, Lord Bledisloe, spoke of the difficulties in the legal profession. I think that what he said indicated that the noble Lord, Lord Grimond, perhaps was wrong. Barristers and advocates are subject to the laws of negligence just like anybody else and the problems of professional indemnity insurance are ones of which the noble Lord opposite and I are aware.
In the time available I have attempted to cover all the points raised by noble Lords. If I have failed to mention any of them or have not dealt immediately with some points, I shall certainly look at what I have said and attempt to answer them in writing. A short debate such as this provides a valuable forum for discussion and the contributions that we have heard today have amply demonstrated the concern that is shown on all sides of the House for the future integrity and well-being of the professions in this country. The Government fully recognise the problems that the professions currently experience. There are some signs that the insurance market may have eased slightly but difficulties about insurance remain. We see difficulties about both limitation of liability and any modification of the obligations which may arise between joint wrongdoers, which can only be at the expense of the rights of the victim.
I have listened carefully and with great interest to today's debate, which is particularly well timed to inform the Government's current consideration of the whole subject. There are many aspects to be taken into account before we reach a final view. The issues are complex and, if I may say so, your Lordships have set them out with very great care. However, there can be no easy solution. We shall want fully to consider the points that noble Lords have so eloquently put forward today. I thank the noble Lord, Lord Hacking, for having given us the opportunity to consider them.
§ 8.2 p.m.
§ Lord Hacking
My Lords, although there has not been a high attendance during the course of this debate in your Lordships' House, I believe that we have been able to give a very clear message that there is a problem which not merely affects the professions but which involves anybody in our Society who provides goods and services. That message has been most clearly delivered in the most powerful speech of the noble Duke, the Duke of Gloucester, which I think we all enjoyed. It has also been delivered in other cogent speeches.
The question is: where do we go now? The noble Viscount, Lord Bledisloe, put forward some non-solutions. I agreed with them and should like to add another. Insurance does not, at the end of the day, solve the problem; it merely transfers responsibility from the insurer to the insured.
1498 During the course of this debate we have also heard various solutions preferred, including giving further consideration to the joint tortfeaser rule and the question of the award of damages. The noble and learned Lord the Lord Advocate referred to the fact that the joint tortfeaser rule and the rules relating to contribution had recently been considered in Parliament and by the Law Commission. I venture to suggest that the contribution rules are somewhat different from the joint tortfeaser rule and certainly the arguments that have been presented during the course of this debate seem to indicate that there are grounds for giving the latter further consideration. The Government have heard what your Lordships have said but, as the noble and learned Lord remarked, they are not yet committed to any particular action.
I think we are left, in the words of the noble Lord, Lord Allen of Abbeydale, in the position that if we do nothing the situation is bound to get worse. In my submission the matter should be pressed forward. I hope therefore that the Government will be able to give it fresh consideration when they have had an opportunity to consider each of the contributions that has been made tonight. I wish to thank all those noble Lords who have participated in the debate for their helpful contributions, which have come from every quarter of your Lordships' House and from many professions. I beg leave to withdraw my Motion for Papers.
§ Motion for Papers, by leave, withdrawn.