HL Deb 11 June 1996 vol 572 cc1645-54

7.30 p.m.

Bill read a third time.

Clause 1 [Assumed rate of return on investment of damages]:

The Lord Chancellor moved Amendment No. 1: Page 1, line 8, after ("return") insert ("(if any)").

The noble and learned Lord said: My Lords, I wish to deal with Amendments Nos. 1 and 2 together. This also deals with an amendment to Clause 4 which was moved on Report by the noble Lord, Lord Meston. The amendments are technical amendments clarifying the manner in which the power conferred by Section I may be exercised.

In response to the amendment to Clause 8 moved by my noble friend Lord Chelmsford at Report, I said that I was willing to consider putting into Clause 1 more express words to achieve more clearly that the power can be exercised in relation to different claims in different ways. That is what I have done, and that is what is achieved by these two amendments. Unless and until the power has been exercised in relation to any particular class of case, the court's assessment of the damages will not be affected by Section 1.

I have already indicated what my intentions are in relation to the probable first exercise of this power, but I should add that my approach to the first exercise would not in any way restrict the discretion of the Lord Chancellor or the Secretary of State on the occasion of any future exercise of the power. Indeed I believe it to be inevitable that those who may subsequently exercise this power must adopt a different approach.

Once the power has been exercised, the courts will follow the direction in subsection (1) to take into account the prescribed rate unless satisfied that some other rate is more appropriate in the case in question. If it then appears that some other rate—perhaps some rate which is not even available in the present market—may be more appropriate for general application, then it would be open to those exercising the power to prescribe that other rate to replace that which the courts had up till then been using. The intention is to assist the courts with guidance and to enable them to take advantage of developments in the market which may provide even more accurate indicators to use in the difficult task of assessing damages for future pecuniary losses.

Finally, I should like to inform your Lordships of the progress we have made in investigating the problem mentioned by the noble Lords, Lord Meston and Lord Irvine of Lairg, when the Bill was last before your Lordships' House. That was a problem which had arisen where an insurance company was in provisional liquidation, and the annuitant under a structured settlement had not been able to recover compensation from the Policyholders Protection Board.

I understand that the difficulty arose, not because the company (Municipal General Insurance Ltd) was in provisional liquidation, but because the structured settlement annuitant was not the policyholder, and to some extent because there were doubts as to whether the liabilities for which he was seeking compensation actually arose from the insurance policy. That structured settlement had been entered into before the reforms which we introduced in the Finance Act 1995 took effect.

Those reforms rationalised the arrangements for structured settlements so that life offices are now able to make payments under annuities bought by defendants with personal injury damages free of tax direct to the plaintiff. That was not previously possible, and that is why, in the case mentioned, the plaintiff was not the policyholder.

The present practice is that for new structured settlements, annuities will be bought in the beneficiary's name. For settlements set up under the old arrangements, the policy can now be assigned to the beneficiary by the general insurance company which purchased the annuity, thus ensuring full protection under the Policyholders Protection Act.

I understand that events had moved too fast in the case in question for that to have been done, but it is highly unlikely that the same situation would arise again. In any event, simply to specify that those provisions should apply where there is a provisional (rather than final) liquidation, would not be necessary or effective, since the Policyholders Protection Board already has powers to make interim orders (under Section 15 of the 1975 Act) and could do so when an insurer was in provisional liquidation. As I have said, it was not the fact of the liquidation being provisional which caused the problem, but the absence of a direct relationship between the beneficiary and the insurance company which was in provisional liquidation.

However, as your Lordships will be aware, my right honourable friend the President of the Board of Trade has already announced his intention to make changes to the Policyholders Protection Act 1975, and to bring forward legislation when parliamentary time permits. We are continuing our inquiries to ensure that there will be no gap in coverage. These will take some time to complete, and if it is found that there is after all still a potential gap, we shall have the opportunity to do something about it when my right honourable friend introduces his reforms.

I shall of course pursue this matter as this Bill goes forward. But my present view is that nothing is required under this Bill and that nothing effective can be done on the basis of the amendment which we considered on Report. I beg to move.

Lord Irvine of Lairg

My Lords, I have some concern about this amendment and I desire to be enlightened by the noble and learned Lord.

I am referring to the addition of the words "if any" to Clause 1(1) so that it will read: take into account such rate of return if any as may from time to time be prescribed by an order made by the Lord Chancellor". Therefore, it appears to me that the words envisage that the noble and learned Lord may decide not to set any prescribed rate of return which the courts will have to take into account in determining the appropriate discount of future pecuniary loss due to its accelerated receipt in the hands of the plaintiff victims. Perhaps I may introduce a slight note of levity. I say that because I imagine that those words do not herald a government pessimism about investments earning no return at all in future.

Therefore, if Amendment No. 1, by the words "if any", signals a retreat from the principle that the Lord Chancellor should, from time to time, set a prescribed rate in the interests of legal certainty so as to ensure that the plaintiff victims are compensated fully, then I regard that as a troubling change of position on the part of the Government.

Therefore, I should welcome the noble and learned Lord's comments on that point. The issue will obviously have to be pursued further when the Bill is considered in another place and this House will have the benefit of returning to it in the light of the discussions there. But I should welcome the noble and learned Lord's observations as regards my anxiety.

Lord Meston

My Lords, my reaction to the first amendment was exactly the same as the reaction of the noble Lord, Lord Irvine of Lairg. Do the words "if any" emphasise or indicate that the Lord Chancellor may well decide not to prescribe any rate at all in the foreseeable future, notwithstanding the enactment of this Bill and it coming into force two months after enactment, as is provided in Clause 8?

It strikes me that that could add uncertainty in an area of law and practice where there is already considerable uncertainty. That uncertainty may not be resolved for several months ahead, particularly as the question of rates of return is to be considered by the Court of Appeal and may, quite possibly, be considered further on appeal by this House in its judicial capacity. My concern is the uncertainty which may be brought about by that situation.

Viscount Chelmsford

My Lords, I should like, first, to thank my noble and learned friend the Lord Chancellor for the words he used on Report which enabled me to withdraw the amendment that I had moved. So far as concerns Amendment No. 1, I understood my noble and learned friend to be using the amendment to reinforce the discretionary nature of his power. If that is so, it would be helpful if he could indicate the circumstances in which he would take the discretionary power and those in which he would not. Alternatively, if that is difficult—and I imagine that it might be—perhaps he will at least explain certain circumstances where it is quite clear that he would use it and other circumstances where it is quite clear that he would not. In that way, we will have some feel for the middle ground.

So far as concerns Amendment No. 2, I wonder whether I have fully understood the definition that my noble and learned friend intends to use regarding the words "different classes of case". If that means, as my noble and learned friend said on Report on 4th June (Hansard, col. 1234), that, the power can be exercised in relation to claims not yet accrued in a way that might be different from the way in which it affects claims already accrued", then I think we will be very happy with the statement. However, if it means, for example, that interest rates could vary as between an award for, say, a motor injury and one for an industrial injury. I believe that the insurance industry would be concerned and, perhaps, also puzzled.

Lord Simon of Glaisdale

My Lords, I share the concern that has been expressed, but from a slightly different angle. I should like, first, to say that the practice of this House is highly convenient for allowing parliamentary draftsmen to have second and third thoughts, so that when a Bill which originates in this Chamber goes to another place it should do so without any blemish.

I can only speak to Amendment No. 1 at the moment, because Amendment No. 2 has not yet been called. I cannot for the life of me see why Amendment No. 1 is necessary. The noble Lords, Lord Irvine and Lord Meston, suggested that it may actually be mischievous. But why is it necessary at all? If the Lord Chancellor does not prescribe any rate of return, obviously the courts cannot have regard to that which does not exist. Therefore, why are the words "if any" necessary?

I shall have something to say on Amendment No. 2, on which the noble Viscount spoke valuably. However, I believe it would be helpful if, before I do so, my noble and learned friend has a chance to deal with the arguments raised on Amendment No. 1 and to comment on what was said on Amendment No. 2 by the noble Viscount.

The Lord Chancellor

My Lords, the emphasis on the words "if any" which I propose in Amendment No. 1 is simply to deal with the point that I tried to make clear on the last occasion; namely, that I would not wish to put in place a rate of return until the courts had decided the current cases. I believe that it is right and appropriate to emphasise that, unless and until a rate is prescribed, the courts must decide in accordance with their own appreciation of the present law. It is possible, as my noble and learned friend Lord Simon said, that that is assumed. However, I think that it is desirable in the context of this particular discretion to make that clear. That is why I have done so.

I turn now to classifications. When looking at the way in which, for example, the Court of Appeal may decide such matters, I believe it to be perfectly possible that it may think that different rates of return might rightly be taken into account in different classes of case, possibly, to some extent, by reference to the size of the award and the nature of the portfolio on which it would be based; or, indeed, in relation to the period over which it was anticipated that the damages should run. For example, if a comparatively short period were envisaged for the loss anticipated, the rate might be different from that applicable to a longer period. I cannot tell.

I believe that one should retain as much flexibility as possible. I certainly wish to maintain flexibility to deal with the matter which my noble friend raised on the last occasion. If there were any question of the rate being different from that which the law would in any event carry as a result of the decisions under existing law, it would be right in my submission to distinguish between cases in respect of which the right of action had already accrued at the date upon which the matter was in question and cases in respect of which the right of action had not accrued. Of course, that would involve a degree of change in the law and that is certainly not something that I would contemplate. I hope that the provision will last for a long time. However, circumstances can change and it is right to make it clear that there is a wide discretion.

I have already spoken to Amendment No. 2. I am certainly anxious to deal with any points which arise upon it either now or when I come formally to move the amendment.

On Question, amendment agreed to.

7.45 p.m.

The Lord Chancellor moved Amendment No. 2: Page 1, line 12, at end insert— ("() An order under subsection (1) above may prescribe different rates of return for different classes of case.").

The noble and learned Lord said: My Lords, I have already spoken to the amendment, but I should remind the House that my moving of this amendment is subject to a correction in that instead of the word "present", the amendment, as set out on the Marshalled List, should read, may prescribe different rates of return for different classes of case". I believe that that error was due to a misprint. I need not, perhaps, further investigate the precise place where it occurred.

Lord Simon of Glaisdale

My Lords, I hope that my noble and learned friend will forgive me if I say that he left me utterly unconvinced that Amendment No. 1 is necessary. Amendment No. 2 is more doubtful, but presumably its purpose is to meet the case. If the Lord Chancellor prescribes different rates of return for different classes of case, as evidently my noble and learned friend envisages from what he just said, would that not be ultra vires, or would it be acceptable? It seems to me to be absolutely incredible that any court could conceivably hold that the Lord Chancellor was going beyond his powers if, in the circumstances that my noble and learned friend described, he prescribed different rates of return in different cases. If so, once again, the amendment is unnecessary.

Among his other multifarious duties, my noble and learned friend is responsible for the state of the statute book. The statute book becomes more and more inflated. The format is enlarged but it soon needs as many volumes as it did before, even in a larger format. It is time that we took some notice of the interests of the user of the statute book and also of the taxpayer who has to pay for printers, ink, secretaries, wordprocessors and all the paraphernalia of publicising an Act of Parliament. Unless it is really necessary to have either of these two amendments—in my respectful submission it is not—they should not be put into this measure.

Then there is the question of what my noble and learned friend says may be a misprint. I rather suspect that the Public Bill Office was unable to read the handwriting of parliamentary counsel. I had that experience, together with parliamentary counsel, on a recent amendment that I submitted. In any event there is on the Marshalled List the word "present" instead of "prescribe". We can only pass the amendment in the form in which it appears on the Marshalled List. If it makes nonsense, my noble and learned friend should withdraw it and submit it in the correct form to the other place.

On the first amendment I said that we were under a duty, when we pass any measure that originates in this House, to see that it goes to the other place in an impeccable condition. That will not be so if Amendment No. 2 is incorporated. Of course if one could make a manuscript amendment on Third Reading, the matter could easily be put right. I have raised the matter on a number of occasions. On the first two occasions, when it caused great inconvenience, I made a submission to the Procedure Committee and got nowhere. As a result I ceased troubling the Procedure Committee or the various people who had to type my documents. It is just another example of how inconvenient this irrational rule is. There are times—on Report or during consideration of Commons amendments—when manuscript amendments can be accepted. On this occasion they cannot. That is highly inconvenient. It is time that the Procedure Committee looked at the matter again.

The Lord Chancellor

My Lords, with regard to Amendment No. 2, the view I have formed is that on the wording of the clause as drafted it is not clear that I would be acting within my powers, therein specified, if I prescribed different rates of return for different classes of case. I understood, in the light of discussion on a previous occasion, that it was highly desirable that that should be made clear. That is why I tabled the amendment.

As regards the point my noble and learned friend made, the notice of amendments is the basic document; that is, amendments to be moved on Third Reading by the Lord Chancellor. Amendment No. 2 states: An order under subsection (1) above may prescribe different rates of return for different classes of case". Therefore my noble and learned friend's diagnosis of the reason for the misprint on the Marshalled List happens, on this occasion, to be incorrect. If it had been my handwriting that was being read I could well understand that a problem might arise. However, that is not the problem in this case.

Lord Simon of Glaisdale

My Lords, I am much obliged to my noble and learned friend for allowing me to intervene. I do not know in what form he will ask us to pass the amendment. Is it with the word "prescribe", and if so how does he get there? Or is it with the word "present" as it appears on the Marshalled List? So far as I know—subject to correction from those who know better—that is the only amendment that can be submitted at this stage.

The Lord Chancellor

My Lords, the amendment I ask your Lordships to pass uses the word "prescribe" because that is the amendment of which I gave notice to be moved on Third Reading. The rules certainly allow the amendment, as notified, to be passed. There is a misprint on the Marshalled List of amendments. However, the actual notice of amendment to be moved on Third Reading uses the word "prescribe". Therefore I submit that I am perfectly in order to move the amendment with that word in place.

Lord Simon of Glaisdale

My Lords, will my noble and learned friend be kind enough to cite the passage in the Companion to the Standing Orders on which he is relying?

Lord Irvine of Lairg

My Lords, is it not the position that Standing Order 46 requires amendments to be tabled in sufficient time to be printed and circulated in the form in which these amendments are to be moved? That was done. There was, however, a printing error but as I understand the position—with the leave of the House—the error can be corrected and obviously should be corrected.

The Lord Chancellor

My Lords, with the leave of the House, what is definitive, for the purposes of the rule to which my noble and learned friend takes objection—I can quite understand why he would like to have manuscript amendments on Third Reading, although the Procedure Committee has not so far agreed with him—is the form in which the amendment was printed and circulated. That is what I am referring to; namely, the list of amendments to be moved on Third Reading by the Lord Chancellor in which Amendment No. 2 uses the word "prescribe". That is what I am asking to give effect to. I have so moved.

The Question is that Amendment No. 2 be agreed to in the form, An order under subsection (1) above may prescribe different rates of return for different classes of case".

Lord Simon of Glaisdale

My Lords, I must protest at the Question being put in that form. The word is "present" not "prescribe".

The Lord Chancellor

My Lords, the amendment I am moving states: Page 1, line 12, at end insert— An order under subsection (1) above may prescribe different rates of return for different classes of case". That is on the circulated list of amendments to be moved on Third Reading by the Lord Chancellor, as printed. The fact that on the Marshalled List, which is before your Lordships, there is a misprint does not preclude my moving the amendment in the form I have intimated in terms of the Standing Order to which the noble Lord, Lord Irvine of Lairg, has referred. Therefore I move the amendment in that form.

On Question, amendment agreed to.

An amendment (privilege) made.

The Lord Chancellor

My Lords, I beg to move that the Bill do now pass. The Bill is of a fairly simple variety intended to facilitate the proper application of the law of damages at present. As your Lordships know, it is based on the work of the Law Commission and I am sure that all of us are grateful for that work.

I thank the noble Lords, Lord Irvine of Lairg, and Lord Meston, for the part that they have played on their respective Benches; my noble and learned friend Lord Ackner and my noble and learned friend Lord Simon of Glaisdale for their participation on a variety of issues in particular in relation to Clause 1; my noble friend Lord Chelmsford for the way in which he explained the concerns of the insurance industry throughout the Bill's passage in a way that I believe we have been able to accommodate; the noble Lord, Lord Mishcon, for amendments to Clauses 5 and 7 which he raised during Committee; and my noble friend Lord Balfour in relation to consideration of Clause 3 as regards Scotland. For all those participations I am grateful. I hope that with your Lordships' expert help on the Bill it may go forward to the other place with reasonable hope of passing into law in due course.

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

8 p.m.

Lord Simon of Glaisdale

My Lords, my noble and learned friend showed quite exceptional charitableness in thanking my noble and learned friend Lord Ackner and myself for our participation. I am afraid that I shall trespass upon his indulgence just a little further on the same point as regards whether it is correct, or permissible, that the Treasury should be consulted on the rate of return when, as my noble and learned friend Lord Ackner pointed out, a government department may be a party to the action.

My noble and learned friend, having raised the matter at Committee and on Report, quite rightly did not table an amendment again, even with a misprint, at Third Reading. However, at this stage we are contemplating the Bill as it stands and as it goes to another place. Perhaps I should say at the outset that it seems to me a valuable Bill and it is a great pity that it should have this blemish.

There are only two possibilities. The first is that my noble and learned friend is entitled to consult the Treasury in the circumstances of Clause 1. If so, the words are unnecessary because, as I ventured to point out, the ordinary machinery of Government provides for constant consultation of that kind, and that has not been controverted. So if my noble and learned friend is entitled to consult the Treasury, and the Treasury is entitled to be consulted, those words are unnecessary. As we mourn over the constant inflation of the statute book, surely we should not neglect any opportunity to pare it somewhat. That is the first possibility.

The second is the point that was argued by my noble and learned friend Lord Ackner: that it is improper for the Treasury to be consulted when it has an interest, or a possible interest, in the matter. That again has not been controverted. Not only should justice be done, but justice should manifestly be seen to be done. If an interested party is consulted, that fundamental rule is set at nought. It is no use to say that the Treasury knows a great deal about these matters; so it does. But it is still an interested party.

With all his wisdom, you do not consult King Solomon if a question of monogamy is at issue. You do not consult any interested party in any matter where his decision may be seen—whether or not with justice—to be liable to be influenced by his interest.

In presuming to give a general blessing to the Bill, I presume once again to draw attention to the great pity that those words are included. The Bill is now going to another place, which I trust will take up that point.

Lord Meston

My Lords, I thank the noble and learned Lord the Lord Chancellor and his officials for the obvious care and attention which has been given to the Bill. The impact of the Bill remains unknown for the reasons that we have been discussing earlier this evening. But it seems to me to have at least considerable potential to give certainty on the question of damages in an area which, as I have already observed, is presently in a state of some uncertainty. Any reduction of uncertainty must be to the benefit of litigants and of insurers.

As regards the point repeatedly and properly raised by the noble and learned Lord, Lord Simon of Glaisdale, it is regrettable that the Treasury as a potential defendant has to be consulted. Nevertheless, whether or not the provision is on the face of the Bill, it seems inevitable that the Treasury will be consulted given the structure of the Bill; and the Treasury, like the Lord Chancellor's Department, will inescapably be a participant in the machinery of the Bill if it becomes enacted. From time to time they will themselves be defendants in personal injury actions. It occurred to me at an earlier stage of the Bill in debate on this point that perhaps I should have declared an interest. I once acted for the Lord Chancellor's Department when it was sued by a lady who had slipped over in a corridor in the Law Courts. The case involved a fascinating comparative analysis of the different types of floor polish used by various government departments. However, the risk of such litigation, or more serious litigation, cannot be a reason for not allowing the Bill to go forward in the form in which it now appears.

The Lord Chancellor

My Lords, I am grateful to the noble Lord, Lord Meston, for pointing out that the Lord Chancellor, who has given the power to make these orders, may from time to time himself have a liability. I do my best to eliminate or minimise such liability, and I shall continue to do so. However, those of us who have potential interests in litigation are perfectly entitled to be consulted. From time to time, I would expect to consult, in addition to Her Majesty's Treasury and the Government Actuary's Department, the potential litigant—insurance companies—those who represent them and those who represent plaintiffs. Obviously one has to be sure that that is done in a proper way and that the matters which the Treasury raise are taken into account in a proper consultation. I should certainly have regard to what my noble and learned friend Lord Ackner said about it on the last occasion. In principle it is right. The issue has been raised and it is particularly important that it should be expressly dealt with in the final form of the Bill.

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

Baroness Trumpington

My Lords, I beg to move that the House do now adjourn during pleasure until 8.30 p.m.

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

[The Sitting was suspended from 8.10 to 8.30 p.m.]

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