Social Security (Recovery of Benefits) Bill [H.L.]

HL Deb 14 January 1997 vol 577 cc110-42

3.31 p.m.

Report received.

Clause 2 [Compensation payments to which this Act applies]:

Earl Russell moved Amendment No. 1: Page 2, line 5, at end insert ("which satisfies the provisions of section 12(3) of this Act"). The noble Earl said: My Lords, I shall speak also to Amendments Nos. 10 and 11, which are grouped with Amendment No. 1 and cover related matters.

We discussed the matter at some length in Committee. Since then I have been attempting to obtain legal advice from a number of quarters. Some of it has reached me within the past hour and some within the past 15 minutes. As I might have expected, I find that the legal advice has led me to the view that the matter is a great deal more complicated than any of us conceived at the last stage of the Bill. In the light of that fact, I wish to begin by asking the Minister to explain the words upon which the amendment purchases in Clause 12(3). It provides that the medical appeal tribunal: must take into account any decision of a court relating to the same, or any similar, issue".

It is those words which created a certain anxiety in my mind and that of the noble Baroness, Lady Hollis, about whether the provision might belong to the same legal family as clauses which appear in other statutes excluding the jurisdiction of the courts.

Obviously, with a medical appeal tribunal the matter is slightly more complex. That is why I wish to begin by asking the Minister to explain the words "take into account". What is the legal meaning of those words? Have they been used in previous legislation? Is there any judicial authority on how they are construed? Are they words as weak as the proverbial "have regard to" in a statute, which means that one can look at something and then ignore it totally, or must the words be given considerable weight?

I turn to the issue of "issue estoppel", of which I believe none of us was aware when we debated the matter in Committee. Issue estoppel is a common law principle under which if a particular issue has been determined in other proceedings it cannot be reviewed again. I apologise for not having given the Minister notice, but I wish to ask him questions which 15 minutes ago I was not aware I intended to ask. How has the issue of issue estoppel normally been treated in the past in proceedings in medical appeal tribunals? Was it past practice that there was an area of specialist medical expertise in which that doctrine was not applied rigorously? Is the practice of issue estoppel to be changed by operation of the Bill, or will it remain exactly as it was previously?

Perhaps I may assist the Minister by pointing out that issue estoppel is the principle which says that although one can try a case one cannot try a particular issue which arises in the case because it has been tried previously. Therefore, some issues which arise in a case may be tried but a particular issue may not. It is, of course, an issue which arises regularly at medical appeal tribunals. The tribunals may look at the medical evidence without wanting to open up the legal issues behind it on which they are inevitably likely to be somewhat less competent than the courts.

Your Lordships will see that this clause takes us into rather difficult and treacherous waters. That means it is of considerable importance to know exactly what is being attempted. If the clause were to restrict further the jurisdiction of the courts I am sure that the Minister will understand why I view it with misgivings. If, in fact, it were not to change matters very much that might be altogether another matter.

With those preliminary observations, and with apologies for having thrown a lot of spanners which have just been thrown at me, I beg to move.

Baroness Hollis of Heigham

My Lords, I rise to support Amendments Nos. 1 and 10 and to speak to Amendment No. 11. We are trying to ensure that the medical appeal tribunal is bound by the finding of the court on the same issue and should take into account the decisions of the court on a similar issue. It matters because without such an amendment two courts—that is, one court and one quasi court—could arrive at different decisions on the same issue. We are trying to ensure that they reach the same decision.

As we said in Committee, a typical case might involve a pre-existing condition, such as a back condition. As the Bill stands the court, which will make the preliminary decision, may well have the experience and guidance of consultants. However, the medical appeal tribunal may be guided only by its doctors, who could be local GPs. Yet the medical appeal tribunal could effectively overrule the court on the basis of weaker and less expert professional judgment. The amendment would stop that happening. I support the noble Earl in saying that, so far as we are aware, there is no other area of law where the decision of one court or surrogate court is not binding on another after findings of fact on the same issue.

We tabled the amendment in Committee when the Minister said that he rejected it because he wanted the option of the medical appeal tribunal being able to arrive at a different decision, not for reasons of equity, justice or consistency but so that the department could recover benefits which the court would not otherwise have allowed it to recover. We thought that that was a statement of very doubtful public probity. When the Minister voiced the argument, we, and I suspect the Minister, were not convinced of its rectitude. Therefore, we have brought the amendment back, first, because, substantively, we believe that the medical appeal tribunal and the courts should respond to the same issue in the same way in order that claimants know where they stand; and, secondly, because in Committee the Minister gave as his reason for rejecting it not grounds of equity, justice or the law but simply that he would have more weapons which the courts of the land would not otherwise have given him with which to recover benefit.

Lord Mackay of Ardbrecknish

My Lords, the amendment deals with Clause 2, but, as I suspected, it has been tabled simply in order to bring Amendments Nos. 10 and 11 into our proceedings earlier than might otherwise have been the case. I do not believe that there is any serious intention to change Clause 2. Just in case there is any such intention, I should say a few words about the effect of Amendment No. 1. Clause 2 of the Bill provides for the compensation payments to which the reformed recovery scheme will apply. The intention is that the provisions of the Bill should apply to all compensation payments made on or after the date that the new scheme comes into force. The exception to that rule will be payments made in pursuance of a court order or agreement made before the date of coming into force. That exception will allow settlement to take place under the terms of the present scheme up until the date that the reformed scheme comes into force.

Amendment No. 1 appears to be an attempt to limit the exceptions that are made to this clause; that is, to limit the types of case which may settle under the terms of the present scheme. The wording of the amendment suggests that the exceptions should only be payments made in pursuance of court orders or agreements made before that day which satisfy the provisions of Section 12(3) of the Act.

I would have found this amendment extremely puzzling had it not dawned on me quite quickly that it was simply a device to ensure that the major issue is debated rather earlier in our proceedings for some reason which, despite burning the midnight oil, I could not for the life of me work out. But it is a puzzling amendment. Clause 12(3) of the Bill relates to the decision-making process for tribunals. It makes it clear that they must take into account any decision of a court relating to the same and similar issues arising in connection with the accident, injury or disease. It does not set out any provisions which court orders or agreements must satisfy. Further, it is in any case difficult to see how any orders made before the date of implementation could possibly satisfy any provisions contained in Clause 12, which will not come into effect until the implementation date. That might mean that no exceptions could be made, even where both victim and compensator had agreed to settle under the terms of the present scheme. I do not believe that that was the noble Earl's intention in putting forward this amendment. I believe that his purpose was to draw into our earlier proceedings Amendments Nos. 10 and 11.

I shall now deal with those amendments. The purpose of Amendment No. 10 is to bind an appeal tribunal to a decision of a court where that decision relates to the same question in respect of the accident, injury or disease. On the face of it, it appears that a lower authority would have the right to reach a decision different from that made by a higher authority. The noble Earl and the noble Baroness wish to tie a tribunal entirely and completely to the decision made in the other court.

Baroness Hollis of Heigham

My Lords, only in the same case should it be taken into account or where it is a similar case.

Lord Mackay of Ardbrecknish

My Lords, I believe that the noble Baroness really means "issue" rather than "case"—the same or similar issues. The noble Baroness's amendment introduces "similar issues", whereas the noble Earl's amendment deals only with "same issues". I shall deal with both of those in turn.

I listened carefully, as I always do, to the debate in Committee. I considered very carefully what had been said. I discussed those matters with my officials and legal advisers and I discovered, as the noble Earl has done, that this is perhaps a rather more complex business than we all considered or thought in Committee.

The noble Earl has raised with me the question of estoppel and how that affects the Bill as it stands. The estoppel principle does not apply because of another legal principle. That other legal principle, which in my halting Latin I shall attempt to explain to your Lordships, is that of res inter alios acta alteri nocere non debet, which is usually abbreviated to res inter alios acta. One or two of your Lordships may require a translation and I am happy to try to explain what it means. It can be translated as: a matter carried out between others ought not to harm another person. It means that a person who was not a party to earlier legal proceedings and therefore did not have the opportunity to give his own evidence or to cross-examine witnesses should not be bound by the decision of the court in later proceedings to which he is a party.

I have attempted to put it more simply and more mathematically by saying that, if a case takes place between A and B, the decisions in that case cannot bind a case between A and C or B and C. In this case, A and B are the victim and the compensator and C the Secretary of State. Therefore, it follows that if an appeal tribunal were bound to follow the decision of the court, the res inter alios acta principle would be compromised. The Secretary of State would not have been heard by the court and any evidence he presented to the appeal tribunal could not affect the decision taken by the court. This means that the Secretary of State would be denied the opportunity to comment on matters of direct interest both to him and to the taxpayer.

The Secretary of State cannot join in proceedings between plaintiff and defendant and it would not be appropriate to change the law to allow him to do so because, quite rightly, the benefit recovery process is not invoked until liability has been established and compensation awarded. If the Secretary of State were given the right to be heard, the department and the court would be embarking on a course of action which could later prove pointless if negligence was not proved. Furthermore, additional costs would have been incurred to no good effect.

I should re-emphasise that Clause 12 of the Bill as drafted does not provide a licence for appeal tribunals to ignore decisions of the courts. Subsection (3) provides that the tribunal must take into account any such decision which relates to the same or any similar issue arising in connection with the accident, injury or disease. If the tribunal does decide in favour of the Secretary of State, it will have to justify that decision. Furthermore, as I made clear in Committee when discussing a similar amendment, it is also important to remember that the decision of a medical appeal tribunal can be the subject of an appeal to a social security commissioner, with leave and on a point of law. If the appeal tribunal has reached a decision which could be seen as novel or unusual, it is entirely possible that leave would be granted. I should add that if the appeal tribunal were to refuse leave, it may be sought direct from the commissioner.

The noble Earl asked me about the words "must take into account", which is the phrase in the Bill. That phrase means simply that the tribunals must evaluate evidence and they must give it due weight. As I have explained, if it is felt that they have not done so, there are procedures in place for appeals against that.

The noble Baroness, Lady Hollis, suggested that the evidence to the tribunal may be weaker than the evidence to the previous court. If that evidence were weaker, as I have said and as the Bill provides, the tribunal must take into account what was decided by the other court. Frankly, one would therefore expect the tribunal to give the appropriate weight to the heavier evidence; that is, the evidence given at the other court. That is the position and I hope that I have answered the points raised about the word "must".

I have explained also why it would be undesirable for a medical appeal tribunal to be bound by the decision of a court on the same issue. The effect of Amendment No. 11 would be to go further and bind a medical appeal tribunal not just to the same decision but to a similar issue as well.

Amendment No. 11 would increase the number of cases going before an appeal tribunal in which the Secretary of State's evidence would have no effect on matters of direct interest to him. Furthermore, in rendering ineffective the Secretary of State's evidence in cases similar to that decided by the court, it could also generate considerable argument over whether the issue in question was similar to that decided by the court or not. One might have two different sets of argument. I believe that that would prove a fertile ground for disputes and increase the number of benefit recovery decisions reaching a commissioner. I believe that continuing the existing arrangements in this area is the right approach. The arrangements strike the right balance. Fewer than 100 recovery of benefit appeals are heard in any given year. Many of them are indeed complex cases and frequently involve court decisions.

A typical situation where the appeal tribunal will differ from the courts is one in which compensation has been awarded on the basis that the court decided that the effect of a particular injury should no longer exist after a certain length of time but where the victim, nevertheless, continues to claim benefit in respect of such effects for some time beyond that date. In such a situation the tribunal may decide that the period during which recoverable benefits have been paid is as specified in the certificate from the Secretary of State and not the period for which compensation has been awarded.

As I indicated, not many cases are involved but they are often complex and unusual. However, they do involve this important legal principle which I am advised takes the lead—I am not sure whether "precedent" is the right word; indeed, I am always cautious when I start using semi-legal phraseology— over the principle which the noble Earl posed to me. As I explained, that principle is that if, in the case of this particular issue, the plaintiff and the defendant are in court, the Secretary of State is not there, has no right to be there and no locus.

However, if a decision is reached at that point and it is subsequently decided to go to an appeal tribunal regarding what is on the certificate, then, in that case, the Secretary of State is a party and it would be the Secretary of State and "A" or the Secretary of State and "B" who would be involved. That is the point of the legal principle which says that that case, which is not the same as the original one because it is not between the same two parties, does not have to take into account or have to abide by the decisions of the other court. With that explanation of what I accept is a legal point, I hope that your Lordships will see the justice of my cause and that the amendment will be withdrawn.

Lord McCarthy

My Lords, before the Minister sits down I would like to raise one further point. The noble Lord introduced the principle of what I might call "third party immunity". However, if I follow the Minister correctly, all the examples put forward have been drawn from this field. My noble friend Lady Hollis asked the Minister whether he could give other examples. Surely such a principle ought to be operating in tax law, in health and safety matters, and so on. If that is the case, can the Minister give further examples?

Lord Mackay of Ardbrecknish

My Lords, it does operate. Indeed, I discussed a similar matter with my officials this morning. As I said, I am always reluctant to get too closely involved in such cases. However, we discussed an interesting criminal case in which the Crown could prosecute and where, perhaps, the case does not go any further or where a not guilty verdict is reached but where the person involved could then sue the person who was the accused. That could actually become a civil case where another decision could be made.

There is another similar case, the details of which I do not have with me. It took place in the late 1940s and was subsequently superseded by a change in statute law to allow for a different circumstance to apply. However, I can assure the noble Lord, Lord McCarthy, that the maxim of res inter alios acta is one of very great duration. It appears in both Roman and canon law and was indeed invoked in common law as early as the reign of Edward II. It prevails to this day as an important point of principle. The noble Baroness may laugh at that if she wishes, but, as I understand it, the importance of English common law is that it does have a very long and distinguished history. We must therefore be careful before we turn it over. However, the Secretary of State, who has some interest as, indeed, does the taxpayer, in such issues, is not a party to the original decision between the defendant and the plaintiff. Therefore, as I said, he has no locus to be there and I do not believe that either I or your Lordships would want him to be there because it would complicate the issue. This could be a subsequent decision which may be made in a dispute between one of the parties and the Secretary of State. In that case, this common law principle is the one which I believe we should abide by.

Earl Russell

My Lords, I must apologise to the Minister for the quality of my paving. I regret to say that it is the sort of paving that I have come to find familiar since the period of Conservative Government began. It is the usual principle: there is no such thing as a free tax cut. But paving it is, however crazed it may be; and, as paving, the Minister justly recognised it.

I thank the Minister for a particularly lucid exposition of an extremely complex problem. Whether or not it is a complete exposition is a question which I believe is worthy of further thought. The principle of res inter alios acta is of course vital. It links with the principle that one may not have a judgment against one when unheard. The two principles are in fact logically connected, but I do not believe that the application of that principle is quite as simple as the Minister suggested.

We are dealing here with a medical appeal tribunal. The Minister is right to say that in the previous damages case, with which we are dealing as regards the recovery of benefit, the Secretary of State will not have been a party. So the Secretary of State may benefit from the principle of res inter alios acta. That is exactly as the Minister expounded it, and I go with him all the way in that respect. But, in a case before the medical appeal tribunal, we have an issue between the claimant and the Secretary of State to which the compensator is not a party, even though the amount of damages that the compensator may have to pay to cover recoupment of benefit may be very materially altered by the finding of that tribunal. Therefore, after the conclusion of the medical appeal tribunal, will not the compensator be able to claim the principle of res inter alios acta and take the matter on a stage further? Has not the Minister set up a merry-go-round from which there is no coming off?

Lord Mackay of Ardbrecknish

My Lords, perhaps I may interrupt in order to assist the noble Earl. The compensator can in fact be a party to the appeal.

Earl Russell

My Lords, I hoped that I would hear that answer; indeed, I am very glad that I have. I thank the Minister warmly. However, there are one or two other related problems. In criminal and civil cases different standards of proof apply. Where there is a criminal injury involved that may be relevant and it might lead to different verdicts. Where we have a court judgment that someone is entitled to benefit because of an injury over a certain period of time and the person remains unfit to work, that person is still entitled to benefit if he is physically unfit to work even if that is no longer ruled to be the consequence of the accident. If one is injured and the injury is then capped by the effect of ageing, one may remain unfit. I am sure that the Minister has not forgotten all the debate about hearing and war pensions which is the same principle. So there is a further complication involved. I am not satisfied that we have got it right, but we may do better with it outside the Chamber than within it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 ["The relevant period"]:

Baroness Hollis of Heigham moved Amendment No. 2: Page 2, line 11, at end insert ("or the disease in question was first diagnosed").

The noble Baroness said: My Lords, in moving the amendment I shall speak also to Amendment No. 3. As the Bill stands, the rules governing the recoupment of benefit if one suffers from injury are treated differently from those regarding people who are suffering from a disease. In Committee we tried to persuade the Minister that, so far as concerns benefit recoupment, disease and injury should be treated in the same way; in other words, from when the disease was first diagnosed or the injury occurred and not from when the first claim was made on benefit.

Although I believe that the Minister raised an eyebrow at the time, we argued in Committee that it was not difficult to treat disease in that way because the GP's initial diagnosis is a perfectly sensible method of dating from when the clock begins to tick. The Government did not accept our amendment, although the Minister was kind enough to follow it up with an explanatory letter. However, I have to say that the Minister's efforts of explanation persuaded neither our advisers nor myself. Indeed, I suspect that they may not have entirely persuaded the Minister. So we now revisit the topic.

The heart of the issue is that the Government are drawing a distinction between disease and injury which the more one examines it the less clear it becomes. On Second Reading, the noble Earl, Lord Russell, asked whether radiation poisoning was a disease or an injury because the heading under which it falls affects how one's benefit recoupment comes into play.

At Committee stage I talked about gluteraldhyde, a sterilising chemical, exposure to which can cause severe asthma type disease. We have considered this matter further and discovered a whole array of other such incidents. We would like the Minister to give us a steer as to whether these count as diseases or injuries. For example, there is a whole array of diseases which can be caused by a one-off exposure to a hazard, or a short series of distinct exposures to hazards. In the case of HIV or hepatitis A and B, these blood-borne diseases can be caught from a one-off exposure. Particularly at risk are those involved in the medical profession, for example a nurse or a dentist. Is that a disease or an injury?

Weil's disease can be contracted by a single exposure to contaminated water. At risk are those in the water industry, including sewerage workers, as the disease is spread by rats. Is that a disease or an injury? Dermatitis can be caused by exposure to a variety of sensitising agents. It can certainly be caused by working with certain oils in machinery after a short time. Is that a disease or an injury?

The psychiatric illness of post-traumatic stress disorder by definition can be caused only by a "trigger" event, a one-off psychologically damaging experience such as, alas, the King's Cross fire, the Zeebrugge ferry disaster, or the Hillsborough football disaster. Is that a disease or an injury?

Platinum allergy can be suffered by workers in the precious metal industry. A one-off exposure can cause lifetime sensitisation to platinum. Is that a disease or an injury? In the agricultural industry, one bite from a sheep tick can cause permanent illness. Legionnaire's disease can be contracted from infected water, or from airborne bacteria in faulty air conditioning. Recently in this House we have had many discussions on organo-phosphate poisoning and the effect it has had on our troops, possibly as a result of a one-off exposure. The consequence was a disease.

No doubt we could go on and on, but I hope that I have produced enough evidence to show that the distinction the Minister seeks to draw in the law between disease and injury does not in practice hold for a large swathe of cases which will come within the framework of this Bill. It would, therefore, be fairer to administer, as well as fairer for the claimant, if disease and injury were treated in the same way; that is, when the disease is first diagnosed the clock begins to tick in much the same way as when an injury first occurs. I beg to move.

Earl Russell

My Lords, the noble Baroness has said almost everything I intended to say. I shall not gild her lily. I shall merely ask the Minister whether the Government introduced this clause as a form of subsidy to the legal profession.

4 p.m.

Lord Mackay of Ardbrecknish

My Lords, I am not sure whether I shall attempt to answer the noble Earl's point. I sometimes think that all the laws we pass in this House, good, bad or indifferent, have as their underlying raison d'être that they will act as a benefit to the legal profession. I very much doubt whether this one will be any different from all the others. However, on a more serious note, Clause 3 defines the period during which benefits, paid in consequence of an accident, injury or disease for which compensation is claimed, may be recovered.

Subsection (2) of the clause provides for the relevant period in cases of accident or injury, and subsection (3) provides for the relevant period in cases of disease. In cases of disease, unless a settlement is reached beforehand, the relevant period ends five years after the day on which the claimant first claims a listed benefit in consequence of the disease. In accident cases, the period runs from the day of the accident. In virtually all accident cases the benefit will run from the date of the accident, for obvious reasons.

We discussed amendments very similar to those now proposed at Committee stage. These amendments would change the relevant period in disease cases so that—as the noble Baroness explained—it would be counted not from the date of claim but from the date of diagnosis of the disease. A series of arguments has been put forward in Committee and again today in favour of amending the scheme in this way. I remain unconvinced by those arguments. I hope I have explained to your Lordships why that is so.

First, there is the argument that it can be difficult to distinguish in certain cases between what is an accident and what is a disease. The noble Baroness gave a number of examples. She referred, for example, to cases of exposure to toxic chemicals. I believe she over-estimated the number of incidents as she became carried away with the different kinds of examples she thought up. I am sure that even the noble Baroness would appreciate that the cases she listed form a small portion of the total number of claims. I accept that there may be some occasions when it is difficult to decide whether certain cases constitute accidents or diseases, but they are rare. The argument of the noble Baroness is that recovery in accident and disease cases should be treated in as equitable a way as possible, so that the difficulty of distinguishing between accidents and diseases should not adversely affect the amount of benefits recovered to the detriment of the victim. I do not dispute that either. However, I believe that we already have such an equitable arrangement in place, and that the changes proposed in these amendments to the period of recovery would worsen the position rather than improve it.

If the noble Baroness did not agree that the position we have outlined in the Bill is equitable, and the Opposition were interested in equity, they would propose an amendment that in both accident and disease cases the period of recovery should run from the first date of claim for benefit; in other words, tie in the position for accidents with that for diseases. That would be equitable. However, the Opposition have not chosen to do that.

Under the definitions used in the present scheme for both accident and disease cases, the benefits recovered are only those claimed in consequence of the same injury for which compensation is also claimed. That is something we must bear in mind. Perhaps I should have mentioned it in the previous discussion. The medical tribunal could only consider benefits claimed as a consequence of the accident or disease. However, in the majority of cases, compensation will be payable for the same period in which benefits have been paid. The definitions for the period of recovery the department uses are an attempt to capture only the benefits which may overlap with compensation. We have absolutely no intention of going any further than that. Using the date of diagnosis could produce inequities whether the diagnosis takes place before or after the date of claim for a recoverable benefit.

If the date of diagnosis was used to determine the relevant period in disease cases it would result in the following effect. Consider two cases where benefit was still in payment after five years. In a case where the date of diagnosis preceded the date of claim, the relevant period for recovery of benefits would include a period during which no benefit had been paid at all. This would produce disparity of treatment with an accident case where the claim for benefit will ordinarily have been made very soon after the accident occurred. In such cases the relevant period would not end until benefits had been in payment for a full five years. This disparity does not exist under the current scheme, nor will it exist under the scheme I propose.

On the other hand, in cases where the date of diagnosis took place after the date of claim for a relevant benefit, double compensation would result. This is because the department would not be able to recover benefits paid for a period for which compensation would normally have been claimed. The Select Committee made it clear that the prevention of double compensation is the reason for the existence of the policy of benefit recovery.

As your Lordships know, the central premise of the reformed scheme is that compensation may only be reduced on account of benefits paid in respect of the same need. Therefore benefit recovery should not result in anything more than the prevention of double compensation. I believe that the amendment would infringe that basic principle of the scheme.

Those principles apply equally to both accident and disease cases. I do not see that changing the definition for the period of recovery in disease cases could do anything other than create a gap between the treatment of accident and disease cases—preventing double compensation in the first case and allowing double compensation in the latter. I therefore believe that the amendments should be rejected.

Baroness Hollis of Heigham

My Lords, I am disappointed by the Minister's reply. I accept that most of the cases that will be considered for recoupment of benefit are likely to be disease cases and that, therefore, the overlap is a small proportion. However, it is a quite significant and substantial proportion of the injury cases. The Minister has not addressed the issue as to what happens when one is dealing with some of the examples that I gave—I referred to HIV cases, and so on—where, because it is difficult to label them as either disease or injury, the appropriate method of recoupment involved is unclear. Does the Minister wish to help us? What guidance will his department give to, say, medical appeal tribunal doctors?

Lord Mackay of Ardbrecknish

My Lords, this is Report stage. With the leave of your Lordships I shall respond briefly to the noble Baroness. As I think I have indicated on a number of occasions, it is difficult on the Floor of the House in theoretical cases to try to put oneself in the position of the people who will have to decide these issues—the compensator, the plaintiff and perhaps ultimately the courts. It is quite hard, and wrong, for Ministers at the Dispatch Box to make judgment on these issues. They are matters for the parties involved and ultimately the courts.

Baroness Hollis of Heigham

My Lords, if that is not a fudge, I do not know what is. The Minister says that he does not know and he will get rid of the issues by calling them theoretical. They are not. I cited to the Minister well testified test cases many of which are familiar to noble Lords from their own experiences. Those cases do not fall tidily into the category of injury or disease on which the Minister's case rests.

The Minister has set up a parallel path system. What happens to those clusters of examples—I gave a quite substantial number of injury cases—which do not fall tidily into either category and therefore confound his parallel path? What will happen to people in those cases? I imagine that lawyers will try to argue that it is either a disease or an injury according to whichever produces the most advantageous situation as regards benefit compensation recovery. That seems to me an undesirable position in which to leave the law. I believe that the Minister wishes again to intervene.

Lord Mackay of Ardbrecknish

My Lords, I believe that the noble Baroness pursues a total red herring which her amendments do not address. The question as to whether it is an injury or a disease is unanswered by her amendment also, if she states that it is unanswered by the Bill. There is no definition. She attempts to put, as she believes, some equity between the two. I have suggested to your Lordships, I believe successfully, that the noble Baroness would be putting inequity between the two. If she really wants equity between the two, she will run both from the date at which benefit starts. That would put equity between the two and would make the situation perfectly clear.

I believe that we have a reasonably equitable position. The questions posed by the noble Baroness are not addressed in her amendments.

Baroness Hollis of Heigham

My Lords, my amendments do not seek to make a distinction between disease and injury. If the amendments are accepted, there is no need to make that distinction between an injury and a disease because they will be treated in the same way. That is what I seek. If the Minister persists in seeking to make a distinction between injury and disease he has to answer my question: how does he label those categories? If he accepts my amendment, he does not have to go down that perilous path because injury and disease will be treated in the same way.

The Minister responds by asking why we do not date them both from the same date. The Minister wishes to intervene again.

Lord Mackay of Ardbrecknish

My Lords, the noble Baroness tempts me into a Committee stage, as she does frequently. If she does not want that, I shall resist doing so for the remainder of the day. Perhaps I may say this to her again at the risk of repeating the arguments. She is making a more significant difference. I believe that what I am doing is equitable. The key point is when the benefit starts. In injury cases the benefits will by and large start when the injury occurs or shortly thereafter. Disease can be diagnosed years before or indeed after benefit starts. In both cases the noble Baroness's amendment would be inequitable because either no compensation would be recovered or there would be a double compensation payment. Neither would be fair and equitable. If the noble Baroness wishes to pursue her argument, the only fair and equitable provision is for both to start on benefit being paid.

Baroness Hollis of Heigham

My Lords, I am unpersuaded by the Minister's reply. I wish to test the opinion of the House.

4.15 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 90; Not-Contents, 147.

Division No. 1
CONTENTS
Acton, L.	McIntosh of Haringey, L.
Addington, L.	Mackie of Benshie, L.
Allen of Abbeydale, L.	McNair, L.
Archer of Sandwell, L.	McNally, L.
Ashley of Stoke, L.	Mar and Kellie, E.
Beaumont of Whitley, L.	Marsh, L.
Borrie, L.	Mason of Bamsley, L.
Brooks of Tremorfa, L.	Merlyn-Rees, L.
Bruce of Donington, L.	Meston, L.
Callaghan of Cardiff, L.	Milner of Leeds, L.
Carmichael of Kelvingrove, L.	Monkswell, L.
Carter, L.	Morris of Castle Morris, L.
Cocks of Hartcliffe, L.	Murray of Epping Forest, L.
Craig of Radley, L.	Nicol, B.
Currie of Marylebone, L.	Peston, L.
David, B.	Plant of Highfield, L.
Dean of Thornton-le-Fylde, B.	Ramsay of Cartvale, B.
Desai, L.	Redesdale, L.
Donoughue, L.	Richard, L.
Dormand of Easington, L.	Rochester, L.
Dubs, L.	Russell, E. [Teller.]
Ezra, L.	Sainsbury, L.
Falkland, V.	Serota, B.
Farrington of Ribbleton, B.	Sewel, L.
Gallacher, L.	Simon, V.
Geraint, L.	Smith of Gilmorehill, B.
Gladwin of Clee, L.	Stallard, L.
Glenamara, L.	Stoddart of Swindon, L.
Graham of Edmonton, L. [Teller.]	Strabolgi, L.
Harris of Greenwich, L.	Symons of Vemham Dean, B.
Haskel, L.	Taveme, L.
Henderson of Brompton, L.	Taylor of Blackburn, L.
Hilton of Eggardon, B.	Taylor of Gryfe, L.
Hollis of Heigham, B.	Thomas of Walliswood, B.
Hooson, L.	Thomson of Monifieth, L.
Howie of Troon, L.	Thurso, V.
Hughes, L.	Tope, L.
Jay of Paddington, B.	Tordoff, L.
Jeger, B.	Turner of Camden, B.
Jenkins of Hillhead, L.	Wamock, B.
Jenkins of Putney, L.	Whitty, L.
Kilbracken, L.	Wigoder,L.
Kirkhill, L.	Williams of Elvel, L.
Lovell-Davis, L.	Williams of Mostyn, L.
McCarthy, L.	Winston, L.

NOT-CONTENTS
Addison, V.	Cadman, L.
Ailsa, M.	Campbell of Alloway, L.
Aldington, L.	Campbell of Croy, L.
Alexander of Tunis, E.	Camegy of Lour, B.
Allenby of Megiddo, V.	Chalker of Wallasey, B.
Anelay of St. Johns, B.	Charteris of Amisfield, L.
Arran, E.	Chesham, L. [Teller.]
Ashboume, L.	Chorley, L.
Astor of Hever, L.	Clanwilliam, E.
Belhaven and Stenton, L.	Clark of Kempston, L.
Berners, B.	Cochrane of Cults, L.
Blatch, B.	Courtown, E.
Boyd-Carpenter, L.	Cranbome, V. [Lord Privy Seal.]
Brabazon of Tara, L.	Crickhowell, L.
Braine of Wheatley, L.	Cuckney, L.
Brookeborough, V.	Cumberlege, B.
Bruntisfield, L.	Davidson, V.
Butterworth, L.	Dean of Harptree, L.
Byford, B.	Denbigh, E.

Denham, L.	Monk Bretton, L.
Denman, L.	Montgomery of Alamein, V.
Dixon-Smith, L.	Munster, E.
Donegall, M.	Murton of Lindisfame, L.
Downshire, M.	Nelson, E.
Elles, B.	Noel-Buxton, L.
Elliott of Morpeth, L.	Northesk, E.
Elton, L.	Orkney, E.
Eme, E.	Orr-Ewing, L.
Exmouth, V.	Oxfuird, V.
Ferrers, E.	Park of Monmouth, B.
Flather, B.	Pearson of Rannoch, L.
Fraser of Carmyllie, L.	Pender, L.
Gainford, L.	Perry of Southwark, B.
Geddes, L.	Pilkington of Oxenford, L.
Glentoran, L.	Platt of Writtle, B.
Goschen, V.	Pym, L.
Gray of Contin, L.	Quinton, L.
Greenway, L.	Rawlinson of Ewell, L.
Harding of Petherton, L.	Reay, L.
Harlech, L.	Renfrew of Kaimsthorn, L.
Harmar-Nicholls, L.	Renton, L.
Harris of Peckham, L.	Romney, E.
Hayhoe, L.	Rotherwick, L.
Henley, L.	St. Davids, V.
Holderness, L.	St. John of Fawsley, L.
Home, E.	Saltoun of Abemethy, Ly.
Hothfield, L.	Sanderson of Bowden, L.
Howe, E.	Sandford, L.
Ilchester, E.	Seccombe, B.
IlChester, E.	Sharples, B.
Inchyra, L.	Shaw ofNorthstead, L.
Inglewood, L.	Shrewsbury, E.
Ironside, L.	Simon of Glaisdale, L.
Johnston of Rockport, L.	Skelmeredale, L.
Kimball, L.	Soulsby of Swaffham Prior, L.
Kintore, E.	Spens, L.
Knollys, V.	Stanley of Alderley, L.
Lane of Horsell, L.	Stodart of Leaston, L.
Lauderdale, E.	Strange, B.
Leigh, L.	Strathcarron, L.
Luidsay, E.	Strathclyde, L. [Telle r.]
Liverpool, E.	Sudeley, L.
Long, V.	Swansea, L.
Lucas, L.	Swinfen, L.
Luke, L.	Taylor of Warwick, L.
Lyell, L.	Teviot, L.
McConnell, L.	Thomas of Gwydir, L.
Mackay of Ardbrecknish, L.	Trefgame, L.
Mackay of Drumadoon, L.	Trumpington, B.
Malmesbury, E.	Vivian, L.
Marlesford, L.	Wade of Chorlton, L.
Mersey, V.	Wilcox, B.
Miller of Hendon, B.	Wilson of Tillyom, L.
Milverton, L.	Wise, L.

On Question, Motion agreed to.

4.25 p.m.

[Amendment No. 3 not moved.]

Clause 4 [Applications for certificates of recoverable benefits]:

Lord Mackay of Ardbrecknish moved Amendment No. 4: Page 2, line 39, at end insert— ("() The compensator may apply for fresh certificates from time to time.").

The noble Lord said: My Lords, in moving this amendment, perhaps I may also speak to Amendment No. 5. Clause 4 relates to applications for and the issue of certificates of recoverable benefit. Amendments Nos. 4 and 5 will change the wording of subsection (5) of Clause 4 to remove any doubts surrounding the Secretary of State's obligation to issue a certificate on request. Amendment No. 4 inserts a new subsection into Clause 4 to make it clear that, The compensator may apply for fresh certificates from time to time".

Amendment No. 5 removes from subsection (5) the statement that the Secretary of State may issue a fresh certificate, on an application by the person who applied for the previous certificate", which, in the light of Amendment No. 4, is no longer required.

The amendments are intended to meet the concern raised by the noble Baroness, Lady Turner, at Committee stage that in this context the word "may" could have led to some uncertainty about the requirement placed on the Secretary of State to issue certificates as set out in subsection (2) of Clause 4.I hope that the noble Baroness will see that the amendments offer a positive response to her concern, and I am sure that the House will support them.

Lord McCarthy

My Lords, we thank the Minister for agreeing to this change. It is an improvement to the Bill.

On Question, amendment agreed to.

Lord Mackay of Ardbrecknish moved Amendment No. 5: Page 2, line 41, leave out from ("certificate") to ("being") in line 1 on page 3 and insert ("without an application for one").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 4.I beg to move.

Lord McCarthy moved Amendment No. 6: Page 3, leave out lines 8 and 9 and insert ("and the fresh certificate shall replace any existing certificate in force").

The noble Lord said: My Lords, we hope that the Minister will agree with us on this occasion too. Clause 4 deals with the rules for the compensator to obtain a certificate. In particular it deals with the situation where the compensator applies for a fresh certificate when the old certificate is still in force.

As we have stated, what we have against the Bill as it stands is that the Secretary of State is bound to issue a new certificate within a prescribed period. We do not like the way that that is spelt out on the face of the Bill; namely, the prescribed period and, secondly, the period stated for a situation where he fails to prescribe. In the second circumstance we do not have a prescribed period; however, the Bill goes on to say that the second situation will apply in the four weeks beginning on the day after the certificate lapses. We feel that that will lead to what we previously termed the problem of hiatus in that there can be four weeks in which there is no valid certificate and therefore no settlement. We therefore wish to amend the Bill so that the relevant part of the text reads, the period of four weeks", and, the fresh certificate shall replace any existing certificate in force".

We consider that that will do away with the hiatus and enable there to be a settlement at any point. I beg to move.

Lord Mackay of Ardbrecknish

My Lords, under the present scheme no application for a fresh certificate may be made until the existing certificate ceases to be in force. Clause 4 of the Bill has already been amended to allow for replacement certificates to be requested before the expiry of existing certificates. The noble Lord, Lord McCarthy, indicated his agreement to this and I believe it is an improvement on the present position.

The amendment we are discussing would go further. It would require the compensation recovery unit to issue replacement certificates before the existing certificates had expired. Once the replacement had been issued it would revoke the certificate already in force.

I have some sympathy with the concerns expressed about the difficulties which can arise through a gap between two certificates. I fully appreciate that, but although the amendment may appear logical and desirable, it could create some potential problems which I wish to set out.

One difficulty that might arise is that if we change the procedure there could be a lack of clarity about the amount of benefits to be repaid if two certificates were in existence at the same time covering the same period. The noble Lord's amendment seeks to deal with the difficulty by making the second certificate take legal precedence over the first. However, that would not solve the problem where the negotiating parties had not received the subsequent certificate but had decided in the meantime to settle on the basis of the previous one. That could happen quite easily where a compensator was requesting certificates at set intervals. A subsequent certificate could be in the post while settlement was being reached on the basis of the earlier certificate. In such a situation the settlement might need to be reopened to reflect the contents of the later certificate. That would present particular problems in a case where an award was made by a court in the light of what turned out to be an invalid certificate, although plainly the problem would not be confined to cases that had reached court. So the creation of overlapping certificates would cause difficulties.

Where difficulties would arise through a gap between certificates, which is the problem the noble Lord, Lord McCarthy, wishes to address—I do not believe that he is concerned about the overlapping point—I can assure the House that the compensation recovery unit already operates a "fastpath" procedure. It will make every effort to provide certificates urgently where there is a genuine need for one. That has on occasion included faxing certificates to courts where necessary so that victims and defendants have the correct documents to hand. I emphasise, as I did in Committee—and I do not believe I heard anyone dispute it—that there is general satisfaction with the service provided by the compensation recovery unit. That is certainly the impression that was conveyed to the Social Security Select Committee in another place during its inquiry into the existing scheme. If we have administrative arrangements that work well, it seems unnecessary to encumber the statute book with excessive detail on how those arrangements should operate, especially when problems could arise in some cases with overlapping certificates, a newly issued certificate being already on its way when a case was being settled on the basis of the old certificate.

I understand the problem and I do not wish to be too unhelpful. I would be prepared to ensure that all practitioners in the field were consulted, as they frequently are, on whether there are any operational improvements they would like to see which could reduce gaps in certificates still further. As I indicated, all the evidence I have is that the "fastpath" procedure prevents gaps occurring and we do not need any statutory provision.

I hope that the noble Lord, Lord McCarthy, will feel that my response has been constructive on the question of gaps. In the light of my explanation and the assurance that if, in all the discussions we have and will continue to have with the practitioners, any problems occur we will try to ensure that we deal with them administratively, I hope that the noble Lord will withdraw his amendment.

Lord McCarthy

My Lords, I thank the Minister. There is still Third Reading for us to persuade him further, as we did just now. I do not know who the people are who apply for new certificates but do not know that negotiations are going on. As I understand it, in the model the claimant or the claimant's representative and the compensator's representative are negotiating. Someone applies for a new certificate, whoever it is, but the people negotiating do not know, so they reach a settlement. Then, when they go home, they say, "It's no good, there's a new certificate." I should have thought that they would know perfectly well that there would be a new certificate. Anyway, if they forgot they could always take it into account and renegotiate the settlement. I can see no difficulty. However, no doubt we can return to the matter at Third Reading. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.30 p.m.

Clause 6 [Liability to pay Secretary of State amount of benefits]:

Baroness Turner of Camden moved Amendment No. 7: Page 3, line 44, at end insert— ("() Subsection (2) shall not apply to an interim payment or payments paid before the final settlement of the claim which is, or where more than one interim payment has been made are in total, below an amount or amounts specified in regulations made pursuant to this subsection.").

The noble Baroness said: My Lords, I am raising again, as I did in Committee, the whole issue of interim payments. As I said then, it can be quite a difficult issue. Often in the case of personal injury it is not possible to make an accurate assessment of future disability immediately, perhaps for some time until the condition has settled down. In such circumstances, it is quite usual for those representing the injured employee, in the case of industrial injury, to attempt to negotiate an interim payment. Of course, that is beneficial and normally to the advantage of the injured person.

It has become the practice, however, for insurers to require the interim payment to be allocated to special rather than general damages. Interest rates on special damages are higher than for general damages. Thus, by making an interim payment allocated to special damages, the insurer can potentially save money on the final settlement. The original recoupment provisions added the complication that any interim payment had not only to deal with the needs of the accident victim but also any recoupment incurred to date. That meant that an interim payment might have to be applied for in a much larger sum than might otherwise have been the case.

In smaller cases, as was explained in Committee, this would not have been much of a problem because under the old system which the present Bill seeks to replace there was a small payments limit of £2,500. There seems to be general agreement that the limit should go because it has been capable of manipulation in settlements in a way that was not originally intended. However, I still think that that leaves us with the problem of interim payments.

The Minister's response last time round was that it would be up to the victim's representatives to negotiate a payment with the provisions of Clause 8 in mind. He said that he appreciated that they would perhaps rather not have to negotiate an interim payment with recovery in mind, but he did not see any alternative if the taxpayer is properly to be protected.

While we understand that argument, we are nevertheless concerned to protect the interests of the person who has had the accident. It may well have occurred through no fault of the victim. Indeed, that is probably the case in situations in which compensation is being paid under an employers' liability policy. We have thought seriously about the problem again. The amendment has been drafted carefully, as last time, to allow the Minister to introduce regulations after appropriate consultations which would specify the amount below which recovery could not be triggered. I had the clear impression last time that the Minister, while not accepting our amendment, nevertheless acknowledged that there was a problem. I hope, therefore, that in the intervening period since the Committee stage, he has been able to look at the matter again and that this time he will be more favourably disposed towards our amendment. I beg to move.

Earl Russell

My Lords, one of the crucial points behind the amendment is that general and special damages pay interest at a different rate. Therefore, the amount to be recovered under them will be different. The key point to which we shall return on the next amendment is that, to agree to a settlement, the claimant needs to know what he is actually getting. The amendment is vital to achieving that end. If it is not achieved, the amount of litigation will increase in a most unwelcome way to all parties concerned.

Lord Mackay of Ardbrecknish

My Lords, as the noble Baroness, Lady Turner, explained, the amendment would exempt interim payments from benefit recovery where the total fell below a prescribed limit. As she indicated, we had a debate on an identical amendment at Committee stage. I had rather hoped that I had persuaded her that the situation should be left as it is in the Bill. However, it has been suggested again that the amendment is necessary to protect interim payments provided to victims to meet their immediate needs.

The principle behind all this is that compensation may only be reduced in respect of benefits already paid to the victim in respect of the same needs and that, of course, also applies to recovery made from interim payments. So an interim payment with no direct parallel within the social security system, such as a payment towards the cost of an operation, could not be made the subject of a reduction. I was sympathetic on that point and happy to give that clear assurance. Reductions can only be made where the victim received public funds to meet the same need for which compensation is claimed. For example, if a victim is offered an interim payment in respect of income lost because of his injury, that payment would be reduced in respect of benefits already paid during the same period to meet the same need. I cannot see anything objectionable about that. The victim will have received benefits since the injury. If he requires any further payment for past earning loss, the compensator will need to make payments covering both sums, and that seems only right and proper.

It was suggested that insurers allocate interim payments to special damages which are paid in respect of pecuniary loss rather than general damages, which include those for pain and suffering, because of the preferential interest rates attached to those damages. I do not approve of attempts to avoid costs by disguising the true reason for making a payment. If such manipulation is taking place, it would be better to address the issue directly rather than change the benefit recovery process in order to mitigate the problem. Indeed, my noble and learned clansman the Lord Chancellor agreed to consider the issues involved.

If we turn to the amendment as proposed, our experience of the way in which the small payments limit has been manipulated under the present scheme—I do not believe there is any disagreement between us on that issue—suggests that public funds would be put at risk if we introduced a similar limit and applied that to interim payments. Of course, it would theoretically be possible to introduce a limit at such a low level that manipulation became almost impossible. However, that would make an interim payment made within such a limit all but valueless to the victim.

We should not repeat the problem of the small payments limit that we have in the existing scheme, and which we are attempting to get away from, by putting a small payments limit on any interim payment; that would be a mistake. Equally, it is right that when the two parties are considering any interim payment and where that interim payment has anything to do with income loss—if it is not to do with income loss, if it concerns pain and suffering or is for a specific purpose for which no benefit has been paid, the repayment of benefit does not come into it—it is right that the two parties take into account the fact that benefit recovery may take place as well. When they come to an agreement about an interim payment in those circumstances, they can take that into account and the compensator can pay whatever it is to the compensation recovery unit and still pay to the plaintiff whatever sum of money the plaintiff was seeking for his income loss other than the benefit that he has been paid.

I hope that I have explained the issue to the noble Baroness and managed to assure her that under the new legislation there will be no question of any payment made of an interim nature—for example, for an operation or for pain and suffering—being drawn back in benefit recovery. It will only be where the payments being made are to do with income loss. Both parties will be well aware of that potential drawing down of the money and will therefore adjust the interim payment accordingly.

Baroness Turner of Camden

My Lords, I thank the Minister for that response, though I am not entirely convinced by it. What bothers me is that, as a result of the new legislation, there may be some impetus not to negotiate interim payments at all. That would be a pity because in many instances interim payments are of great value to the injured employee and we would not want to do anything which would inhibit such arrangements.

Moreover, although there is concern about special and general damages, I suspect that insurers do not regard it as manipulation to allocate money to specials; they regard it as legitimate, probably with a view to reducing the interest burden. I suspect we shall still see that happening with the new arrangements.

I note that the Minister says that it is only intended to deal with income loss. He is again concerned with the possibility that there may be double compensation. I do not share those concerns. When we discussed this matter originally I expressed the view that the whole argument in relation to double compensation was one that could be rather unfair to the individual who had been injured, and that is still my position. However, I do not intend to press the issue to a vote at this stage. I shall think about it again between now and Third Reading.

I am not altogether satisfied with what we have been told this afternoon. It presents some problems, particularly for people who have to represent those individuals who have been injured at work. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 8 [Reduction of compensation payment]:

4.45 p.m.

Lord McCarthy moved Amendment No. 8: Page 5, line 25, at end insert— ("() A person who makes an offer of a compensation payment (whether by payment into court or otherwise) shall state whether that compensation payment has been calculated in accordance with this section and, if so, the amount allowed in the offer for each head of compensation listed in column 1 of Schedule 2 and the amount of each recoverable benefit which has been deducted from each of those heads of compensation.").

The noble Lord said: My Lords, we return to a subject that we have debated throughout the passage of the Bill. In moving Amendment No. 8 I shall speak also to Amendment No. 9, in which the noble Earl, Lord Russell, is trying to do the same as many others have tried to do with different forms of words at different stages. We have not yet made much ground.

It may help if I say in simple terms what we take to be the central issue; that is, that in this area there should be equal rights for the compensator and the victim. Every right of access and information flow which goes to one should go to the other. Knowledge is power. It is not right and it is not seen to be right if one of the parties to a dispute of this kind has more access to information in a preferential way than the other party. That is our belief.

The second cause we are trying to advance is that it is better to settle matters in knowledge than in ignorance. On the whole, people will obtain more justice and be more satisfied with that justice if they have all the facts before them when the decision is made and they resolve what they want to do. We have tried in successive amendments to embody those two principles but the Government have not accepted them. This amendment seeks to break down the compensation into various headings so that the parties know how much compensation is for pain and how much for suffering. In particular, we want them to know how much they will have to pay back in terms of benefits received.

The noble Viscount, Lord Chelmsford, told us that in the real world people do not want those things. They would rather act in ignorance; they go in for aggregates and in that way avoid court settlements. Perhaps they do; but it is not right that the victims should not have access to the information if they want it and if they want to break that practice. The Minister said that that is the way the real world works.

The Minister wrote to me. I thank him for the letter and want to say a word about it. The Minister did three things in that letter: first, he made an admission; secondly, he offered us some comfort; and, thirdly, he gave us a warning. None of those things leads us to feel that we should not press the amendment. The Minister admitted in the letter that there may be a conflict of interest; indeed, he said that in Committee. It might be explicable that the Association of British Insurers favoured ignorance and non-specification and that the Association of Personal Injury Lawyers and their clients favoured knowledge, information and specificity because it was felt that they would do better, and there was a conflict of interest. But we say that if there is a conflict of interest, the law should hold the balance. I do not find that argument convincing.

The letter then offered a comfort. It said that it does not matter because those who negotiate can always negotiate over a net sum. Even if they do not know, they can reach an agreement that they will bear any unusually large recovery which takes away from the net sum. Yes, they can, but we do not know that they will. We have no proof that they will. If we do not give the victim the same information as the compensator gets, he or she will be under some premium to do it that way and to agree that that is the way it should be done.

Finally, the Minister offered us a warning. That warning is probably the best argument he has. He said that if we do it in this way there will not be settlements and that if we do it this way everything will come to court. The trouble with that argument is that we have no evidence that that will be the case. We think it is equally likely— indeed, more likely—that if people have all the evidence and know the circumstances they will be more willing to settle out of court than to go to court. I beg to move.

Earl Russell

My Lords, it is arguable that this may be the most important amendment to the Bill. Indeed, I am inclined to suspect that the Bill may be totally inoperable if we do not accept something along these lines. The key question is whether people will be prepared to settle out of court. It is common ground among every quarter of the House that, where possible, we would like to keep down the amount of litigation. In Committee the Minister gave us a good deal of talk about the real world. But the real world is mutable. When in another place it was decided that the width between the two Front Benches should be two sword lengths, that was, when it was done, entirely in the real world. But the real world has moved on and now there are other considerations which influence the placing of Front Benches.

In the real world, as it has hitherto been, the Minister argued that if you could accept a global sum it did not desperately matter how that sum was made up. That was true hitherto. It will not be true in the future because under the Bill certain heads of damages will be liable to recoupment while certain others will not be liable to recoupment. Until you know whether the sum you are being offered comes under heads subject to recoupment, you simply cannot calculate how much you will get.

Perhaps I may take a case which appears to me to be strictly on all fours with what the Bill is proposing. Let me assume that I am invited to give a lecture at the University of Sheffield. I am offered a fee plus travelling expenses. I am told that the two together will amount to £200. Because I have to return after the last train, I have to drive. Those of your Lordships who have been Members of another place know that there is more than one way to calculate car expenses. Let us assume that I charge expenses at the rate that I usually do, which is lOp per mile. In that case the expenses will come to £36. I shall end up with a very limited amount of expenses and paying a considerable sum in tax.

Then suppose that I am getting expenses at the rate at which, until recently, Members in another place received it for medium sized cars—47.2p per mile. In that case I shall end up with a large amount of expenses, which of course will not be liable to tax, and a very much smaller amount of taxable income. I shall end up pocketing something closer to £190 rather than something closer to £130.

It is of some interest to me—I must declare an interest in the literal sense—which of those things I might be being offered. I find it hard to believe that a claimant is really very different. If you are offered an out of court settlement, you do not want to know a whole lot of theoretical things. I have never been particularly interested in my gross income. I want to know what I am actually going to get in my pay packet. Similarly, I think a claimant wants to know what he will actually get in his settlement. If he is not going to know that, I do not see why he should settle.

The Minister suggests that the claimant should simply telephone and get the figure. If he is that fly, perhaps it is all right. But not everyone in the real world—more sides of the House than one can talk about the real world—actually is that fly. The Minister said: The concern of victims at the moment and the one which we are addressing in the Bill is that benefit recovery can eat into pain and suffering. If the victim sees that all his award will be removed because of benefit recovery and nothing has been allowed for pain and suffering he will not agree to the deal".—[Official Report, 10/12/96; cols. 991–2.] The Minister could not have put my point better.

The Earl of Clanwilliam

My Lords, the noble Lord, Lord McCarthy, mentioned my noble friend Lord Chelmsford, who, unfortunately, cannot be present here today and has asked me to say a few words on his behalf. We are talking about the real world. Noble Lords opposite seem to think that claimants make their claims personally and do not make them through solicitors. In point of fact, a small claim may be readily agreed, and there is no problem. However, in larger cases there are the general costs and added to those are the special costs, including payment for suffering and loss of amenity. In such cases there will be much higher value awards, and a whole mass of additional, peripheral claims are made to maximise the claim by the solicitor on behalf of the claimants. The claimant does not make those claims. It is done by the solicitor.

For instance, loss of amenity can cover everything from a gardener's wages to holidays in the sun. The amendment would allow an unlimited range of additions which could open up a whole can of worms of new complaints, involving enormous time and expense on the part of solicitors. These matters are in the hands of solicitors. It is they who have the reins in their hands. They will be expected to maximise the claim item by subjective item if the opportunity is offered to them. That is the real world. The amendment will cause unnecessary delay. That is not in the claimant's interest and may tend to confuse the issue. Further delay will be inevitable. I emphasise that that is not in the plaintiff's interests and is contrary to the principles promoted by the noble and learned Lord, Lord Woolf. If it so happened that heads of damages could be agreed at the outset, there would implicitly be co-operation between the parties. No problems would arise and a quick settlement would ensue. However, the amendment would open up a can of worms and would delay matters interminably.

Lord Mackay of Ardbrecknish

My Lords, as your Lordships will recall, these amendments were discussed at some length in Committee. I expressed the view then—and it remains my opinion—that the effect of either of the amendments would be to allow benefit recovery to affect the settlement process to an unacceptable degree. We cannot allow the tail to wag the dog.

Earl Russell

My Lords, can the Minister explain why that is unacceptable? He puzzles me very greatly.

Lord Mackay of Ardbrecknish

My Lords, I shall indicate at least one reason why it is unacceptable if the noble Earl wishes me to do so now. It may be unacceptable to the plaintiff to allow the settlement to drag out. He may be quite keen to get to the end point and get his money. Furthermore, as it so happens, if it drags out and benefit is in payment, the potential amount of benefit recovery will be increased. Therefore, the sooner a conclusion can be reached the better it is for the plaintiff and the better it is for the compensator— for exactly the same reason of benefit recovery. As long as the clock is ticking and is moving on, benefit is being paid which potentially can be recovered. If the case is settled, that is an end of the matter so far as concerns any further benefit recovery. So I believe that it is in the interests of the plaintiff and of the compensator to come to a speedy solution.

Your Lordships may recall that I mentioned at Committee stage that over 90 per cent. of compensation settlements are made out of court. A settlement is offered representing compensation for all losses suffered. What may be included in that figure is loss of earnings, cost of care, pain, suffering and so on, and they are not separately identifiable. That is what actually happens, but whether that is the real world or not that is the situation.

As I have explained, negotiating parties may never agree on the amounts of compensation that they believe would be appropriate in respect of each of these elements. Nonetheless, they may be able to agree a global sum in settlement of the claim. That is the situation under the present scheme. Although the benefit recovery arrangements will change, the Association of British Insurers firmly believes that victims and compensators will still, in most cases, wish to negotiate a global settlement without the necessity to agree on its constituent parts. I see no reason to doubt its word. Indeed, as my noble friend Lord Clanwilliam has just outlined, that is the argument put very firmly by the practitioners in the field and by the Association of British Insurers. It is also the argument that was put very firmly by my noble friend Lord Chelmsford at Committee stage from his experience in this particular area.

I do not have any reason to doubt the word of the people involved that the position will still be as it is currently and that in most cases global sums will be negotiated in out of court settlements. Unless the noble Earl is keen—and he did not seem to be at the beginning of our discussion—to have a "benefit for lawyers" operation here, he should perhaps agree that the quicker the settlements are made and the fewer that go to court the better it will be for the general public, the taxpayer, plaintiff and compensator, but perhaps not for the lawyer.

5 p.m.

Earl Russell

My Lords, can the Minister accept that it is common ground between us that the sooner settlements are made the better? The point at issue is the quickest way to a settlement. Our contention is that settlements are not easily reached if they are never in the interests of the claimants.

Lord Mackay of Ardbrecknish

My Lords, a settlement will not be reached if the claimant does not believe that it is in his interest and he is not happy with the settlement being offered. But, as I have suggested, over 90 per cent. of cases are resolved out of court. The Association of British Insurers and my noble friends Lord Clanwilliam and Lord Chelmsford have claimed that that is how the system works. As I tried to explain in the letter that I sent to the noble Baroness, referred to by the noble Lord, Lord McCarthy, if the process remains broadly as it is now, in a case where benefit falls to be recovered we fully expect that the sum agreed with the victim will usually be net of compensation. For example, if £B of benefit were due to be repaid the compensator might offer the victim a further £C in compensation. The victim would get the £C in compensation, but the compensator's liability would in fact be £B plus £C. That is how we believe these settlements will be negotiated, and all the advice that we have received suggests that that will happen.

Of course, in future it will be possible for the victim and the compensator to assess the amount of compensation they believe should be paid in respect of the losses that the victim has sustained and the amount of any reduction in respect of benefit recovery. In the circumstances that we are talking about, neither side will know what calculation the other side has made in order to arrive at the estimate and how they have built up their own negotiating position. That is usually the case where the figure for compensation is negotiated between two parties whether or not benefit has been paid. Nonetheless, we believe that when both parties are satisfied that the offer on the table conforms with their own estimate, then they will settle, just as happens under the present scheme. We certainly do not believe that we should say, "No, you cannot do that. The compensator must spell out the heads of damages that make up this global figure that is being offered".

If a victim is not content with the global figure offered by the compensator or suspects that the protection of compensation for pain and suffering under the benefit recovery rules has not been taken into account, then there are options open to him. If he were unsure about the reason for the discrepancy he could ask the compensator about the reason for it, producing supplementary evidence to support his position.

Ultimately, the case could go to court, but that is no different from the present position where a multiplicity of factors can result in that outcome.

Court awards of compensation will specify any elements which may be reduced in respect of repaid benefits. Any reduction of such compensation may only take place in accordance with the rules as set out in the legislation. However, if the compensator's offer closely matched the victim's own expectations, there would be no reason for him to complain and the case should be capable of being settled.

Finally, it has been suggested that if the compensator were required to reveal his calculations to the victim it would expedite settlements. Victims' representatives may believe this, but the Association of British Insurers suggests the reverse—that the additional procedure would delay settlements. I at least understand that because one can believe that one can agree the total sum, but when the way in which it is split up is seen, the victim may say, "I don't agree with that and we shall have a fight over it". It obscures the fact that they are reasonably satisfied with the total sum and are prepared to accept it.

I return to a point that I made to the noble Earl earlier. Since the period for benefit recovery runs to the date of settlement, any delay would be likely to increase the amount of benefit recoverable and might therefore result in a further reduction in the amount of compensation payable to the victim. I do not believe that that is a desirable outcome. Indeed, in an intervention the noble Earl indicated that we are at one in wanting settlements to be made as speedily as possible.

I believe that there is a serious difference between us and partly, I believe, because we are listening to different sets of outside advisers who are giving us different advice. I am content to stand by the views of the Association of British Insurers that we shall continue to see most of the cases being dealt with in out of court settlements if we proceed along the lines that the Bill outlines. That will enable a compensator to make an offer without having to break it up. I am not sure whether I have persuaded the parties opposite of the lightness of my case. If I have not and they pursue the matter to a Division, I hope that my noble friends will support me.

Lord McCarthy

My Lords, I am glad that the Minister spoke at some length because he made it more and more clear as he spoke that he was representing to us the position of the Association of British Insurers. As I understand it, that is also the view of the noble Earl, Lord Clanwilliam. That is the advice which is received and it is the advice that the Minister takes. But it is not the advice that we get. We have been told that the victims' solicitors need to know the breakdown so that they can advise their clients what to do.

The Earl of Clanwilliam

My Lords, surely, it is the claimant's solicitor who is making the excessive claims which are going to extend the process interminably.

Lord McCarthy

My Lords, that is a natural attitude for an insurer to take and I quite see that. But the claimant may say that if he has not got someone making as many claims as he can, he will be done by the insurer's solicitors. That is what it is all about. The claimants' solicitors are saying to us that they need to have a breakdown and that it is not irrelevant but extremely relevant to have that. For example, they need to know the level of the benefits deducted and whether those benefits are legitimate. They also wish to know whether the Ministry has deducted the proper figures. They need to test these matters. They say to us that the modern trend in litigation, whatever may happen with insurers, is to have the cards on the table. It is up to the plaintiff. If he feels that the claim is dragging out because his solicitor is listing all these irrelevant matters, it is up to him or her to say, "I want a settlement."

It is bizarre that the Minister paints a picture of such strange people who only want the settlement and are not interested in the details. According to the Minister, only their solicitors are interested in the details and all they want is the settlement. Suddenly, however, when they are told the details, they go mad. They do not say, "I just want an overall figure"; they say, "How much am I getting for this and how much for that?" According to the Minister, we have to keep such information away from such weak-minded people because, if they were told such information, they would go to their solicitors and say, "Keep it up for another six months". That is totally bizarre. It is unlikely and implausible, but that is what the Minister believes because he takes advice from the Association of British Insurers. We may have to come back to this on Third Reading—

Baroness Hollis of Heigham

We shall!

Lord McCarthy

My Lords, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 9 not moved.]

Clause 12 [Reference of questions to medical appeal tribunal]:

[Amendments Nos. 10 and 11 not moved.]

Lord Mackay of Ardbrecknish moved Amendment No. 12: After Clause 21, insert the following new clause— LIABILITY OF INSURERS (".—(1) If a compensation payment is made in a case where—

1. (a) a person is liable to any extent in respect of the accident, injury or disease, and
2. (b) the liability is covered to any extent by a policy of insurance, the policy is also to be treated as covering any liability of that person under section 6.

(2) Liability imposed on the insurer by subsection (1) cannot be excluded or restricted. (3) For that purpose excluding or restricting liability includes—

1. (a) making the liability or its enforcement subject to restrictive or onerous conditions,
138
2. (b) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy, or
3. (c) excluding or restricting rules of evidence or procedure.

(4) Regulations may in prescribed cases limit the amount of the liability imposed on the insurer by subsection (1). (5) This section applies to policies of insurance issued before (as well as those issued after) its coming into force. (6) References in this section to policies of insurance and their issue include references to contracts of insurance and their making.").

The noble Lord said: My Lords, as noble Lords may recall, I explained at Second Reading of this Bill that, if necessary, I would later bring forward amendments to put it beyond doubt that policies of insurance cover the liability to repay benefit. The amendment I am now proposing introduces a new clause into the Bill dealing with insurers' liabilities under contract.

Although we had identified the possible need for this clause at a much earlier stage of the Bill, it relates to an area of law which is inherently complex. It has been necessary to consult other government departments to ensure that their regulations were taken into account before finalising the clause.

I now turn to the detail of the clause itself. Subsection (1) provides that insurance policies giving cover against injuries to third parties shall also be taken to cover the liability to repay recoverable benefits set out in Clause 6 of the Bill.

Subsections (2) and (3) put it beyond doubt that the liability of an insurer to repay benefits cannot be circumscribed or restricted.

Subsection (4) is designed to deal with the situation where an upper limit on the insurer's liability to pay compensation in the event of injury has been agreed and reached. It enables the Secretary of State to restrict the amount of benefit the insurer has to repay in such circumstances. Because the upper limits which apply in personal injury policies are usually very high, such situations are likely to arise extremely rarely. However, where such a limit is reached, and the insurer is not liable to pay the whole of any compensation due, it would not be appropriate for him to be held responsible for the repayment of the whole of the benefits recoverable. However, we still intend to seek full repayment of benefits from the compensator in all other circumstances. It will be necessary to devise workable rules for restricting liability to repay benefits in such a scenario in consultation with interested parties. The inclusion of this regulation-making power gives us the flexibility to carry out that consultation before the new scheme comes into effect.

For the avoidance of any doubt, I should make it clear that, where the liability of the insurer for the full amount of the recoverable benefits has been reduced by virtue of the operation of regulations made under subsection (4) of the new clause, the provisions of Clause 8 of the Bill will be operated on the basis of that reduced liability in order to calculate the appropriate net compensation payment to the victim.

Subsection (5) makes it clear that the new liability to repay recoverable benefits applies to policies contracted both before and after the point of implementation of the reformed scheme.

Subsection (6) deals with the fact that an insurance contract underlies an insurance policy—thus putting the clause on a correct legal basis. I commend the amendment to your Lordships. I beg to move.

Schedule 1 [Compensation payments]:

Baroness Turner of Camden moved Amendment No. 13: Page 17, line 27, at end insert— (". Any payment made—

1. (a) in consequence of an action under the Fatal Accidents Act 1976; or
2. (b) in circumstances where, had an action been brought, it would have been brought under that Act.

. Any payment made to or for the injured person in respect of a liability arising by virtue of section 1 of the Damages (Scotland) Act 1976. . Without prejudice to section 6(4) of the Vaccine Damage Payments Act 1979 (which provides for the deduction of any such payment in the assessment of any award of damages), any payment made under that Act to or for the injured person. . Any award of compensation made to or for the injured person by the Criminal Injuries Compensation Board or Criminal Injuries Compensation Authority under the Criminal Injuries Compensation Act 1995. . Any payment made out of property held for the purpose of the charitable trust called the Macfarlane Trust and established partly out of funds provided by the Secretary of State to the Haemophilia Society for the relief of poverty or distress among those suffering from haemophilia. . Any compensation payment made by British Coal in accordance with the NCB Pneumoconiosis Compensation Scheme set out in the schedule to an agreement made on 13th September 1974 between the National Coal Board, the National Union of Mineworkers, the National Association of Colliery Overmen, Deputies and Shot-firers and the British Association of Colliery Management. . Any payment made to or for the injured person in respect of sensorineural hearing loss where the loss is less than 50db in one or both ears. . Any contractual amount paid to the injured person by his employer in respect of a day of incapacity for work. . Any payment made by the Macfarlane (Special Payments) Trust established on 29th January 1990 partly out of funds provided by the Secretary of State for the benefit of certain persons suffering from haemophilia. . Any payment made by the Macfarlane (Special Payments) (No. 2) Trust established on 3rd May 1991 partly out of funds provided by the Secretary of State for the benefit of certain persons suffering from haemophilia and other beneficiaries. . Any payment made under the National Health Service (Injury Benefits) Regulations 1974 or the National Health Service (Scotland) (Injury Benefits) Regulations 1974; . Any payment made to or for the injured person to compensate him for the cost of medical treatment and incidental expenses for medication and travel for medical treatment. . Any payment made to or for the injured person to compensate him for damage to property including (but not limited to) damage to or loss of a motor vehicle and expenses incidental to such damage or loss, damage to or loss of clothing or jewellery and damage to or loss of physical aids used by the injured person.").

The noble Baroness said: My Lords, the amendment is designed to write into the Bill the exemptions to recoupment which exist in the present legislation. The Minister confirmed in Committee that it was not part of the Government's intention to change the existing exemptions in any way. As will be seen from the list in the amendment, the exemptions are important, covering as they do benefits to haemophiliacs, payments made under the Fatal Accidents Act, and payments to victims of pneumoconiosis, which often affects miners for the rest of their lives once it has been contracted.

I do not want to repeat all the arguments that were advanced in Committee, and the reason we return to the amendment is that the Minister told us then that his departmental lawyers were considering the matter carefully to see, apparently, whether it was necessary to include the list in the Bill. We believe that the list should be included. This Bill deals with the recovery of social benefits. If there are to be exemptions to recovery, it is clearly better that they should be set out in the same piece of legislation. We should therefore like to know what the Minister's lawyers have had to say about this for the sake of clarity. As I said in Committee we believe that the list should be included. I beg to move.

5.15 p.m.

Lord Mackay of Ardbrecknish

My Lords, as your Lordships know, the payments which are exempt from the benefit recovery scheme are set out in Schedule 1 to the Bill. The schedule also contains a power to exempt other types of payment.

The amendment proposed by the noble Baroness would put on the face of the Bill payments which appear as exempt in the present scheme under either primary or secondary legislation, as the noble Baroness has explained. On the previous occasion when we discussed this issue I emphasised the Government's intention that payments which are exempt in the current scheme should remain exempt under the new arrangements.

As the noble Baroness pointed out, the list of exempted payments in Schedule 1 to the Bill does not mirror those currently contained in the Social Security Administration Act because we are confident that the payments which have not been included could not be caught by the provisions of the Bill. I repeat that we are confident of that and I hope that that reassures the noble Baroness.

Perhaps I may give one or two examples. Compensation paid in consequence of the Vaccine Damage Payments Act 1979 or the Criminal Injuries Compensation Act 1995 is paid in consequence of the Secretary of State's statutory duty to make such payments. It is not paid because the Secretary of State is himself liable for the injuries sustained by the victim. When it comes to payments currently listed in regulations as exempt from recovery which could be caught by the Bill, use will be made of the power given in paragraph 8 of Schedule 1 to ensure that they remain exempt when the new scheme takes effect.

I hope that that explanation and the examples given with regard to the Vaccine Damage Payments Act and the Criminal Injuries Compensation Act will reassure the noble Baroness about exactly why our lawyers are confident that the advice that they gave me last time is correct. That is why I have restated the position as firmly as I have to the noble Baroness. I hope that my explanation has persuaded the noble Baroness that there is nothing sinister in shortening the list of exempted payments currently contained in the Social Security Administration Act and that the fears which the noble Baroness quite understandably brings to this issue are without any justification. I hope that she will feel able to withdraw the amendment.

Earl Russell

My Lords, I thank the Minister for those remarks, but wonder whether I may attempt to clarify them a little further. I am always a little anxious when I hear the words, "The Government are confident" because they always seem to indicate that the Government are quite certain what they think but cannot quite tell us why they think it. Perhaps, therefore, I may relieve my misgivings by probing a little further about why the departmental lawyers are confident.

I see the seeds of two possible answers and I should like to know on which of those the Minister is relying. One possible answer is that the Minister is relying on Schedule 1 (8) and that the payments were exempted by regulation under the heading, "Any prescribed payment". That is a familiar principle of the Cambyses laws—that the Secretary of State may do whatever he likes. I dare say that it may be a complete reassurance for the Minister for this Government for the remainder of this Parliament. To avoid making any personal reference to any party, I say that that cannot be a convincing assurance on behalf of the Government after next. Nobody can know what they might be going to prescribe. If that is all that the Minister is relying on, I fully accept his sincerity, but I do not accept the legal force of what he says. It is not sufficient.

Alternatively, he may be relying on the fact that the Acts containing these payments are not specified in the repealing schedule and therefore cannot be altered except by primary legislation. As I understand it, this is not a Henry VIII provision in the schedule. Am I right in thinking that the words "Any prescribed payment" cannot apply to any payment not specified in a statute and that he cannot alter a statute by means of this regulation? If he gave that answer I would be a little more reassured than I am merely by the invocation of the regulation-making power. That may be of material assistance to me, and I shall be very interested to hear what the Minister has to say about it.

Lord Mackay of Ardbrecknish

My Lords, I believe that if the noble Earl checks in Hansard he will see that I picked out two of the Acts which the noble Baroness, Lady Turner, had listed: the Vaccine Damage Payments Act and the Criminal Injuries Compensation Act. I explained why they could not be caught by the provisions of this Bill. They are not paid because the Secretary of State is himself liable for the injuries sustained by the victim. It is for that reason that they cannot be caught, and the department's lawyers are very clear in that view. The only other payments that are exempted by primary legislation governing the operation of the present scheme which have not been carried forward are payments made under the Fatal Accidents Act 1976 and the Damages (Scotland) Act 1976. Such payments are made to a close relative of a deceased person as a consequence of bereavement. The provisions of Clause 1 of the Bill do not permit the recovery of benefits paid in respect of a deceased person from the payment of compensation made to a surviving relative. It follows, as I am sure the noble Earl understands, that there is no need to exempt such payments specifically either on the face of the Bill or in regulations. I hope that that provides a little help in this difficult issue.

Baroness Turner of Camden

My Lords, I thank the Minister for his response to this amendment and his assurance, which he has repeated this afternoon, that the Government do not intend to remove any of the protections or exemptions that already exist, which is very important. I note his comment about the various pieces of legislation referred to in my amendment. I also note his comment that the Government are confident, and their lawyers have advised them, that they do not have to do anything on the lines of the amendment tabled this afternoon. It is not my intention to press this matter to a vote this afternoon. I shall look carefully at the assurances given by the Minister that are now on record in response to the issues raised in Committee. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.