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', if the claimant consents,'.

Mr. Deputy Speaker: With this we may take amendment No. 10, in page 50, leave out lines 27 to 34.

Mr. Dismore: I should declare an interest, Mr. Deputy Speaker, because I remain a partner in a firm of solicitors that specialises in personal injury cases, although I have not dealt with any since I entered the House. I also remain a member of the Association of Personal Injury Lawyers; I was formerly a member of its executive committee and I chaired its damages specialist interest group. In that capacity I was closely involved in the original development of what were then known as structured settlements and are now called periodic payments. That was in the late 1980s.

I am a great believer in that system of compensation for the right cases in the right circumstances. There is a risk of overdoing things, but I am pleased that progress in the development of the law in that area, for that important remedy, has been so successful. Nevertheless, problems remain, and the Bill addresses some of them—

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but unfortunately, new ones are created, especially in relation to consent. I also think that an opportunity was missed when we considered how inflation should be dealt with.

My amendment No. 9 deals with consent. It is important to point out that periodical payments have both advantages and disadvantages. Claimants would not have to fear running out of compensation, as they would if damages were ordered as a lump sum, but periodical payments create a lifetime relationship between the claimant and the defendant which the claimant may find extremely difficult. For that reason, the merits of imposing periodical payments must be assessed on an individual case-by-case basis, and I am concerned that, under clause 100, awards for future pecuniary loss—the lion's share of any award—can be made irrespective of whether the claimant consents. That is particularly important if periodical payments are being linked to the retail prices index in respect of inflation because it would prevent the claimant from looking for a better rate of return. Under clause 100, it is possible for a court to order a periodical payment without the consent of either party, let alone just that of the claimant. That puts the claimant completely at the mercy of the court's discretion and the defendant's arguments. I believe that that is unfair because only the claimant is able to say how an award can best be used to place him in the position that he was in before the injury.

In 1991 I wrote a paper for the Law Commission on that very issue. I summarised my views then and they have not changed at all on this particular issue. I wrote:

"It is the Plaintiff who has been injured by the Defendant, and it should be for the Plaintiff to decide whether he or she wishes to have the damages by lump sum or structured periodic payments. The Court should not have power to compel a Plaintiff to accept a structured settlement if the Plaintiff prefers a lump sum award . . . The only exception . . . should be where the Plaintiff is under a legal disability, when the Court has a role in approving any terms of settlement, and in those circumstances, it may be appropriate for the Court to have the power".

In response to my submission and others, the Law Commission produced a report in 1994. Paragraph 3.38 on page 38 summarises the position:

"The corollary of this liberal principle"—

the question of how the plaintiff should be able to spend the damages—

"is that plaintiffs should be able to insist on receiving their reward in the form of an immediate lump sum payment. Imposition of a different form of award has been seen as interference with freedom of contract. It is also argued by some that it is wrong to introduce paternalism into personal injury awards when awards of damages in other areas of the law continue to leave plaintiffs in receipt of lump sums which they are free to spend as they wish."

Baroness Scotland said in another place:

"We agree with the noble Lord, Lord Goodhart, that the views of the claimant in relation to periodical payments is the important issue."

She continued later:

"The weight to be given to the claimant's wishes, for example, might depend on the reasons for them and the quality of advice on which they are based."—[Official Report, House of Lords, 27 March 2003; Vol. 646, c. 937.]

That is to adopt a nanny state approach to this important issue. Elsewhere it has been suggested that if the claimant wanted to set up a business, the court

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should start to examine the claimant's business case to see whether it was sensible, but that is putting the cart before the horse.

My experience of claimants over more than 20 years in active practice before I became a Member of Parliament is that they are sensible and cautious people, concerned to ensure that their money will not run out. Whether through a lump sum or a structured settlement, they are concerned to ensure that their money is invested and spent wisely. It is the claimant's right to say how he or she should receive their compensation. In taking that right away from claimants, the Bill creates more problems than it will resolve. It is wrong for the courts to impose an award against the wishes of the claimant, let alone those of the defendant.

However, my main concerns about clause 100 are expressed primarily in amendment No. 10, which deals with the question of how to operate a periodic payment in respect of inflation. The clause provides that such operation should, except at the court's discretion, be by reference to the retail prices index. The current position in common law was restated in the Court of Appeal in three cases only last week. The lead case was Sheppard v. Stibbe. The appeal was brought on behalf of a young boy aged nine, Ben Sheppard, who suffered serious spinal injuries—his five-year-old sister was killed—in a car accident in June 2001. Ben is now in a wheelchair; the driver of the other vehicle was convicted of dangerous driving.

Another case was that of Mr. Page, who suffered brain injuries when a motorcycle struck him when he was 13; and another was a 12-year-old from Bristol, Sonni Cooke, who suffered permanently disabling injuries during birth. The cases were appealed against the refusal by judges in the lower courts to admit accountancy evidence to the effect that the future cost of care in each case would be grossly underestimated if the conventional method—the discount rate or, for our argument, the retail prices index, which is the mirror image of the same argument—were applied, thus grossly underestimating the damages. The Court of Appeal ruled that the substance of the appeals constituted an assault on the rate set by the Lord Chancellor—the discount rate of 2.5 per cent., which was applied to compensation for future losses, such as we are discussing in clause 100.

Lord Justice Laws ruled that if a

"single discount rate is taken across the board, as has been done by the Lord Chancellor's order, the full compensation principle will only be achieved in a rough and ready way. Counsel for the appellants would, of course, roundly insist that that is scant comfort to their clients, who it is said stand to suffer very substantial shortfalls. Be it so on the facts of these cases: still, it cannot in my judgment amount to a proper basis for allowing these appeals to prosper. The court is obliged by ordinary constitutional principles to act in its decisions case by case conformably with the discount rate set by the Lord Chancellor . . . He may be persuaded at the political level to set a different rate. He may (I encourage nothing) be amenable to judicial review. But so long as the rate he has set is extant, the courts cannot in the adjudication of personal injury claims subvert or undermine it."

The effect of the current position—including clause 100— can be seen by using the Ben Shepherd case as an example. Future care costs would be assessed on the conventional basis of the RPI, so he would receive about £900,000 under that head. Between 1963 and 2000, the costs of care increased 2.5 per cent annually above the

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rate of inflation. If that higher rate were taken into account, the damages would be increased by 149 per cent. to more than £2.2 million. Similarly, compensation for future loss of earnings would go up from about £500,000 to almost £900,000, and damages for medical treatment would be increased from under £700,000 to more than £1 million.

If, as expected, Ben lives into his late 70s, the money will run out and there will be nothing left to pay for his care for the last 30 years of his life. He will be thrown back into dependency on the state. In the past, the practice has been that general damages for pain, suffering and loss of amenity have been used to cross-subsidise the cost of care, but that is effectively subsidising the insurance company and is not the answer.

The Government's position was stated in the other place by Baroness Scotland, who said:

"It is important that the real value of periodical payments can be preserved over the whole period for which they are payable. The indexation of payments is already a matter for the court's discretion and the Bill does not affect that."

However, as I have just illustrated, the courts are not using that discretion in practice. She continued:

"At present, it is common practice to link payments to the retail prices index. However, it would not be appropriate to prescribe this as a blanket index to which all payments must be linked. In some cases it may be appropriate to link different heads of damage to different indices. The court currently has that flexibility."

However—as I have suggested—it is not used in practice. She continued further:

"We believe that it is important to retain the current flexibility and for indexation to be left to the discretion of the court."—[Official Report, House of Lords, 27 March 2003; Vol. 646, c. 934.]

In practice, that discretion is fettered by, for example, the rate set by the Lord Chancellor under the Damages Act 1996 at 2.5 per cent. Now the Government have put the RPI in the Bill, theoretically to reflect the current position, but in practice it would have the effect of further fettering the discretion of the court when awarding damages for future loss by way of periodic payment.

The draft rule amendments to part 40 of the civil procedure rules, which are supposed to bring into effect clause 100, should it be passed by the House, set out the criteria that should be considered when deciding whether to uprate. It says that

"the amount of the payments shall vary annually by reference to the retail prices index, unless the court orders otherwise under section 2(9) of the 1996 Act."

In other words, we are back to where we started. It is a circular argument. The draft practice direction amendments contain nothing to specify how the discretion to depart from RPI should be exercised. I should have thought that if the intention was for that discretion to be used properly, there would at least be something in the draft practice direction to set out guidance to judges on the use of that discretion. In fact, the explanatory notes to the Bill make the position even worse. They emphasise RPI as the appropriate approach. Explanatory note 275 states:

"To ensure that the real value of periodical payments is preserved over the whole period for which they are payable, new

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section 2 provides that periodical payments orders will be treated as linking the payments to the . . . RPI"—

subject to discretion. Again, that emphasises the RPI as the norm.

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