Select Committee on Constitutional Affairs Minutes of Evidence


Examination of Witnesses (Questions 107-119)

NICK STARLING, JUSTIN JACOBS, DOMINIC CLAYDEN AND PHIL RUSE

10 JANUARY 2006

  Chairman: Welcome everyone. Welcome, in particular, Mr Starling and Mr Jacobs from ABI, Mr Clayden from Norwich Union and Mr Ruse from Allianz Cornhill, if I have got all that right. Before we seek your invaluable help, and we are very glad that you have come along to help us today, we have the duty to declare any interests that we might have.

  David Howarth: I write legal text books on the law of tort.

  James Brokenshire: I am a non-practising solicitor.

  Chairman: I am a consultant to Bourne Leisure, which has holiday park interests.

  Q107  David Howarth: Can we start with clause 1 of   the Compensation Bill and your views of it? Obviously there have been grave doubts expressed, first of all, about the need for such a clause at all and, secondly, even among those who think that it might be a good idea to have a clause, about the way it is drafted. Can you start by giving us your general view at this point of clause 1?

  Dominic Clayden: We support the principle behind seeking to address the issues around a compensation culture. We have got some significant reservations around how clause 1 would actually be interpreted by the courts. We are concerned that there would be a period of uncertainty while the courts work out its impact, and, as such, we do not support it in its current form.

  Q108  David Howarth: In what form would you support it?

  Dominic Clayden: We would look to have a situation where there is greater clarity for what the Government is seeking to put outside of claims for   compensation. I think that is a matter of government policy.

  Q109  David Howarth: Is it not inherent in the exercise of legislating and producing a statutory section that there will be litigation about it? Does not the logic of your argument take you to a different position of not being in favour of such a clause in the first place?

  Dominic Clayden: I think the issue is that there is a reasonably clear body of case authority around what is covered by negligence and what is not, and if the whole body of negligence law was going to be re-looked at in individual circumstances that would lead to a significant period of uncertainty.

  Q110  David Howarth: What sort of more limited clause are you suggesting? What sort of issues are you suggesting should be covered by legislative action and what not?

  Dominic Clayden: At the moment we do not believe that there should be an extension of that in terms of seeking to reduce the scope of negligence.

  Q111  David Howarth: What about the other problem that has been raised, which is the problem of the legal scope of the clause? I think in the House of Lords there was some discussion of whether the clause should or should not cover breach of statutory duty, which of course itself is an ambiguous term. What is your view on that?

  Dominic Clayden: I think in truth if I were to go into a level of detail I would probably have to write to you separately.[1]


  Q112 David Howarth: Does anyone else have any views on that?

  Nick Starling: Broadly speaking, we do not see the need for this particular clause. It is not for us the   main issue in the whole issue around the compensation culture and the compensation debate. We think that the Bill in general is a good first step, if you like. We would like it to go much further. That is our broad approach.

  Q113  David Howarth: Could you tell us a bit more about in what way it could go further?

  Nick Starling: We think that there are problems in the personal injury compensation system. We do not think it is working effectively. We think it is adversarial. It is complex, it costs too much, it takes too long, it undervalues the importance of getting people better after personal injury, it encourages frivolous claims and, in fact, deters legitimate claimants. We think that what is actually needed is a proper reform of the compensation system, and we have put forward proposals, as you know. We think that the Bill is a good first step, but it needs to have something which addresses some of these issues which I have set out.

  Q114  David Howarth: Before we move on, I think you are suggesting some sort of parallel to the NHS Redress Bill, and I want to cover that in a second, but could I finish off this line of questioning by asking whether you think there needs to be any legislative change to the common law of negligence.

  Dominic Clayden: No.

  Q115  Chairman: You do not all have to have the same view.

  Nick Starling: No.

  Q116  David Howarth: No conferring, should I say!

  Justin Jacobs: I think the general point is we agree that there needs to be greater clarity about when people are entitled to compensation. It might be the case that clarity has been lost in recent years, but whether the best way of achieving that clarity is through legislation is something which is clearly open to debate and perhaps not the best way forward.

  Q117  David Howarth: Could I go on to the recommendation that you are making that there should be consensual mechanisms, I think is the best way of putting it, similar to the NHS Redress Bill. Could you just take us through the system that you would expect to come into place were your recommendations to be taken up?

  Nick Starling: The problem at the moment with the personal injury system, the compensation system, is that it starts off as if everything is going to end up in the courts, and we think that for claims below £25,000, which is about 90% of claims, in a very large number of cases they can be sorted out without recourse to the courts and they can be sorted out much more quickly. We are proposing a set of proposals which essentially mean that, instead of an average of I think it is 400 days for a personal injury claim to be notified to an insurer, notification happens virtually immediately. It means that arrangements can be made to get the person better—rehabilitation, medical treatment and so forth—and a process then starts whereby insurers have to come back with whether they accept or reject the claim within three months and with a figure for compensation within six months via a form, a proposal for people putting their claim forward on which there will be a free helpline. Once the claim has been received, once the suggested compensation has been received by the claimant, it will be informed by a tariff of compensation payments, which will be set by government, it will then be open for claims above the small claim limit for the claimant to accept or reject or to go for legal advice. The next step beyond that, if is not settled, will be mediation and only, finally, after that, would it go to the courts. So we think there is a system which would enable the straightforward claims where everyone is agreed where liability falls, everyone agrees what the compensation should be by a tariff of compensation proposals, and they can be sorted much more quickly than the current three-year average which we see and reduce the costs, which are very high—40% transaction costs.

  Q118  David Howarth: Can I ask a couple of questions about that. The first question is how do you envisage the tariff being drawn up? Would it be based on the courts' present methods of estimating damages?

  Nick Starling: I think that would be the starting point. I think it is important that it is society which decides what compensation levels are appropriate, and that is the courts, that is government. It is not for the insurance industry itself to decide what the compensation should be. I think that is quite an important point.

  Q119  David Howarth: The second point is how would you envisage giving incentives for people to stick to this system, this line of going first to the tariff, then to mediation and then only finally to the courts? How would that work?

  Nick Starling: We think there should be penalties for people who do not stick by the laws, insurers who do not stick to the three months plus three months system, and there should be penalties for exaggerated or frivolous claims as well.


1   Note by witness: There are many claims particularly in public and employers liability cases where the cause of action will be pleaded both in terms of negligence and /or breach of statutory duty. In view of the way Clause 1 is presently worded and in addition to our written evidence, a judge when considering if a desirable activity may be affected by alleged breach of the standard of care in negligence has no similar discretion to apply to breaches of statutory duty. This could result in the intention and purpose of the Bill being obviated in a considerable number of cases Back


 
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