Mr.
Hoban: Part of the problem is that the Government, in
trying to maximise their flexibility and avoid too much constraint, are
deploying that flexibility at the expense of greater clarity and
certainty. It is a dull point to return to, but if the process had been
further along the track before the Bill came along, it might have
clarified a number of doubts about the operation of the provisions. The
timing is not great, frankly. We are introducing legislative proposals
that create huge uncertainty while the safeguards are not yet in such a
state that people can refer to and gain comfort and reassurance from
them. That is part of the challenge with which we are dealing. Some are
demanding greater certainty and clarity about the use of the powers
than is available in the Bill. That is what the amendments aim to tease
out from the
Minister. I
will not press amendments 63 and 64, but there is a challenge here that
must be addressed. The clauses are creating debate and concern because
the process is taking place in a vacuum and we do not have sight of
draft rules or regulations. That is the problem that we are going to
have. The Minister’s remarks might be sufficient to satisfy
people outside the House, but we will have to consider the provisions
again on Report or during proceedings in the other place. I beg to ask
leave to withdraw the
amendment. Amendment,
by leave,
withdrawn.
Clause 22
ordered to stand part of the Bill.
Clause
23Regulations
under section 22(1):
damages
Mr.
Hoban: I beg to move amendment 65, in clause
23, page 26, line 20, leave out paragraph (a) and
insert— ‘(a) to make a
single award of damages in respect of all or some of those claims if
the aggregate of the defendant’s liability to some or all class
members can be determined by a reasonably accurate assessment and
without proof by individual class
members,’.
The
Chairman: With this it will be convenient to discuss
amendment 66, in clause 23, page 26, line 25, at end
insert—
‘(3A) The regulations must require the court,
before making an order under subsection (3), to provide the defendant
with an opportunity to make submissions to the court in respect of any
matter relating to a proposed aggregate damages
award.’.
Mr.
Hoban: The amendments are to clause 23, which gives the
Treasury the power to make regulations concerning damages. I am not
clear about the interaction between the regulation-making power and the
court rules, whether the powers are reserve powers, or whether we will
see regulations that will drive the court rule process. Perhaps the
Minister can provide some clarification on that. In clause 22(2)(f),
the Treasury is enabled to make regulations about the award of damages,
and clause 23 sets out the scope of the regulations in more detail. The
key part is subsection (2), which
says: “The
regulations may enable the court to make an award of damages without
undertaking an assessment of the amount of damages recoverable in
respect of each claim comprised in the
proceedings.” With
collective proceedings, what happens when we get to the end of the
case? What sort of ruling does the court make on the damages that are
to be awarded against the defendant, and how does that reflect the
experiences of each claimant? That method will be useful in dealing
with a lot of claims all at once, and it would be particularly helpful
in dealing with opt-out
proceedings. There
are two approaches in clause 23. Subsection (3)(a) says that the court
can make a total estimate of damages, based on the damages likely to be
awarded to individual complainants. It can think about the loss that
each individual claimant might have made, and use that as the basis for
calculating the total estimate of damages. If the court knows that
everybody lost £5 as a consequence of a policy being mis-sold,
it would be relatively straightforward to determine the total estimate
of losses. Alternatively, in subsection (3)(b) a formula specified by
the court is used to calculate the level of damages.
Another issue
is the departure from the principles laid down by the CJC. In its
recommendations, the CJC called for the Lord Chancellor to conduct a
wider policy debate on the issues, given the interaction of this law
with substantive law. Will the Minister tell the Committee whether that
wider policy debate has taken place and what its outcome was? Has that
recommendation been ignored, and if so, why?
On the
proposals, the CJC endorses something along the lines of what is
written in subsection (3)(a), which is a principle known as damage
aggregation. Damage aggregation is characterised
by “a computation of
damages that does not depend upon the summation of the class
members’ actual loss and damage. It is a means of quantifying
and proving loss not by reference to an individual claimant but by
treating the entire class as a unitary entity and assessing the global
damage suffered by the entire class. In that respect, an aggregate
assessment can practically occur by either a global or lump sum awarded
against the defendant, or it may be achieved by a formula applied on a
class-wide basis that determines individual class members’
entitlements. Once the aggregate award is made then it is either for
the court to assess individual class members’ entitlement to a
share of the global sum or it is for the individual class members to
prove their entitlement to a
share.” We
can see an attempt at the damage aggregation principle in subsection
(3), but the wording is different from that used by the CJC, which says
that the principle
“does not depend
on the summation of the class members’ actual
loss”, and
is a means of calculating the
loss “not
by reference to an individual
claimant”. There
is divergence here: subsection (3)(a) seems to be a summation rather
than an aggregation, whereas the principle set out in the Civil Justice
Council paper was an aggregation. I am interested to know why the
Government have decided to go down the summation route rather than the
aggregation
route. 5.30
pm The
issue about aggregation is not just about a claimant’s
perspective but about the defendant’s perspective. The Civil
Justice Council made the point about providing greater certainty for
defendants: “Damage
aggregation...ensures that the defendant has certainty and
finality in terms of their liability to all claimants who have suffered
detriment, especially where class members who have not yet joined the
beneficiaries have an opportunity to opt-in to the award or court
approved settlement; the award ensures that each claimant will get fair
compensation predicated on the totality of harm caused both by the
defendant per se and to each claimant on an individual basis; it thus
serves to ensure that claimants are properly compensated and that
defendants are not left in possession of any financial benefit derived
from their unjust conduct; it thus through its primarily compensatory
basis serves to assist and complement public regulatory
action.” In
such a case, the defendants will know the total amount that they have
to pay, and the money is then allocated to each claimant on the basis
determined by the court. Subsection (3)(a) suggests simply totalling up
the losses that each individual has suffered. We have tabled amendments
65 and 66 to move away from summation to the aggregation approach
proposed by the Civil Justice
Council.
Ian
Pearson: The amendments relate to a Treasury power to make
regulations about damages. I think that the hon. Gentleman accepts the
necessity of enabling the court to award damages without undertaking an
assessment of each individual claim. Instead, the court may make an
estimate of the damages for the whole group of claimants, or set out a
formula for assessing the damages for each claimant. That will enable
the courts to deal quickly and efficiently with cases involving
detriment to large numbers of consumers. It is an essential component
of the ability to manage a class
action. The
clause sets out some illustrative examples of what the regulations may
cover. The list is not exhaustive. The proposed amendments clarify that
a court may make an award to all or some claimants, provided that
liability can be assessed reasonably accurately and without proof from
individual members. The language in the example in the clause does not
exclude a power for the Treasury to permit aggregated damages for a
subgroup of persons. The clause refers to an award in respect of
different kinds of claims in a class action. As I say, the list is
illustrative. It would be consistent if an award could be made to a
subgroup of cases. Clause 24, which we shall come on to, envisages
subgroups being
formed. The
amendments would also give defendants the right to make submissions to
the court about an aggregate damages award. Providing a specific right
for the defendant to make submissions is not necessary, because
defendants
have a right to be heard throughout the proceedings. However, I agree
with the hon. Member for Fareham that a court should be able to make an
award to some and not all claimants, if that is the right thing to do,
but there is a danger of the amendments straying on to territory
covered by generic court
rules. I
fear that the hon. Gentleman will not be satisfied with the response
that the issue will be covered in the rules, but my general point,
which I have made in previous debates on such matters, is that the
measures will not come into force until the court rules and the
Treasury regulations have been consulted on and put in place. There
will be ample opportunity for the industry, consumer groups and others
to make representations on them. The court rules are highly likely to
provide for the management of subclasses of claimants and may provide
for a specific right to make submissions about damages to the
court. I
assure the hon. Gentleman that his concerns, as set out in the
amendments, will be taken on board when developing the rules. As he is
aware, we have set out our sectoral approach to collective proceedings,
and we will consult on the regulations. Our response to the CJC
recommendations has been to say that further work will be done on
damages by the Lord Chancellor. We have worked closely with the
Ministry of Justice and will continue to do so to co-ordinate policy on
aggregated damages. We have sought to ensure broad consistency with
Civil Justice Council thinking on such issues, and there will be
opportunity for individuals, the industry and consumer groups to
comment on the detail of the regulations. It is for those reasons that
I do not believe that the amendments are necessary, and I urge the hon.
Gentleman to withdraw
them.
Mr.
Hoban: I am grateful to the Minister for his response, in
which he gently reminded me that I had not spoken much at all about
amendment 66, which is about the right for the defendant to be heard
before an award is made for aggregated damages. I am pleased by his
reassurance that the defendant will have a right to be heard throughout
the case, including on the important issue that we are
discussing. In
a way, the debate is taking place in a vacuum. We have had the
opportunity in this and previous debates to identify some of the issues
to do with safeguards in the Bill that are causing people concern.
Knowing that the rules committee will examine the matter is helpful. It
will be a challenge to ensure that the Bill makes clear the
relationship between the court rules and the regulations, and makes it
clear that the powers are reserve powers, a matter to which I shall
return on Report. However, I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn.
Mr.
Hoban: I beg to move amendment 67, in clause
23, page 26, line 38, leave out from ‘applied’ to end of
line 39 and insert— ‘in a
manner that may reasonably be expected to benefit class
members.’. The
amendment deals with a further aspect of the clause and relates to
matters arising from an opt-out basis. What happens when the court
produces the award of damages and not everyone comes forward to claim
their share of the damages? We have an opt-out court process, but how
do we know that the final award will
be distributed to all the potential claimants? Some balance might be
left at the end. Under subsection (5)(b), there is “provision about
the purposes for which any money not paid to represented persons is to
be
applied”. My
amendment would modify the wording that follows in brackets. It would
remove
“(which may
include charitable or other
purposes)” and
make the provision more specific,
inserting “in
a manner that may reasonably be expected to benefit class
members”, because
there is concern about what purpose the residual money will be used
for. Should we try to find a way to use any unclaimed money to benefit
the people who have been part of the collective proceedings
order?
The vagueness
of “other purposes” causes concern. There is also a legal
principle at issue involving the pursuit of something called a
cy-près distribution, where aggregate damages result in unpaid
moneys remaining when all payment has been satisfied. What will happen
to the
excess? The
Civil Justice Council
says: “Where
collective actions are pursued on an opt-out basis experience shows
that there is the likelihood that there will remain an unclaimed
residue of the judgment damages award, especially where damage
aggregation occurs, or the settlement
award.” The
question then is: what is a fair and just use for such money? Which?
says: “A
‘cy-près’ distribution of damages is needed: This
ensures any money left over from damages paid out to eligible consumers
can be used in a way specifically related to the claim, for example to
fund financial education or some other specific consumer-based project,
rather than returned to the
defendant.” That
means that the court can determine what damages the defendant should
pay to reflect the gravity of the case, and that the defendant should
not benefit if money is left over at the end of the day, but should pay
the full price to the subject of the claim.
The Civil
Justice Council recommended
that “a
trustee be appointed to administer any judgment or settlement award or
alternatively that the representative party hold such a sum as trustee
for the class, and that where after a proper period of time with proper
and proportionate notice given to the class an unclaimed residue
remains that residue be applied by the trustee according to general
trust law principles. In appropriate cases, this unclaimed residue
could on this basis be distributed to a Foundation or
Trust.” My
amendment draws the uses to which the unclaimed residue could be put
rather more tightly than the Bill does; the Bill
says: “(which
may include charitable or other
purposes)”. Amendment
67 would tweak the rules back, so that the process was closer to that
which the Civil Justice Council thought ought to take place when it
published its report in
2008.
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