Draft Civil Law Reform Bill: pre-legislative scrutiny - Justice Committee Contents


Memorandum submitted by the Ministry of Justice

  I am very sorry that I was unable to give evidence to the Justice Committee on 10 March, due to illness. I am, however, very grateful to the Committee for its scrutiny of the draft Bill and look forward to seeing a copy of its report. In the meantime, I am pleased to provide written replies to the technical questions raised by the Committee. As he promised, the Justice Secretary is himself replying separately to you to provide a fuller response to the question you asked him on 10 March concerning the time that it has taken to bring the damages provisions in the draft Civil Law Reform Bill before Parliament.

DEPENDENCY DAMAGES

1.   Why has the Ministry of Justice rejected the Law Commission's proposal that dependency damages should be available to persons who would have been maintained by the deceased but for his or her death?

  As we stated in our 2007 Consultation Paper, we believe that eligibility for dependency damages should not be extended to persons who were not maintained by the deceased immediately before the death, but who would, but for the death, have been maintained by the deceased at some time in the future. We consider that to make such an extension would meet no significant need, be too open-ended and could encourage loosely framed and speculative claims which would be difficult to prove or disprove.

  We acknowledge that the exclusion of this class could mean that some people who might potentially have been able to receive dependency damages under the Law Commission proposal would not be able to do so. However, on balance, we consider it fairest to make dependency damages available to all those who were actually dependent on the deceased while avoiding the possibility of speculative claims based on possible future dependency. We think that our approach is supported by the consensus of opinion as it was supported by the majority of those who replied to our 2007 consultation and only a small minority of those who commented on clause 1 of the draft Bill in reply to the 2009 consultation expressly supported the Law Commission's recommendation.

2.   Is there a case for giving the court a wider discretion in a case involving an adult so that the court could decide not to take the remarriage etc into account?

  We do not think so. It seems to us that the Bill strikes the right balance between opposing views. On one extreme, there are those, typically perhaps those who represent claimants, who argue that nothing that occurs after the event that caused the death should be taken into account. On the other end of the scale, there are those, typically perhaps insurers, who argue that everything that occurs after the event should be taken into account. And of course there are people arguing for points in between. The proposal in clause 2 of the draft Bill is intended to provide a clear set of provisions, fair to both parties and avoiding as far as possible the need for intrusive enquiries.

  In our view, the fact of marriage or remarriage, entering a civil partnership or passing the second anniversary of a relevant cohabiting relationship as defined in clause 2 of the Bill are clear and material events in the claimant's life, which ought to be taken into account. It is of course for the court to decide how great the effect of this should be on the award of damages in any particular case. This approach was supported by the majority of those who commented on this subject in response to our 2007 and 2009 consultations.

  The balance to be struck is different where the claimant is a child of the deceased. Here, following comments received on consultation in 2007 pointing out that any new partner of the deceased would not have the same obligation as a deceased parent to maintain a child, the draft Bill provides that where the claimant is a child of the deceased the court may take into account a remarriage and so on of a surviving parent (see clause 2(3)). This allows the court to take the new fact into account if it thinks it is right to do so in the circumstances of the case.

BEREAVEMENT DAMAGES

3.   What is the Ministry of Justice's definition of the function of bereavement damages?

  Bereavement damages under the Fatal Accidents Act 1976 were introduced in 1982. The then Lord Chancellor, the late Lord Hailsham, said that it was impossible to quantify or provide adequate financial compensation for the grief felt at the loss of a loved one. As Parliament intended therefore bereavement damages constitute a token payment in acknowledgement of grief and are not intended to reflect the value of a life or to inflict a punishment for causing a death.

4.   The Law Commission recommended that the function of bereavement damages should be explained in the Explanatory Notes. Why isn't it? Is there another way that the function could be explained?

  In general terms, the Explanatory Notes published with a Bill are intended to assist the reader in understanding the Bill, but they are not a tool for explaining wider policy issues. On this basis, in preparing the notes to the draft Bill, we took the view that including an explanation of the underlying function of bereavement damages would not be appropriate.

  In 2007 consultees who commented on this recommendation of the Law Commission made various suggestions as to how the purpose of bereavement damages could be explained to the public. These included agreeing a standard explanation for solicitors to use with their clients; providing information in booklets or leaflets; and placing information on websites. We are grateful for all these suggestions. We would add that many consultees generally doubted that such an explanation would in any event make much difference.

  We will continue to consider how the limited purpose of bereavement damages can best be explained. However, we consider that it must be recognised that any explanation is unlikely to prevent people in these tragic circumstances from feeling that the award is inadequate.

5.   What is the rationale/principle underlying the inclusion of the categories that have been included in the class of persons eligible to claim bereavement damages?

  Bereavement damages are currently available to the wife, husband or civil partner of the deceased; and where the deceased was a minor who was never married or a civil partner, his or her parents, if he or she was legitimate; and his or her mother, if he or she was illegitimate.

  The intention is that bereavement damages should be available to those who are most likely to be closest to and most affected by the death of a loved one, whilst recognising the need to keep the award within finite limits. At the same time, we want the system to be as simple and straightforward to operate as possible and to avoid the need for intrusive enquiries into the closeness of the relationship or the extent of a person's grief. In addition, keeping classes of person finite and limited also ensures that the award is less likely to be diluted among what could in some situations be quite a significant number of claimants.

  Of course, no one can predict where grief and loss will be most felt and the question of where to draw the line is a very difficult one, but, from time to time, as society changes, it is appropriate to reconsider whether the class of eligible persons is still appropriate. Clause 5 of the draft Bill is the result of such an exercise. Of course, we accept that there will be different views as to where the new boundaries should be drawn but we consider that the balance struck by clause 5 of the draft Bill is appropriate.

6.   What is the rationale for the limits within categories of persons that further restrict eligibility for bereavement damages?

  The draft Bill extends those eligible to claim bereavement damages to include:

    —  any person who had been living with the deceased as the deceased's husband or wife or civil partner for a period of at least two years ending with the date of the death (new subsection (2)(aa)); and

    —  any child of the deceased, who was under the age of 18 at the time of the death (new subsection (2)(ab)).

    —  a father with parental responsibility (within the meaning of the Children Act 1989) in relation to the death of an illegitimate child under 18 who was not married or in a civil partnership.

  The same principles have been applied to setting limits on eligibility to claim within a broader category of persons as have been applied to defining the broader category itself as discussed in response to question 5. We think that the proposals in clause 5 of the draft Bill create a clear and straightforward system and strike a reasonable balance between all those affected.

7.   Why are bereavement damages not being extended to parents for the death of a child over 18? [ie parents will only be able to claim bereavement damages for the death of a child under the age of 18].

  The death of a child before a parent is always a tragedy, and we accept that grief and loss cannot be neatly analysed by the age of majority. We also accept that restricting bereavement damages to children under the age of 18 is bound to be particularly difficult to accept where there are siblings killed whose ages straddle that boundary. However, an open ended extension allowing parents to claim bereavement damages for the death of any child, however old, would be a very significant extension of the present class and would increase the possibility that claimants would in fact not be particularly close to the deceased.

  This would increase the need for intrusive enquiries into the closeness of the relationship, which we wish to avoid, and would undermine the simplicity and clarity of the present scheme.

  We note that suggestions have been made to the effect that the cut off point should be at the age of 21 or 25. These would limit the scope of the extension, albeit to a lesser extent than a cut-off at the age of 18, but difficult borderline cases would still inevitably arise.

  18 years of age is the age of majority recognised by the law as the dividing line in a range of different circumstances and, given that an open ended class is not acceptable, we consider that restricting eligibility to claims in respect of children under the age of 18 is the most appropriate and practical limit.

  The same arguments broadly apply to the provision proposed in clause 5 of the draft Bill restricting eligibility to claim bereavement damages in respect of the death of a parent to children under the age of 18 rather than to children generally.

8.   The Law Commission proposed that where two or more children qualified for bereavement damages each should have a full award subject to an overall cap.

  MoJ has proposed that each child should receive half the standard award without a cap. What is the rationale for that limit?

  The Law Commission proposed that there should be a finite limit on the total amount of bereavement damages for which a defendant could be liable in an individual case. It suggested a figure of £30,000 (three times the then award). Within this cap the Commission proposed that every claimant would receive an equal share. Thus, in the case of a husband who was killed leaving a wife and five minor children, each would have received £5,000 (at the rate of award then applicable). If, say, all the deceased's children over the age of 18 or the deceased's siblings were also included the award would be reduced further. We considered that this approach was capable of diluting the award too much and that the amount payable should not be so contingent on the number of eligible claimants.

  In general we take the view that the award to those in the closest categories of relationship to the deceased should not be diluted. However, it is currently the position that where two parents of the deceased are eligible the award is shared between them. In accordance with that approach we considered that it was appropriate to award half of the full award to each child of the deceased, regardless of the number of children involved.

  We therefore proposed in 2007 that a surviving spouse, civil partner or qualifying co-habiting partner (see clause 5(2) of the draft Bill) should receive the full award (then £10,000) and the children half the award each (then £5,000).

  There was a lack of consensus on this point among the consultees who replied to the 2007 consultation. Responses ranged from those who argued for a full award to be made to each eligible child and those who argued for a single award to be divided between however many children were eligible. The point did not, however, attract much comment from those who replied to the 2009 consultation.

  We accept that different views may reasonably be held, but consider that our approach strikes a fair balance between those opposed viewpoints.

  For completeness, I should mention that we have increased the sum payable for bereavement damages from £10,000 to £11,800 in respect of causes of action arising on or after 1 January 2008. On this basis children would therefore each receive £5,900 under the draft Bill.

DAMAGES FOR GRATUITOUS CARE

9.   Why should claimants have to account to the carer in respect of damages awarded for future care?

  There seems to be a consensus that damages should be capable of being awarded for gratuitous care—at least where the carer is not the wrongdoer.

  Under the present law claimants have to hold damages received in respect of the loss to another person (the carer) of providing gratuitous care to them in trust for the carer. This is a cumbersome approach. Both the Law Commission and the Government agreed that it should be simplified and that the claimant should instead be under an obligation to account to the carer for the money received. The Law Commission, however, considered that the duty to account should only apply to damages received in respect of past gratuitous care.

  At present, we are not persuaded that damages for past and future should be distinguished in this way. In receiving money for future gratuitous care the recipient is receiving money for services that will be rendered by someone else. It seems to us to be reasonable that the provider of the services should be able to have the benefit of these payments when the services have been performed. This could, in a small way, encourage carers.

  We do, however, acknowledge that there is some force in the arguments that have been made and will give further consideration to the exact nature of the obligation on the claimant to account to the carer.

10.   What is the rationale/justification for the distinction between the treatment of gratuitous care provided by the wrongdoer before and after the date of the award of damages?

  The present law does not allow the court to award damages to the claimant in respect of gratuitous care provided by the wrongdoer in any circumstances. As this is primarily likely to arise where the wrongdoer is a member of the family, it is clearly a controversial rule on which strongly held differing views are put forward.

  Clauses 6 and 7 of the draft Bill allow the court to award damages in respect of future gratuitous care to be provided by the wrongdoer but not for gratuitous care which has already been provided by him or her before the date of the award of damages. A majority of the responses to the 2007 consultation supported this approach. However, the responses received in 2009 were more mixed.

  The advantage of awarding damages for future care in respect of a wrongdoer is that it may enable the claimant to receive gratuitous care that would otherwise have to be procured at commercial rates, increasing costs and possibly inconvenience all round. A number of responses suggested circumstances in which the payment of damages for past gratuitous care by the wrongdoer might be appropriate but we consider that it would be very difficult to differentiate between the appropriate and inappropriate cases in legislation.

  We therefore conclude that in light of these considerations and bearing in mind that such claims are not possible at present, the present rule should continue in relation to past gratuitous care only. Nonetheless, we recognise that this is a difficult issue and we greatly respect the concerns that have been expressed. We will be giving the problem further consideration.

11.   The Committee notes that under the Bill the court cannot award damages to the claimant in respect of the gratuitous care provided by the wrongdoer to the claimant before the date of the award of damages. One concern appears to be that these damages (if payable) would be paid by the wrongdoer to the claimant, who would then be under an obligation to account to the wrongdoer for them. How is this argument affected by the practical reality that damages are almost invariably paid by an insurer?

  Clauses 6 and 7 of the draft Bill do not allow the court to award damages in respect of gratuitous care provided by the wrongdoer before the date of the award of damages. This follows the existing law. Certain responses to the 2007 consultation took the view that the implementation of the Law Commission's recommendation that damages should be payable for gratuitous care provided by the wrongdoer before the date of the award would appear inappropriate, as the money could simply be returned immediately to the wrongdoer under the duty to account. Others have argued that this circularity is more apparent than real because the money paid to the claimant comes from the wrongdoer's insurer rather than the wrongdoer.

  We accept that in practice most awards of damages in relation to personal injury and fatal accident claims are paid out by an insurer, but the insurer is indemnifying the wrongdoer as a result of premiums paid. The fact that the monies are likely to be paid by an insurer does not therefore fundamentally alter the nature of the transactions. We will consider this issue further but are not convinced at present that the provisions in clauses 6 and 7 of the draft Bill are inappropriate.

12.   There seems to be a tension between the notion that paying a wrongdoer damages is contrary to public policy and the view that paying such damages supports a public policy objective of encouraging the provision of care within the family. Where does MoJ stand on this? Is gratuitous care viewed as preferable to commercial care services? Does the law encourage carers and persons they are caring for to enter into commercial arrangements to circumvent restrictions on damages?

  Clearly, the overall object of awarding damages is to compensate the claimant not to benefit the wrongdoer.

  However, the provisions in clauses 6 and 7 of the draft Bill allow damages to be paid to the claimant in respect of gratuitous care to be provided to him or her in the future by the wrongdoer and for the claimant to be under a duty to account to the wrongdoer for such damages when the care has been provided. We accept that it might therefore be argued that the wrongdoer is, albeit indirectly, benefiting from the award of damages. On the other hand, the existence of the duty to account could well encourage the provision of care in the future. Further, the wrongdoer may be a pillar of support for the victim and care for that victim, perhaps to a better standard- and certainly cheaper- than a commercial carer. Thus, as so often in civil law policy, a balance has to be struck between competing demands. In this case, we note that the Law Commission supported the payment of damages in respect of gratuitous care and consider that the balance struck by the Bill is appropriate. This position was adequately supported on consultation.

  Whether commercial or gratuitous care is to be preferred in any individual case will depend upon its circumstances. It is not an issue on which a single general rule applies. What is needed is a pragmatic workable approach that strikes the right balance between victim and carer and society at large.

  We are aware of suggestions that carers enter into contracts for the provision of care with persons who would otherwise provide gratuitous care to avoid the present prohibitions on claims for damages in respect of gratuitous care. We are, however, not aware of any widespread practice of this kind. Whether or not it is appropriate for persons in individual cases to enter commercial agreements is a matter for them to decide in the circumstances of the case. If such agreements are a sham, they may well be challenged and thereby result in extra costs and fail in any event. Under the draft Bill, damages will be recoverable for past and future care provided by persons other than the wrongdoer and in respect of future care provided by the wrongdoer. The temptation to enter into sham agreements should therefore be greatly reduced. We do not consider that the possibility there may be such sham agreements undermines the case for maintaining a bar on damages for past gratuitous care by the wrongdoer.

INTEREST

13.   The Committee notes that the interest provisions are largely an enabling power allowing the Lord Chancellor to specify the pre- and post-judgment interest rates. Why hasn't a conclusion been reached on the use of the powers?

  The interest provisions in the draft Bill are indeed largely enabling provisions. They give the courts power to decide whether to award interest and the Lord Chancellor power to specify what the rate of interest should be. The Lord Chancellor's power is intended to be flexible. These provisions provide a possible legal framework in which the policy set out in the Government's 2008 response to the Law Commission's recommendations in its 2004 report on Pre-judgment interest on Debt and Damages (HC 295) could be developed. The details of how the power to set interest rates will be exercised remain to be settled. The response to the 2009 consultation forms part of that process and we will consider carefully the comments received. Our intention is to consult widely before any decisions are taken as to how the powers will be used.

GENERAL

14.   Do you agree that it is for society, or Parliament acting on its behalf, to set parameters for who is eligible for what and how much in personal injury damages cases and for the insurance industry to price its products accordingly?

  The setting of levels of damages and the determination of the circumstance in which they should be awarded has largely been the role of the courts under the common law. We believe that it is important the courts should retain that role in order to do justice in individual cases and to develop the law to meet changing situations. Nonetheless, it is of course clearly for Parliament to legislate when the need arises.

  In the main area covered by the damages related provisions in the draft Bill, that of damages for fatal accidents, a statute already exists. It is over 30 years old. It is important to ensure that it is amended where it is no longer clear or no longer reflects the needs of modern society.

  Of course, there are inevitably a link between the levels of compensation payable and the affordability of insurance. So, once again, a balancing exercise is necessary because compensation should be adequate and insurance affordable. The Government believes that the central principles which must continue to govern these considerations are that claimants with valid claims should receive fair compensation to meet their needs and that responsibility for this compensation should rest with the person who has caused the injury and, through them, their insurer.

15.   What assessment was made of the impact of the different costs of the different possible solutions in relation to such damages?

  The impact assessments outlining the estimated costs and benefits of the reforms proposed in the draft Bill were published in the 2009 consultation paper. Those on damages had also previously been the subject of our consultation in 2007, and the views of those responding to that consultation were taken into account in producing the impact assessment accompanying the draft Bill. We will be considering the comments made on costs carefully in preparing the final impact assessment in relation to the draft Bill.

  I hope that the Committee finds these answers helpful.

Bridget Prentice MP

Parliamentary Under-Secretary of State

March 2010





 
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