Memorandum submitted by the Law Commission
I am writing in response to the call for evidence
from the Justice Committee in relation to its examination of the
draft Civil Law Reform Bill.
The Law Commission welcomes the publication
of the draft Bill, which implements reforms discussed in four
Law Commission reports, namely:
— The Forfeiture Rule and the Law
of Succession (2005) Law Com No 295.
— Pre-Judgment Interest on Debts and
Damages (2004) Law Com No 287.
— Claims for Wrongful Death (1999)
Law Com No 263.
— Damages for Personal Injury: Medical,
Nursing and Other Expenses; Collateral Benefits (1999) Law Com
No 262.
The Law Commission also welcomes the Government's
recent support in taking forward work deriving from the Law Commission,
such as the Perpetuities and Accumulations Act 2009, and the Bribery
Bill and the Third Parties (Rights Against Insurers) Bill, both
currently before Parliament.
It may be helpful to consider each of the four
reports listed above in turn.
THE
FORFEITURE RULE
AND THE
LAW OF
SUCCESSION
This deals with a small but difficult problem
which arose in the case of Re DWS.[1]
A person killed both his parents, who died intestate. Rightly,
the killer was not entitled to inherit, but the Court of Appeal
found that the killer's son was similarly disinherited. The estate
passed to more distant relatives.
In July 2003, the Department for Constitutional
Affairs asked the Law Commission to consider the law in this area.
There was widespread agreement that the current law was unfair
and arbitrary. It was not based on public policy but arose from
anomalies in the way the legislation was drafted.
We thought that the inheritance should pass
as if the killer had died immediately before the intestate or
testator. We are pleased that the Government has accepted our
recommendations and has incorporated them in the draft Bill.
PRE-JUDGMENT
INTEREST ON
DEBTS AND
DAMAGES
This report considered the amount of interest
the courts should award on debts and damages in court proceedings.
It looked at what the interest rate should be; how it should be
set; when it should be departed from; and whether it should be
simple or compound.
In practice, the most important issue is the
rate itself. The issue of compound interest only becomes significant
in the longest running cases (which in practice tend to be clinical
negligence cases).
The current law gives the courts a wide discretion
over pre-judgment interest. However, in practice, the courts follow
the judgment interest rate, which was set at 8% in 1993. In 2003,
the base rate was 3.75% and we thought that 8% was too high. Now
that the base rate is 0.5%, it is clearly much too high, and grants
a windfall to the successful claimant.
The issue is important because excessive court
interest rates penalise some of the most vulnerable people in
society. Research shows that most of those taken to court for
debt "can't pay" rather than "won't pay".
Families are already in serious financial difficulty, and cannot
afford this further penalty.
We are pleased that the draft Bill includes
statutory provisions to set a prescribed rate. We also welcome
the Government's decision to enact similar provisions for post-judgment
debts.
However, we are disappointed that the Government
has still not reached a decision on the main policy issue, which
is what the rate should be. In our report, we considered arguments
that the rate should be 1%, 2% or 3% above base. We concluded
that in general cases, a rate of 1% above base would be fair to
compensate creditors for their loss. Today, this would have the
effect of reducing the rate from 8% to 1.5%.
We do not think this is a particularly complex
issue. We urge the Government to reach a concluded view on what
a fair rate would be, and then act to protect the many thousands
of vulnerable families passing through the courts each year.
THE
DAMAGES REPORTS
The other two reports (Law Com Nos 262 and 263)
were part of an extensive review of personal injury damages which
the Law Commission carried out in the 1990s. We also published
reports on Aggravated, Exemplary and Restitutionary Damages (1997
Law Com No 247); Liability for Psychiatric Illness (1999 Law Com
No 249); and Damages for Non-Pecuniary Loss (1999 Law Com No 257).
There has been extensive delay in the consideration
of these reports. In November 1999, the Government announced that
it would undertake a comprehensive assessment of our recommendations.Unfortunately,
the Department's consultation paper was not published until May
2007. The consultation period ended in July 2007 and the Department
published a summary of responses in July 2009.
We welcome the December 2009 draft Bill and
accompanying consultation paper (CP53/09) as an important contribution
to the debate. However, the delay means that it has been difficult
for the Law Commission to comment on some of the details of the
draft Bill.All those involved in the original review have now
left the Commission, circumstances have changed, case law has
developed, and the consultation we conducted in the 1990s may
no longer represent consultees' current views.
WRONGFUL DEATH
The main reforms set out in the draft Bill concern
damages for wrongful death. These are of two sorts: dependency
damages, where the claimant was financially dependent on the deceased;
and bereavement damages, which grant a small, fixed sum for non-financial
loss.
Extending those entitled to dependency damages
We are particularly pleased that the Government
proposes to extend the list of those eligible to claim as dependants
under section 1(3) of the Fatal Accidents Act 1976. The current
list is too restrictive: for example, it leaves out cohabitees
of less than two years; children who were not biologically related
to the deceased but who were supported by them in a cohabiting
relationship; and non-relatives who were nevertheless maintained
by the deceased. We support clause 1, which permits any other
person who was being maintained by the deceased before the death
to claim for dependency damages.
The Law Commission recommended that claims should
also be allowed from future dependants: that is from those who
were not maintained at the time of death, but who would have become
maintained had death not occurred. The Ministry of Justice has
taken a different view, and has not included future dependants
in the draft Bill. This exclusion will not affect many cases,
and we understand the Ministry's objection that the category should
not become too open-ended. However, we would hope that careful
consideration is given as to whether this exclusion could do injustice
in some difficult cases, for example, in disallowing the claim
of a child in the womb in assisted fertilisation situations, who
is not the deceased's biological child.
Effect of remarriage and prospects of divorce
We are pleased to see that the Government has
largely adopted our recommendations on these issues.
However, there are some concerns about the way
that clauses 2 and 3 have been drafted. For example, clause 2
repeals the provision in section 3(3) of the Fatal Accidents Act
1976 which prevents the court from taking into account a widow's
prospects of remarriage. We think it would be helpful to clarify
that the courts should not take such prospects into account.
Extending bereavement damages
Bereavement damages will always be controversial.
By their nature, they award arbitrary sums to an arbitrary list
of people. Strong arguments could be made that bereavement damages
should be abolished, or that they should be substantially increased.
That said, we recommended that bereavement damages
should be retained. They had become entrenched in law and in the
public's sense of justice. We thought they were needed to compensate
the bereaved person, as far as a standardised award of money can,
for their grief, sorrow and the loss of care, guidance and society.
In 1999 we recommended that the then applicable
sum of £7,500 should be increased to £10,000, and should
be further increased in line with the Retail Price Index (RPI).
We welcome the fact that the Government increased the amount to
£10,000 in 2002, and again to £11,800 in 2007.
However, the Government appears to have rejected
our recommendation to index-link. Instead, it is committed to
updating the sum from time to time. Had our recommendation of
£10,000 been implemented in September 1997 with an RPI link,
the sum would now be £12,803.
Clause 5 of the draft Bill extends the list
of those eligible for bereavement damages to children under 18;
to cohabitants who have lived together for at least two years;
and to unmarried fathers with parental responsibilities. We welcome
these extensions. However, the list is substantially narrower
than the extensions we recommended in 1999. Our list would, for
example, have included parents who lost children aged over 18;
adults who lost parents; and siblings.
We can understand that the issue of who should
receive bereavement damages involves difficult judgements, and
that views on this issue differ. However, we would hope that further
thought could be given to the position of some of those on our
original list, especially the parents of young adults, who may
feel the bereavement acutely.
DAMAGES FOR
GRATUITOUS CARE
The draft Bill also deals with an issue discussed
in our report on Medical, Nursing and Other Expenses; Collateral
Benefits (Law Com No 262), namely how claimants should be compensated
for the gratuitous care they receive from family members and others.
A personal injury claimant is able to recover
for the cost of their care. Where the care is provided gratuitously,
the claimant can claim an equivalent value to be held on trust
by them for the carer. This was part of the reasoning of the House
of Lords in Hunt v Severs.[2]
In 1999, we thought there were difficulties
with the trust mechanism. It created a proprietary right protected
from insolvency for no clear reason and the obligations of a claimant
trustee were not certain. Consultees described the trust mechanism
as impractical and unworkable for future gratuitous services.
We recommended that damages should continue
to be available from the tortfeasor for past and future gratuitous
services. However, the issue raised more difficult questions about
the rights of the carer as against the claimant. We thought that
there should be a legal obligation on the claimant to account
to the carer for past gratuitous services, but not for future
services.
By contrast, clause 7 of the draft Bill imposes
an obligation on the claimant to account to the carer for any
future services which were provided. In 1999, we thought that
a legal obligation of this sort would be impracticable and uncertain.
Much may change. A carer who at trial was willing to provide substantial
care may find they are able to do less. Or the claimant's needs
may increase. In either case, the claimant may need to seek commercial
care for some or all of their needs. We pointed out that the damages
may be insufficient to compensate both the carer and to pay other
expenses. We commented that a legal obligation to remunerate the
carer for future care "runs the unacceptable risk of compensating
the carer at the expense of under-compensating the claimant".[3]
Under clause 7 it is not clear how far a claimant
who has been awarded compensation for future care to be met on
a gratuitous basis could use the money to meet unforeseen additional
needs which were provided by a commercial carer. Nor is it clear
how a dispute between claimant and carer under clause 7(2)(b)
would proceed.
The other and particularly problematic aspect
of Hunt v Severs was that damages were held to be irrecoverable
where the carer was the defendant (as in that case). In line with
the overwhelming majority of our consultees, we recommended the
reversal of that rule. Unfortunately, the draft Bill would leave
Hunt v Severs intact in respect of damages for past services
by the defendant.
OTHER DAMAGES
REPORTS
The Bill does not implement any of the recommendations
we made in our report on Aggravated, Exemplary and Restitutionary
Damages (1997 Law Com No 247), or in our report on Liability for
Psychiatric Illness (1999 Law Com No 249). These reports have
now been rejected.
LIMITATION
OF ACTIONS
In 2008, the Government announced that the Civil
Law Reform Bill would be likely to include proposals to reform
the Limitation Act 1980. These proposals are not now, however,
included in the draft Bill. On 19 November 2009, the Government
announced, by Written Ministerial Statement, that consultations
with stakeholders demonstrated insufficient benefits and potentially
large-scale costs associated with the reform. The Government noted
that the courts have now remedied some of the key difficulties,
for example in relation to child abuse cases. We understand that
objections were received from several different sectors. In particular,
the Government considered that our reforms would place potentially
large-scale costs on the debt/credit industry. The statement made
clear that the recommendations in our 2001 report, Limitation
of Actions (Law Com 270), have now been rejected. It is disappointing
that it has taken the Government so long to come to this conclusion.
At present, a creditor has six years to enforce
a debt from the time when the debtor either acknowledges a debt
or makes part-payment under it. Under our recommendations, these
six years would be reduced to three years. Thus, for example,
under our proposal, if a bank wished to enforce a credit card
debt, it must contact with the debtor within three years, and
either obtain a written acknowledgement that the debt is owed
or some payment towards the debt. There are many reasons why creditors
may not wish to proceed to court, but we felt that creditors should
strive to contact debtors every three years. They should not simply
sit on debts.Instead, creditors should be given six years in which
to establish contact.
We accept that if the time limit for pursuing
a contract debt is to be retained at six years, it would be difficult
to introduce a consistent, simplified regime in the way we had
intended.
Rt Hon Lord Justice Munby
Chairman
January 2010
1 [2001] Ch 568. Back
2
[1994] 2 AC 350. Back
3
Law Com No 262, para 3.59. Back
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