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Lord Simon of Glaisdale: My Lords, as I must accept some responsibility for what happened at the Report stage, I should like to support what the noble Viscount has just proposed. I would add only one point. There is an unreasonable and very inconvenient rule that manuscript amendments may not be moved at

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Third Reading. Although that has twice been considered by the Procedure Committee, the rule still stands, so, unless the amendment of my noble and learned friend Lord Hoffmann is promptly tabled, there will be no opportunity to move an amendment which may well be desirable if the matter is to be decided at all in your Lordships' House rather than in the other place which is primarily concerned.

Viscount Cranborne: My Lords, I note what the noble and learned Lord has said and I am sure that the noble and learned Lord, Lord Hoffmann, will also have noted it. I certainly look forward to the debate at Third Reading if the House approves this Motion.

On Question, Motion agreed to.

Damages Bill [H.L.]

3.12 p.m.

The Lord Chancellor: My Lords, I beg to move that this Bill be now read a second time.

This is the fourth Bill I have introduced this Session to give effect to recommendations for law reform. I am, as always, pleased to be able to bring before your Lordships a Bill to give effect to recommendations of the Law Commission. This Bill gives effect to recommendations made in its report on Structured Settlements and Interim and Provisional Damages, which is the first report presented as a result of its current examination of the principles governing and the effectiveness of the present remedy of damages for monetary and non-monetary loss, with particular regard to personal injury litigation. The Law Commission has already published consultation papers on other aspects of the law of damages, and I look forward to considering further reports and recommendations on these subjects when they are published. The present Bill is the result of its consideration of the use of structured settlements as an alternative to, or in conjunction with, lump sum awards, and the interconnected interim and provisional damages regimes.

I am particularly glad to remind your Lordships that a number of the recommendations made in this report have been included in legislation which completed its passage during the last Session, very soon after the recommendations were made. That accounts in part for the difference between this short Bill, and the draft annexed to the Law Commission report. As your Lordships will be aware, a number of the recommendations related to the tax treatment of payments made under structured settlements. Such recommendations are most appropriately to be implemented in a Finance Bill, applying on a United Kingdom basis. Accordingly, most of them were included in the Finance Act 1995, and the remaining revenue provisions (which are complementary to provisions included in this Bill) have been added to the current Finance Bill during its Committee stage in another place.

One other recommendation, which was peculiarly suited for inclusion in other legislation, was included in the Civil Evidence Act 1995. That Act, implementing

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the recommendations of another Law Commission report, effectively abolishes the rule against hearsay evidence, and in response to the suggestion made by the noble Lord, Lord Mishcon, at Second Reading, we were able to incorporate a clause to deal with one special kind of hearsay evidence; namely, the actuarial tables published by the Government Actuary's Department.

Those are the provisions which might have been thought to be missing in this Bill, which in several other respects goes somewhat further than the Law Commission Bill. Having explained the apparent omissions, I propose, with your Lordships' leave, to explain the reasons for the other differences before offering a brief outline of the Bill's provisions.

The Law Commission referred in its report to a particular problem which had arisen in the context of structured settlements offered in the public sector. Although it is a normal feature of private sector structured settlements that an annuity is purchased to provide the injured person with periodical payments during his lifetime, government departments and other public sector bodies are more likely to provide such payments out of their own resources. A structured settlement offered from the public sector in this way is often described as "self-funded". There had, however, been some reluctance to accept self-funded structured settlements offered by public sector bodies which could, in theory, cease to exist without their liabilities being taken over, unless such settlements were backed by some form of government guarantee. The Law Commission expressed its support for legislation which had already been proposed to allow the Secretary of State for Health to provide appropriate Crown guarantees, and recommended that a general solution applicable to all departments should be the longer term aim. That we have done, and the general solution is in Clause 6, providing further facilitation for the use of structured settlements.

The Law Commission had also expressed concern that, in the assessment of damages for future pecuniary loss, particular discount rates were being used, although the market had developed in such a way that other rates could be applied to produce a more accurate assessment of a plaintiff's loss. These are the discounts which must be applied to reflect the fact that the plaintiff receives an immediate lump sum payment. That payment compensates, in advance, for a loss which is not itself immediate, but will be suffered over a number of years. The assessment must therefore take into account the value of the income which the lump sum can be expected to produce when the plaintiff invests it, so that the award does, so far as possible, correspond to the loss he will actually suffer over the same period.

The Law Commission's recommendation was that the courts should be required to take into account the net return on an index-linked government security, but that I should have power to prescribe an alternative indicator if no index-linked government security existed. Clause 1 of the Bill is designed to meet the concerns expressed by the Law Commission, but to do so in a way which does not run any risk of imposing an unnecessarily rigid structure on the courts, whose primary concern is to produce a just result in every case. The Bill therefore

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makes provision to ensure that the courts will always be able to make use of the best reflection of market opinion as to what real interest rates will be in the future, by providing a wider power for the Lord Chancellor and the Secretary of State for Scotland to prescribe from time to time the rate of return of which account should be taken. The wide power in Clause 1 can be used to assist the court as and when necessary. Prescribed indicators should not of course prevent the court from deciding that in the particular case before it, some other indicator will do the job better. That is one flexibility which needs to be preserved. Nor should we create a situation whereby the courts might find themselves bound to take into account, or to continue to take into account, a particular specified indicator, even though different, new, indicators might have become available and become accepted as better tools for assessing plaintiffs' losses accurately. It is undoubtedly right that the courts should have the facility to adopt indicators illustrating the expertly recognised probabilities at that time, in the absence of evidence of special circumstances or other considerations. Noble Lords will be aware that this is what the courts are constantly seeking to do, and that difficulties perceived by the Law Commission, before it published its report, may no longer be apparent. I am at present conducting a thorough examination of the discounts now being applied and other suggestions which have been put forward as possible representative investment patterns, which I shall of course take fully into account, in consultation with the experts, before exercising such a power.

The Bill also develops the Law Commission's recommendation for clarifying and rationalising the interaction between the provisional damages regime and the Fatal Accidents Act 1976 and the Law Reform (Miscellaneous Provisions) Act 1934. Provisional damages may be awarded where there is a recognised risk that the injured plaintiff may develop a further disease or suffer particular deterioration, but accepts provisional damages assessed on the basis that he will not, subject to the right to apply for further damages if he does. The Law Commission found the present position uncertain and unsatisfactory, and recommended clarification of the law so that where a plaintiff dies of his injuries after receiving a provisional award, his dependants will not be precluded from claiming for loss of dependency. There should not, however, be any element of double recovery. We have modified the clause proposed by the Law Commission so that the provision against double recovery gives preference to the dependant's claims, rather than the estate's. That is in line with the rule which applies generally when there could be duplication between the claims of dependants and the estate. It is very similar to the position which already exists in Scotland, and no corresponding clarification of Scots' law is needed. Otherwise, although the Law Commission's recommendations related to England and Wales only, they have equal application and have been adopted for Scotland and Northern Ireland.

Subject to those points which I have mentioned, fuller explanations of the current law and the proposed changes may be found in the Law Commission report to

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which I have referred. Full Notes on Clauses are available for any Members of the House who may wish to examine the provisions in greater detail.

Clause 1 provides the power, which I have explained, to prescribe the rate of return of which account should be taken. Clause 2 enables courts, with the consent of the parties in personal injury actions, to make orders for damages to be paid wholly or partly by periodical payments. It is, of course, an essential feature of structured settlements that at least some of the damages will be paid in that way and this clause resolves any doubts whether the court has power to order a structured settlement by consent.

As I have explained, Clause 3 prevents an award of provisional damages, which was made to a person who subsequently died from the injuries for which those damages were awarded, from barring an action under the Fatal Accidents Act 1976 for the benefit of his dependants, but it prevents the same pecuniary losses being taken into account more than once in assessing the damages payable by the defendant.

Clauses 4 and 5 allay possible concerns, in private sector structured settlements, that beneficiaries may not be adequately protected in the event that the insurance provider should fail at some time during the duration of the settlement. Phasing payments over many years, rather than paying a lump sum now, clearly exposes claimants to some risk of this happening.

There is already considerable protection for the policyholders of failed insurance companies under the Policyholders Protection Act 1975. The amount normally payable by the Policyholders Protection Board is 90 per cent. of any valid claims so that the consumers must take at least some responsibility for choosing their insurance provider wisely. Nevertheless, because of their special circumstances, it is the view of the insurance industry and the Government that beneficiaries of structured settlements should have full protection under the Policyholders Protection Act 1975. Clause 4, therefore, amends the Policyholders Protection Act 1975 to provide 100 per cent. protection to beneficiaries under structured settlements as defined in Clause 5.

Clause 6 achieves a similar objective in the context of public sector structured settlements. It too overcomes what may be a disincentive for a plaintiff to accept a structured settlement unless it is seen to be fully secure. It confers a statutory power for Ministers to guarantee payments due under self-funded structured settlements entered into by public sector bodies. There is equivalent provision in the schedule for guarantees by Northern Ireland departments.

I believe that this is a useful law reform measure and I commend it to the House.

Moved, That the Bill be now read a second time.--(The Lord Chancellor.)

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