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Earl Russell: My Lords, it is arguable that this may be the most important amendment to the Bill. Indeed, I am inclined to suspect that the Bill may be totally inoperable if we do not accept something along these lines. The key question is whether people will be prepared to settle out of court. It is common ground among every quarter of the House that, where possible, we would like to keep down the amount of litigation. In Committee the Minister gave us a good deal of talk about the real world. But the real world is mutable. When in another place it was decided that the width between the two Front Benches should be two sword lengths, that was, when it was done, entirely in the real world. But the real world has moved on and now there are other considerations which influence the placing of Front Benches.
In the real world, as it has hitherto been, the Minister argued that if you could accept a global sum it did not desperately matter how that sum was made up. That was true hitherto. It will not be true in the future because under the Bill certain heads of damages will be liable to recoupment while certain others will not be liable to recoupment. Until you know whether the sum you are being offered comes under heads subject to recoupment, you simply cannot calculate how much you will get.
Perhaps I may take a case which appears to me to be strictly on all fours with what the Bill is proposing. Let me assume that I am invited to give a lecture at the University of Sheffield. I am offered a fee plus travelling expenses. I am told that the two together will amount to £200. Because I have to return after the last train, I have to drive. Those of your Lordships who have been Members of another place know that there is more than one way to calculate car expenses. Let us assume that I charge expenses at the rate that I usually do, which is 10p per mile. In that case the expenses will come to £36. I shall end up with a very limited amount of expenses and paying a considerable sum in tax.
Then suppose that I am getting expenses at the rate at which, until recently, Members in another place received it for medium sized cars--47.2p per mile. In that case I shall end up with a large amount of expenses, which of course will not be liable to tax, and a very
much smaller amount of taxable income. I shall end up pocketing something closer to £190 rather than something closer to £130.It is of some interest to me--I must declare an interest in the literal sense--which of those things I might be being offered. I find it hard to believe that a claimant is really very different. If you are offered an out of court settlement, you do not want to know a whole lot of theoretical things. I have never been particularly interested in my gross income. I want to know what I am actually going to get in my pay packet. Similarly, I think a claimant wants to know what he will actually get in his settlement. If he is not going to know that, I do not see why he should settle.
The Minister suggests that the claimant should simply telephone and get the figure. If he is that fly, perhaps it is all right. But not everyone in the real world--more sides of the House than one can talk about the real world--actually is that fly. The Minister said:
- "The concern of victims at the moment and the one which we are addressing in the Bill is that benefit recovery can eat into pain and suffering. If the victim sees that all his award will be removed because of benefit recovery and nothing has been allowed for pain and suffering he will not agree to the deal".--[Official Report, 10/12/96; cols. 991-2.]
The Earl of Clanwilliam: My Lords, the noble Lord, Lord McCarthy, mentioned my noble friend Lord Chelmsford, who, unfortunately, cannot be present here today and has asked me to say a few words on his behalf. We are talking about the real world. Noble Lords opposite seem to think that claimants make their claims personally and do not make them through solicitors. In point of fact, a small claim may be readily agreed, and there is no problem. However, in larger cases there are the general costs and added to those are the special costs, including payment for suffering and loss of amenity. In such cases there will be much higher value awards, and a whole mass of additional, peripheral claims are made to maximise the claim by the solicitor on behalf of the claimants. The claimant does not make those claims. It is done by the solicitor.
For instance, loss of amenity can cover everything from a gardener's wages to holidays in the sun. The amendment would allow an unlimited range of additions which could open up a whole can of worms of new complaints, involving enormous time and expense on the part of solicitors. These matters are in the hands of solicitors. It is they who have the reins in their hands. They will be expected to maximise the claim item by subjective item if the opportunity is offered to them. That is the real world. The amendment will cause unnecessary delay. That is not in the claimant's interest and may tend to confuse the issue. Further delay will be inevitable. I emphasise that that is not in the plaintiff's interests and is contrary to the principles promoted by the noble and learned Lord, Lord Woolf. If it so happened that heads of damages could be agreed at the outset, there would implicitly be co-operation between the parties. No problems would arise and a quick
settlement would ensue. However, the amendment would open up a can of worms and would delay matters interminably.
Lord Mackay of Ardbrecknish: My Lords, as your Lordships will recall, these amendments were discussed at some length in Committee. I expressed the view then--and it remains my opinion--that the effect of either of the amendments would be to allow benefit recovery to affect the settlement process to an unacceptable degree. We cannot allow the tail to wag the dog.
Earl Russell: My Lords, can the Minister explain why that is unacceptable? He puzzles me very greatly.
Lord Mackay of Ardbrecknish: My Lords, I shall indicate at least one reason why it is unacceptable if the noble Earl wishes me to do so now. It may be unacceptable to the plaintiff to allow the settlement to drag out. He may be quite keen to get to the end point and get his money. Furthermore, as it so happens, if it drags out and benefit is in payment, the potential amount of benefit recovery will be increased. Therefore, the sooner a conclusion can be reached the better it is for the plaintiff and the better it is for the compensator--for exactly the same reason of benefit recovery. As long as the clock is ticking and is moving on, benefit is being paid which potentially can be recovered. If the case is settled, that is an end of the matter so far as concerns any further benefit recovery. So I believe that it is in the interests of the plaintiff and of the compensator to come to a speedy solution.
Your Lordships may recall that I mentioned at Committee stage that over 90 per cent. of compensation settlements are made out of court. A settlement is offered representing compensation for all losses suffered. What may be included in that figure is loss of earnings, cost of care, pain, suffering and so on, and they are not separately identifiable. That is what actually happens, but whether that is the real world or not that is the situation.
As I have explained, negotiating parties may never agree on the amounts of compensation that they believe would be appropriate in respect of each of these elements. Nonetheless, they may be able to agree a global sum in settlement of the claim. That is the situation under the present scheme. Although the benefit recovery arrangements will change, the Association of British Insurers firmly believes that victims and compensators will still, in most cases, wish to negotiate a global settlement without the necessity to agree on its constituent parts. I see no reason to doubt its word. Indeed, as my noble friend Lord Clanwilliam has just outlined, that is the argument put very firmly by the practitioners in the field and by the Association of British Insurers. It is also the argument that was put very firmly by my noble friend Lord Chelmsford at Committee stage from his experience in this particular area.
I do not have any reason to doubt the word of the people involved that the position will still be as it is currently and that in most cases global sums will be
negotiated in out of court settlements. Unless the noble Earl is keen--and he did not seem to be at the beginning of our discussion--to have a "benefit for lawyers" operation here, he should perhaps agree that the quicker the settlements are made and the fewer that go to court the better it will be for the general public, the taxpayer, plaintiff and compensator, but perhaps not for the lawyer.5 p.m.
Earl Russell: My Lords, can the Minister accept that it is common ground between us that the sooner settlements are made the better? The point at issue is the quickest way to a settlement. Our contention is that settlements are not easily reached if they are never in the interests of the claimants.
Lord Mackay of Ardbrecknish: My Lords, a settlement will not be reached if the claimant does not believe that it is in his interest and he is not happy with the settlement being offered. But, as I have suggested, over 90 per cent. of cases are resolved out of court. The Association of British Insurers and my noble friends Lord Clanwilliam and Lord Chelmsford have claimed that that is how the system works. As I tried to explain in the letter that I sent to the noble Baroness, referred to by the noble Lord, Lord McCarthy, if the process remains broadly as it is now, in a case where benefit falls to be recovered we fully expect that the sum agreed with the victim will usually be net of compensation. For example, if £B of benefit were due to be repaid the compensator might offer the victim a further £C in compensation. The victim would get the £C in compensation, but the compensator's liability would in fact be £B plus £C. That is how we believe these settlements will be negotiated, and all the advice that we have received suggests that that will happen.
Of course, in future it will be possible for the victim and the compensator to assess the amount of compensation they believe should be paid in respect of the losses that the victim has sustained and the amount of any reduction in respect of benefit recovery. In the circumstances that we are talking about, neither side will know what calculation the other side has made in order to arrive at the estimate and how they have built up their own negotiating position. That is usually the case where the figure for compensation is negotiated between two parties whether or not benefit has been paid. Nonetheless, we believe that when both parties are satisfied that the offer on the table conforms with their own estimate, then they will settle, just as happens under the present scheme. We certainly do not believe that we should say, "No, you cannot do that. The compensator must spell out the heads of damages that make up this global figure that is being offered".
If a victim is not content with the global figure offered by the compensator or suspects that the protection of compensation for pain and suffering under the benefit recovery rules has not been taken into account, then there are options open to him. If he were unsure about the reason for the discrepancy he could ask the compensator about the reason for it, producing supplementary evidence to support his position.
Ultimately, the case could go to court, but that is no different from the present position where a multiplicity of factors can result in that outcome.Court awards of compensation will specify any elements which may be reduced in respect of repaid benefits. Any reduction of such compensation may only take place in accordance with the rules as set out in the legislation. However, if the compensator's offer closely matched the victim's own expectations, there would be no reason for him to complain and the case should be capable of being settled.
Finally, it has been suggested that if the compensator were required to reveal his calculations to the victim it would expedite settlements. Victims' representatives may believe this, but the Association of British Insurers suggests the reverse--that the additional procedure would delay settlements. I at least understand that because one can believe that one can agree the total sum, but when the way in which it is split up is seen, the victim may say, "I don't agree with that and we shall have a fight over it". It obscures the fact that they are reasonably satisfied with the total sum and are prepared to accept it.
I return to a point that I made to the noble Earl earlier. Since the period for benefit recovery runs to the date of settlement, any delay would be likely to increase the amount of benefit recoverable and might therefore result in a further reduction in the amount of compensation payable to the victim. I do not believe that that is a desirable outcome. Indeed, in an intervention the noble Earl indicated that we are at one in wanting settlements to be made as speedily as possible.
I believe that there is a serious difference between us and partly, I believe, because we are listening to different sets of outside advisers who are giving us different advice. I am content to stand by the views of the Association of British Insurers that we shall continue to see most of the cases being dealt with in out of court settlements if we proceed along the lines that the Bill outlines. That will enable a compensator to make an offer without having to break it up. I am not sure whether I have persuaded the parties opposite of the rightness of my case. If I have not and they pursue the matter to a Division, I hope that my noble friends will support me.
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