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The Earl of Clanwilliam: My Lords, I hope that your Lordships will forgive me. I must catch a train at half past eight as I have an important engagement in the country tomorrow morning and this is my last opportunity to get there. My point is simply that the solicitor is the person involved in this activity who knows exactly what is going on and can explain quite clearly to the claimant exactly which item represents what. If the solicitor cannot do that, it will certainly be extremely difficult for anyone else to do so.
Earl Russell: My Lords, before the noble Earl sits down, will he agree that some solicitors are more solicitous than others?
The Earl of Clanwilliam: My Lords, indeed. With that, I hope that the House will give me leave to withdraw.
Lord Mackay of Ardbrecknish: My Lords, we have returned to a topic that we discussed at length both in Committee and on Report. I am afraid that, as I indicated towards the end of the Report stage, there seems to be a fundamental disagreement between the Government and noble Lords opposite on this matter, although, I am happy to say, not on the rest of the Bill.
The disagreement may in part stem from a muddying of two distinct issues. The first is whether offers of compensation need to be broken down into their constituent parts. The second is whether offers of compensation will be made gross or net of benefit recovery under the reformed scheme.
Some noble Lords seem to be under a misapprehension that the former is necessary because, as they believe, offers of compensation will be made gross. Indeed, I thought the noble Lord, Lord McCarthy, went even further in his remarks. He seemed to think that it would require "nods and winks" to find out what the recoverable benefits were. I cannot understand that at all. The victim receives a copy of the certificate of total benefits. That seems to have little to do with the statement of reduction. Clause 4 makes matters perfectly clear in relation to the certificate of recoverable benefits. I hope that that misunderstanding has been laid to rest.
The noble Earl suggested today, and previously, that until a person knows what sum he or she is being offered, and what heads it comes under, the calculation as to how much will be received simply cannot be made. I believe that was the substance of his remarks. However, that is not the case if the sum you are offered is already net of compensation recovery and the offer made to you is the amount of money you will receive. That is what the organisation representing those who will make the offer, the Association of British Insurers, assures us will be the case. That point has been made three times now by my noble friend Lord Chelmsford and was made again this evening.
Noble Lords opposite seem to be sceptical about that; but they have not explained what the advantages would be to insurers of making a gross offer of compensation and refusing to explain its value to the victim. It has been suggested that victims will refuse to settle on the basis of a gross offer whose value is unknown to them. Quite so. It would indeed be foolish to accept an offer whose value was unclear. There is no suggestion that victims could be forced to accept an offer where the benefit recovery position was unknown. It will usually be known because of the certificate which will have been asked for and copied. If that has not happened, it would be unwise of the victim to accept a gross settlement; he will look for a net one. I believe that is common sense.
I think it is unlikely that under the reformed scheme insurers will wish to delay settlements. They will have the responsibility to repay benefits and the benefit bill will continue to accumulate up to the point of settlement; the clock will keep on ticking. Why would they bother to make an offer which was not clear and which therefore prevented assessment of its net value? Why should they attempt to make the whole thing a bit of a mystery? The insurer will be equally keen to know the cost of the offer to himself when he makes it. He cannot do that without identifying the amount he will have to pay the victim in addition to the amount he will have to repay to the compensation recovery unit. I cannot for the life of me understand what advantage there would be to the insurers in making an offer where the total bill was unclear. That would seem a very imprudent way for an insurer to conduct himself.
If there is a misunderstanding here, it may well surround the question of gross or net. As I have said, the evidence we have and the experience of how this works--and logic tells me how it will work--show that the insurers will offer net. They will know what the recoverable benefits are and what the total cost will be to them and will say to whoever it is, "We are prepared to offer £X thousand to you in your pocket". If they say "£X thousand" and leave it a mystery as to whether that is in his pocket or whether recoverable benefit has to be taken off, I would have thought that that would delay settlement. It is unrealistic to think that the matter will proceed in that way. I think it is net and clear and that that will expedite settlement in the interests of everybody.
The noble Lord, Lord McCarthy, emphasised again that:
- "It is not right ... if one of the parties to a dispute ... has more access to information ... than the other party".
The noble Lord, Lord McCarthy, suggested that it was,
- "not right that the victim should not have access to the information if they want it"
- "victims' solicitors need to know the breakdown so that they can advise their clients what to do".
8.15 p.m.
Lord McCarthy: My Lords, the noble Lord is putting words into my mouth. I am answering his case. He is the one who said--and if we had Hansard here we could show it--over and over again that all people want is the quantum. That is his argument, not my argument.
Lord Mackay of Ardbrecknish: My Lords, I am just reinforcing that argument. I think that people want to know what they will receive net, and that is what I think will happen. Frankly, I do not understand the noble Lord's intervention at all. He seems to be agreeing with me.
Earl Russell: My Lords, it would materially assist the House if the Minister could explain how the victims will know how much they will receive when they do not know into what heads it is broken down.
Lord Mackay of Ardbrecknish: My Lords, they know how much they will receive because they will be offered it: they will be offered £X thousand and, when the solicitor says, "Does that include the recovery of benefit?", the compensator will say, "No, it does not;
I will deal with the recovery of benefit myself; I will pick that up. Your client will get £X thousand". Perhaps I am just too stupid to understand this argument, but it seems to me a perfectly understandable position.
Earl Russell: My Lords, I understand that the Minister believes that settlements will work this way. Can he tell us why he believes it?
Lord Mackay of Ardbrecknish: My Lords, I believe it because that is the way many of them have worked to date. That is the advice that we are given by the Association of British Insurers, who operate this system, and that is how they see the system operating currently, where 90 per cent. of the claims are settled out of court. My noble and learned friend the Lord Chancellor has underlined that point. That is the evidence on which I base my view. It is also a common sense point of view. That is actually what somebody will be interested in.
I was raising the question of those cases in which no benefit is involved. It seems to me that there is no requirement in the kinds of cases we are talking about for the insurer to break down the offer he has made. I think the Opposition accept that the usual practice at present is to make an offer of a global sum by way of settlement of the claim. How do solicitors tell whether or not these claims are fair and reasonable? The solicitor in such a case will know little, if anything, about the calculation which underlies the offer made by the compensator. Yet the noble Lord has been told that this information is vital for a solicitor to advise a client as to whether to accept an offer of compensation. Frankly, I do not believe that at all. If that is the case, the implication is that, once a solicitor is presented with a claim where benefits are an additional factor, his knowledge, experience and judgment will desert him and the claim will have to be stalled. That cannot be right. The victim's advisers will make their own estimate of the value of the claim and assess any offer in the light of that estimate in the normal way.
It has been suggested that it would be easier for the negotiating parties to agree on several figures making up a total offer of compensation than on a single figure. I have to say that that seems very unlikely. Even in the mildly adversarial climate--let alone a major adversarial climate--in which negotiations are conducted, that is more likely to lead to greater scope for argument, with cases progressing to court, and I do not think that anybody wants that.
Amendment No. 1 would limit the requirement to provide a statement of reduction in compensation to cases where recoverable benefits exceeded a limit to be prescribed by regulation. I am always flattered when I am encouraged to take regulation-making powers. This is an interesting variation on the Opposition's theme. It seems that they are offering us an implicit acknowledgment that statements of reduction would mean an onerous and bureaucratic task for the compensator and therefore they want it de minimis.
Of course, the amendment would still mean that a statement of reduction in compensation would be required in a high-value case. I am advised that
high-value cases are the ones that tend to include a claim for compensation under a multiplicity of different heads. Unsurprisingly, they also tend to be fought the hardest and are the category of case most likely to end in a court hearing. If there were a requirement to spell out the heads of compensation in such cases, there would be even less chance of reaching an informal settlement. I am therefore unattracted by this aspect of Amendment No. 1.Under the reformed benefit recovery scheme, the liability to repay benefits is separate and distinct from the liability to pay compensation. I have tried to make the distinction between net and gross and I will try this different way: separate and distinct. Although the compensator is required to apply for a certificate of recoverable benefits, he does not have to have received it before making a compensation payment. That frees the negotiating parties to agree an early settlement, without unnecessary interference from the department. Under the first amendment the compensator might discover, after offering or even paying an award, that the amount on the certificate of recoverable benefits exceeded the limit. He would then have to back-calculate, using the net amount he had paid to the victim and the amounts of various recoverable benefits, what compensation would have been payable under each head before reduction. He would have to do this despite the fact that the victim had already received compensation and irrespective of the fact that the gross figures could be calculated in several different ways. In short, the compensator would be obliged to pursue a pointless paper-chase and incur additional administrative expense to invent a breakdown by heads of damage which would be of no interest to the victim, who had already settled.
In summary, a number of arguments have been made in support of these amendments. None has convinced me. None has convinced me that it would improve the Bill in any way.
In some ways there is a degree of opportunism from certain people who would like to go down that route, cloaked in an argument about legal principle. I think that the argument is essentially bogus. The Bill is not about making life easier for personal injury lawyers or indeed making it more lucrative. It is in fact about trying to ensure that as many settlements as possible are entered into out of court as quickly as possible for the benefit of the victim; and, overall, of course, that in the kind of cases that we are discussing the victim knows exactly, as will the compensator, what the recovery for benefit will be and what sum of money he will receive.
That seems to me to be a perfectly sensible way to think that the legislation will work. I hope, if the noble Earl and the noble Lord, Lord McCarthy, put their amendments to your Lordships, that my noble friends will support me in the Lobby.
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