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Baroness Scotland of Asthal moved Amendments Nos. 139ZC to 139ZF:

    Page 44, leave out line 37.

    Page 44, line 38, at beginning insert "it is protected by"

    Page 44, line 40, at end insert ", or

(c) the source of payment is a government or health service body."

On Question, amendments agreed to.

Baroness Scotland of Asthal moved Amendment No. 139ZG:

    Page 45, line 1, leave out paragraphs (a) and (b) and insert—

"(a) requiring the party responsible for the payments to use a method (selected or to be selected by him) under which the continuity of payment is reasonably secure by virtue of subsection (4);

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(b) about how the payments are to be made, if not by a method under which the continuity of payment is reasonably secure by virtue of subsection (4);
(ba) requiring the party responsible for the payments to take specified action to secure continuity of payment, where continuity is not reasonably secure by virtue of subsection (4);"

The noble Baroness said: As I explained in speaking to previous amendments, the Government wish to give defendants and their insurers as much flexibility as possible in funding court-ordered periodical payments provided always that the claimant's interest in the ongoing security of the payments is protected. To ensure that the Bill achieves that, Amendments Nos. 139ZG and 139C clarify the provisions relating to the method of funding payments. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 139A and 139B not moved.]

Baroness Scotland of Asthal moved Amendment No. 139C:

    Page 45, line 5, leave out "or (b)" and insert ", (b) or (ba)"

On Question, amendment agreed to.

Lord Goodhart moved Amendment No. 140:

    Page 45, line 10, after "arrangement" insert "shall not vest in his trustee in the event of his bankruptcy and"

The noble Lord said: This probing amendment is intended to discover the proposed effect of a bankruptcy order on a right to periodical payments. I believe that the position should be similar to that of occupational and personal pensions. The position in that regard broadly is, first, that the underlying right to a future pension payment does not vest in the trustee in bankruptcy and therefore cannot be sold to pay debts; secondly, that the pensioner can retain part of the current payments—the guaranteed minimum payment in the case of a contracted-out occupational pension—but the balance of the current payment goes to a trustee in bankruptcy; and, thirdly, that after the pensioner has been discharged from bankruptcy, he or she gets the subsequent pension payments in full. That seems to be a good model for periodical payments for damages.

It would be distasteful in the extreme if someone's rights to substantial periodical payments for severe personal injury could be bought and sold. However, it is not clear that new Section 2(6) of the Damages Act 1996 achieves that. It provides for restrictions on the assignment or charge of the right to periodical payments, which I welcome. But what about bankruptcy? It is not mentioned in that provision. The fact is that the property vests in a trustee in bankruptcy by operation of law, not by assignment or charge. Subsection (6) does not appear to cover the case of bankruptcy. Have the Government formed a view about the effect that a claimant's bankruptcy should have on an order for periodical payments? Do the rights in fact vest in the trustee in bankruptcy? If so, can he dispose of them? What happens about periodical payments becoming payable during a period of insolvency? Do they vest in the trustee in bankruptcy? If so, should all or part of them remain

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payable to the claimant? For example, should the claimant continue to be entitled to receive payments that would be equal to what he might otherwise receive in means-tested benefits?

This important issue needs more consideration than it appears to have received to date. I beg to move.

Baroness Scotland of Asthal: I say straightaway how grateful I am to the noble Lord, Lord Goodhart, for raising the issue of the insolvency treatment of periodical payments, which I agree is in need of clarification. He spoke on this issue at Second Reading. In my subsequent letter to him and other noble Lords, I set out my understanding of the current law. I have since been informed that the situation is more complicated than was suggested by the initial advice that we were given. We therefore welcome this opportunity to consider the matter.

This is a complex area of the law, and one which has not yet been tested by the courts. At present, the treatment of periodical payments in bankruptcy will depend on whether they are to be considered to be in the nature of "property" or "income" for the purposes of the Insolvency Act 1986. The law is unclear. If they are considered to be property, they would vest in the trustee, but any "personal" element, including care costs, would be held on constructive trust for the bankrupt. Those anxieties were highlighted by the noble Lord. If they are considered to be income, Section 310 of the Insolvency Act 1986 provides that income received after the date of bankruptcy may be claimed for the bankrupt's estate by way of an income payments order. New Section 2A(2) of the Bill ensures that income payments orders can be put in place where necessary.

We believe that periodical payments that relate to loss of earnings should be treated in the same way as the earnings of a bankrupt who is working. It is not fair to treat payments made to replace earned income differently from earned income itself. However, we recognise that different considerations should apply where a claimant is receiving periodical payments specifically to meet the cost of care needs and believe that it should not be possible for those to be claimed for the bankrupt's estate. Under current law, if periodical payments are treated as "income", it is unlikely that the court would make an income payments order in respect of care costs because the provisions of the 1986 Act specify that the court shall not make an order the effect of which would be to reduce the bankrupt's income below that necessary to meet his or her reasonable domestic needs.

If periodical payments are treated as property, care costs will be considered as personal and held on constructive trust for the complainant. We believe that the bankruptcy treatment of periodical payments should strike a balance which recognises that care costs should be protected but does not otherwise give those in receipt of payments preferential treatment over other bankrupts. We are in discussion with the Insolvency Service over an amendment to achieve that balance and to clarify the treatment of periodical payments. Therefore, my thanks to the noble Lord are

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very genuine, and I am sure that many claimants will thank him, too. I hope that the noble Lord feels able to withdraw his amendment in anticipation of the amendments that we shall bring forward on Report.

Lord Goodhart: Of course, in those circumstances, I shall withdraw the amendment. I am glad that the Government have now taken this matter on board and are dealing with it. I shall look forward with a good deal of interest to seeing the Government's amendments on this in due course. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bassam of Brighton: This may be a convenient moment for the Committee to adjourn until after the consideration of Commons reasons on the Community Care (Delayed Discharges etc.) Bill. Therefore, I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

Lord Bassam of Brighton: My Lords, I beg to move that the House do now adjourn during pleasure.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 1.31 to 3 p.m.]

Hereditary Peers' By-election

The Clerk of the Parliaments: My Lords, with the leave of the House, I am now able to announce the result of the by-election to elect a hereditary Peer in accordance with Standing Order 10.

Four hundred and twenty-three Lords completed valid ballot papers. A paper setting out the complete results is being made available in the Printed Paper Office and the Library. That paper gives the number of votes cast for each candidate.

The successful candidate was Viscount Ullswater.


3.1 p.m.

Lord Blaker: My Lords, on behalf of the House, I should like to congratulate the noble Viscount, Lord Ullswater, on his success. I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows:

    To ask Her Majesty's Government whether it is their policy that the suspension of Zimbabwe from the councils of the Commonwealth should be continued.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Amos): My Lords, yes.

Lord Blaker: My Lords, does the noble Baroness agree that conditions in Zimbabwe have got worse in

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almost every respect since the suspension began just over a year ago, not least the horrendous political violence being perpetrated at the present time against the opposition? Does she recall that last Friday Mr Mugabe said that he could be,

    "a black Hitler tenfold in crushing his opponents"?

If anything like the present situation in Zimbabwe persists until December when the review takes place, will it not be a travesty and very damaging to the cohesion of the Commonwealth if the suspension is not continued or strengthened? If that is the view of Her Majesty's Government, will they make it clear to the whole of the Commonwealth?

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