Select Committee on Delegated Powers and Regulatory Reform Fourteenth Report

Annex 6


Supplementary Memorandum by the Lord Chancellor's Department

Further to the memorandum from the Lord Chancellor's Department reported on by the Committee in its 2nd Report on 11 December 2002, this supplementary memorandum covers a Government amendment to clause 92 of the Courts Bill.

Clause 92 replaces section 2 of the Damages Act 1996 for England, Wales and Northern Ireland with new sections 2, 2A and 2B, and gives the courts the power to order periodical payments for future pecuniary loss in personal injury cases without the consent of the parties. The clause implements proposals set out in the LCD's consultation paper "Damages for Future Loss", published in March 2002, and which were supported by the majority of those who responded to the consultation.

New section 2(3) requires the court to be satisfied that the continuity of the payments is reasonably secure before it makes a periodical payments order. New section 2(4) provides that payments made by public sector bodies protected by a Ministerial guarantee made under section 6 of the 1996 Act or payments protected by the Financial Services Compensation Scheme are reasonably secure for this purpose.

It will be possible for the court to make periodical payments orders against all defendants, including Government departments and health service bodies (in particular the National Health Service Litigation Authority). At present, these bodies usually fund periodical payments directly as they arise rather than by purchasing an annuity at the outset. It is necessary to ensure that this remains the case under the new system. However, these funding methods will not be caught effectively by new section 2(4). Section 6 of the 1996 Act is not designed to cover payments by Government departments and it is not suited to the NHS, which will be funding a substantial number of periodical payment orders, as an individual guarantee would appear to be required in every case. Under the present consensual system of periodical payments, the absence of formal guarantees has been no bar to settlement, as it would be clear to the claimant that the defendant department would be a reliable source of payment, and payments by health service bodies are statutorily secure under the NHS (Residual Liabilities) Act 1996. In the future however, a court ordering periodical payments will need to be satisfied of their future security. Government amendments have therefore been tabled to new sections 2(4) and 2(7) (which deals with alterations to the method of payment) to provide that payments made by "government and health service bodies" are to be considered reasonably secure for this purpose.

Amendment 140ZBC enables the Lord Chancellor to designate by order the bodies that are "government and health service bodies" for the purposes of new sections 2(4) and 2(7). It is essential that there is clarity as to the specific bodies that are protected, and flexibility to makes alterations should they, for example, change in name or status. This is therefore best dealt with through delegated legislation. An order made under this amendment will be subject to the negative resolution procedure. This level of parliamentary scrutiny is considered appropriate because the power will be used simply to provide information to assist the court in ensuring that any order for periodical payments is reasonably secure.

March 2003

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