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Lord Hunt of Wirral: My Lords, I thank the Minister for the very helpful way in which he has set out the historical background to, and the details of, the draft order. Once again I declare my interest as senior partner of Beachcroft Wansbroughs.
The Minister asked whether he could add anything. Perhaps at the conclusion of the debate he might define what the word "shortly" means. It would be very helpful if we could have an indication whether that means January or February of next year. I understand that at the moment it is more likely to be February, but it would be so helpful to all those involved if we could have a more specific commitment.
This is a very important opportunity, not only to debate the particular power under this order to vary periodical payments, but also to seek certain clarifications from Ministers on the issue of periodical payments themselves.
First, I should very much like to know if Ministers have come to an agreed view on how widely they expect periodical payments to be used. The ministerial trumpet has recently sounded a trifle uncertain with regard to this matter. It would be helpful to clarify the position.
I would remind the House that when we debated the Courts Bill the noble Baroness, Lady Scotland of Asthal, said that the Government's proposals aimed,
"to promote the widespread use of periodical payments as a means of paying compensation for future financial loss and care costs in personal injury cases".—[Official Report, 27/3/03; col. 930.]
That appeared to be the kind of unequivocal statement that the courts might welcome as they worked to bed down the new system.
I must, however, now ask the Minister to clarify the position in view of last week's comments in another place by his colleague, Mr David Lammy, which on the face of them seem to contradict directly those of the noble Baroness. In the Sixth Standing Committee on Delegated Legislation on 20 October, Mr Lammy said that,
"it was expected that there would be quite a small number of periodical payments, in the same way as there is a relatively small number of provisional damages".
I hope that Mr Lammy meant to say that it was expected that there would be a small number of periodical payments which would be varied. If he had said that, I would agree with him because, as this House concluded on our previous debate on the matter, it is certainly important that the scope of variation be tightly controlled. Perhaps the Minister would take this opportunity to untie the knot and sort out for us exactly what the Government's position is.
During the same debate in the other place on 20 October, Mr David Heath raised questions about the application of Section 2(4) of the Law Reform (Personal Injuries) Act 1948, which he described as an anomaly. Mr Lammy replied that the Government were considering such issues, with a view to further consultation if appropriate.
The Chief Medical Officer proposed in his excellent report Making Amends that Section 2(4) should be abolished, so far as clinical negligence was concerned. Last September, in a Written Answer, the Government stated that they were considering abolition for other personal injury claims, too. That was warmly welcomed at the time. It would be helpful to know the present position. It is indeed anomalous that the courts are prevented under Section 2(4) from considering the treatment which might be freely available under the National Health Service to help with the rehabilitation of the injured party, and, in particular, with their future care.
The insurance industry is more than capable of putting forward imaginative proposals in this area. Indeed, as of next April, it is facing up to its responsibility to pay out an additional £150 million for emergency health service treatment provided to those injured negligently, mainly those injured at work. Rather than operating simply as a levy, the money could be targeted at producing better facilities for ensuring that people have an early opportunity to return to work and to a good quality of life. I believe that it is generally agreed that the facilities under the National Health Service could well be improved in that very important respect. It would be very helpful for the insurance industry and all of us to have at least some indication of the timescale within which the Government expect to operate.
In the field of compensation, a much closer match to the needs rather than the wishes of the injured party is vital. I recall that the noble Baroness, Lady Scotland of Asthal, said in the same debate that,
"it is our intention that the Civil Procedure Rules, supported by practice directions, will provide guidance to assist the court in making an order that best meets the needs of the claimant".—[Official Report, 27/3/03; col. GC 932.]
Already under Section 100 of the Courts Act 2003, Civil Procedure Rules are to be made with regard to what consideration should be taken into account by the court in deciding whether to order periodical payments. I am sure many would agree that it would be very helpful if the rules could stress, in particular, the need for the court to have regard to the form of award that best meets the claimant's needs. A restatement of that overriding principle would now be welcome.
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As the Minister is aware, however, whenever retrospection is involved, considerable clarity and caution should be exercised. I am well aware that no government will ever be able to sweep away the incubus of possible retrospection once and for all, but I hope that new elements of uncertainty will never be introduced gratuitously or needlessly. When there is such a strong perception of a compensation culture, it is vital that compensation should not exceed "sustainable" levels, with regard both to the level of costs and to the predictability of the level of damages.
Returning to the question of periodical payments, I know that the Minister will agree with me that it is essential that judges be given clear and consistent guidance as well as adequate training. Not only do I ask that such guidance be provided, but perhaps the Minister might look kindly on a plea that such guidance be made public in order that everyone can understand the way in which this new system is to operate.
There is strong support in principle for periodical payments; in particular, when they form part of a structured settlement. There are great advantages for all concerned. They will enable the courts to give claimants the guaranteed level of income they require and deserve to meet their needs, in place of a lump sum, with all the defects which the Minister outlined and are conceded by all those who have to operate the system. It is, therefore, a great responsibility to ensure that the system is readily understood from its very earliest days by everyone who has to work within it. Let our watchwords be: caution, clarity and consistency.
Lord Goodhart: My Lords, the courts have had power for some years to make orders for provisional damages. Those powers are set out in what is now Section 32A of the Supreme Court Act 1981. That means that, where there is at the time of the trial an uncertain prognosis of the injury caused by the defendant's negligence, an order can be made for payment of damages immediately, that order being calculated on the basis of a favourable prognosis. But if the condition of the claimant deteriorates, the claimant then has the right to come back to ask for additional lump-sum damages.
That principle has been criticised from two very different directions. First, insurers and medical organisations such as the Medical Defence Union and the Medical Protection Society are concerned about the uncertainty that they, or their members, face regarding the amount of the liability. Secondly, doctors such as the noble Baroness, Lady Finlay of Llandaff, are concerned at the effect of continued uncertainty on the claimants.
The Courts Act 2003 gave the courts a new power to make orders for periodical payments as an alternative to lump-sum damages. Until then, periodical payments could be made only under structured settlements. We certainly welcome the power to make an order for
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periodical payments in contested cases, not just where the parties agreed to a structured settlement. Now it is obvious that the problems with an uncertain prognosis apply to a case where a periodical payment has been ordered as much as they apply to a case where a lump sum has been awarded.
The Courts Act, when it was a Bill, included a wide power to make orders to vary a periodical payments order or settlement providing for periodical payments. That power of variation was criticised by the noble Baroness, Lady Finlay of Llandaff, in a powerful speech in the Committee stage of the Courts Bill. She said:
"Leaving settlements open to review may mean that patients cannot complete the grieving process that will and must occur. They cannot have closure".—[Official Report, 27/3/03; col. GC 940.]
When taking part in that debate, I recognised the force of the noble Baroness's argument, but I could also see real value in allowing variation of earlier orders in a limited class of cases. Therefore in the debates on the Courts Bill I welcomed the power to vary an order for periodical payments or a structured settlement, but only on strict conditions. There were two conditions. First, that the power to vary an order should be limited to circumstances corresponding to those where an order for provisional damages could already be made under Section 32A of the 1981 Act. Secondly, the power should be limited to circumstances where the original order or settlement expressly provided for the possibility of the subsequent variation.
I wanted those conditions to be written into the Bill. The Government refused to put those restrictions in the Bill, except in one limited respect where they accepted my amendment relating to structured settlements. But the present order meets the spirit of the conditions that I wanted to put in the Bill. We therefore are happy to welcome it.
As the noble Lord, Lord Triesman, pointed out, the power to vary a periodical payment order differs from the rules for provisional damages. Unlike provisional damages, it permits a downward variation as well as an upward variation. I accept that as being entirely reasonable. The provisional lump sum damages cannot be varied downwards without recovering a payment that has already been made to the claimant. The drawbacks of trying to do that are obvious. In the case of a periodical payment order, future payments can be reduced without clawing back what has already been paid. Therefore, on those grounds, I am happy with that.
I have one small query. I note that the order in Article 13 does not appear to provide for the possible termination of a periodical payment where the claimant has fully recovered, which will happen no doubt from time to time. But, presumably, it could, without being terminated, be reduced to a nominal sum. Can the Minister confirm that that is the position?
I should finally add that if the Government come back with a further order to provide for variation of periodical payments in circumstances that are additional to those covered by this order, which fall outside the conditions that I sought to enforce when
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debating the Courts Act, in such circumstances we would be unable to promise our support for any such further order.
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