My Lords, this is an extremely interesting Bill for me, for reasons that I will explain in a moment.
I will not say much about the first part of the Bill and the types of injury it deals with. That is because long ago, when I was in practice in Scotland, the system was still that juries awarded damages in personal injuries cases. I acted for the defendant in a case of whiplash injury. The lady came to the jury to explain how bad her injuries were. We had put in an advance offer—as was usual—for what we understood, from the medical evidence, was a reasonable estimate of the worth of the injuries. At the jury trial the lady was very good at explaining how bad the whole thing was, and she got an award considerably above our offer. My reputation as an estimator was, therefore, adversely affected by that experience.
I had the great advantage, however, that the late Lord Fraser of Tullybelton—as he became—was the presiding judge. In those days the judge was not supposed to give much indication: it was a matter for the jury
and he was not supposed to intervene to say it should be this or that. Lord Fraser—as those who knew him will remember—was an excellent judge who observed that requirement meticulously. He came to me afterwards and said that he thought I had been very badly treated by the jury, which shows how difficult it is to estimate genuinely on this type of injury. I have no doubt that there may be some question about precisely what the rate should be when the whole thing is lumped together as if it were a reasonably common experience, with reasonably common results.
However, I want to speak primarily about Part 2 of the Bill, because I am in the remarkable position of seeing that this part would amend a Bill that I introduced, and which became an Act, in 1996. My recollection of that—it is over 20 years ago, as your Lordships will quickly be able to observe—was that the judges were having a lot of difficulty in assessing damages, particularly for the whole of life, as some cases required. They were of course experiencing the benefit of actuaries and other people who ran investments, and so on. This involved a very large amount of work in the individual cases and the judiciary were anxious—I am subject to correction by members of the judiciary who may remember this situation—to avoid the necessity for this repeated excursion into financial administration. The other thing is that at that time, in 1996, the markets were probably a bit less volatile than they are now.
Eventually we passed that Bill, which required the Lord Chancellor to fix the discount rate. Fortunately, I had managed to retire before I had to do it so it fell to the noble and learned Lord, Lord Irvine of Lairg, to fix it, which I am sure he did to the best of his ability. He had to take the advice of the Government Actuary but he was not confined to that. He fixed the rate and that rate has lasted until 2017. The great thing about that matter is that if it changes after such a lapse of time, it is going to be quite a change and the effect on the estimates within various bodies, particularly public bodies such as the National Health Service, is terrific. I entirely agree that something more regular is required and that it is a difficult task, because the effects of the kind of injuries that may come before the court can vary tremendously, from those which will last for a lifetime to those which are much shorter.
I want to look at the assumptions that the Lord Chancellor is required to make under the Bill and I venture to suggest that they form a bit of a challenge. The Bill says in Part 2:
“The Lord Chancellor must make the rate determination on the basis that the rate of return should be the rate that, in the opinion of the Lord Chancellor, a recipient of relevant damages could reasonably be expected to achieve if the recipient invested the relevant damages for the purpose of securing that—
(a) the relevant damages would meet the losses and costs for which they are awarded”.
That is fairly easy to say on a day-to-day basis. But Part 2 then says that,
“the relevant damages would meet those losses and costs at the time or times when they fall to be met by the relevant damages”.
These will be years ahead in some cases, so it is quite an assumption that the Lord Chancellor has to make. The last provision is really crucial. It says that,
“the relevant damages would be exhausted at the end of the period for which they are awarded”.
When I chaired the Select Committee that looked into the Assisted Dying Bill, one thing we learned was that doctors had great difficulty in assessing the length of life. One of the great difficulties is to assess when the damages should be finished, because in the life cases, which are now a very substantial part of the damages that have to be paid by the National Health Service, life expectancy is very difficult to estimate. Even as you get near the end of life, life expectancy seems to be very difficult to estimate. When a baby is born and the results affect that baby for the rest of its life, you can imagine the difficulty of trying to determine that.
The Lord Chancellor has to go on, having made these assumptions, to assume,
“that the relevant damages are payable in a lump sum”.
He is not allowed to take account of the fact that you can now pay in instalments. The second assumption is,
“that the recipient of the relevant damages is properly advised on the investment of the relevant damages”.
That seems a fairly easy assumption to make. It is not so easy to know what the right advice would be. The third assumption is,
“that the recipient of the relevant damages invests the relevant damages in a diversified portfolio of investments”.
You would think that might be covered in proposed new subsection 3(b), but for clarity it has been separated out. Proposed new subsection 3(d) is the one I want particularly to draw attention to because I think it is possible that we may want to look at it in some detail in Committee. It says:
“The assumption that the relevant damages are invested using an approach that involves … more risk than a very low level of risk, but … less risk than would ordinarily be accepted by a prudent and properly advised individual investor who has different financial aims”.
I assume these are different aims from the people who are investing the damages award for the injured party.
The assumptions that have to be made by the Lord Chancellor on this basis all seem very reasonable, but I think it would require the Lord Chancellor to have a certain element of the prophet about him or her to enable these assumptions to be taken with any degree of accuracy—we really need to look at this. I imagine that the promoters of this Bill have looked at this very carefully and if it is going to be accurate from the point of view of awarding damages, these conditions have to be fulfilled. The difficulty about it is how you satisfy yourself that that will be true. That is what I would like to hear a little about.
The expert panel included an actuary, but my understanding of actuarial science—it is a limited understanding—is that it is very much based on the statistical evidence on length of life. The trouble is that each case is separate; it is not the average, it is an individual case. How do actuaries go about doing this? I am interested to know. The Government Actuary has to do all that kind of thing and does it extremely well, but it is not by any means easy. Getting an expert panel to agree—it includes an actuary and investment people—will be very difficult.
The Bill deals with making fair the system of awards in civil liability. Two distinct aspects are covered in the Bill—the particular kind of injuries are dealt with in the first part and the discount rate in the second part, but the system is bigger than that. One of the important elements in the present system is an Act of 1948 in which Section 4(2)—I am sorry, Section 2(4); I better get them in the right order—indicates that the damages are to be calculated on the basis that the medical attention is given on a private basis. I can see that in 1948, when the health service was very young, that might be appropriate, but I think modern times have crept up on that and it is rather doubtful whether that is a good basis.
There is another point in relation to that. One of the biggest areas of claim for the National Health Service is in obstetrics. The trouble with an obstetric injury is that it is likely to have effect for the rest of the person’s life and, as I say, you have to forecast what that is. My understanding is that the amount of private practice in obstetrics has almost disappeared for the reason that the premium for an operator in obstetrics is so large as not to be worth while; he is better to be in the National Health Service. I am not sure about that but it is what I understand to be the case. If so, it strengthens very much the need for a revision of a rule that requires you to assume what is not there as a basis for damages. Assessing damages is difficult enough without trying to assume what now is no longer practised.
5.10 pm