Civil Liability Bill House of Lords Report stage: what the press didn't report and what's outstanding
It is fair to say that the whiplash provisions of the Civil Liability Bill have had star billing in the reporting of the recent House of Lords and last week's reports in Legal Futures and the Gazette were no exception. In this update we provide a brief recap of the whiplash debate but also look at developments on the discount rate provisions, which whilst having a less bumpy ride through the Lords, are of no less interest to insurers. There is also now news as to how the Scottish Government intends to move forwards on the discount rate having issued a consultation.
We knew before Tuesday's sitting that the Government had made a significant concession in agreeing to insert the detailed definition of whiplash into the Bill itself as opposed to it being dealt with in secondary legislation. But we also needed to see whether a number of issues left over from the Committee stage would be raised again, such as the limiting of the category of claims covered by the proposals to 12 month injuries, and the linking of the tariff valuations to the Judicial College Guidelines.
However, on Tuesday those issues took a back seat, as the focus of the debate was a bold new challenge from Lord Woolf, author of the 1996 Access to Justice Report, to remove the concept of the tariff altogether on the basis that it removed judicial responsibility for the assessment of damages.
From a position in the gallery of the House of Lords on the day, it was possible to watch at close hand the lively debate which centred largely on an argument between the principle of whether the assessment of damages should be a judicial task or whether there was an acceptable policy reason for restricting damages in these cases. Lord Woolf challenged the Government view that the level of damages set out in the JCG was too high. There was also concern about the potential unfairness of a policy which, in targeting fraudulent claims also punishes genuine claimants.
Whilst Lord Woolf had substantial support for his amendment, there were also a similar number of lords supporting the Government's proposals to address what was referred to on a number of occasions as "a racket". Unsurprisingly Lord Keen was unable to agree to Lord Woolf's amendment which "would in effect tear the bottom out of [the Bill]; it would remove its raison d'être". As we know from the headlines, the Government narrowly defeated the amendment by 218 votes to 205, although the Government saw as helpful a more limited proposal from Lord Judge, that the Lord Chief Justice should be consulted when setting the tariff, and indicated that they would come forward with their own amendment to deal with the issue at Third Reading.
The other headline grabbing issue was Labour's attempt to restrict the ability of the Government to increase the Small Claims Track limit to restrict the ability of the Government to increase the Small Claims Track unless justified by RPI increases since 1999 and only then up to £1,500, with further increases being restricted to no more than £500 at a time again based on inflationary rises. Again the Government defeated the proposed amendment by 183 votes to 169 but did agree to further consider the proposal to exempt vulnerable road users from the £5,000 limit.
In response to proposals designed to require insurers to report on savings made under the reforms and their impact on premiums, the Government also agreed to develop an amendment ready for the House of Commons which provides for an effective reporting requirement.
Finally on the whiplash provisions, it is worth noting that Labour did not pursue a number of amendments on the day, as they would have been unnecessary in the event of Lord Woolf's amendment succeeding. However, Lord Beecham pointed out that if necessary, Labour would need to bring their amendments back at Third Reading. In particular, this means we need to continue to look out for the return of the proposed amendment to limit the category of claims covered by the provisions to 12 month injuries.
We have seen no press comment at all on the discount rate despite the Lords debating those provisions for almost two hours, yet there were some interesting developments.
Perhaps of most interest was that there was no real challenge to the new proposed risk assumptions, which would see the rate set by reference to "low risk" rather than "very low risk" investments as at present. Labour attempted to insert a review of those assumptions into the Bill although Lord Keen indicated that this was more suitable for the usual post-legislative scrutiny.
First review to take place without the panel
The main development arising from the debate was the agreement by the Government to return to its original plan of carrying out the first review without the involvement of a panel. The Government acknowledged that this would reverse a policy decision taken when replying to the Justice Select Committee recommendations, but was persuaded that the aim behind the amendment to speed up the first review was sensible and pragmatic. That change was accompanied by the Government's agreement to a reduced timetable for the first review so that it is to be completed within 140 days of the Lord Chancellor starting the review.
There are though, two issues in relation to the timetable of the first review that are due for further consideration at Third Reading:
The first is the length of time required to start the review following the commencement of the Act. An attempt to reduce the period from 90 to 25 days was unsuccessful but Lord Keen invited further discussion to examine how the 90 day period might be reduced.
The second is the timing of the actual commencement of the Act. Again an attempt was made to reduce the period from Royal Assent to commencement to zero. This was also unsuccessful but again Lord Keen was happy to discuss an appropriate timeframe before Third Reading.
Similarly the timetable for subsequent reviews, currently at 180 days, will remain open for "fine tuning" before Third Reading.
Previous estimates of when we might see a change in the discount rate had been pointing towards the latter part of 2019. On the assumption that further reductions can be made both to the commencement of the Act and the start of the first review, we might reasonably hope for the rate change to be brought forward to the summer of 2019.
Period between reviews
The door has also been left ajar on the question of the period between reviews. The Government rejected a proposal that it should be left to the expert panel to recommend a review when market forces deem it appropriate. The Government also remained unpersuaded on this occasion by Lord Faulks' attempt to increase the review period to five years. However, Lord Keen admitted that three years had been the compromise choice following the consultation and agreed there was no clear cut case for it, so again indicated a willingness to discuss the matter before the Third Reading but warned there would need to be "new evidence" to persuade him of the need to change the period.
Power to set a different rate
A more jurisprudential discussion took place about the power of the court to set a different rate in certain cases if appropriate. Lord Hope pointed out that the proposed wording of the Bill is practically the same as the current wording in Damages Act 1996. Following Appeal Court cases of Warriner and Tortolano he was concerned that the provision as currently drafted is "effectively a dead letter" because following these precedents the courts will feel there is no case for interfering, even in extreme cases. Lord Keen agreed, saying that he wanted to give the question further consideration to see "whether something might be done to tailor the wording to address the almost complete guillotine that is in effect in place in the two Appeal Court decisions" but without encouraging parties to litigate simply to get a different rate.
Finally, the Government resisted a further Labour proposal to import a review into the Bill on its impact on the propensity for periodical payment orders. In rejecting the proposal Lord Keen outlined a range of steps being taken by the Government to look into better advice being given on PPOs to increase their use and understanding, and whether there is the potential for reform, perhaps through procedural rules to encourage the uptake of PPOs whenever they are suitable.
Estimating a future discount rate – hints from Scotland?
On Friday (15 June) the Scottish Government set out its proposals for the future setting of the discount rate in Scotland by publishing the Damages (Investment Returns and Periodical Payments) (Scotland) Bill. The Bill, which we will comment on more fully in due course, broadly mirrors the proposals for England and Wales but with some differences, such as the rate being assessed by the Government Actuary for every review, and the rate being set by reference to a "notional investment portfolio" constructed "on the basis of portfolios described as cautious". Interestingly, the Financial Memorandum published alongside the draft Bill indicates that "[t]he portfolio and adjustments in the Bill would currently produce a discount rate of 0.0%."
The Third Reading of the Civil Liability Bill in the House of Lords is scheduled to take place on Wednesday, 27 June. While the passage of the Bill has passed another stage towards implementation and has overcome some significant opposition in the House of Lords in doing so, it seems clear there is still plenty to discuss and no room currently for complacency on the part of the Government in their hope to see the measure reach the statute book.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.