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Lord McIntosh of Haringey moved Amendment No. 23:


After Clause 7, insert the following new clause—

Calculation of future financial loss

(". Where the calculation of an additional amount of compensation requires a calculation of future financial loss, that calculation shall be made by reference to the actuarial tables (together with explanatory notes) for use in personal injury and fatal accident cases issued from time to time by the Government Actuary's Department.").

The noble Lord said: My Lords, we had a somewhat inconclusive debate on this issue in Committee. The amendment is concerned with the calculation of future financial loss. The basis upon which the scheme proposes that future financial loss shall be calculated is by means of a note to the scheme which sets out years in five-year bands and multipliers in a diminishing proportion.

I am not enough of an algebraist to be able to turn that into a algebraic formula, although there must be such an algebraic formula. Fortunately, I do not need to because there are perfectly good actuarial tables which exist for that purpose (the Ogden tables). They could perfectly well have been used.

In opposition to that alternative it was urged that that would be long and complicated, that the tables covered many pages and that they had not yet been used in legislation because the Civil Evidence Bill, of which they form part, had not at the time we discussed the matter been through Parliament. I answer that point in a number of ways. First, when the crude table in the note

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to the scheme was criticised we were told, "Oh, we did not really need it. It is only going to be used as a guideline. It is not actually going to be used for calculation. It will simply give the adjudicator an idea of what sort of amounts should finally be awarded". I thought that the whole purpose of the Bill was to avoid such discretion and to make the scheme as simple to administer as possible; so I was not impressed by that argument. You do not put down a table which is expressed in mathematical terms and then say, "We are not really going to use it".

On the second point, I looked again at the Ogden tables. In their full form they contain a large number of tables and they could be complicated, although people use them successfully. However, we would not need to use all of them for this purpose because we would need to take only a particular example and incorporate it in the scheme, or in the note to the scheme, to use it for the purposes of the Bill.

On the third point, I was told that, although the tables exist and it is proposed that they be included in legislation, the Civil Evidence Bill has not yet been passed. I looked up the Civil Evidence Bill, and here I am puzzled, because on examining the progress of government legislation I found the Civil Evidence Bill was supposed to have reached its final stage in the other place yesterday. It would have been legislation by now, although it would not have received Royal Assent until next week. When I looked in Hansard yesterday I could find no reference to the Civil Evidence Bill and I wondered whether it was lost. I wonder whether anyone knows what has happened to it because, according to the timetable of future business that I was given, it should have received its Report stage and closing stages on 30th October. I was told, "We would not like to lead in this matter. We would not like this to be the first Bill to put down tables of this kind in legislation". Does it matter?

The point is that it has been accepted that these tables are going to be used in legislation. It is capable of being accepted that they can be used for this purpose in a simplified form. It is clear that even if the Civil Evidence Bill did not achieve its Report and Third Reading yesterday it will be enacted in that form. I should have thought that common sense would indicate that we should now enact in the scheme a formula which works and which can be adhered to rather than something that is so crude as to be only a guideline. I beg to move.

Lord Rodger of Earlsferry: My Lords, we considered most carefully what was said by your Lordships in Committee and what was said in consultation on the new scheme. As a result, I am pleased to be able to tell the House that a number of changes will be made to the relevant parts of the draft scheme. The next draft will therefore illustrate not only the approach to the calculation of future loss with greater clarity—that is, the multiplier and multiplicand tables will be set out more fully, as we discussed—but also and perhaps most importantly it will stipulate that reference may be made to the actuarial tables as defined in this amendment. It will not state that they must be

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used but that reference may be made to them. When the missing Bill is found it will be seen that it does not prescribe that the Ogden tables have to be used but merely that reference may be made to them. I do not believe that on this issue it matters whether we shall be in the lead or behind but your Lordships have the reassurance that the actuarial tables will be available.

Lord McIntosh of Haringey: My Lords, I believe that that is the best that I am going to get and it is certainly an advance on what we were told in Committee. I am grateful to the Minister and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.45 p.m.

Lord McIntosh of Haringey moved Amendment No. 24:


After Clause 8, insert the following new clause—

Protection of annuities

(".—(1) Where for the purposes of providing a qualifying award an annuity is purchased from an authorised insurance company within the meaning of the Policyholders Protection Act 1975, sections 10 and 11 of that Act (protection in the event of liquidation of insurer) shall have effect as if any reference to ninety per cent. of the amount of the liability, of any future benefit or of the value attributed to the policy were a reference to the full amount of the liability, benefit or value.
(2) In this section "qualifying award" has the same meaning as that given in section 329C(1) of the Income and Corporation Taxes Act 1988.").

The noble Lord said: My Lords, this issue was not raised in Committee because it had not then been drawn to my attention. Your Lordships will know, because you read of such things every day with your morning tea and toast, that the Law Commission in its report Structured Settlements and Interim and Provisional Damages (Command Paper 2646) made a number of recommendations about the treatment of structured settlements, in particular about the protection provided by the Policy Holders Protection Act 1975. That Act ensures that policy holders receive 90 per cent. of the sums due under an annuity in the event that the life assurance company goes into liquidation. The Law Commission recommended that the proportion protected should be extended to the full 100 per cent. in the case of annuities purchased for the purposes of providing a structured settlement.

It will be argued that the matter should be dealt with as part of a comprehensive damages Bill, which incorporates all of the Law Commission's recommendations. However, we have a case in which injustice is occurring and which could be put right with relatively little difficulty in the context of this Bill. I shall refer to only one case; that of Philip Anthony Johns. In an accident in 1989 he received serious spinal injuries resulting in permanent paraplegia. In 1992 he received an award of £479,000, plus contributory negligence. Of that amount £202,000 was structured, producing an annuity of about £800 per month.

The insurer, who insured the defendant, was Municipal General Insurance Company Limited. It went into voluntary liquidation in 1994 and declared a claims

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payment moratorium. At the point of settling the case it had purchased an annuity from Sun Life for the sum of £202,000, which was the structured part, and it continued to receive the monthly payments due under the annuity. Every attempt has been made to recover the money for Mr. Johns but every potentially legally responsible body refuses to accept any duty, whether legal or moral, to ensure that the insurance industry, which continues to receive the benefit of the annuity contract, pays out Mr. Johns. The liquidator is joined in that refusal. The matter will come before the court in the spring of next year. That is a particular case of an injustice which needs to be put right.

In the course of the past week and since I tabled the amendment, we have received a press notice from the Department of Trade and Industry. The President of the Board of Trade has announced that he will make changes to the Policy Holders Protection Act 1975, including provision for 100 per cent. protection in the case of an annuity provider failing in the context of a structured settlement. He has said that the amendments will require primary legislation which he will bring forward when parliamentary time permits.

It may be thought unsatisfactory for such matters to be dealt with piecemeal. However, when a particular source of injustice can be corrected now in line with a Law Commission report and the Government's response to it, I believe that we should seize the opportunity. The amendment will do no harm whatever to the structure and content of the Bill and will provide a real benefit for a small number of people. I beg to move.

Lord Rodger of Earlsferry: My Lords, the Policy Holders Protection Act 1975 provides a system of compensation for certain policy holders of failed insurance companies. It is administered by the Policy Holders Protection Board. As the noble Lord indicated, if an insurance company goes into liquidation the board is required to arrange that insurance liabilities to policyholders are met in full where insurance is compulsory. For private non-compulsory general insurance and long-term life assurance policies the board is required to secure the payment of 90 per cent. of outstanding claims and to arrange continuity of life insurance with benefits at 90 per cent.

On 23rd October my right honourable friend the President of the Board of Trade announced the Government's intention of extending the 1975 Act to provide structured settlement beneficiaries with 100 per cent. protection. I can say that the Government intend to seek an early opportunity to do that. Nonetheless, as the noble Lord rather anticipated, we take the view that this particular amendment would extend 100 per cent. protection to annuities purchased under this scheme and would amount to singling out awards under this particular scheme. We do not believe that that approach is right. It would give special treatment in the case of criminal injuries compensation awards by anticipating a legislative change which is to be made in respect of structured settlements as a whole.

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On the basis that the Government intend to seek an early opportunity to bring in legislation to extend the protection in the way that I have indicated, I ask the noble Lord to withdraw the amendment.


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