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Baroness Scotland of Asthal moved Amendment No. 23:



"(8) An order for periodical payments shall be treated as providing for the amount of payments to vary by reference to the retail prices index (within the meaning of section 833(2) of the Income and Corporation Taxes Act 1988 (c. 1)) at such times, and in such a manner, as may be determined by or in accordance with Civil Procedure Rules.
(9) But an order for periodical payments may include provision—


(a) disapplying subsection (8), or
(b) modifying the effect of subsection (8)."

The noble Baroness said: My Lords, Amendment No. 23 has been brought forward in response to an amendment tabled at Report stage by the noble Lord, Lord Goodhart. I am aware that the issue of indexation has been a cause of concern and I hope that this amendment is able to offer some reassurance. In moving the amendment, I shall also speak to Amendment No. 24, tabled by the noble Lord, Lord Hunt of Wirral.

At Report stage, I explained that we did not think a provision to make explicit the court's power to index link periodical payments was necessary but agreed that such a provision might act as a useful guide to the courts and parties. Amendment No. 23 therefore provides that periodical payments orders shall be treated as providing for the amount of payments to vary by reference to the retail prices index. We expect that, as now, periodical payments will be linked to the retail prices index in the great majority of cases. However, subsection (9) preserves the court's existing power to make different provision where the court considers it appropriate in the circumstances.

I emphasise that the amendment is merely intended to reflect the current position in respect of indexation. The Bill addresses how payments of personal injury compensation are to be made. It does not seek to deal with how such claims are to be valued. As I said, we expect that the retail prices index will continue to be

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the norm and that the court will depart from it only where the particular circumstances of the case make it appropriate.

That position is parallel with that of the discount rate, which effectively incorporates the retail prices index in calculating the future loss element of lump sums. I am mindful of the reasons given by the noble and learned Lord the Lord Chancellor in 2001 when setting the discount rate using his powers under Section 1 of the Damages Act 1996. In his reasons, the Lord Chancellor emphasised the need for certainty for all parties while noting that it would remain open for the courts, under Section 1(2), to adopt a different rate in a particular case if there were exceptional circumstances which justified their doing so. That view has since been supported by the Court of Appeal. We would expect the courts to adopt the same approach in the analogous case of periodical payments when considering whether to exercise their discretion under subsection (9). On that basis, I hope that the noble Lord, Lord Hunt, will be reassured about the effect of subsection (9) and will not press his amendment. I beg to move.

5.45 p.m.

Lord Hunt of Wirral had given notice of his intention to move, as an amendment to Amendment No. 23, Amendment No. 24:


    Line 7, after "may" insert "in exceptional circumstances or by agreement between the parties"

The noble Lord said: My Lords, in speaking to these amendments I very much welcome the Minister's comments. I was not able to respond to her previous comments, at Report stage, because I had already spoken. However, I did point out on that occasion my concern that people outside this House were beginning to think about trying to run arguments for higher indexation of future loss claims in a number of claims for lump sum payments. The effect of those arguments would be to seek to undermine the force of the reasons given by the noble and learned Lord the Lord Chancellor in 2001 when he fixed the discount rate at 2.5 per cent. I believe, however, that the Minister has now firmly closed that door. That will no doubt be a great relief to those facing such arguments, including the National Health Service.

As the Minister rightly emphasised, the purpose of these clauses is to introduce a new method of payment in personal injury claims. That is broadly to be welcomed. The overall effect of the Damages Act will now be to give a consistent definition for both the method of payment and the way in which claims for future loss are to be valued. By making it clear that in both respects the provisions apply to all save exceptional cases, the Minister has brought welcome certainty for all the parties involved. There will, I am sure, be no justification for satellite litigation on the meaning of subsection (9). In those circumstances, I feel able not to move the consequential amendment standing in my name.

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[Amendment No. 24, as an amendment to Amendment No. 23, not moved.]

Lord Goodhart: My Lords, I am most grateful to the Minister. Amendment No. 23, as she said, takes up a point I raised at an earlier stage in the Bill. I am glad that the Government have accepted the argument for putting in a reference to the retail prices index. I also accept that a substantial element of flexibility should be available to the courts here. Therefore, although the noble Lord, Lord Hunt of Wirral, is not intending to press Amendment No. 24, had it been in issue I would have preferred the version put forward by the Government as it stands now rather than as amended. I am very pleased with what the Government have done on this occasion.

On Question, Amendment No. 23 agreed to.

Baroness Scotland of Asthal moved Amendment No. 25:


    Page 50, line 9, leave out paragraphs (a) and (b).

The noble Baroness said: My Lords, Amendments Nos. 25 and 26 make provision about the bankruptcy treatment of periodical payments. I am very grateful to the noble Lord, Lord Goodhart, for raising this issue in Committee. I hope that these amendments meet his concerns. I say without hesitation that it was right that he highlighted the issue; it might not otherwise have been given the attention it deserves. I genuinely thank him for that.

The amendments are based on the principle that I outlined in Committee. We believe that the bankruptcy treatment of periodical payments should strike a balance which recognises that payments for care costs should be protected but does not otherwise give those in receipt of periodical payments preferential treatment over bankrupts who are not in receipt of personal injury damages.

As I explained, at present the treatment of periodical payments in bankruptcy depends on whether periodical payments are considered to be in the nature of "property" or "income" for the purposes of the Insolvency Act 1986. If they are considered to be property, they would vest in the trustee in bankruptcy, but any personal element would be held on constructive trust for the bankrupt. If they are considered to be income, Section 310 of the Insolvency Act 1986 provides that income received after the date of bankruptcy may be claimed for the bankrupt's estate by way of an income payments order.

Amendment No. 26 prescribes that periodical payments for future pecuniary loss are to be treated as income. However, it also provides that payments made for expenditure incurred as a result of the personal injury—that is, for care and medical costs—cannot be claimed for the bankrupt's estate by an income payments order. An income payments order can still be made and put in place where necessary in respect of payments for other purposes. This ensures that periodical payments relating to loss of earnings are treated in the same way as the earnings of a bankrupt who has not suffered a personal injury.

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The new subsection (4)(b) provides that the right to receive periodical payments and any arrangement designed to protect their continuity cannot form part of the bankrupt's estate. This ensures that the right to payments and any annuity used to fund them cannot be sold or disposed of for the benefit of the bankrupt's creditors.

Amendment No. 25 is a consequential amendment deleting the existing reference to insolvency law in Clause 98. I hope that these amendments will answer the concerns that the noble Lord, Lord Goodhart, raised in Committee. I beg to move.

Lord Goodhart: My Lords, I am happy to say that these amendments entirely satisfy my concerns. I am very glad that they have now been inserted so that there is a provision that deals with the question of the bankruptcy of the claimant. I am entirely satisfied with the way this has been dealt with; that is, by treating this as income payments and excluding from an income payments order anything that is needed for the care and medical treatment of the claimant.

On Question, amendment agreed to.

Clause 99 [Periodical payments: security]:

Baroness Scotland of Asthal moved Amendment No. 26:


    Page 53, line 38, leave out subsection (4) and insert—


"(4) Where an individual who has a right to receive periodical payments becomes bankrupt—
(a) the payments shall be treated for the purposes of the bankruptcy as income of the bankrupt (but without prejudice to section 329AA of the Income and Corporation Taxes Act 1988 (c. 1)),
(b) neither the right to receive periodical payments, nor any property or arrangement designed to protect continuity of the periodical payments, shall form part of the bankrupt's estate for the purposes of the Insolvency Act 1986 (c. 45) or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)),
(c) an income payments order may not be made in respect of any part of the periodical payments identified (in the order or agreement under which the payments are made) as relating wholly to expenditure likely to be incurred by or for the individual as a result of the personal injury concerned,
(d) nothing in section 2 of the Damages Act 1996 (c. 48) shall prevent a court from making an income payments order (subject to paragraph (c)), and
(e) nothing in section 2 of that Act shall prevent entry into an income payments agreement.
(5) In subsection (4)—
"bankrupt" has the meaning given by section 381 of the Insolvency Act 1986 (c. 45) or Article 9 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)),
"income payments agreement" means an agreement under section 310A of that Act or equivalent legislation for Northern Ireland,
"income payments order" means an order under section 310 of that Act or equivalent legislation for Northern Ireland, and
"periodical payments" means periodical payments awarded or agreed, or in so far as awarded or agreed, as damages for future pecuniary loss by—

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(a) an order of a court made in reliance on section 2 of the Damages Act 1996 (c. 48) (including an order as varied), or
(b) an agreement settling a claim or action for damages in respect of personal injury (including an agreement as varied).
(6) In this section—
(a) subsections (1) to (3) shall extend to the whole of the United Kingdom, and
(b) subsections (4) and (5) shall extend only to England and Wales and Northern Ireland."

On Question, amendment agreed to.

Schedule 1 [Constitution and procedure of courts boards]:

[Amendment No. 27 not moved.]

Schedule 3 [Collection of fines by fines officers]:


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