A former justice minister has warned peers of discount rate ‘gaming’ under the new system of triennial reviews set out in the Civil Liability Bill.
Lord Faulks QC – who practises in clinical negligence and personal injury – said the problem with reviewing the rate every three years was that “parties to litigation will have a quite understandable tendency to try to guess the outcome of the determination of the new discount rate and to game the system”.
Speaking in the House of Lords last week during the bill’s committee stage, the QC described the three-year review cycle as “definitely too short”, and said he would have preferred seven years, but opted for a “compromise” of five years in his amendment.
“If any evidence is needed of the gaming of the system, it is apparent now. That evidence may be anecdotal, but there is such an accumulation of this anecdotal evidence that it simply cannot be ignored.
“Parties are either anxious to conclude their cases before the putative date of the variation of the discount rate or to delay matters. There is much speculation as to when this bill will become an Act.
“I fear that such manoeuvring will take place almost continuously if the three-year period is maintained.”
Lord Faulks said that unless the review was less frequent, there would be a “very real increase” in the number of claims that were not settled.
“Alternatively, there will be a number of applications to court to try to adjourn matters or accelerate them to reflect some perceived advantage to one side or another.”
Responding on behalf of the government, Baroness Vere said reviews on a three-year cycle “should lead to smaller adjustments in the rate on each review” than on a five-year cycle.
“This should reduce concerns about the size of any change in the rate as a result of the review, which should also reduce any temptation to distort the litigation process in the hope of benefiting from a significant advantageous change to the rate.
“We continue to believe that a three-year maximum review period represents a reasonable compromise between the different views held in this House and outside it.”
None of the ‘probing amendments’ proposed at the committee stage were voted on by peers last week and the government made no concessions.
Justice minister Lord Keen came closest when he suggested there might be a rethink on whether the expert panel which the Lord Chancellor must consult before setting the rate under the Civil Liability Bill should be involved in the first review.
Lord Keen said there might be benefits to using the established statutory consultees to apply the Bill’s new principles for the first time.
“I will certainly reflect on the views of noble Lords, although at present the government believe that the panel ought, if practicable, to be involved in the first review.”
Lord Keen said “preparatory work” on the setting up of the panel was already under way and the government would progress the appointment process as far as it could before the bill received royal assent.
He said the government would publish the terms of reference for the panel in time for the report stage, set for 12 June.
Lord Keen explained that, under the bill, the Lord Chancellor, when setting the rate, would make allowance for “investment management costs”, because these costs were not currently recoverable as a head of damage.
Responding to a number of amendments designed to increase the use of periodical payment orders (PPOs), the minister said “appropriate guidance” would be put in place by the end of this year.
“In addition, we are investigating whether current advice received by claimants on the respective benefits of lump sums and PPOs is effective, and whether there are any ways in which the use of PPOs could be increased within the present system.
“At present, we intend to complete this work by the summer of 2019.”