Mr Martin Bare

2 FEBRUARY 2010

  Q161Chairman: Mr Bare, can we welcome you to this meeting of our Committee, and thank you very much for the evidence which we have already received. From that, it is apparent that your Association, the Association of Personal Injury Lawyers, has taken, as I understand it, an interest in this subject for quite a long time.

  Mr Bare: Yes, that is correct, my Lord. If I might start by clearing up a little bit about the Association itself, the Association is a victims' organisation, it is not a lawyers' trade union. What it is is 4,500, nearly 5,000, lawyers, all of whom are solicitors, barristers, academics and others. Its primary interest is on behalf of the victim and it is not a lawyers' trade union, but we are a victims' organisation. Because the law can be complex, as I have heard this morning, the view was taken that the victims themselves cannot be left without expert assistance in this area, which was the reason why the Association was formed, because obviously the lay person really has no voice in this type of situation, so that is the Association and that is why I am here. Perhaps I can also say, like Lord Mance said, this Bill has our strongest support and anything I say, which might prove to be controversial, we would not wish to affect the passage of this Bill which we have wanted for a long time.

  Q162  Chairman: Thank you very much, and you have expressed your support for the Bill in the written evidence you have already given and now you confirm that, in general, you are supportive of the Bill.

  Mr Bare: Yes, indeed.

  Q163  Chairman: You have three points which you have set out, and perhaps it would be best if we took those three points in turn. The first of course is the question of set-off, which we have touched on with Lord Mance a few moments ago, which you probably heard. What really is the point that you want to make about that?

  Mr Bare: The main point here is the way that this would potentially impact upon the innocent victim. It has been touched on, as you say, but let us suppose that a defendant becomes insolvent, having already partially paid his insurance premium. The insurer, under this Bill, will be entitled to offset that unpaid portion of the premium against the damages that it pays the victim. Now, that has been the situation in the past, but there are other areas of law where that is not the situation, and this Bill presents an opportunity, I would submit, to look again at that question. Now, if that takes us into a controversial area, then, in view of how I opened, I will defer to the passage of the Bill, but nevertheless, the chance, in my submission, should be taken to have a look at this. If we start with the position in other areas of law, the personal injury victim is given, if you like, special rights. We know from section 3 of the Compensation Act 2006 that a mesothelioma victim is given special rights in terms of causation and proving the cause of the mesothelioma. We know from Europe that road accident victims can sue insurers direct without any worry about whether the premium has been paid or not, and that is an important point and I do not want to skip over that because the majority of personal injury cases in fact are road accidents, so, if the ABI were to say to you that removing this insurer's potential defence or set-off in the clause would be a major concern, that would be partially contradicted by the fact that they are already with that ball anyway because the majority of claims are road accidents and, by virtue of European law, they are stuck with that and, whether they have been paid a premium or not, they cannot, under European law, set that off, so then you are left with occupiers' liability cases or employers' liability cases. If we then look at occupiers' and employers' liability cases, we know that their ability to set off is already restricted in relation to, and there are two categories, partial payment of premium, as I have mentioned, and policy excess, which is a familiar concept and we have all got policy excesses on our cars, et cetera. Now, we know that, in an employers' liability case, the insurer is not allowed to set off that policy excess vis-a"-vis the innocent victim. It is in the Law Commission report and, if one needs, I can refer you to it. The relevant cases are Monktonhall because that was the name of the colliery in Scotland, and we know that that is an interpretation of the Employers' Liability (Compulsory Insurance) Regulations 1998 which come from the Employers' Liability (Compulsory Insurance) Act 1969. Now, my concern is that, whilst that remains the law under the Regulations, those Regulations are of course subordinate legislation, they are a Statutory Instrument, and we are here concerned with primary legislation. Therefore, if we have a potential conflict, and I am not a parliamentary draftsman, between primary legislation, saying, "There is a right to set-off", yet we have case law dependent upon a Statutory Instrument, then the primary legislation will in fact take precedence so that the old case law and an old interpretation of the 1998 Employers' Liability (Compulsory Insurance) Regulations will fall by the wayside by virtue of the wording of this particular set-off part of the Act or what will be the Act, I hope. One must also remember in terms of future-proofing that this Bill will be around for another 80 years, as you said, yet the Regulations could be changed either by the Lord Chancellor or the Secretary of State for the Department for Work and Pensions, I think it is actually, so we have got that interesting, it is not a conflict, but they do not sit neatly together. The position here is that the European law is saying that you simply cannot offset vis-a"-vis a road accident victim and the Employers' Liability (Compulsory Insurance) Regulations are saying that you cannot offset an excess against an employer's liability to an employee, yet here in this Act we have a total set-off clause.

  Q164  Chairman: So what you are suggesting, as I understand it, is an amendment to clause 10(2), page 8, line 20, to read as you have set out here, which would exclude third party claims for personal injuries from the ordinary right of the insurer to set off claims. Is that what you are saying?

  Mr Bare: Yes, that is it exactly. It is to create a special category, and I heard what Lord Mance said about that, in relation to personal injury victims or in cases of death.

  Q165  Chairman: If I can just make sure I am understanding it, would that cover personal injury claims, no matter how large, or would it be limited to claims beneath the figure of £5,000, which you have mentioned?

  Mr Bare: No, it would cover them, no matter how large, and, in my submission, it is right and proper for that to be so. One does not have to look too hard to find examples of how this could actually come to pass. There used to be a store on every high street that sold bottles of Coca-Cola and pick-n-mix, and I will not name it, but it was reported by the BBC that in a particular store in Bideford in Devon, I think it was, asbestos dust covered effectively the whole store. They were subsequently prosecuted by the Health & Safety Executive, or it might have been the local authority actually, as the enforcing authority, because they had simply failed to control the asbestos, and they were fined £40,000, and that was proven in a court and reported by the BBC. What they did, and part of the reason why the fine was so large, was that they asked the staff to wipe the bottles of Coca-Cola that were covered in asbestos dust with a wet cloth and then they sold them. Now, that company has since become insolvent and I do not know if they had paid their premium or not, but I know that for a very large company it would be a very large premium. If one of those workers, for argument's sake, was to go on to develop mesothelioma in 30 years' time, that claim could be worth, say, £150,000 in today's money because that person is going to die, yet the premium could be huge for such a large organisation.

  Q166  Chairman: But is it not the same point, however large the claim is and however large the premium?

  Mr Bare: Well, yes, exactly so.

<jf114>Chairman: I think we have got that point now, Mr Bare, so shall we see what the views of the Committee are on your suggestion that we should add this amendment to the Bill.

  Q167  Lord Borrie: Could I just put this point, Mr Bare: you say in your written note that you do believe that this can be the intention of the legislation. Well, I do not suppose the 1930 legislation wanted the outcome that you have just mentioned, but surely one of the very clear intentions of the 1930 legislation was that the third party should stand in the shoes of the insured and not be better off than the insured in the claim that could be made against the insurer, so, if the insurer has a set-off right, particularly because of non-payment of premia, then that should be transferred, under the 1930 legislation, to the third party. You are proposing something which, over a whole range of personal injury cases, is a very radical change to the notion that what the 1930 legislation and the amending legislation today is designed for and which the Law Commission has proposed should be simply that one stands in the shoes of the other.

  Mr Bare: I would answer that in this way: that in the historical context of 1930 the only insurance which was compulsory was motor insurance under the 1930 Road Traffic Act. Since then, if you like, the compulsory insurance safety net has been extended to include obviously employers' liability insurance. We now know that that right of the insured to set off a premium has vanished in relation to motor accidents and has also vanished, if the 1998 Regulations are not changed or this Act does not change them, in relation to employers' liability cases, so time has moved on since the original 1930 Act. What I am suggesting is that, maybe by mistake, this Bill could trump or superimpose the 1998 Employers' Liability (Compulsory Insurance) Regulations because it is a primary Act rather than Regulations, so there may be an unintended change being made because this is primary legislation whereas the case law is on a Statutory Instrument.

<jf114>Chairman: You have made the point, if I may say, very, very clearly, and shall we just see if there are any other questions which might be asked on that.

  Q168  Lord Goodhart: When we were hearing evidence from Professor Merkin the last time we came here, we were discussing, I think, at this point not in fact removing the right to set-off, but an associated provision which would be less damaging, I think, to the insurers which would have involved providing more information to them, information at an earlier stage than is the case now. Professor Merkin took the view then that this would be something which would cause upset among the insurers if they were forced to produce this information. Do you agree with that? Also, perhaps moving on to the question here, is it not very likely that, if the insurers are going to be upset at having to give that information, they will be even more upset at having to provide the insurance money to the third party, even without deducting the set-off?

  Mr Bare: In response to that, I cannot speak for the insurance industry, but I can suspect that it would not go down well. If I go back to first principles, insurance is a way of spreading losses and it is about fairness. If it is compulsory, it is about fairness; you have to have the insurance, so then it goes to fairness, and who has the loss? Now, if an insurer has been done out of his premium, but has to pay the innocent victim, if I can use the vernacular, then one knows that insurers are very good at analysing risk. The innocent victim has no way of judging the solvency of the organisation with which he is employed or into whose shop he goes, whereas the insurer does and the insurer has actuaries who can. The concept of insuring a premium is not new: "We might not get this premium, so we can build that in". Now, your point is, and I take it, that this could be moving towards an area where there is not consensus.

  Q169  Lord Goodhart: Well, I think, if I may interrupt you there, that, in a way, is our problem. I would have no hesitation in saying that we should put something in of this kind if we were dealing with the ordinary procedure of legislation. The problem is that this is now being dealt with under the new, fast-track procedure for, what are thought to be, non-controversial Law Commission Bills.

  Mr Bare: I did not hesitate to raise it because I see from the ABI's paper to you that they have already said that they accept that this Bill enhances some of the rights of the innocent victim, the third party, and they say, "The rights transferring would be subject to the same defences. However, a small number of enhancements would be made to third party rights", including, for example, the right to fulfil the insurer's policy conditions. There is also another one which deals with the question of legal costs, which is not very exciting. The Bill adopts something on page 85 of the Law Commission report and the ABI do not even comment on it, and they will know of it. I cannot speak for them, as I said, but there is a measure of acceptance, I hope, from the concept of fairness that I was talking about before, because inroads have already been made by other legislation or, as I have already talked about, other statutory instruments, so there is not a lot left in terms of personal injuries as a category that this amendment would actually change, but, without it, you run the risk of railroading the 1998 Employers' Liability (Compulsory Insurance) Regulations and with it, as Lord Goodhart has pointed out, there is the potential for the special procedure to be effected. I simply draw the attention of the Committee to it.

<jf114>Chairman: Well, you do make the point very clearly and it is obviously an important point.

<jf114>Lord Sheikh: This question about the unpaid premium, which is causing you concern, I have been reflecting on it. You referred to road traffic accidents. Following the Road Traffic Act, it was then discovered that there were people who did not have insurance and insurers set up the Motor Insurance Bureau, and that was, if you like, a voluntary act on the part of insurers and the Motor Insurance Bureau is funded by levies on motor insurance. However, the point which you raised with regard to other issues is a much wider point, but I think the intention certainly is that every third party must be compensated with regard to employers' liability, but there would be situations where the third party does not get compensation, and you have talked about the deduction of set-off, but there would be also instances where there is no insurance cover and where there is no payment of a premium, or, for example, where there is a flaw, where there is a non-disclosure aspect to it or misrepresentation, so the policy is not valid. The point I am making, and we have discussed it and the points have been raised over and over again, is that, if there is satisfaction, then the intention is to look at passing it, and I think the point you are making perhaps would be best dealt with by looking at the setting up of a mechanism where employers' liability claims are satisfied. I have this feeling that, if we start doing this, then the premiums could be quite substantial. You have talked about the asbestos situation and asbestos policies are quite hefty, and, although I have every sympathy, I thought about it last week, that the whole intention must be to the injured third party and that under motor insurance or employers' liability it is properly dealt with and compensated, I have this feeling that, if we start putting that in, we may be asking for trouble, although I have every sympathy, and I have thought about it a lot over the last few weeks.

  Q170  Chairman: Unless you have wish to add anything to what you have already said, we could move on to your second point.

  Mr Bare: I am happy to move on to the second point, but I agree with the view expressed in relation to the Motor Insurance Bureau, but here there would be a policy in existence, so the uninsured situation does not arise, but it is just a question of how you access that policy, and that is what this Bill deals with.

  Q171  Chairman: Your second point is really on Schedule 1, clause 3(5) where you say that that really is doing nothing and should, therefore, be left out of the Bill. You say it is simply a legal device. This is perhaps not quite such a strong point as your first point.

  Mr Bare: Again, if I may again use the vernacular—sorry, I am from Newcastle—this actually just does not need to be there. This actually is going to create problems. What this section of the Bill, as I understand it, deals with is the right to information. If one looks at 3(1)(a) and (b), if the person has started proceedings under this Act against an insurer in respect of that liability and there is a defunct body, the person may, by notice in writing, require a person to disclose any documents where there is that liability, and then it sets out the people who might have those documents for such a defunct company, such as the people who are directors, the company secretary, the insolvency practitioner or the Official Receiver, and then it goes on to say what the claimant would have to give that person or those persons with that request, and it then provides that they will then reply on behalf of the defunct body because the defunct body does not exist. So far, so good and very good too, it has my total support, but then, in my submission, the Bill falls into the problem area because it then says, "But a body corporate is not defunct for the purposes of this paragraph if it has been restored".

  Q172  Chairman: It seems to me, and I do not want to cut you short, that this is quite an important provision that, if the body has been restored, it is not necessarily the concern of some of these other people, so it is actually quite an important point.

  Mr Bare: That is my point because, if it has been restored, there is still no natural or real person to ask questions of. You have simply got it back on a computer in Cardiff and there is nothing else, there are no offices, there are no directors, there is no secretary, but it is simply back on the list. There are no real people that you can ask. The only real people, live people, are those listed in the earlier part, so it is a mistake to say that, just because it has been restored to the register, there is somebody who can reply on its behalf. There is nobody who can reply on its behalf; it has simply been reactivated somewhere on a computer.

  Q173  Chairman: I think we follow that point. Are there any questions on whether we should leave out sub-paragraph (5)? No, so your last point is on Schedule 1, clause 4, and here you say that we should set up in this Bill its own separate procedure rather than relying on the Civil Procedure Rules.

  Mr Bare: Yes, I do.

  Q174  Chairman: What is the reason for that?

  Mr Bare: This is quite a detailed point, but the case law has actually been referred to by, I think it was, Professor Merkin at one point in one of his papers, and that is whether standard disclosure, as defined by the Civil Procedure Rules, would actually give the third party a right to this information. I heard Lord Mance refer to the OT Computers case, and the OT Computers case uses Part 18 of the Civil Procedure Rules and standard disclosure is in Part 31, so this Bill does not refer to OT Computers. Secondly, there was a case decided subsequently to that which Professor Merkin does cite, West London Pipeline v Total and TAV, which is a case arising out of the Buncefield oil disaster where Total were being sued as a result of events in Buncefield. They had bought something which, they alleged, caused the problem from a company called TAV and they wanted to know how much insurance TAV had as to whether to bother to try and claim part back from them. The High Court judge in that case held that the Civil Procedure Rules did not permit Total to know that, and that Part 31 of the Civil Procedure Rules, which deals with standard disclosure, could not be used to provide that information to Total in that case, so the only case which is spot on the point dealing with standard disclosure in Part 31 says that that insurance information cannot be compelled under that part of the Civil Procedure Rule. On the narrow point, therefore, it does not work and, on the wider point, I go back to a point I touched on slightly, that the CPRs again are subordinate legislation, a Statutory Instrument, they can be changed by Order in Council and we do not have future-proofing if we have got primary legislation referring to the CPRs. Otherwise, every time you change the Civil Procedure Rules, you are, by definition, changing an Act without actually necessarily meaning to, and we know from other areas of work that the Civil Procedure Rules have recently been considered by the independent judges in different contexts and we may have changes there as well. It seems to me that the early parts of Schedule 1, subclauses (1) and (2) set out a very workable procedure in those circumstances and there is no need then in subclauses (3) and (4) to default to the Civil Procedure Rules.

  Q175  Chairman: In a sense, you are saying that the Civil Procedure Rules, from your point of view, are too flexible a procedure and we do not quite know what may happen tomorrow.

  Mr Bare: That case I referred to could be appealed and next week the law could be different, or a different case could be appealed and next week the law could be different, but that then, because of the way the Bill is drafted, changes what the Bill is, and I do not think that can be the best way forward. I do not think there is any argument from anybody, and certainly not from Lord Mance from what I heard, that this requirement of information is not a good thing, but I am just seeking to advise the Committee of the mechanics of that.

<jf114>Chairman: Are there any questions on that?

  Q176  Lord Bach: Just in very simple terms, the Civil Procedure Rules are well-respected and have become an important part, as I understand it, of civil justice. If we were to set it up, as I think you are proposing, to have separate rules in this particular instance, would that not slightly undermine the Civil Procedure Rules' theory, as it were, but also set up a potential source of competition that may not be a very good precedent?

  Mr Bare: In that case, I have failed to express myself at all clearly.

  Q177  Lord Bach: I am sure it is my fault.

  Mr Bare: The earlier parts of the Bill, let us say, of Schedule 1 itself, subclause (1), "Notices requesting information", and then the next page, "Provision of information where notice given under paragraph 1", they set out the procedure to follow in the circumstances described, and a very good procedure it is too and it has my total support. When we then go to subclauses (3) and (4), for some reason, there is a reference to the Civil Procedure Rules. Now, there does not need to be. The Civil Procedure Rules, for the reasons I have outlined, can be changed, they can be subject to case law. At the moment, the case law suggests that this will not work. Now, the Bill can set out, with everybody's support, its own requirements, so it does not compete with the Civil Procedure Rules, but it is simply the Bill setting out is requirements for the provision of information, as it already does in subclauses (1) and (2), but does not in (3) and (4) because in (3) and (4) it uses, if you like, a shorthand of going to the Civil Procedure Rules, but, unfortunately, the shorthand does not give you what it wants. As the industry, the insurers, the insured and other respondees and Professor Merkin would agree, it does not do it because of the case law, and it is the West London Pipeline v Total and TAV case, which the eminent professor has indeed referred you to, so this is not a controversial thing and there is no suggestion that the Civil Procedure Rules are wrong in anything that they do or deal with, but it is just that they are the wrong vehicle for what this Bill is seeking to achieve, in my strong submission.

<jf114>Chairman: Well, Mr Bare, I think we are very grateful to you and to your Association for coming along today and helping us with this difficult question and thank you very, very much indeed.