Economy, Energy and Fair Work Committee

Meeting date: Tuesday, October 23, 2018

Official Report 729KB pdf

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Damages (Investment Returns and Periodical Payments) (Scotland) Bill: Stage 1

We move on to agenda item 3. I welcome our witnesses: Simon Di Rollo QC, from the Faculty of Advocates; Gordon Dalyell, vice-president of the Association of Personal Injury Lawyers; Professor Victoria Wass, professor of human resource management at Cardiff business school; and Patrick McGuire, solicitor advocate at Thompsons Solicitors. I thank all four of you for coming in today.

I should refer to my registered interest as a member of the Faculty of Advocates.

Before I bring in other committee members, I want to ask about the setting of the personal injury discount rate. I looked at the submissions from the Faculty of Advocates and Thompsons Solicitors, in particular, and it appears, at least on the surface, that slightly different approaches are being taken. Mr Di Rollo and Mr McGuire might want to comment on that—indeed, the other two panel members might want to do so.

There is a question about the involvement of the United Kingdom Government actuary in the setting of the rate. Thompsons suggested that it might be better to involve an “expert or expert panel”, whereas the faculty said:

“We agree that it is right to seek to remove the setting of the rate from the political sphere. We understand that the Government Actuary will be able to deliver what is sought.”

Is there disagreement on that point? I noted that the faculty commented that expert advice or evidence would need to be referred to in relation to a lot of other areas.

The faculty’s position is that, in so far as we understand how these things work, the Government actuary would be able to perform the role adequately. There might be room for a different view; I do not have a particularly strong view on that aspect of the matter. From what I understand of the role of the Government actuary and how they operate, it seemed to us that they would be able to perform the role as proposed, and to do so independently of Government, because they are meant to deliver advice independently.

My comments in that section of my submission are secondary and almost esto case to my primary point that I do not believe that the approach to the investment is correct. The notion of the cautious investor is wrong. Therefore, in many ways, my comments about the Government actuary are secondary to that. If my primary position is accepted, there is no need to go down that road.

I have two points to make. First, independent of the Government or not, it strikes me that the role of the Government actuary is at least quasi-political. When we look at the two Parliaments and their approaches to key issues such as this one and all matters of civil justice over the past decade, there has been clear divergence between the two. It strikes me that it would be inappropriate and a retrograde step for the Parliament here to rely on the Government actuary at Westminster.

My second point is on the process around how the Government actuary arrives at a figure and how that can be reviewed. As drafted—this is also the approach that is to be followed in England and Wales—the figure will be set and cannot be reviewed by an expert panel for five years. That could very well be far too late.

In all those respects, we really should be doing our own thing north of the border.

I will say a few words about myself before I respond. You might be wondering why a professor of human resource management has an interest in this issue. My background is economics, I am trained as an economist and I largely teach economics in university. I have had an interest in damages going back a long time.

The politics comes in here in the mix of the portfolio, not in whatever the Government Actuary’s Department will do. The biggest determining factor of the rates that the department comes up with will be the mix of the portfolio that the ministers have decided on—that is where the politics come in.

The Association of Personal Injury Lawyers takes the view that there is an advantage in the Government actuary being involved in making the decision, because there is a certain independence there and we felt that they may be free from political influence. Professor Wass’s point is right: prior to the Government actuary coming to the decision, Scottish ministers will have the power to issue regulations setting out how the portfolio is comprised and setting the standard adjustment rates that are mentioned in the bill. There is the potential for significant political influence. The committee ought to be aware of that and consider whether that is appropriate.

It does not really matter whether it is the Government actuary or whether we go along with what Patrick McGuire said. That is not the important point here.

That is helpful clarification.

Other colleagues will explore the detail of that with you, so forgive me if I go back and take this logically and pursue a couple of aspects of the discount rate. The issue of what pursuers do with any award is interesting, because my understanding is that Wells v Wells established that what a pursuer does with an award is irrelevant. Do you have a view on how pursuers would likely invest their awards? Is that remotely relevant to setting the discount rate?

It is not relevant, and I will explain why. I do not know because I do not have any contact with pursuers after their damages have been ordered, but I hear that they largely invest not in index-linked Government stocks but in risk-bearing assets. The reason why they invest in those assets is the most important issue: they are undercompensated by their award and they have no choice but to invest in those assets in order to make up the shortfall.

In paragraph 2(a) of my written submission, I go through four sources of undercompensation. The first shortfall that all claimants have to make up is that the personal injury discount rate since 2003 has always been above the actual risk-free rate on ILGS. They also have a risk of longevity; they do not know when they are going to die, so they always feel that they need to keep back some money so that they do not run out of their lump sum before their actual date of death rather than predicted date of death. That is another reason why they invest outside ILGS.

A lot of what the lump sum will cover is earnings-based losses. It might be loss of earnings, but principally it will be care. Care costs go up according to earnings inflation rather than price inflation and ILGS only protects against price inflation. Earnings inflation, up until the past 10 years, has always been more than price inflation. That is another shortfall that claimants have always been trying to make up.

The fourth shortfall is on accommodation. Because of the way in which the accommodation is compensated, people do not have enough to pay for adapted accommodation—the accommodation that they need—so they need extra there.

Because people are undercompensated from all those different sources, if they invested in ILGS, there would be a certain shortfall. That is what drives them to take a bet so that they have a chance of reducing that shortfall. They also take a chance that the shortfall might be greater but what is driving the behaviour that we are observing, as the research on this has shown, is the fact that they are undercompensated to start with.

One thing that you should always keep in mind in considering this issue is that if you settle a case, you are buying off a risk of losing or getting less if you have to litigate. When you settle, you very often take a discount in exchange for the certainty of getting your award of compensation at a particular level.

There will be a discount anyway, in terms of any settlement figure, in order to avoid going into court. There is an inherent amount—there is a component of any award that is short of what, potentially at least, the court would award. A risk-averse pursuer who is a stranger to litigation and litigates only once will always buy off that risk, or will be advised to buy off that risk, by cautious advisers to avoid potentially losing the case or a finding of contributory negligence or getting a lower award than is being proposed because of arguments about the amount of damages. Therefore, there is an inherent shortfall in the system in any event. You can add that point to what Victoria Wass mentioned.

Are you saying therefore that the system is risk averse—that it encourages people to be risk averse and be undercompensated?

Any person who litigates takes a chance if they go into court; court proceedings are uncertain and they do not know how things will turn out. There is always an element of risk in any court process.

The vast majority of the pursuers whom we act for are risk averse. That is because the fundamental principle that we are dealing with is that of restitution—putting the person who has been injured back in the position that they would have been in had the accident not happened. The compensation is to reflect their pain and suffering, their loss of earnings, care costs and, in more serious cases, other heads of claim.

Somebody who has suffered that kind of accident does not want to take any risks investing money in the markets. They want to be as certain as they can be that the money will be there to pay for their needs, often for the rest of their life. That is why I think that past investment behaviour is on the basis of a discount rate of 2.5 per cent, which was woefully inadequate; it had not changed for 15 or 16 years. In essence, you had systemic undercompensation over a large part of that time.

From my perspective, every survivor of a catastrophic injury is different in the approach that they take to the lump sum compensation that they receive, just as every member of society is different. I agree with Gordon Dalyell that they are generally very risk averse and that is for very obvious reasons.

However, I return to my fundamental point, which is that I do not think that we should be asking how, historically, survivors of catastrophic injury have invested their money. We should be looking at the most fundamental issue of law of all, which is how we ensure that they receive restitution—that is, as best as the law permits, to put them back in the position they would have been in through financial compensation—and that can be done only with an investment rate that guarantees that rate with no-risk investment. We are looking at it the wrong way otherwise.

11:00  

Contrary to the impression that I am getting from the panel, the defenders’ representatives would argue that the bill’s provisions create overcompensation and depart from the principle of 100 per cent compensation. Do you think that that will be the case? Could you also give your view on how the awards are calculated and what impact, from your perspective, that could have on the likelihood of overcompensation for the pursuer?

What is the basis for saying that people are being overcompensated? That is the key question. What is the justification? I am not coming at this from either a pursuer’s or a defender’s point of view. What I would like to know is the evidence for overcompensation. Somebody such as Victoria Wass is in a good position to tell us whether there is any justification for that perspective.

Indeed, and when the defenders’ representatives are before us we intend to question them on their assertion too.

We all agree that claimants are risk averse. It is not contended otherwise in the bill. I was there when Lord Keen was giving evidence at a Westminster select committee, and he agreed that claimants are risk averse. If they are risk averse, they should face the risk-free investments, because they are having to invest their lump sum and take an investment risk all for injury-related reasons. If they had not been injured, they would not be in a position where they have to invest a lump sum in order to generate a cash flow for the rest of their lives, so it is entirely injury related. If they are risk averse, that means that facing risk imposes a cost on them. If you are going to deliver 100 per cent compensation, you should not make people who are risk averse bear a risk that they would not otherwise have had to face.

I have looked for overcompensation, and I cannot find any overcompensation, pre-bill or post-bill. My advice to the committee is that, unless you are sure that there is some overcompensation, you should be very careful about signing up to this bill.

That is very helpful.

I simply do not recognise the concept of overcompensation and I would entirely echo Victoria Wass’s comments. Where is the evidence from the economic and financial experts, not Government ministers in Westminster, that establishes the point? There is none, as far as I can see.

As soon as you move away from gilts in calculating the discount rate, you are highly likely to have undercompensation. There is certainly no question of overcompensation.

If we are talking about overcompensation and undercompensation, a court determining an award and looking at the length of time the award is meant to cover to compensate someone fully is, to a certain extent, doing a best estimate or guesstimate of how long the person will live. It is true that there is uncertainty about those things in any event, unless one were to go back and review the award over the course of time.

That is right.

It is fairly uncertain, and moving away from gilts adds to that uncertainty because you are relying on the markets. To be frank, I would be surprised if anybody has any firm idea of what the markets are likely to be doing in the foreseeable future.

I was also thinking that the question of how long the person will live is uncertain, if you are looking at it from the point of view of awarding compensation.

It is very uncertain. The worst type of situation involves a parent with a catastrophically injured child having to consider how long their child will live. When the parent is no longer able to look after their child, their concern is about who will do so. They will want to get as much money as possible in order to be able to look after their child for as long as possible, but there is an inherent uncertainty in the whole process. The point that is being made is that if we depart from gilts and a risk is required to be taken, we will introduce yet another uncertainty.

A pension fund, for example, does not have all its money in gilts because people want a better return, so money is put into property or the stock market, and generally that money does better than money that is put into gilts. Although risk is involved, my assumption is that that will lead to a better return.

The bill proposes a further margin of 0.5 per cent. I am not saying that I am arguing this, but it is argued that that is overcompensation, because we are aiming for 100 per cent restitution and then throwing in an arbitrary 0.5 per cent. Is that 0.5 per cent necessary? Will it damage the process, as some people are arguing?

You raised the question about the pension scheme, so can I answer that?

Okay.

I imagine that at least half of the investment in an immature pension scheme would be in equities. However, almost the entire investment in a closed pension scheme would be in ILGS or something very close to it. It is a requirement that a closed pension scheme is invested in that sort of portfolio. The claimant is in exactly the same position as the closed pension scheme. They have a lump sum and nothing further coming in, but they have a stream of liabilities going out that they need to plan for. A claimant is like a closed pension scheme and, under a closed pension scheme, the requirement is that investment is in a very low-risk portfolio—probably ILGS.

That is helpful.

John Mason might well be right. It might well be the case that having a mixed portfolio, with investment in equities to some extent, could lead to a better return. However, the fundamental question that we need to address is this: why should we force victims of the most serious accidents to do that? If they choose to have a mixed portfolio, they might end up with slightly more money at the end of the day, but why should we force them to do that? As far as I can understand from the bill, the only purpose of forcing people to do that is to benefit shareholders of insurance companies. Is that what we want to be doing?

I presume that it will also benefit the national health service if we do not overcompensate.

Again, the word “overcompensation” is being used. The same principle applies: why should we be forcing victims of the most serious injuries to take that risk? I have not heard an answer to that question in any of the consultation responses.

Why do you say “forcing”? You say that we should not look at what people do, but surely we are not forcing them if people are doing that already.

The bill—

You are not listening to what Victoria Wass said.

One at a time, please.

If the bill is passed, it will force every victim of serious accidents or serious disease to invest in equities. That is exactly what is in the bill. We will force victims to take a risk. Why should we force victims to take any risk at all when the law says that they should be entitled to restitution?

On the standard adjustment rate, two rates are proposed in the bill—one to reflect investment charges and tax and the second to reflect other contingencies. The suggestion in the bill is 0.5 per cent. The committee needs to look at that area in more detail. The information that we have received suggests that the investment charges and the tax costs could be anything from 0.5 per cent up to 1.5 or 2 per cent.

To be honest, we are probably not the best people to give evidence on that aspect. The committee will need to speak to financial experts and people who have experience of investing those sums. I think that suggestions about who might be able to help have already been made to the committee. I have certainly seen one or two submissions from people who have that expertise, and APIL strongly urges the committee to take evidence from such people.

On that specific point, do you feel that we should not have one rate for everybody? Should the rate be more flexible or variable? Could it be 0.5 per cent for one person and 1.5 per cent for someone else?

No. The bill sets out that there is to be a rate for the amount that is to be taken off whatever the portfolios come up with. Of course, that is against the backdrop of the Scottish ministers having the power to issue regulations to set the rate. You would need to look at the matter as a whole and ask how the decisions are being made. There needs to be transparency and accountability in how the Scottish ministers come to their decision on how the portfolios should be set up and what rate should be set. The Government actuary then has to come to its decision. Again, you may want to look at the mechanism for that.

I want to repeat what Victoria Wass said and emphasise its importance. It is important to understand that you cannot say that certain people, because they are investing in more risky investments in order to make their money last, are being overcompensated, because the rate is fixed by gilts. If you understand what Victoria Wass is saying, that argument falls away.

It is about what people do with their money. They have to invest in more risky investments in order to make their money last. Someone who has to pay £100,000 a year for full-time care does not know how long they are going to live, they have to anticipate wage rises in excess of the retail prices index, and they may require an additional carer as they get older. Those are all factors and uncertainties that may require someone to go beyond investing in index-linked Government securities.

That is what has driven the behaviour of people if that is what they have done so far. If we could say to people, “We can certainly give you this amount of money, and it will last you for your lifelong needs”, that would be a closed pension scheme-type scenario. In that situation, you would expect to be told by any financial adviser that you should invest in gilts. It is not a good argument to say that people are currently being overcompensated. It is not correct.

I will come back on that. I understand the argument—I am not entirely stupid. The point is that, yes, we can have a theoretical argument, but I do not think that we can ignore what people have actually spent their money on and how they have invested it, for whatever reason. Theoretically, if everybody had made a large profit and had a large lump sum left at the end, that would suggest that there was overcompensation. I am not making that argument, but I am saying that it is possible.

I have one other question. Inflation is another factor. At present, the retail prices index is used. Somebody—I think that it was Professor Wass—mentioned that wages inflation is much higher. Should a different method be used to take inflation into account?

It ties in with the fact that that is a source of undercompensation for the claimant. If we use ILGS as the benchmark, we do not have a choice about which inflation rate we use, because ILGS are indexed only to the RPI. There are no gilts that are indexed to the consumer prices index or to earnings inflation. One of the hits that the claimant has to bear is the fact that his or her lump sum protects only against RPI inflation and not against earnings inflation. Does that make sense?

Thank you.

Can I clarify that point? We need to distinguish between the award of damages and what might be regarded as an investment portfolio. The award of damages is not an investment pot—it is not a reward. It is a sum of damages that is awarded to look after somebody’s needs for the rest of their life. The point is that the discount rate is used as a mechanism to calculate what the award of damages ought to be. You need to be careful about how you assess behaviour thereafter. As the Scottish Government sets out in its policy memorandum, it did not think it relevant that past investment behaviour should be looked at, and the same applies into the future.

What a person does with their damages can vary from case to case. For the reasons that Professor Wass expressed, there are often immediate shortfalls when someone receives an award of damages. In serious cases, somebody may have to buy a new house, adapt it and buy equipment. They may not have recovered the full extent of the money needed to pay for that. That can be for a number of reasons, some of which were expressed by Mr Di Rollo earlier.

There is the discount rate, and the award of damages is calculated at a certain point. How awards are utilised thereafter varies, however.

11:15  

I will briefly conclude on this point. We refer—I think correctly—to the very powerful contribution made by Professor Wass. There are two other independent contributors to the process, as I would describe them: Personal Financial Planning Ltd and the Institute and Faculty of Actuaries. Professor Wass and those organisations are entirely clear that they do not recognise the concept of overcompensation. They say that the bill should be drafted in such a way that victims are entitled to no-risk investment to achieve restitution. We should not overlook that.

We have talked quite a bit about the question of overcompensation. As a matter of legal principle, once a case is settled in court, should any consideration be given to how the person may behave in the rest of their life? That is their private matter. As a matter of legal principle, is it right that by implication—or, in fact, as directly proposed in the bill—we take account of their behaviour in the future, or is there no legal principle involved here?

The only legal principle is that a person should be put in the same position that they would have been in but for the accident or the event, in so far as money can do that, but the court has no interest in what happens once the damages are awarded.

That powerful legal principle, which is embodied in the bill, suggests that putting people in that position should rely on them having to take risks on the performance of energy companies, Vodafone or any other firms. Such risks are completely outwith their control.

That is right.

I turn to a more fundamental question in our consideration of the principles of the bill. Mr Di Rollo, you mentioned a situation involving a child. Given the uncertainties about the future of someone who has suffered a catastrophic injury or disease and who faces huge uncertainties for the rest of their life, is it appropriate to award a lump sum in any case?

I would say that lump sums are—[Interruption.]

I am sorry: I should have explained at the outset that the sound desk deals with the microphones. There is no need to press any buttons at all. My apologies, Mr Di Rollo.

Thank you—that is all right.

The question is about lump sums. There is a place for lump-sum damages. Until now, that has been the only method that a court could provide for in Scotland, unless there is consent from both parties. One of the good things about the proposal in the bill is that it provides the court with a menu of options to allow periodical payment orders. There are disadvantages with periodical payment orders compared with lump sums, and I do not think that you can say that one is necessarily better than the other. It depends on the individual case. Where there is a big dispute about life expectancy, you would think that a periodical payment order was more appropriate.

However, from both parties’ point of view, a lump sum is preferable in some situations. Insurers will tell you that they like to close their books. They like to finish the case off—they do not want to have a future liability. They want to buy off the risk for themselves and they are prepared to do that. A lump sum therefore often suits the defender.

Equally, the periodical payment route potentially brings uncertainties for a pursuer, and a lump sum can assist. It is not a case of saying that one approach is superior to the other; it is important to have the ability to do one thing or the other, depending on the circumstances of the case and the desires of the parties.

Let me address the point that Mr Wightman made. Following the passing of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018, in more serious cases, in particular where future losses are more than £1 million, there is an obligation for the pursuer’s side to obtain a report from an independent actuary on whether a periodical payment order is the appropriate way to deal with that element of the damages claim. The report would be made available to the court in suitable cases, and a decision would be made. There is already a safeguard in extremely serious cases.

In general terms, then, all the witnesses welcome the greater flexibility that the bill provides in the approach to settling the future needs of people who have suffered damage—I see that you are indicating that you do.

Someone—it might have been Patrick McGuire—talked about different approaches north and south of the border. Does it matter if we have a different discount rate? If it matters, what are the implications? Could pursuers start to shop around for where they litigate?

For my part, I do not think that it matters terribly if there is a different discount rate. We already have different levels of awards of damages in certain aspects of our procedure, and I do not think that there being different approaches is a major reason why we would not approach the matter for ourselves, in a way with which we are comfortable. I do not think that having a different discount rate is a major problem. I do not know what others think.

I agree entirely. We are seeing more and more divergence between the two jurisdictions on various levels of compensation. That is because the two Parliaments take different views on fundamental issues, which can only be a good thing. Even before the divergence that we are seeing as a result of recent legislation, there have always been differences between the jurisdictions. For example, there are differences in awards for fatal damages.

As a matter of principle, is there a problem with victims in Scotland being compensated at a different—dare we say “higher”—level? I see no problem of principle or policy there.

Will having a different level create what people sometimes describe as “forum shopping”? That has become far more difficult in recent years, given some court judgments, so I think that it is pretty much a non-issue.

It is therefore a question of policy and principle. Is it a problem for this Parliament that our victims are compensated at a higher rate, if that is appropriate? I hope that the answer is no.

As I understand it, a court should be able to require periodical payment only where the organisation that pays the compensation is reasonably secure. Does that present a risk that, in cases where an award of periodical payment would be the best and most appropriate solution for the pursuer, the pursuer will not get that award, purely because the defender is in a different position? If that is the case, should we consider alternative mechanisms for ensuring security of periodical payments for everyone for whom they are suitable?

You raise quite a wide issue. One of the main areas of concern relates to cases that involve employers’ liability insurance and public liability insurance. Such policies generally have an indemnity limit of £10 million. That is sufficient for most lump-sum cases, but in a case that involved a young pursuer, in particular, a PPO might create difficulties for the future. The issue would need to be looked at carefully and would require reassessment of the obligations on employers and public bodies in relation to their levels of insurance cover.

What I am hinting at is some kind of underlying state-backed guarantee scheme that would prevent people losing out on a periodical payment award, where that was appropriate for them, merely because, as a result of some historical fluke or accident, the defender was not in a position to be reasonably secure.

We already have that in motor cases. We should look at extending that into the employers liability area—

Sorry, but what do we already have in motor cases?

Essentially, a state-backed guarantee.

Okay, thanks.

This is on a slightly different issue, but we are talking more broadly about the limits on PPOs. PPOs look like a really good idea. You said that lack of security is a constraint. Another constraint is that most cases do not go to court. Private defenders do not like periodical payments because they are very expensive for them. The defender is usually in the driving seat in litigation. The cases that do not go to court will end up in payment of lump sums. We have noticed that in England and Wales.

When there is a public defender, periodical payments go through, because that is in everyone’s interests. It is not in the interests of a general insurer to have damages awarded under a PPO.

There is information about this in one of the submissions to the committee. The rate of PPO use in private insurer situations is about a quarter of the rate of PPO use in NHS cases in England and Wales.

I want to continue to look at PPOs. Generally speaking, how does the panel view the provisions in the bill that deal with PPOs?

The faculty has no real problem with the proposals on PPOs, which look reasonably sensible and strike the necessary balance to allow for people to come back under very limited circumstances. They also deal with the issue of security and the rest. From my perspective, the provisions look quite sensible.

Do the rest of the panel members agree?

I refer to the constraints that were raised before about lack of security, cases not going to court and private defenders not wanting a PPO—in the end, they usually get their preference.

Several defender representatives have argued that pursuers prefer a lump sum award, rather than a PPO. Is that your experience?

If pursuers were advised by an IFOA member and had large care costs going forward, it is very unlikely that they would be advised to go for a lump sum. However, some would and there are circumstances in which a lump sum is better. For cases in which there will be large future costs, the advice will be that a PPO would be better. I referred to risks and shortfalls at the beginning. You would take out the risk around life expectancy and longevity and earnings inflation—very often care costs are linked to an earnings index, not a prices index.

The reality is that many private insurers also like lump sum payments, because they provide certainty and finality. Particularly in higher-value cases, not only do you have an insurer involved, you often also have a reinsurer, and reinsurers like finality as well.

In what circumstances would pursuers prefer a lump sum? What circumstances would lead to that conclusion?

There might be uncertainty about the creditworthiness of the defender if it is not a public body and there is a limitation. You would have to investigate how financially sound even the insurer is. If you are dealing with significant sums of money, you need to know who the insurer is and what sort of company you are dealing with. Some of them might be registered in Gibraltar or somewhere else that is not in the UK. There might be concerns about whether they are covered by the guarantee scheme under the financial services provisions. That is one example of where you might say that you would rather have a lump sum.

Another aspect is that there is no danger of anybody coming back; the litigation is finished, you do not have to deal with other things and there is no possible prospect of a future argument about whether you are entitled to a sum of money. That potential concern might drive people towards a lump sum rather than a periodical payment order.

 

I do not think that we can generalise; it is a very individual choice. It is important that the court will have powers that it does not have in Scotland at the moment. If one party says, “I would like a periodical payment order to be imposed,” the court cannot do that at the moment if the other party does not agree; a Scottish court can only award a lump sum in those circumstances. It is welcome that these provisions change that.

11:30  

 

PPOs have an implication that the pursuer could presumably come back to court at some point to seek a revision of the terms of the payment that has been made or that an agreed trigger point would result in the case going back to court. Who would be responsible for the court fees?

I will bring in Mr McGuire, as he has been wanting to get in.

Thank you. Mr Beattie’s point was raised in my paper, and you have asked what I feel about how the bill is drafted on that point. I have two issues with the drafting. Before addressing those, I will deal with the general point about whether insurers or claimants are more pro or anti-PPOs. I think that, if they are properly advised, the vast majority of pursuers in the most serious cases will see the benefit of PPOs. It has been suggested that they would run away and go for lump sums, but that would be rare, subject to what has been said, correctly, about concerns about liquidity and so on.

However, my concern is that the bill creates a situation in which a PPO could be forced on a victim. I have personal experience of acting at the Scottish end of litigations in which the claim has been raised in England for jurisdiction reasons and a Scottish person has had a PPO forced on them. That occurrence—when a person does not want a PPO and wants the choice of a lump sum but the court makes the decision for them—can be very difficult for somebody at the end of what is often an extremely long road to compensation, as catastrophic injury cases inevitably are. The process of finally getting compensation is ultimately empowering and a decision that is forced on a person in many ways disempowers them. I caution against creating a situation whereby the decision can be forced on a victim. That is not necessarily the case for insurers, but if a victim wants a PPO, they ought to be able to argue for that and a court can make a decision irrespective of an insurer’s view.

With regard to reviews of the PPO rates, they could go either way. You have indicated that a victim may realise that they are falling short and look for more. It is possible that an insurer may think that circumstances have changed and the person has got better, so the rate should be reduced. You have highlighted the important point that that would involve a court process and we now live in the post-QOCS—qualified one-way costs shifting—world. As far as I am concerned, the QOCS principles should apply to these further court processes for PPOs; the victims should have their costs shifting protected, irrespective of the outcome. That is missing from the bill.

Do you feel that there is an exposure at the moment?

Yes, there could be, as the bill is drafted.

As an extension to that point, how are pursuers who lack mental capacity handled?

They would require a guardian to be appointed on their behalf to represent them and to take decisions for them.

Would the guardian sign off on the compensation package?

Yes, and the guardian would have to take the decision as to whether it is a lump sum or a PPO.

Who appoints the guardians? Is it the court?

An application is made to the court, which appoints the guardian. It is not a personal injury action; it is a different process that takes place in the sheriff court.

Thank you for your contributions.

We have run slightly over time. The meeting will move into private session.

11:35 Meeting continued in private until 12:49.