Item 6 is the first evidence session on the Damages (Scotland) Bill, which was introduced by Bill Butler MSP. As previously advised, under standing orders rule 9.13A.2, Mr Butler, as the member in charge of the bill, may not participate in his capacity as a member of the Justice Committee in any of the committee’s considerations of the bill. Mr Butler is, of course, still permitted—as any MSP is—to attend this and any other public meeting, and he is particularly welcome to do so.
Good morning, Mr Garrett, and thank you for coming to speak to us today.
Yes, indeed. I must stress that I have spent 35 years trying to work out people’s living expenses, and I am not sure that I have managed to do it in any given case to this day. It is an extremely difficult exercise to calculate what someone’s individual living expenses were. As the committee will appreciate, most couples do not live their lives in the expectation that they will face litigation, and so they do not keep the type of detailed accounts that would allow one to arrive at an arithmetical figure.
What would you say to the argument that the proposal could lead to wealthier people ending up with better settlements than poorer people?
I think that that reflects the reality of the situation. With wealthier people, we are talking about larger amounts of money. A wealthy couple will always have a bigger damages claim if one of them dies; that simply reflects the fact that they had a higher earning capacity.
Is there not an argument that using the figure of 25 per cent could disproportionately favour the wealthy and take away from people at the lower end of the income scale?
I do not think that it would take away from those at the lower end, although it probably would give more to those at the upper end. My impression is that, at present, 25 per cent tends very much to be the starting figure.
Am I right in saying that you would claim that having a fixed figure of 25 per cent would have the advantages of speeding things up and meaning that people would not be subjected to an intrusive inquiry on those extremely personal matters at a highly sensitive time?
That is correct. In addition, I question the effectiveness of much of the investigation process that takes place. As I said at the outset, it is necessary to make a large number of assumptions, so the process is not arithmetically precise, even if one devotes large amounts of time to it. In the society’s view, anything that cut through that and introduced an element of certainty would be welcome.
I believe that the society has changed its position. Will you elaborate a little on why it did that and pick up on the point about the 25 per cent being fixed rather than a rebuttable presumption?
Let me deal with the first issue. I joined the obligations law sub-committee relatively recently, after the society had submitted its initial response on the bill. At that time, there was no personal injury practitioner on the obligations sub-committee. I believe that the initial response was drafted by Dr Ross Anderson, who is an academic at the University of Glasgow. Although he is an extremely competent and able man, he did not have any experience of this field of law. When I came in, I was asked to take over the reins of the submissions. The matter was debated earlier this month in the obligations sub-committee, and the response that you now have represents the current thinking.
I want to ask about the second point that was raised. Why do you support a fixed rule rather than a presumption? I think that you said in one of your earlier answers that the 25 per cent figure is accurate in most cases or generally speaking. I accept that, but your answers tended to suggest that there would be cases in which 25 per cent would not be accurate.
The Law Society sees merit in introducing certainty in order to cut to an early settlement and to try to keep cases out of court. When we introduce a rebuttable presumption, defenders, being defenders, will try to rebut it. On some occasions they may be successful in their efforts, but often all that will happen is that, in having a rebuttable presumption, you will reintroduce by one door the arguments that you thought you had got rid of through another. In practice, you would still face the argument if there were a rebuttable presumption.
I understand what you are saying and the reasons for introducing a rule, but is it acceptable that both sides would be refused the right to challenge the fixed figure based on the individual circumstances of the case?
If the parameters for the deductions at which the cases are being settled were wide, one could see that a rule might create unfairness, but the deductions tend to be at or about the 25 per cent mark. There was a court decision by Lord Kinclaven in which he took a figure of 30 per cent, but that case is noteworthy because it is exceptional. We are not talking about major differences or parameters of 25 to 50 per cent; we are talking about relatively small figures in an area in which we can never be precise anyway, because the information is often lacking.
I want to explore the issue a little further. It is fair to say that the obligations sub-committee of the Law Society has one view of the matter, and the evidence that we have before us has divided views—with an insurance perspective to the fore among those who take a different view from you.
The 25 per cent rule will not arrive at a precise arithmetical approach in all cases, but I am not convinced that we are arriving at a precise arithmetical approach in cases anyway, because we are having to make fairly broad assumptions.
I accept entirely what you say about the difficulties in some cases, and I guess that, if it was a matter of a few percent either way, there would be some advantages in having a fixed position without any great injustice. However, in your experience from negotiations that you have been involved in or have heard about—I appreciate that there are not many reported cases on this issue—how wide is the variation that is argued and agreed?
The parameters tend to be 25 to 30 per cent. In the case of Guilbert, Lord Kinclaven came up with a curious position in which he allowed a 30 per cent reduction up to the date of retiral that then increased to 35 per cent after retiral. That was a very unusual case on its facts because—this is perhaps a reflection of the generosity of the French pension scheme—the income of Mr Guilbert, who was a French national, would increase rather than decrease on retiral. That is not a situation that I have ever encountered in practice and it is not one that I expect to encounter before I retire: it was highly unusual. I think that the parameters are 25 to 30 per cent.
Does that not make the point that there are cases—however unusual they may be—in which individual circumstances must be considered and in which a moderately substantial difference from the figure is justifiable, according to what you tell us?
Yes, although I keep returning to the point that we do not start with a precise percentage anyway. Considerable fudging goes on in negotiations and in trying to arrive at a figure.
On whether there is a mischief to resolve, you say that most people proceed on the basis that 25 per cent is the rule of thumb to begin with at least. Given that, does an issue exist? Will time be saved? Is there a problem with the process?
The problem would be the intrusiveness of the inquiries at a time when people are particularly vulnerable. Having to sit down with a newly bereaved widow or widower and start picking through the grocery and household bills is not a pleasant task. If that exercise produced significant differences, it might be worth while but, from my experience, I am not convinced that it would be worth while.
Has the obligations sub-committee conducted any research into that?
No.
You have talked about your experience, but have you looked around seriously at other practitioners’ experience?
I am a member of the Association of Personal Injury Lawyers. From talking to other members of that organisation, I know that their experience broadly mirrors mine.
On speeding up the process, can you say what time might be saved? Would cost savings be made and would the cost of lawyers be reduced? That is always attractive to me, anyway. How significant would such savings be?
That would—obviously—vary with the case. In higher income brackets, people tend to lead more complex lives and to have more financial commitments, so more time is spent on the task. Even in an average case, we might well spend four or five hours on investigating the situation, because people are rarely able to produce everything that we ask for at the first request. We often have to go back to them to chase up missing bits of information. Often, we must recognise that the information simply is not there and we must make the best stab at it that we can.
Is the Guilbert case reported? Can you give me the reference?
I can give you the citation—it is Jean Francois Guilbert v Allianz Insurance [2009] CSOH 10. The decision was by Lord Kinclaven.
I turn to the proposal in the bill to restrict the categories of relative who can claim for loss of the victim’s financial support. On page 3 of its submission, the Law Society states that it has “major concerns” with that measure. Why does the society oppose it? What was the rationale for the changes along those lines that were proposed for England and Wales in the draft Civil Law Reform Bill?
The society opposes the recommendation because it seems unnecessary and unfair. The society recognises that, in practice, a member of the immediate family will make the claim in virtually every case in which there is a claim for financial loss. That is the norm, but a small number of cases fall outwith that. The obvious example is a nephew or niece who is supported by an uncle. That relationship would fall outwith the “immediate family” category, which would mean that, in the event of the uncle’s wrongful death, a niece or nephew whom he was financially supporting would have no remedy.
One of the Scottish Law Commission’s arguments against that proposal was a fear that there was a danger of including business, not domestic, relationships. How do you respond to that argument?
That would be a matter for the parliamentary draftsmen. It does not seem to the society that it would be too difficult to draw a distinction between personal support and business support. The matter could easily be interpreted by judges if the need arose.
Is it the obligations sub-committee’s view that, although it would affect a small number of people, the bill could be improved if your proposal was included?
Yes.
The Law Society appears to take the view laid down in the judgment of Brown v Ferguson, which is a 1990 case, with regard to the 75 per cent rule. Critics say that the rule violates the fundamental principle that an individual should be compensated only for the loss that he or she has suffered. What is your answer to that?
The 75 per cent rule is a necessary corollary of taking a 25 per cent reduction so, if we accept one, we have to accept the other, otherwise we would be left with a gap. Therefore, what I said in relation to the 25 per cent reduction for own upkeep must imply that 75 per cent of the victim’s income should be the loss of financial dependency element.
Yes. One is a corollary of the other. That is a totally logical position.
I would respond by saying that the Brown v Ferguson ruling has probably led to, and continues to lead to, undercompensation. Its approach might have been valid at a time when society was composed of nuclear families that had one main breadwinner and someone—generally the wife—who earned some pin money, but that no longer reflects society as I see it. That does not reflect the realities of my clients’ lives when they come to me in the event of the death of a loved one. We are now in a society in which, increasingly, couples have, if not equal, something approaching equal earning capacity. The Brown v Ferguson approach does such families a considerable disservice. We are starting off not from a position in which people currently receive fair compensation and what is proposed would give them a bonus, but from a position in which people are currently being undercompensated. The proposals would redress that element of undercompensation.
Playing devil’s advocate for just a moment, I might suggest that, notwithstanding the old story that hard cases make bad law, in some instances there could be a complete imbalance in the household income in respect of one partner or another. If tragic circumstances occur and one partner seeks compensation, the 75 per cent calculation might not be apposite. Could it be argued that the 75 per cent calculation should be accepted unless cause is shown as to why that would be unfair?
That is certainly a valid argument, but the Law Society did not support it for the reasons that I gave in relation to the 25 per cent reduction. Where a rebuttable presumption is introduced, people will try to rebut it. That would take away the element of certainty and would eat into the savings in legal costs that a fixed presumption would provide.
As an experienced lawyer in dealing with such matters, can you confirm whether, as I imagine is the case, the majority of people who make claims are on modest incomes? Am I right in thinking that they are not high up the income scale?
Yes indeed. I do not have the statistics, but I am sure that they would show that people in certain social classes are more likely to be killed because of the types of job that they do and because of a variety of other reasons. For example, such people might drive older cars, which are less safe than larger modern cars, so they are more likely to be killed in the event of a road accident. The Scottish Law Commission report makes much of the distortion in the higher-income family units, but those are very much the rarity. The norm is that we are acting on behalf of people who are at or about average earnings in the very great majority of cases.
Thanks for clarifying that.
I just want to challenge the notion that the 75 per cent is an automatic corollary of the 25 per cent. I am not disputing the arithmetic—I have the right number of fingers and toes—but some people, albeit not many these days, save a sizeable fraction of their income, which would be a very different kind of expenditure. Equally, some people might make significant charitable gifts, which would be included in the 75 per cent but would not routinely have been available to the other party. Does that not negate the presumption? Equally, other commitments, such as under a previous divorce, could form a significant fraction of that 75 per cent. I raise all those points just to challenge the idea. Can you explain why I am wrong?
Let me pick up that last point about the financial provision on divorce. Both the report and the bill make it clear that the 25 per cent figure for the person’s own upkeep applies only in relation to the spouse, cohabitee or dependent children. Both the report and the bill make it clear that, where the person was supporting other relatives, such support must be deducted from the 75 per cent balance—it is not included in the 25 per cent reduction. That would have the effect of reducing the 75 per cent figure.
I have one question about the income of the relatives. If the deceased person were a pensioner in a pension scheme in which the partner would gain the equivalent of a quarter or a half of the pension on the death of the other party, would that sort of payment be included?
Yes, it would form part of a claim for loss of pension rights. It would not form part of the claim for loss of financial support, but would be dealt with as a separate pension loss, from pensionable age until normal life expectancy.
I have a question about the multiplier for which section 7 provides. The provision is that the multiplier for loss of support will run from the date of the court order, not from the date of the death. I want to get some background on the thinking on that issue. In a sense, the date of the court interlocutor is an irrelevance to the factual position—surely the key point is the death of the person. Why is it better to identify the date of the court interlocutor as a dividing point from which the multiplier would start to be used?
I can put on my Ogden tables working party hat here, because I am a member of the Ogden committee. The traditional approach has been heavily criticised by Ogden. I am not an actuary, but the Ogden committee is made up of a mixture of lawyers from both sides of the divide—claimant lawyers and defendant lawyers—and actuaries. There is unanimity on the committee that, actuarially, the traditional approach makes no sense, because it discounts the losses that have arisen between date of death and date of settlement. The Ogden tables discount for two reasons—for mortality and for early receipt of compensation. There has been no early receipt of compensation in relation to the past element.
I understand the point that payment has not been received, which is fairly straightforward. However, surely the argument is not so much that the person is already dead as that, had the events that caused the death not happened, there was a risk in actuarial terms that something else might have happened in the meantime. It is probably fairly marginal and may not have a significant effect.
The point is that it is more than marginal—it is almost so small as to be unmeasurable. If you apply a discount for mortality to a 30-year-old who, it is anticipated, will live into his 80s, and that discount appears in the Ogden tables, you are measuring the risk that the person will die at some stage before he reaches age 85 or 87. However, where you are talking about a much shorter period, between the fatal accident and the date of settlement, the risk in actuarial terms of somebody who is 30 dying before he reaches 34 is infinitesimal.
So we should concentrate on the lack of early payment as being the crucial reason for the distinction between before the settlement and after it. For obvious reasons, in actuarial terms that does not sound as I understood it.
Yes indeed.
I have a question about the change of wording in section 4 from “solatium” to “grief and companionship award”. I can understand the argument for using the more understandable expression, but putting aside the mental health aspect for the moment, is there a risk that it will cause greater uncertainty to what is an established legal category when it does not give someone great practical advantages?
Practitioners of my vintage still refer to the award by its previous name of “loss of society”, so we have not caught up with legislation of 10 years ago. However, everybody understands what we are measuring. I do not think that it is a significant risk.
In effect you are redefining it—you are calling it something different and it is a new category that I think is, by definition, unrelated to the earlier ones. Does that create potential unintended consequences?
I do not think so. Although I did not refresh my memory of the current legislation before I came today, I think that it refers to “companionship” and “guidance”, so the concepts are pretty well recognised and understood.
My colleague, Dr Simpson, wants to pursue the mental health aspect.
First of all, distinguishing normal grief from abnormal grief must be difficult for the courts to do. Secondly, I am trying to grasp why a mental disorder that is a direct consequence of another person’s dying should not be compensated.
It restates the existing law, which draws a distinction between mental illness suffered as part of a bereavement process and mental illness suffered by a relative who witnesses the death of a relative. The proposal is that that will not change. For example, if there is a car accident in which husband and wife are involved and one of them witnesses the death of the other and suffers a psychiatric reaction, they would continue to be able to make their own claim, rather than a fatal claim, from having witnessed the death of a loved one. The traditional approach has been not to compensate for psychiatric illness arising from bereavement per se, although the fact that a relative develops a psychiatric illness might be compensated because it might be a measure of the degree of grief that that relative suffered. They are being compensated, but only indirectly. There will be no award for the psychiatric illness as such, but it might put them higher up the compensation scale in relation to bereavement damages.
The bill says that an award
It would be excluded. That is the traditional approach.
I think that the Mental Welfare Commission for Scotland has raised the issue. I am not a member of the Justice Committee, but I draw members’ attention to the fact that there is a significant problem that needs to be looked at in questioning other witnesses.
Yes—that is a valid point.
Thank you, convener. Mr Garrett, I would like to consider the level of damages that will come about as a result of the bill. Everyone has suggested that the net result will be an increase in the level, or at least an increase in the average level, and that it will probably make the largest difference at the highest level.
Yes.
I appreciate that policy belongs on our side of the table, but does that make sense to you as a matter of policy? Do you believe that the current system is giving the wrong answer?
The current system is giving undervalued damages, which is why the Scottish Law Commission made its recommendations. It is important to remember that the commission’s report was not solely the work of the law commissioners. They had an advisory panel of practising lawyers from both sides of the argument—pursuers and defenders—and my understanding is that there was general agreement on the recommendations that the commission made. Among practitioners, there is a recognition that Brown v Ferguson has increasingly had unwanted consequences as society has changed.
I am privy to some numbers. We have only just had access to them, but if I read them aright, their implication is that the differences that we might see as a result of the bill are of the order of thousands of pounds. None of them gets into five figures and, with a few exceptions, we are talking about amounts under £5,000. I do not wish to trivialise the matter or upset anybody, but is it really worth it? Are we making life complicated for what are, in the grand scheme of things, relatively small sums of money, or are these issues which we really should be worrying about and teasing out the detail on?
The approach in Brown v Ferguson will become increasingly irrelevant to the way in which people in Scotland live their lives. That is a worry in that, in practice, it is becoming increasingly difficult to explain to clients why we have to go through a formula that concentrates not on the lost income but on the remaining income, which was there before the death and which is still there. Clients have great difficulty in understanding that. They regard it as unfair, and in many cases I can sympathise with that view.
Right—so this is all about fairness. It is not about anybody’s view of what £5,000 adds up to. That is absolutely right. I have no trouble at all with that. However, I ask you to put that—
May I add a comment? We have to balance against a potential small increase in the damages that are awarded the savings that might be made in legal expenses through speed of settlement and the settling of cases without recourse to litigation. Litigation is an expensive process that takes up valuable resources, so if it can be avoided by sensible measures, there are definitely savings to be made.
Thank you. That is precisely the point that I was going to come to. We could take whatever view we like about whether sums of £5,000 or less are real sums of money. I am sure that, to many people, they are real sums of money, so I do not have a difficulty with that. What kind of legal costs are we looking at? If we simplify the system and take out significant amounts of legal effort, what savings will we see on cases?
How long is a piece of string? It depends on individual circumstances, but the savings would be into four figures. A rough figure would perhaps be £1,000 or £2,000. The amount would be in that area, although it could be more if the issue was the main sticking point in a settlement. Such cases can go on for months or even years before a settlement is achieved, so in some cases the measures in the bill would result in substantially higher savings.
So if the average figure is less than £2,000—I am looking at Mr Butler because I am sure that he has a far better grasp of this than I have—that could easily be swallowed up in legal costs, anyway.
Yes.
Thank you.
I will go back to the 25 per cent issue that we talked about earlier, if I may. I have had a chance to look through the evidence that we received this morning from the judges of the Court of Session. That evidence says that the judges are not terribly much in favour of the 25 per cent rule, but they point out that, with both parties having a financial lifestyle that might be different to what it was in the past, one party might undertake obligations such as a big loan for a car, a house or a holiday, and that could distort the traditional methods of calculating the figure. Is there not some validity in that point?
There might be in a small number of cases. As I indicated earlier, most couples who are involved in a fatal accident have pretty simple lifestyles, although we can always think of exceptions that will distort the general rule. Will they arise frequently in practice? They will not, according to my experience.
It is quite easy to envisage such a situation, however. For example, take a normal household in which the husband might spend more money on goods than does the wife. Let us suppose that he smokes 20 cigarettes a day, which would probably cost £2,000 a year, and spends £1,000 a year on drink, which is not excessive nowadays. That is a total of £3,000. If his wife does not indulge in such pleasures, then the savings in the household bills will be considerable.
Yes. Obviously, that depends upon income. We would also need to know what percentage of the total household income that £3,000 represented. Some people might indulge to a much greater extent than that, but it would still not take their upkeep beyond the 25 per cent figure.
Yes, and in many cases, the saving would purely be on food because the partner who is left still requires to live in the house and has other living expenses.
Indeed.
Mr Butler, you have been taking careful notes. Are there any questions that you would like to put to the witness?
No. I am content indeed with the responses that I have heard from Mr Garrett, and I am grateful to colleagues for their interrogation of the witness.
As no one has any further questions for Mr Garrett, I thank you for your attendance this morning. It has been extremely useful.
Thank you.
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