Damages (Scotland) Bill: Financial Memorandum
Item 2 is to take evidence on the financial memorandum to the Damages (Scotland) Bill, a member’s bill that was introduced by Bill Butler MSP, whom I welcome to the committee. Mr Butler is accompanied by Syd Smith and Laura Blane from Thompsons Solicitors. Before inviting Mr Butler to make an opening statement, I note that yesterday afternoon he submitted additional evidence on the financial effects of the bill. Given that that appears to be substantial new information, I propose that the committee invite views on it from the Scottish Government, which we can consider when finalising our draft report at our meeting on 21 September. Is that agreed?
Members indicated agreement.
I invite Mr Butler to make a statement.
Bill Butler (Glasgow Anniesland) (Lab)
Good afternoon, colleagues. I thank the committee for giving me the opportunity to speak to it about my bill. I have with me as supporting witnesses Ms Laura Blane and Mr Syd Smith, both of Thompsons Solicitors Scotland. Thompsons specialises in personal injury cases, among which are, tragically, cases involving fatal injuries. The cases range from disasters such as Piper Alpha through to medical accidents such as those involving hepatitis C and C diff, industrial accidents, road traffic accidents, railway accidents, shipping accidents and industrial diseases.
In view of Thompsons’ role in such cases, it has been involved in assisting me with preparing the bill and the accompanying documents for introduction, including the financial memorandum and the paper to which the convener referred, which was forwarded to the clerk yesterday and is entitled “Revised Financial Effects of Damages (Scotland) Bill 2010”.
I introduced the bill, plus the accompanying documents, on 1 June 2010. Its purpose is to implement the recommendations of the Scottish Law Commission’s “Report on Damages for Wrongful Death”, which was published in September 2008. In Scots law, when an individual suffers an injury or contracts a disease as a result of the acts or omissions of another person or as a result of the acts or omissions of a legal entity such as a company, damages can be claimed from the wrongdoer. The law makes specific provision for cases of personal injury that result in premature death, whether that death is immediate or more protracted. The Damages (Scotland) Act 1976 is the main piece of legislation that addresses damages for wrongful death.
In its report, the Scottish Law Commission concluded that, although
“there is general satisfaction with the existing law and ... there is little support for radical reform”,
there is general acceptance that the 1976 act
“has become over-complex and, indeed, contains inaccuracies as a consequence of the numerous amendments made to it.”
Accordingly, the SLC’s major recommendation was
“that the 1976 Act should be repealed and replaced by new legislation which will restate the current law with greater clarity and accuracy.”
Appendix 2 to the policy memorandum contains a complete list of the commission’s recommendations. Members will observe that most of them recommend the continuation of the existing law. Indeed, the commission recommends that only five substantive changes to the existing law be made.
The first of the two most significant amendments concerns the deductions that require to be made when calculating the financial loss of a person dying from personal injuries through the fault of another, in order to take account of that person’s living expenses. The commission recommended that there should be a standard deduction of 25 per cent of the victim’s net income to take account of living expenses.
The second amendment concerns the financial loss that is suffered by any dependent relative of such a person who has died, in order to take account of the deceased’s living expenses and the dependant’s income. The commission recommended that there should be a standard deduction of 25 per cent of the deceased’s net income to take account of such living expenses and that no deduction should be made for the income of the widow or widower or dependent children.
I believe that introducing the provisions would simplify and modernise Scots law on damages. Reform is needed urgently because of the nature of the cases and the numbers that are affected by them. Hundreds of people in Scotland are wrongful death victims or become ill with fatal work-related diseases every year. On average, 30 people die every year in Scotland in workplace accidents. In 2008, 272 people died on Scottish roads. Between 1 January 2009 and 20 April 2010, 210 people with mesothelioma and 58 people with asbestos-related lung cancer sought assistance from Clydeside Action on Asbestos. In numerous other fatal accidents that were unrelated to work or road traffic accidents, the deceased person was the victim of another’s negligence.
Most such deaths become claims and then court actions. Year on year, they add to the volume of wrongful death cases in which claims are made. It is accepted that wrongful death cases are among the most difficult and anxious cases with which a personal injury practitioner deals. Such cases tend to be hard fought by insurers and defenders, which can mean that they take longer to resolve.
As well as dealing with their bereavement, families have the practical burden of financial hardship to shoulder, and the unknown and often daunting legal process to face. If the reforms in my bill can reduce the uncertainty and delays to which families and victims are subjected, the Scottish Parliament will meet a need that has perhaps been understood only by victims and those who assist them.
Neither the financial memorandum nor the recent Scottish Government consultation paper on the SLC’s report expects the bill to increase the number of cases that are brought for damages for wrongful death. The bill creates no new category of wrongful death case. Like the Scottish Government, I expect an increase in the level of damages that are awarded for loss of financial support when the surviving spouse, civil partner or cohabitant has his or her own income. The Scottish Government expects the proposed change to be particularly beneficial for survivors who are relatively high earners—I agree.
The financial memorandum suggests that potential savings will be associated with the enhanced legal clarity that is expected to result from the bill. Indeed, several respondents to my consultation saw potential savings associated with enhanced legal clarity or suggested for the same reason that the proposals would be cost neutral. However, I accept that other respondents were much more cautious. The Association of British Insurers and the Forum of Insurance Lawyers suggested a need for further financial assessment of the proposals’ impact, while the Forum of Scottish Claims Managers thought that costs would be associated with the bill and would be passed on to consumers in various ways.
I am grateful for the committee’s indulgence and I will do my best to answer questions.
Thank you for your statement. Will you explain the suggestion in paragraph 8.3 of the additional information that Thompsons has provided that figures that you included in the financial memorandum are
“irrelevant, and could be misleading”?
I will try to explain that. The figures in the financial memorandum were based on a small number of cases—eight in all, I believe—because of the time constraints of publishing the bill on 1 June. I thought that it would produce much more robust and statistically significant figures if we looked at more cases in considering the financial impact, so I asked Thompsons to undertake work on that basis. Over the summer, the firm examined more than 600 cases to try to produce a much more statistically significant and robust set of figures.
15:30
The irrelevance relates to the figures in the financial memorandum in this respect:
“it is irrelevant, and could be misleading, to determine, as is done in the Financial memorandum, what could be the average percentage increase in damages in both live and fatal cases ... what is more relevant is to determine what could be the average increase in the multiplicand or annual loss figure in those cases”
That is the basis on which the revised financial effects paper was supplied to the committee clerk yesterday, 6 September.
As members will be aware, the multiplicand is the figure that is deemed to be the annual financial loss either to the victim in a live case, or to the dependent relative of the deceased in a fatal case. The figure is then multiplied by the number of years for which the victim or deceased would otherwise have been expected to live, in order to produce the total amount that can be claimed under the head of damages. I believe that I am right in saying that that is the multiplier effect.
I believe the additional information that I have supplied to the committee produces figures that are more objective, more statistically significant and much more transparent. As members can see from the revised financial effects paper, the size of the increase in the multiplicand means that
“In the 100 fatal mesothelioma claims shown in Annex 2, the average annual loss will increase by £3,106”,
that
“In the 25 live mesothelioma claims shown in Annex 3, the average annual loss will increase by £1,807.83”,
and that
“In the 18 fatal accident claims shown in Annex 4, the average annual loss will increase by £8,803.85.”
In the latter type of case, the difference is more marked because
“These cases generally involve younger victims of generations where both partners work”.
I hope that that has gone some way towards explaining why I asked Thompsons to look again at all the cases that it could, and why the revised financial effects paper came late. I did not mean to introduce a difficulty for the committee, but the work involved took some time. The figures in the paper only became available yesterday, and although it might cause some delay, for which I apologise, the paper is there to help the committee because the figures in it are more detailed, more transparent and, I believe, more objective.
Thank you. That explanation was helpful. I now invite questions from members.
Thank you for your impressive presentation, Mr Butler. If Parliament is about anything, it should be about helping individual citizens when they are involved in uneven contests, and there is an uneven contest in the cases that you have raised. That has been the case for years. What you are trying to do with the bill is laudable.
I read the submission from the Association of British Insurers, and although this may be of some comfort to you, it will be of no comfort to that organisation to know that the submission absolutely convinced me that what you are doing is right, and that I should disregard the association’s self-interested ramblings with some speed, which is what I did.
Although additional costs are involved, and it is hard to put a figure on them, the bulk of those costs will fall on the private sector—insurance companies and what have you. Am I right that, although there will be some costs to public sector organisations—such as local authorities, among others—there is a strong likelihood that they will form a smaller percentage of the overall additional costs, and that the larger costs will fall on other organisations?
I welcome your initial comments, Mr McCabe, although I cannot comment on them, and I agree with the general thrust of your question. Paragraph 107 on page 16 of the financial memorandum states:
“The Bill will have implications for employers’ liability, public liability and road traffic insurers ... This, in turn, may have the effect of raising insurance premiums for policies covering such liabilities but insurers will also have the option of loading premiums in respect of claim histories and increasing excesses.”
However, regarding British Shipbuilders, paragraph 99 on page 15 states:
“The case numbers are not particularly large and any increase in damages will depend on the financial circumstances of each family on a case by case basis. These cases are indemnified by Department for Business, Enterprise and Regulatory Reform.”
So, I believe that the general thrust is correct. Regarding the Scottish Government, paragraph 98 on page 14 states:
“There would appear to be few wrongful death cases brought against SG so the future cost for such cases is therefore expected to be negligible.”
If somebody were to ask me about the statement of funding policy, that would be an interesting question to which the answer is in paragraph 98.
Thank you very much.
It is obviously important that we have confidence in the figures that we are using. Thank you for your explanation and for the additional information that you have provided, which is helpful. Nevertheless, a bit of work needs to be done to get some answers for the future. You mentioned that the figures came from Thompsons Solicitors, which has been supportive of your bill from the start. Have all the figures come from Thompsons, or has any attempt been made to get information from somebody other than a direct supporter of the bill?
All the figures have come from Thompsons and Clydeside Action on Asbestos. That is no surprise, as about 60 per cent of the cases reside—if that is the correct term—with Thompsons.
Would it not have been possible to get information regarding the other 40 per cent of cases from elsewhere? It is obviously a concern when a body that supports a bill is providing all the information for it.
I understand that that might be seen as a possible difficulty. However, I am advised that Thompsons’ experience has been roughly the same as that of the others who are involved in such cases in the north-east and other parts of Scotland—it is not out of kilter. Syd Smith might want to add something on that.
Syd Smith (Thompsons Solicitors)
There are two points to make. First, the additional information that we have been able to provide comes from our own files, and it required a huge exercise over the summer to obtain that. We had two people working full time on that for just over two months. The work involved getting files out of storage, going through the detail of settlements and working out exactly how they were split between the various heads of damage. It was a pretty intensive exercise, and I do not know how easy it would be to get other solicitors to provide the equivalent information within the timescale that we had.
Secondly, I know anecdotally from colleagues in the likes of the Association of Personal Injury Lawyers that our experience is mirrored by theirs, so I am pretty confident that what we have provided gives a good general picture. I dare say that APIL will be able to confirm that in the course of the consultation and in the further evidence giving that will take place.
I can say for the information of Mr FitzPatrick and the rest of the committee that Thompsons deals with 90 per cent of the asbestos-related cases. Obviously, if we are asked to try to improve on the information, we will do so, but I think that the revised figures are much better than those in the original financial memorandum because we use the multiplicand. It is on that basis that the information is more objective, statistically significant and robust. However, if the committee asks us to improve on it, we will do our best.
That is helpful, but if there was a slight widening of the net, it might help the robustness.
Sure.
Mr Butler, will you comment on the Scottish Government’s views as expressed to the Justice Committee about the impact that the bill would have on the Scottish Court Service? It states that
“they are not persuaded that court resources would be freed up as a consequence of the legislation.”
However, the Government then does a backflip, saying:
“In addition they believe that any reduction in the level of litigation will result in a commensurate reduction in fee income.”
Let me say clearly that the Scottish Government has been very supportive thus far—and I look forward to its continued support—on the main issues that the bill seeks to tackle. I put it on record that the Minister for Community Safety has been especially helpful, as have his officials.
I admit that I was a wee bit mystified about the comments on the implications for the courts. My view remains that there could be savings from fewer cases having to go to court. I hear what the Government is saying and I am not going to fall out with it about that because so far it has been very supportive. Of course, as you will see from its submission, that does not mean that the Government does not have real and serious points to make, including amendments to suggest if we reach stage 2, but in all fairness I had to state that first point very clearly.
For my own interest as much as for anything else, why was the figure of 25 per cent hit on as the fixed deduction for victims’ living expenses?
Syd Smith and Laura Blane will know more about that than I do, but if you look at cases you see that the deduction made is, by and large, between 25 and 30 per cent. If we agree as a Parliament to make the legislative change, it will give certainty to people who, some would say—and rightly in my view—have suffered enough. They are experiencing bereavement and do not want the unnecessary extra burden of facing a court. The figure of 25 per cent is generally within the parameters of what happens in the real world. As members will be able to see when the Official Report of this morning’s meeting of the Justice Committee is published, that was the view of the representative of the Law Society of Scotland. It is only one view, but it is an important one.
There is currently no hard-and-fast rule for what the deduction should be, which is part of the problem. The Scottish Law Commission recommended that there should be such a rule. The figure of 25 per cent has been referred to judges as being a rule of thumb and good cross-check. It is a compromise position and is the one that has been fixed on as being reasonable.
One problem that we have with cases is when we start looking at the particular. That is when the difficulties arise. How much was a deceased person spending per week on their personal shopping? Folk who are dying or the relatives of those who have already died are not in a position to produce that sort of detail. We would like the rule of thumb that has been generally recognised as reasonable to be introduced to get rid of the arguments about the minutiae and to speed things up. There is no court rule about it as yet, but 25 per cent is recognised as being an appropriate figure.
There being no further questions, do you wish to make any final comments, Mr Butler?
I want just to thank the committee, on behalf of my colleagues Laura Blane and Syd Smith, for hearing us today. I await what the committee will say with obvious interest.
I thank the witnesses for their evidence and comments.