§ 177A The Lord Williams of Elvel to move, That this House do disagree with the Commons in their Amendment No. 177.
§ Lord Williams of Elvel
My Lords, I beg to move Amendment No. 177A standing in my name on the Marshalled List. We do not disagree with the basic thrust of what is proposed by the Commons, but it is, I am afraid, a necessary procedure when dealing with Commons amendments to move Motions so as to have a debate and to have a chance to respond to the Minister's reply to the substance of what we have to say. It is for those reasons that I have moved the Motion, not to indicate disapproval of the basic intent of what Amendment No. 177 seeks to do.
There are, however, two possible problems with Amendment No. 177. The first is the 20-year old problem. If a company was dissolved 20 years previously, it is not inconceivable that the documents of that company will not have been kept and will not be available and therefore that there cannot be any proceedings for damages. That may be a rather long period for dissolved companies' documents to be kept hanging around somewhere in limbo in a sort of life-after-death situation.
The second problem is that the provisions start to smack of a bit of retrospective legislation. I should like to have some comfort from the Minister that 1013 that is in order and that the sums involved are not substantial. Those are the two points that I wish to raise, and I look forward to hearing the Government's reply.
Moved, That the House do disagree with the Commons in their Amendment No. 177.—(Lord Williams of Elvel.)
§ Lord Jenkin of Roding
My Lords, I take a rather more critical view of the amendments than did the noble Lord, Lord Williams of Elvel. Just before he sat down he said that Amendment No. 177 smacked of retrospection. It is an absolute slap in the face so far as retrospection goes. It is clear that the effect of that amendment is to reopen a potential liability on the part of an insurance company which, under the existing law as it has always been believed to be —which was upheld in the case of Bradley v. Eagle Star Insurance—would have known that once the period had expired (it was then two years) that was the end of the opportunity to declare the dissolution void. Consequently, a claim against a company, which might then result in a claim against its insurers, would no longer lie.
I may be out of order in talking to Amendment No. 176. One can perhaps quarrel with the extension of two years to 20 years, although I can understand the reason for it. I believe that I can equally understand the indignation of some of the insurance companies. It seems to me that the House should look with extreme care at Amendment No. 177. When I saw the Motion tabled by the noble Lord, Lord Williams, on the Marshalled List, I though that he was perhaps going to undertake the Opposition's traditional and proper role of challenging governments when they introduce retrospective legislation. I was appalled to hear him say that he agreed with the amendment although there might be some minor obstacles.
We should be under no illusion whatever as to the effect of Amendment No. 177. It reopens the possibility of a litigant challenging the dissolution of a company and getting a court to declare, where that right has not previously existed, that the dissolution at any time up to 20 years previously is void. It is reviving a right which the previous law declared dead.
I have defended from the Dispatch Box in another place, and I have supported from the Back Benches, retrospective legislation to restore the law to what everybody always thought it was. A case may be decided in the courts which effectively defeats what had always widely been regarded as the intention of Parliament. However, I shall always challenge, and I hope I shall have some support in challenging, legislation which seeks to reverse the effect of a court case which in fact revives a potential obligation which did not hitherto exist. Previously one could go back two years; now one can go back 20 years and do so retroactively.
It seems to me that however much sympathy one may have with the plaintiff who has suffered injury or disease, if his right was exhausted under the existing law it should not lie within the powers of this Parliament —although of course Parliament can 1014 do anything —but it is not consistent with the rule of law that Parliament should legislate to revive that, to the detriment of the other parties. The fact that it happens to be an insurance company seems to me to show that we are beginning to adopt the attitude of the American courts. The first question that the judge asks is whether or not the liability in the case is insured. If it is, one is pretty certain that the American court will hold that the plaintiff wins.
I earnestly beg your Lordships to look most carefully at this provision. What will its effect be? Companies which have been dissolved for two years or more and their insurers will be affected. What will happen to the records which might be necessary in order to defend a claim which is brought by a plaintiff in that case? It was thought that the matter was dead and under the existing law it was dead. Something may have happened 10 years ago. The company may have been dissolved 10 years ago. The whole matter has finished and passed into history. As I read the clause, there will be a revival of that dead right. The courts will be allowed to declare the dissolution of a company void and allow the action to proceed, notwithstanding that every record in the case has long since been consigned to the dustbin.
I cannot believe that it is right that we should do this. Certainly, it is a matter which seems to have slipped by with remarkably little attention given to it by the lawyers who are normally very quick to seize on retrospective legislation and to challenge it. However, I have to say that I remain profoundly unhappy.
Since the noble Lord has put down an amendment that we should not agree with Commons Amendment No. 177, the only one that is retrospective—one may not like Amendment No. 176, but it is not retrospective —I am inclined to ask your Lordships to refuse customary leave for the noble Lord to withdraw his amendment. I ask noble Lords to seek to take the opinion of the House on the matter. I do not think that we should accept this kind of retrospective legislation.
§ 6.45 p.m.
§ Lord Templeman
My Lords, while I share to the full the dislike of retrospective legislation, this is a special case. It is not directed against insurance companies. It is directed to a bargain and a bargain should be carried out. What happens is that the insurance company enters into a bargain. It takes a premium and agrees to pay if there is an injury within the policy. Years go by. The fact that the risk matures is not known to anybody because it is one of those diseases which does not reveal itself until later, after the injury has been caused. When the injury is caused there is a cause of action: the insurance company has to pay.
Suddenly it is said, "Oh, but if the company which employed the injured person has been dissolved, then although the insurance company has taken the premium and entered into a bargain, it is free from that bargain". I failed to persuade my four colleagues in the Appellate Committee that as a matter of law the dissolution of the company is irrelevant. However, I am entitled to, and I do, say that the 1015 majority of the Appellate Committee reached that conclusion with reluctance, only on the basis of the present law.
The argument against retrospectivity is this. The company having retrospectively had the premium, the company having retrospectively assumed the risk, it is right that the company should pay, notwithstanding the perfectly irrelevant dissolution of the employer. That is why the amendment has been brought in.
The other point which has been raised is about the absence of documents. Of course documents can be absent, whether the employer company has gone into dissolution or not. But more than that, it will be for the plaintiff, the injured person, to seek the documents because it will lie upon the plaintiff, if necessary some 20 years after the event has occurred, to prove to the court that it was the employer who caused the injury. Asbestosis is a typical case in point. If the documents are missing, it will be the plaintiff who fails. If the documents are there, why should not the plaintiff be able to come to court? Why should not the insurance company have to pay?
In this particular instance I commend to your Lordships the amendments made in another place and I support the Government in their view on the matter.
§ Lord Trefgarne
My Lords, I have listened with very great care to the words uttered by your Lordships this evening. Before amendment, Clause 112, which amends Section 651 of the Companies Act 1985, would have enabled the court to reverse the dissolution of a company on a relevant application made within 20 years of the date of dissolution, rather than within two years as at present. This increases the opportunities for recovering compensation for personal injuries by an employee whose company has gone into liquidation and been dissolved where the company had relevant insurance cover. After debate in the other place the Government accepted that as some diseases may take much longer than 20 years to become apparent then there should be no future time limit within which personal injury applicants must act, although they would, as under the unamended clause, fail if clearly barred by the Statute of Limitations.
The provisions of subsection (4) of the clause as it left this House restricted the restoration to those companies which were dissolved no more than two years before the commencement of the section. It is, of course, not in general acceptable to legislate in a manner which retroactively alters rights or obligations. However, Members from all sides in the other place argued forcefully that the two-year restriction would cause hardship and was unjust to personal injury claimants, for example, who have contracted an industrial respiratory disease and who, because of their employer's subsequent liquidation and dissolution, could not pursue their remedy against the company and hence its insurers. There may also be an element of misfortune in that the claimant just happens to have a claim against a company which is subsequently dissolved and cannot be restored after two years.
1016 I have said that retroaction is not normally acceptable. However, the Government accept that hardship has been suffered and that this injustice should be remedied in this particular instance. This of course has the full support of many leading members of the legal profession. Your Lordships will have heard the remarks of the noble and learned Lord, Lord Templeman, this evening. The Limitation Act 1963 is a precedent for retroactive legislation in this area. If the noble Lord's amendment were eventually accepted, it would reinstate the original limit of two years and the injustice and hardship to which I have referred would continue. I am sure that your Lordships will be happy to endorse the Commons amendments and I hope that the noble Lord, Lord Williams, will therefore agree to withdraw his Motion. Judging by what he has said, I feel certain that he will.
I now turn to the remarks of my noble friend Lord Jenkin. I accept that due account must be taken of the position of insurers. Insurance premiums are calculated by reference to the insurer's past experience of similar claims. The reserves of the insurance company are determined on a similar basis and therefore do not include provision to any greater extent than the insurer can expect in the light of its previous record of such claims.
When the Government first considered amending Section 651, they were concerned about the principle of retroaction, but those concerns have been allayed by the number of lawyers who support retroaction in this instance and by the feelings expressed in another place with Opposition and Government Members united. Hardship has been suffered and I believe the view of this House is that we should agree with the views of the legal profession and those expressed in another place and exceptionally remedy that injustice.
This is a question of balancing the position of the insurance industry on the one hand against that of those persons suffering unjust hardship on the other. Having listened to the arguments put forward, I feel that the right balance has been struck. The noble Lord, Lord Williams, specifically asked me about the retention of papers for the 20-year period. We are justified in choosing that period to allow actions where the papers of the company are still in existence. As the noble and learned Lord, Lord Templeman, said in the course of his remarks, there will no doubt be cases where the papers do not exist and that will often prevent an action going ahead. I believe that the amendment proposed by another place is the right one and I hope that the noble Lord, Lord Williams, will not seek to press his Motion.
§ Lord Dormand of Easington
My Lords, before the noble Lord sits down, I hope he can answer a query I have. I should say immediately that I have no legal knowledge. In view of what the noble Lord, Lord Jenkin, said, and what has been said from the Cross-Benches, will the noble Lord say what is special or magic about 20 years? I hear that two years is normally the period which appears in legislation. There is quite a difference between two years, if that is the situation, and the proposal of 20 years in the 1017 amendment. I feel that noble Lords are entitled to an explanation on that point.
§ Lord Templeman
My Lords, with the leave of the House, I shall venture to answer that point. The two-year period applied right across the board. It had nothing to do with personal injuries. It is quite inappropriate to a disease such as asbestosis where a man is employed and thinks he is well but years later it is discovered that he has the disease. A two-year period for such a disease is useless. All the experience of asbestosis and other such industrial diseases shows that a 20-year period is required. It is arguable that there may be a case for 30 years. However, the Government have chosen 20 years. In nearly every case the disease will have manifested itself within 20 years, but it will not do so within two years. That is why one has to go from two years to 20 years. The amendment is carefully drawn so that it only applies to those kinds of injury where, through no fault of the injured person, he wakes up years later to discover he has contracted this disease while working for his employer.
§ Lord Williams of Elvel
My Lords, I am most grateful to noble Lords who have taken part in this short debate. I am particularly grateful to the noble and learned Lord, Lord Templeman, who has set my mind at rest on one aspect, the retrospection aspect. The noble and learned Lord quite rightly pointed out —the Minister quite rightly picked him up on that —that if records are not preserved it is the plaintiff who will suffer rather than the insurance company. I am reassured by the remarks of the noble and learned Lord.
As regards the 20-year period, I accept entirely what the noble and learned Lord said. I believe the Government have to decide on a period. One can argue endlessly whether that period should be 20 years, 25 years, 30 years or 50 years; but 20 years seems perfectly reasonable. I am still worried, as we all are, about retrospective legislation. But I think that in this case, in spite of what has been said by various noble Lords, I am comforted by the position as explained by the noble and learned Lord and by the Government. I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.
§ Lord Trefgarne
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 177.
Moved, That the House do agree with the Commons in the said amendment. —(Lord Trefgarne.)
On Question, Motion agreed to.