This Memorandum refers to the Damages (Asbestos - related Conditions) Bill as introduced in the Northern Ireland Assembly on 14 December 2010 (Bill 10/10)

DAMAGES (ASBESTOS - RELATED CONDITIONS) BILL (NORTHERN IRELAND) 2010

Explanatory and financial memorandum

INTRODUCTION

1. This Explanatory and Financial Memorandum has been prepared by the Department of Finance and Personnel (“DFP”) in order to assist the reader of the Bill and to help inform debate on it. It does not form part of the Bill and has not been endorsed by the Assembly.

2. The Memorandum needs to be read in conjunction with the Bill. It is not, and is not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require an explanation or comment, none is given.

BACKGROUND AND POLICY OBJECTIVES

3. In Johnston v NEI International Combustion Ltd, published on 17 October 2007, the House of Lords (“HoL”) ruled that asymptomatic pleural plaques (an asbestos-related condition) do not give rise to a cause of action because they do not signify damage or injury that is sufficiently material to found a claim for damages in tort. The decision is binding in Northern Ireland.

4. The decision in the Johnston case was welcomed by the insurance industry. However, several early day motions, which called for the decision to be overturned, were set down in the UK Parliament and the matter was the subject of adjournment debates. During the debates, many MPs spoke in favour of the decision being overturned by legislation.

5. On 29 November 2007 the Scottish Government announced that it would legislate to “overturn” the decision. The Damages (Asbestos-Related Conditions) (Scotland) Act 2009 (“the 2009 Act”), which provides for asbestos-related pleural plaques to be a non-negligible personal injury for which damages can be recovered, came into force on 17 June 2009. As it is possible that the courts might look to the Johnston case as authority in relation to claims in respect of other asymptomatic asbestos-related conditions, the 2009 Act also provides that asymptomatic pleural thickening and asymptomatic asbestosis, when caused by wrongful exposure to asbestos, should continue to give rise to a claim for damages.

6. On 25 February 2010 Jack Straw, the then Secretary of State for Justice and Lord Chancellor, announced that the UK Government had decided not to “overturn” the decision in the Johnston case in England and Wales. Mr Straw went on to say that an extra-statutory payment scheme, which would allow for payments of £5000, would be introduced in that jurisdiction. However, payments would only be available to individuals who had already begun, but not resolved, a legal claim for compensation for pleural plaques at the time of the HoL’s ruling in October 2007. The scheme was duly launched on 1 August 2010 and is set to run to 1 August 2011.

7. Following consultation in Northern Ireland (paragraphs 8-12 below refer), it was decided that the law should be amended to ensure that the decision in the Johnston case does not have effect in Northern Ireland. The purpose of the Bill is, therefore, to reinstate asymptomatic pleural plaques as an actionable condition under the law of negligence. The Bill also provides that asymptomatic pleural thickening and asymptomatic asbestosis, when caused by wrongful exposure to asbestos, continue to give rise to a claim for damages in Northern Ireland. The Bill does not affect the law on quantum (the amount that is paid in damages). Where a person sustains a physical injury which is compensatable, the compensation they receive can include sums for e.g. anxiety and risk of the person’s condition deteriorating in the future.

CONSULTATION

8. On 13 October 2008 the Department of Finance and Personnel issued a consultation paper which considered the impact of the decision in the Johnston case and sought views on the following options:

Option 1 - increased support, help and information for people with pleural
plaques;

Option 2 - the introduction of a register of those with pleural plaques;

Option 3 - the introduction of a no fault payment scheme for pleural
plaques; and

Option 4 - the introduction of amending legislation to “reinstate” civil
claims in negligence for asymptomatic pleural plaques. The legislation
would also cover asymptomatic pleural thickening and asbestosis.

9. The consultation period concluded on 12 January 2008 and 94 responses were received. Ultimately, the option of legislative change commanded the most support. However, there was also general support for awareness-raising and information gathering/sharing, provided such activities were undertaken in a careful and sensitive way.

10. The option of a register did not find favour, largely because of concerns about the cost of creating and maintaining the register, but also because of concerns about its intrinsic value and the danger of stigmatisation.

11. The creation of a no-fault payment scheme was also generally opposed, although some respondents were willing to countenance such a scheme if legislative change is not forthcoming.

12. From 9 July to 6 September 2010 the Department consulted on the terms of the Bill. Only 12 responses were received. Most of the responses came from the insurance industry, which restated its opposition to legislative change.

CONSIDERATION OF OPTIONS

13. As mentioned above, option 1 attracted general support. However, ultimately, it was determined that this option should be viewed as an ancillary measure, which should be progressed at an administrative level.

14. Under option 2 the HoL’s decision in Johnston would stand and claims in negligence in respect of asymptomatic pleural plaques (and possibly asymptomatic pleural thickening and asymptomatic asbestosis) would be dismissed by the courts. This option was rejected because it would mean that people in Northern Ireland who have developed pleural plaques would not be compensated under the law of negligence and their position would compare unfavourably with their counterparts in Scotland. Also it was recognised that:

- accountability is an important driver in securing compliance with health
and safety requirements and there was a danger that, if the Johnston case
was allowed to stand, employers would think they could act with
impunity;

- this option could produce a financial windfall for insurance companies;
and

- it is unfair for some people to be compensated for having developed
pleural plaques through negligent exposure to asbestos, whilst others are
precluded from doing so.  

15. Turning to option 3, there are various ways in which a payment scheme could be set up. However, on a practical level, a scheme would essentially “side-step” the judgment in the Johnston case, by providing for some measure of compensation at an administrative level, albeit that the level of compensation would not match that previously awarded or agreed on foot of a legal claim. This option was rejected primarily because the insurers ruled out the possibility of making any contribution to the scheme. Without the insurance industry’s “buy in”, the burden of the scheme, both in terms of the operational costs and the cost of the compensation, would fall on the Government. This was considered unfair, given that the insurance industry may have levied insurance premiums.

16. Moving to option 4, which allows for legislation to ensure that the decision in the Johnston case does not have effect in Northern Ireland. This was the preferred option because it will ensure that all those who have developed pleural plaques are treated equally. Also, it will hold employers to account, which is in keeping with most people’s sense of justice and fairness, and will encourage compliance with health and safety requirements.

OVERVIEW

17. The Bill consists of 5 Clauses.

COMMENTARY ON CLAUSES

Clause 1 – Pleural plaques

This Clause addresses the central reasoning of the judgment in Johnston by providing that asbestos-related pleural plaques are actionable damage. Subsections (1) and (2) provide that pleural plaques can be the subject of a claim for damages. In other words, pleural plaques are material damage that is not de minimis for the purposes of a claim in negligence. Subsection (3) disapplies any rule of law, such as the common law principles referred to in the Johnston case, to the extent that their application would result in pleural plaques being considered non-actionable. Subsection (4) ensures that section 1 does not otherwise affect the operation of statutory or common law rules for determining liability.

Clause 2 – Pleural thickening and asbestosis

This Clause prevents the ruling in the Johnston case from being applied in relation to asymptomatic pleural thickening or asbestosis (because the courts may consider that the ratio (principles of law underlying and justifying the decision) in Johnston provides authority in these cases). Subsections (1) and (2) provide that asbestos-related pleural thickening and asbestosis, which have not and are not causing physical impairment, constitute actionable damage. In subsection (1) the phrase “for the avoidance of doubt” is used because there is, in fact, no authoritative decision to the effect that asymptomatic pleural thickening and asbestosis are not actionable. Subsections (3) and (4) are consistent with subsections (2) and (3) of section 1. Subsection (3) disapplies any rule of law, such as the common law principles referred to in the Johnston judgment, to the extent that their application would result in asymptomatic pleural thickening or asbestosis being considered non-actionable. Subsection (4) ensures that section 2 does not otherwise affect the operation of statutory or common law rules for determining liability.

Clause 3 – Limitation of actions

This Clause provides that the period between the date of the decision in Johnston (17 October 2007) and the date on which any change to the law comes into force does not count towards the three-year limitation period for raising an action for damages in respect of the three conditions covered in the Bill. Subsection (1)(a) addresses the kinds of claims to which this Clause applies, that is, claims involving the asbestos-related conditions covered by Clauses 1 and 2. This includes claims that have been raised in the courts before any change to the law comes into force, as well as future claims. Subsection (1)(b) provides that, where actions have been raised before the date on which the change to the law comes into force, this section will apply only if those cases are ongoing at that date. The effect of this Clause is to address cases that may be at risk of being dismissed by the courts on time-bar grounds. For example, a person who developed pleural plaques in December 2004 and whose case could be considered time-barred by December 2007 might have delayed raising his/her case because s/he thought s/he had no right of action because of the decision in Johnston. That person may then have lodged a claim because DFP announced that it was recommending a change to the law. Without this provision, which will, for a specified period, stop the time-bar clock running, that person’s claim could be dismissed as having been raised beyond the three-year limitation period.

Clause 4 – Commencement and retrospective effect

This Clause sets out the provisions for commencement and retrospection. Subsection (1) provides that the substantive provisions of the Bill will come into force on a date appointed by the DFP by Commencement Order. The remaining subsections explain the retrospective effect of the provisions of the Bill. Subsection (2) provides that Clauses 1 and 2 of the Bill are to be treated for all purposes as always having had effect. This is necessary in order to fully address the effect of the decision in Johnston, because an authoritative statement of the law by the HoL is considered to state the law as it has always been. Subsection (3) qualifies the effect of subsection (2) by providing that Clauses 1 and 2 do not have effect in relation to claims settled, or legal proceedings determined, before the date the Act (if made) comes into force. The effect of subsections (2) and (3) is that claimants in cases which have not been settled, or determined by a court, before the Act (if made) comes into force will be able to raise, or continue, an action for damages.

Clause 5 – Short title and Crown application

This Clause gives the short title of the Bill and provides that the Act (if made) will bind the Crown.

FINANCIAL EFFECTS OF THE BILL

18. There is no requirement to record a diagnosis of pleural plaques and there is, therefore, no way of way of accurately knowing the number of pleural plaques cases.

19. The Scottish Government was able to determine how many cases had “backed up” in the run-up to the decision in the Johnston case. It was also able to estimate the future number of cases by reference to figures supplied by solicitors. On the basis of total costs and compensation of £25,000 per case, it estimated that the cost to business of dealing with outstanding cases would be £17,125,000. The annual cost would be around £5,450,000, likely to rise to £6,540,000 when cases are expected to peak.

20. During the consultation exercises DFP asked for information on the number of cases “backed up” and the costs associated with those cases. Very little information was forthcoming, making it difficult to predict the likely impact of a change to the law. It might, however, be possible to estimate the likely financial burden in Northern Ireland of legislative change by reference to the figures produced in Scotland and to population. In 2008, the population of Northern Ireland was stated to be 1.775 million. The population in Scotland is around 5.2 million. This means the population in Northern Ireland is about ⅓ of that in Scotland. On that basis, the annual cost to business for pleural plaques cases in Northern Ireland could be estimated to be £1,816,666.

21. However, DFP recognises that that is but one estimate and that other methodologies could produce different estimates (although, all are, ultimately, estimates). In addition, it has to be borne in mind that the level of payments of compensation in Northern Ireland are higher than in Scotland.

HUMAN RIGHTS ISSUES

22. The provisions of the Bill are considered to be compatible with the European Convention on Human Rights.

EQUALITY IMPACT ASSESSMENT

23. DFP has screened the Bill and has not identified any adverse or negative impact on any of the sections of the community specified in section 75 of the Northern Ireland Act 1998.

SUMMARY OF THE REGULATORY IMPACT ASSESSMENT

24. It has not been possible, in the absence of firm figures about the number of pleural plaques cases, to undertake a full regulatory impact assessment. Nevertheless, a partial regulatory impact assessment was included in the consultation paper on the Bill. The paper can be viewed at http://www.dfpni.gov.uk/

LEGISLATIVE COMPETENCE

25. The Minister of Finance and Personnel had made the following statement under section 9 of the Northern Ireland Act 1998:

“In my view the Damages (Asbestos-related Conditions) Bill ( Northern Ireland) would be within the legislative competence of the Northern Ireland Assembly.”