Comment: Exception may prove the rule on personal injury laws
Over the last few months, Digby Brown have led debate on the discount rate applied to personal injury damages. Currently, a discount rate of 2.5% is applied to personal injury damages based on a 2001 calculation of the rate of return individuals could achieve from investing in low risk government bonds. Such investments do not currently achieve this level of return. The result is that victims of accidents who have suffered severe and life changing injuries are left hundreds of thousands of pounds short of what they need to live independently. Their only option is to take risks with their investments if they are to avoid their damages running out early.
The article below on the latest legal developments in our work to argue that we should be allowed to present evidence on applying a different discount rate, was written by Brian Fitzpatrick and was published in The Scotsman newspaper on Monday 4th March.
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Legal: Exception may prove the rule on personal injury laws
By BRIAN FITZPATRICK
Published on Monday 4 March 2013 00:00
EVERY so often a civil appeal decision comes along from the Inner House of the Court of Session that excites keen interest.
Then, like buses, another appears hard on its heels. That was the story in Parliament House last week as practitioners mulled over the decisions in Tortolano v Ogilvie Construction and in Farstad Supply v Enviroco.
Seemingly disparate cases, they highlight difficulties the courts face with the knock-on effects on litigated cases of the global economic downturn.
The argument in Tortolano was straightforward. A severely injured young man, with care needs stretching far into the future, argued that the proper calculation of his damages needed the court to look into the selection of the best “multiplier” to be applied to those annual costs. The multiplier generally applied in such cases is selected on the basis of an assumed rate of return of 2.5 per cent on index-linked government stock. It was agreed in court that the downturn has meant even government stocks are not a productive investment vehicle. (If any reader can identify a government stock paying in sterling at 2.5 per cent 60 years hence they should abandon the law and improve the credentials of financiers.)
Our Inner House judges, wary of being tempted into economic prediction and the effects of allowing expert evidence on likely investment returns, turned down the appeal by 3-0.
Mr Tortolano now needs to seek leave to appeal to the UK Supreme Court. The outline of his appeal is clear. In their decision their lordships determined that a multiplier selected by reference to a lower rate of return than the assumed 2.5 per cent (stick with me, that means a larger multiplier) would only be permitted in “exceptional cases”. A Scottish pursuer with a further life expectancy over 60 years was no exception, but a Dutch higher-rate taxpayer tourist might be, was the distinction considered. That hurdle of being an “exceptional” case seems challengeable. That concept was not part of the policy discussion behind the governing Damages Act 1996. Then, the Lord Chancellor, Lord Mackay of Clashfern, refused to accept an amendment to that effect.
Constitutional lawyers may also pause on hearing that our appeal judges used a statement made in the UK Parliament in 2001 by Lord Mackay’s successor, Lord Irvine of Lairg, to assist their interpretation of what the UK Parliament had intended back in 1996. Lord Irvine, for good measure, was the peer who mooted the amendment of “exceptional circumstances” that was withdrawn in the face of Lord Mackay’s resistance.
Admittedly, in 2001, the Scottish justice minister issued a statement citing Irvine’s reasoning as good cause for following suit. But, here, the provision was approved by the Scottish Parliament under its own negative resolution procedure for some subordinate legislation.
An interesting question arises on whether any of the relevant committee members ever saw Lord Irvine’s statement, made long after devolution, never mind took it into account.
The second case last week was Farstad Supply. For some time, successful claimants even in commercial cases have had a bit of a bonanza as the judicial interest rate remains stuck at 8 per cent. Given recent talk of negative interest within the Bank of England, if you don’t need your damages now, and you know your opponent is good for the funds, delay can prove highly profitable. In Farstad the delay was some nine years. While not persuaded to depart from the existing rule, it is clear from the judgment that in this case their lordships were indeed concerned by the “mismatch” between the prevailing judicial rate and market rates, and asked for its “urgent” consideration by the Rules Council. The cynic might say cold money excites action rapidly.
The likes of Mr Tortolano, however, must await a Supreme Court intervention. His advisers may take comfort from the recent further consultation round announced by the UK Government on the discount rate.
It appears, at least in 2013, the UK Government understands that a court might apply a different multiplier in an “appropriate” rather than an “exceptional” case, just as he argued in his appeal.
Losses sometimes transform into wins, not least between Edinburgh and London. Watch this space.
• Brian Fitzpatrick is an advocate and personal injury lawyer with Ampersand Stable
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