Inner House decision in discount rate appeal "deeply disappointing"

Woman getting advice from solicitor

Digby Brown have described today’s (Thursday) Inner House decision to deny them the opportunity to present evidence on the discount rate applied to personal injury damages in Scotland as “deeply disappointing” and one which will disadvantage people across Scotland who have suffered serious injury through no fault of their own. 

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.  

Digby Brown sought to lead evidence on the case for applying a different discount rate when Anthony Stephen Tortolano v Ogilvie Construction Ltd was heard by the Court of Session. Following an Opinion by Lord Brodie in October 2012 that such evidence could not be heard unless the circumstances were exceptional, the firm appealed to the Inner House. 

The firm has expressed their frustration that the court has not allowed the evidence to be led, which comes at a time when government policy in this area appears increasingly to be designed for the benefit of insurance companies and not accident victims.

Moira Kay, Partner in Digby Brown’s serious injury department said:

“This is a deeply disappointing decision the consequences of which will only be to further disadvantage people across Scotland who suffered serious injury after being the victim of an accident.

“The current discount rate of 2.5% was set in 2001 and has not been reviewed since. To say the economic climate has changed since then is an understatement.  Low-risk investments simply do not generate a 2.5% level of return at this time.  This means those receiving compensation have to either accept not receiving the sum of damages needed to allow them to live independently of statutory services, or, like a normal stock market investor, take risks with their money.

“In making our original submission and in this appeal, we sought the opportunity to present this reality in court and make a case for how the court could proactively remedy the injustice through the application of a more appropriate discount rate. “

Moira Kay also expressed concern at the decision in the context of wider government policy. Last week the Ministry of Justice in England the Scottish Government and the Northern Irish Department for Justice jointly published a consultation on the discount rate. Moira Kay said:

“It is depressingly clear from the content and tone of the consultation published last week that the UK Government is seeking to raise not lower the discount rate, a move which would only benefit insurance companies and their shareholders while disadvantaging people who require fair and adequate compensation to allow them to live with dignity and independence following a serious injury.

“The insurance lobby has sought to characterise personal injury damages, the discount rate and the independence and dignity their proper application give to people who have suffered serious injuries, as somehow “too expensive”.  If this is going to be the basis of the government’s policy in this area, it is even more frustrating that we have been denied the opportunity to present a case on behalf of those directly affected by the issue before the courts."