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Cooke v United Bristol Healthcare and two other cases, Court of Appeal, 16 October 2003

22 October 2003
The issues

Multiplier – discount rate – care costs – inflation.

The facts

Three appeals were brought together in that they all raised an important question about the calculation of damages for future loss and personal injury claims. In each case the Claimant had been severely injured and there was no outstanding dispute on liability. Two of the Claimants were infants. The third was a young man of 20. Of the Claimants, Sheppard (9) had suffered grave internal and spinal injuries in a road traffic accident; Cooke (12) claimed for neonatal negligence, suffering severe brain damage and other associated deficits. Page had suffered severe cerebral damage in a traffic accident.

The major element in the damages related to the cost of care. The Claimants had obtained expert evidence from Rowland Hogg and sought its admissibility. The burden of that evidence was to the effect that the future cost of care would be grossly underestimated if the conventional method of assessing damages was applied. The Judge below had ordered that Mr Hogg’s evidence should not be admitted and the appeals were against those orders.

In Wells -v- Wells, the discount rate to be applied to the multiplier (the attempt by the Courts to reflect the fact that a lump sum payment to a Claimant at the conclusion of an action amounts to a gain to the Claimant from his investment of that sum and the fact that the calculation made by the Trial Judge does not cater for future investment) had been put at 3%. The Lord Chancellor under the powers vested in him by Section 1 of the Damages Act 1996 set that rate at 2.5% in 2001. The Court retained (under Section 1(ii) of the Act) the right to set an alternative rate if more appropriate, but in Warrener -v- Warrener the Court of Appeal made it clear that that power was to be exercised only in very exceptional cases.

The substance of Mr Hogg’s evidence was the argument that care costs and wages historically increased at a significantly steeper rate than was represented by the RPI. He produced evidence to the effect that since 1983 the National Health Service Pay Cost Index (chosen as the most suitable inflation index for care costs) had increased at an annual average rate of 2.5% above RPI.

The decision

1. These appeals were an attempt to launch an assault on the Lord Chancellor’s discount rate. The Courts could not depart from the Lord Chancellor’s discount rate, save in a case properly falling within Section 1(ii) of the Damages Act. The test for that departure was contained in the Judgment of Lord Justice Dyson in Warrener -v- Warrener at paragraph 33 of that Judgment. Lord Justice Dyson had noted that the Lord Chancellor had prescribed a rate giving detailed reasons as to what factors he took into account in arriving at the rate that he had prescribed and held, that in deciding whether a different rate was more appropriate, the Court had to have regard to those reasons. If the case fell into a category that the Lord Chancellor did not take into account or there were special features of the case which were material to the choice of rate of return and were shown from an examination of the Lord Chancellor’s reasons not to have been taken into account, then and only then a different rate might be more appropriate. It was clear however that no assault on the Lord Chancellor’s rate “in principle” was permissible.

2. Assessment of future loss was not an exact science and there would always be cases where some Claimant who received lump sums would be under-compensated and others over-compensated. That had been in the Lord Chancellor’s mind when the rate of 2.5% was fixed.

3. The only way in which a different discount rate could be applied, would be by invoking Section 1(ii) and this had been argued by Mr Hogarth QC in Cooke. However, Warrener was an insuperable obstacle. The exceptional factors relied upon by the Claimant in Cooke were long-life expectancy and the very high cost of future care and the fact that the damages if awarded on the basis of a 2.5% discount rate would be about half what they would be if Mr Hogg’s evidence was accepted. However, the first two factors had been clearly in the Lord Chancellors mind when he fixed the rate at 2.5% and were therefore ruled out for exceptional treatment by Warrener and the third factor was merely a function of the first two factors.

Appeals dismissed.

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