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Flora v Wakom, Queen's Bench Division, 7 December 2005

23 January 2006
The issues

Warrener v Warrener – Cooke v United Bristol Healthcare NHS Trust – Damages Act 1996 – Discount Rate – Whether Court Claimed That The Trial Judge Should Be Entitled To Calculate An Award On The Basis Of A Different Discount Rate Than That Fixed By The Lord Chancellor – Periodical Payments

The facts

The Claimant brought a claim against the Defendant for damages for personal injuries and consequential losses following an accident at work occurring on 13th May 2002. Liability was admitted.

The Directions Order provided that the Claimant should serve a Statement of Case together with expert financial advice in support stating:-

A) Whether he considered periodical payments or a lump sum was the more appropriate form for all or part of the award of damages;

B) and b; whether he considered an order for periodical payments should include provision within Section 2(9) Damages Act 1996 dissapplying or modifying the effects of Section 2(8) as to the effect of the retail index.

The decision

The Defendant brought an Application that the Claimant’s case as to Section 2(9) of the Act had no reasonable prospects of success and the paragraphs in the Statement of Case relevant to it should be struck out.

Section 2(9) of the Damages Act has changed the law not just by enabling Courts to order periodical payments otherwise and by the consent of the parties but also by permitting the Courts to fix the variation and periodical payment otherwise and by reference to the retail prices index. The cases of Warrener and Cooke were concerned only with an attempt to circumvent the effect of the damages order. Those two cases were concerned with a computation of a lump sum.

The closest analogy to “discount rate” in the Damages Act Section 1 is to be found in Section 2(8) in the provision dealing with variation of payments by reference to the retail prices index. This was some indication that Parliament had recognised that without such provision the Courts which made the Order for periodical payment would not be able to adjust the payments by reference to the impact of inflation and would lead to a danger of under compensation. The Lord Chancellor when setting the discount rate was not concerned with this problem. There was a clear difference between the computation of a lump sum including an element in the multiplier attended to provide protection for future inflation and an award by way of periodical payments.

The matter for decision was not assisted by past jurisprudence. The Court was concerned with the new provision found in legislation for the first time. An attempt had to be made to find the proper construction of Sections 2(8) and (9). The Section 2(8) was the earliest point in the Section which gave recognition to the fact that inflation was likely to affect the value of periodical payments over time. One view of the sub section was to say that it was default provision which was to apply in the absence of evidence to demonstrate that of the RPI was not the appropriate measure. Another aspect was to build on the default position and so that there had to be a burden equal to that which had been held to exist under the decisions in Cooke and Warrener in respect of Section 1 and that something in the nature of exceptional circumstances would be required to justify the cause in exercising its section 2(9) powers. What those exceptional circumstances should be was unclear. Moreover as a matter of convention or statutory construction it was impermissible to read into the sub sections not only words which we not there but words which could easily have been inserted on similar lines to Section 1(1). There was a need for the Court of Appeal to provide guidelines in these cases which would curtail the seemingly endless and repetitive processes in individual cases that had been features of personal injury actions in the 20 years between 1979 and 1999 in respect of the discount rate issue.

On a narrow and procedural basis the Application would be dismissed as misconceived. There was no relevant jurisprudence by reference to which it could be said that the statement of case was bound to fail. There was in contrast a pressing need for the issues which the Claimant wanted to have decided to be the subject of judicial determination. It might be that following the process the Courts would deny significant content to Section 2(9) of the Act.

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