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Flora v Wakom (Heathrow) Ltd (2006), Court of Appeal, 28 July 2006

11 August 2006
The issues

Warrener v Warrener – Cooke v United Bristol Healthcare NHS Trust – Damages Act 1996 – discount rate – whether 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 Claimants brought a claim against the Defendant for damages for personal injuries and consequential losses following an accident at work occurring on the 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 Order for Damages;

b) Whether he considered an award for periodical payments should include a provision within Section 2(9) Damages Act 1996 disapplying or modifying the effects of Section 2(8) as to the effect of the retail index.

The Defendant brought an Application that the Claimant’s case had no reasonable prospects of success and that the paragraphs in the Statement of Case relevant to it should be struck out. The Judge found the Application misconceived and dismissed the Application. The Defendant appealed to the Court of Appeal.

The decision

The dispute centred around the interpretation of Sections 2(8) and 2(9) of the Damages Act 1996; “(8) an Order for periodical payments shall be treated as providing for the amount of payments to vary by reference to the retail prices index (within the meaning of Section 833(2) of the Income and Corporation Taxes Act 1988) at such times, and in such manner, as may be determined by or in accordance with Civil Procedure Rules
(9) but an Order for periodical payments may include provision –

a) disapplying subsection (8), or

(b) modifying the effects of Subsection (8)”.

The Claimant was contending that a wage related index, such as the Average Earnings Index, would be more suitable than the Retail Price Index as the mechanism for varying sums payable under the Periodical Payments Order and in support of that contention the Claimant relied on an expert, Dr Victoria Wass. The Defendant sought to strike out the Statement of Case in which the Claimant put this argument and exclude the evidence of Dr Wass.

It was not the job of the Court of Appeal, on the basis of this appeal to express any view about the merits of either party’s case.

The Claimant argued that Section 2(8) identified the default position and that the Court could make the Orders identified in Section 2(9) whenever it appeared just to it to do so. The Defendant argued that the Court would ordinarily make the Order as set out in Section 2(8) and could only make an Order under Section 2(9) in exceptional circumstances.

This was an issue of statutory interpretation. It was argued for the Defendant that if there was any ambiguity in the words used by Parliament, extracts from the debate in the House of Lords on the Committee and reports stages and on the third reading of the Bill should be considered.

The House of Lords had made it clear that reference to statements made in Parliament about the meaning or effect of a particular clause in a Bill was only permissible if three conditions were satisfied (see Pepper v Hart and R v Secretary of State for Transport, the Environment and the regions ex-parte Spath Holme Ltd). The first of those conditions was that the reference was permissible only if the legislation under consideration was ambiguous or obscure, or led to an absurdity. This condition was not satisfied in the present case. There was nothing in the language of the subsections to suggest that the power to make provision as identified in Section 2(9) might only be triggered in an exceptional case, whatsoever that that might mean.

The Court had also been referred to the recent history surrounding the identification of the appropriate discount rate for the purpose of calculating lump sum awards in personal injury cases and the statement of the Lord Chancellor in July 2001. The Court had considered Cooke v United Bristol Healthcare, Wells v Wells, Warrener v Warrener, and the Lord Chancellors statement. That history showed that an award of a lump sum was entirely different in character from an award of periodical payments as a mechanism for compensating for losses. When setting the appropriate discount rate in the context of a lump sum award the House of Lords or the Lord Chancellor had to guess the future and to hope that a prudent investment policy would enable a seriously injured Claimant to benefit fully from the award. A Periodical Payments Order was quite different. This risk was taken away from the Claimant. The fact that these two different mechanisms sat side by side in the same Act of Parliament did not mean that the problems that infected the operation of the one should be allowed to infect the operation of the other. There was nothing in the statute to indicate that in implementing Section 2 of the 1996 Act Parliament intended the Court to depart from what Lord Steyn had described in Wells v Wells as the “hundred percent principle”, namely that the victim of a tort was entitled to be compensated as nearly as possible in full for all pecuniary losses. For this reason the argument that Parliament must have intended to provide compensation lower than that that would have been awarded through adherence to the hundred percent principle was rejected and for the same reason the argument that the Courts should consider questions of affordability when determining what Order to make would be rejected. Policy arguments based on affordability were a matter for Parliament and not for the Courts.

The Claimant should be allowed to advance his Statement of Case and deduce the evidence of Dr Wass at Trial and it would be for the Trial Judge to decide whether it was appropriate to use the powers given to him by Parliament in Section 2(9) and to make an Order Index linking the periodical payment as he considered appropriate and fair in all the circumstances, without being obliged to detect exceptional circumstances before he was at liberty to depart from the RPI.

Appeal dismissed.

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