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the law on damages - the governments response

6 July 2009

The government released its long awaited response to the consultation The Law on Damages this week.

Having taken two years to compile the response, the government is disappointingly non-committal in relation to many of the key areas addressed in the consultation, including mesothelioma claims, assessment of accommodation costs and the interface between damages and the availability of statutory care.

Collateral benefits and double recovery

A significant theme of the consultation was double recovery. The governments aim was stated to be that a claimant should be compensated for his or her losses, but only once. However, despite consulting in detail on the extent to which courts should take into account collateral benefits, the government does not intend to take further steps to ensure double recovery is avoided.

The government does propose to introduce a personal obligation on the claimant to account to a care provider in relation to damages for gratuitous care, in place of the trust approach, currently adopted by the courts. However, it is difficult to see that this will give rise to any significant practical benefits.

Ten pages of the consultation paper dealt with the cost of private care and section 2(4) of the Law Reform (Personal Injuries) Act 1948. It is clear that a number of respondents provided detailed submissions, but the governments conclusions on the subject are limited to 2 paragraphs, indicating that the topic will be given further consideration.

Section 2(4) provides that in assessing damages for care and treatment, the possibility of using NHS facilities is to be disregarded. However, this legislation is a product of its time and subsequent studies and reports, including the Chief Medical Officers 2003 report "Making Amends"[1], have recommended that the section be repealed.

It is disappointing that approximately half of respondents opposed repeal of section 2(4). Many of these were claimant representatives, who may have a vested interest in the section being retained. However, another quarter of respondents suggested further research into double recovery was required before a decision was taken.

It appears that many of those responding have misunderstood the issues involved. Section 2(4), in conjunction with the NHS philosophy of providing services free at the point of delivery, means that there is no mechanism to prevent a claimant from seeking damages for treatment, and then securing the same treatment, at no cost to himself, from the NHS.

Further research in relation to the extent of double recovery will not resolve this debate. The fact that the law permits such double recovery (whether or not it is prevalent) is unacceptable.

Fatal accidents

The government intends to take forward a number of proposals in relation to the law on fatal accidents. In particular, categories of claimants entitled to recover under the Fatal Accidents Act (FAA) will be extended to include any person who was being wholly or partly maintained by the deceased immediately before death. There will be no qualifying period (such as the two years cohabitation currently required) for claimants to satisfy the test.

Though the government has taken a liberal approach in determining who may bring a dependency claim, the same flexibility is not reflected in relation to the circumstances the court may take into account in determining damages. Courts will not be permitted to consider the prospects of re-marriage or of further relationships of dependency but, will be limited to taking into account the fact of marriage or of cohabitation for a period of two years.

Similarly, the only circumstances to which courts will be permitted to have regard in considering whether dependency was likely to continue, will be a petition for divorce (or equivalent) or evidence that a couple no longer cohabited.

There is a definite discrepancy between the approach adopted in relation to the dependants relationship with the deceased (which will generally be treated as lifelong and secure) and subsequent relationships (which are assumed to be transient and to offer inadequate financial protection unless they have been ongoing for two years or have led to marriage).

While it is undoubtedly important that dependants are not undercompensated, the governments proposals are likely to lead to overcompensation and double recovery in many cases. They do not meet the governments own standard that claimants should be compensated for losses, but only once.

Bereavement damages

The government also intends to extend the categories of claimants entitled to bereavement damages. These will include unmarried fathers with parental responsibilities, children of the deceased under 18 years of age and cohabitees of two years. The possibility of including step parents, siblings and engaged couples has been rejected.

Bereavement damages were increased to £11,800 from January 2008, and will remain at this level for most categories of claimants, with children of the deceased receiving £5,900 per child. The government intends to uplift the figures in line with RPI every three years. There will be no cap on total bereavement damages.

While the basic level of bereavement damages have not been increased by the consultation, the broadening of the categories of claimants who can recover will significantly increase damages in many claims. For the average family, bereavement damages for loss of one parent will double and in many instances the increase will be greater.

In consulting upon bereavement damages, the government asked whether awards should be reduced for contributory negligence - the majority of responses agreed this, and it seems the government will include relevant provisions in legislation. Some respondents have suggested that contributory negligence should not apply to children under 14, a position they argue is already established by caselaw. Those submissions are wrong, and it is to be hoped that the government will not impose an arbitrary age limit in relation to contributory negligence in this context.

The cost of reform

While the government has refused to take forward proposals in a number of key areas, the significance of the changes it intends to introduce, and their likely cost, should not be underestimated.

The risk assessment which accompanies the response suggests additional cost to compensators in the region of £5,500,000 per annum. However, on closer scrutiny it appears that this figure is too low. It is based upon calculations in relation to bereavement claims only and relies on conservative estimates of the number of potential claims. For example, the calculation assumes that only 50 of deaths caused in motor accidents or the work place will give rise to a potential claim.

More fundamentally, the calculation deals with damages only and fails to take into account the additional legal costs of the further claims that will be brought in relation to bereavement. In light of the statistics, on costs of claims at this level, it would not be surprising if this increased the overall additional cost to defendants by 50 to 100.

The summary also excludes estimated costs of additional liabilities under the FAA, which come to £5,560,000 on the governments figures. Again, this may be an underestimate. A broad brush reduction of 50 is applied to baseline figures, with limited justification, and it is not made clear whether these figures are intended to include legal costs incurred in dealing with claims. In any event, the figures are old, dating to 2001.

The amendments to the FAA are likely to have a particularly marked effect on defendants liabilities under the Act. The types of relationships which they will permit to form the basis of a claim (unmarried and not cohabiting) are likely to be particularly common between younger individuals. The additional liability imposed will be high as:

Fatal road traffic accidents are particularly common among young drivers - many more of these may now give rise to dependency claims

Damages awarded to this new class of claimant are likely to be substantial, being assessed on the basis of dependency continuing over many years or decades

These factors are not adequately considered in the governments analysis.

The FAA amendments are also likely to lead to increased prospects of double recovery, which is already a significant concern in this area. Statistically, many of those who bring claims under the FAA at present will go on to form new relationships. The issue will only be compounded if a broader range of relationships are permitted to form the basis of claims, while the scope for defendants to limit damages remains narrow.

In its cost-benefit analysis, the government assumes that the benefits will be equal to cost - after all, money is simply being transferred from defendants to claimants. However, this fails to recognise the drain upon public bodies, insurers and ultimately the general public, which is caused by claim costs. It also neglects the potential for money to be lost to double recovery.

Conclusion

In all, the response is something of a disappointment. A review which set out to tackle some of the most thorny issues of damages has resulted in a few unimaginative amendments the Fatal Accidents Act and (contrary to its aim) is likely to increase the problem of double recovery.

It is to be hoped that the government, or its successor, will follow up on submissions in relation to the remaining areas considered in the paper, and that we will see further proposals for reform in the near future.

[1] Making Amends - A consultation paper setting out proposals for reforming the approach to clinical negligence in the NHS

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