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the law on damages

25 October 2007

Introduction

The Governments consultation "The Law on Damages" closed on 27 July 2007. Click here to read Browne Jacobson's full response.

The Governments paper

The Government deals with important principles of damages law and covers a number of key areas:

1. Dependency and bereavement claims

2. Claims in relation to psychiatric illness

3. "Collateral benefits"

4. The interface between damages for care, and care from statutory services (Sowden/Crofton issues)

5. The valuation of claims for alternative accommodation

6. Aggravated, exemplary and restitutional damages

7. Damages in intellectual property claims, including additional damages

A principled approach

The Government sets out a number of principles underlying their proposals:

a) There should be no change in the law unless it will bring positive identifiable benefits

b) The Claimant should be compensated for losses, but only once and, where practicable, at the expense of the tortfeasor. Double recovery should be avoided

c) The Court should be allowed as much flexibility as possible in considering whether damages can be awarded in a particular case

We believe that these are sound principles but priority should be given to principles of certainty and avoidance of double recovery.

The other principles set out in the paper, such as the need for judges to have flexibility when determining damages and the "tortfeasor pays" principle, are important, but we do not consider it appropriate to seek to achieve these at the expense of certainty, or if it is likely to lead to double recovery.

Claims relating to death

The Government sets out proposals for reform both in relation to dependency claims under the Fatal Accident Acts 1976 (FAA) and claims to bereavement damages. Proposals include:

a) Residual category of individuals eligible to claim under the FAA for those who can show any kind of past dependency

b) The retention, and in some cases extension, of restrictions as to factors that can be taken into account to reduce dependency claims (eg the prospect of remarriage)

c) Clarification of the purpose of bereavement damages

d) Extension of bereavement damages, most significantly to children and to partners who have cohabited for at least two years

We do not support the proposed extension of the test for those entitled to make dependency claims. A death may affect a broad range of individuals, but it is not reasonable for all those affected to expect to recover damages. Damages should be limited to those who have been deprived of benefits that they could reasonably expect to have continued but for the death.

Where new sources of dependency have arisen, or are likely to arise, for example through remarriage, then these should be taken into account in order to avoid double recovery. Defendants are not likely to abuse the opportunity to investigate future sources of dependency, but in any event the Judiciary should be trusted to control evidence appropriately. The judiciary can also be relied upon to weigh up this evidence, based on experience of handling similar issues, for example in the family courts.

In relation to bereavement damages, the Governments proposals are reasonable. They will make the list of eligible claimants consistent with the FAA, but will retain a clearly defined test of eligibility.

Mesothelioma claims

The Government uses this paper as an opportunity to canvass opinion as to an appropriate procedure to address the need for those suffering mesothelioma to receive compensation in a timely manner, while maintaining the right for dependents to make a claim under the FAA.

We consider that any bespoke procedure is likely to be slow to implement and costly to operate. We make proposals whereby a Part 7 claim, with an interim payment and appropriate stay, can be utilised to achieve the required result.

Psychiatric injuries

The Government proposes no change to the current common law tests of eligibility to claim in relation to psychiatric injury and we believe this is appropriate. The existing test strikes a fair balance in determining who should be eligible to bring a claim and is now sufficiently clear that it rarely gives rise to satellite litigation.

Collateral benefits

The Government has considered the way in which courts take account of sick pay, pensions, charitable payments, payments under policies of insurance and gratuitous care in awarding damages. Certain of these heads, for example charitable payments, are currently disregarded completely when damages come to be assessed. Others, for example sick pay, will only be payable by a tortfeasor where the collateral benefit has been provided in such ways to give rise to a subrogated claim.

The Governments general position is that all collateral benefits should be disregarded in order to achieve the tortfeasor pays principle. It can be left to collateral benefit providers to contract for recovery, in order to prevent double recovery.

In our view, the Governments proposals will inevitably give rise to double recovery. It will often not be possible for collateral benefit payers to contract for recovery, for example where terms of the payment are already set under an employment or insurance contract.

We believe that collateral benefits should reduce damages in all cases. Claimants should recover only for losses actually incurred. Collateral benefit payers are and should remain able to contract to recover their outlay when damages are received. The current law provides for a subrogated claim to be brought in such cases.

The provision of care treatment or funding by statutory services

The Governments proposals focus upon s2(4) of the Law Reform (Personal Injuries) Act 1948 and the availability of NHS treatment. They do not deal with the key issues affecting all defendants handling large cases, namely the interplay between damages provided for care provision and state provision of care services by Local Authorities and the NHS, pursuant to a complex statutory framework. We consider that these areas need to be considered together and the statutes and regulations relating to entitlement to care and funding need to be made clear and consistent.

The Government considers in a limited way a scheme for direct funding of care providers by defendants. It contemplates the possibility of certain aspects of treatment being provided by the NHS, subject to recovery of costs. For many reasons, we believe that this would be undesirable and unworkable.

We consider that the current approach of allowing the court to determine funding and treatment which is likely to be received from statutory services, having considered all relevant evidence, remains the best way of dealing with these issues. This exercise will be simplified if our proposal for clarification of the statutory and regulatory regime is adopted.

Browne Jacobson is currently developing a protocol for co-operation between statutory services and defendants to claims involving Sowden/Crofton issues which we hope will assist both defendants and statutory services in dealing with these claims in an efficient and cost effective manner.

The use of capped indemnities and reverse indemnities in this type of claim is an effective means of reducing the risk of double recovery. Such indemnities are often agreed in claims involving Sowden/Crofton issues but have not yet been ordered by the courts. We believe this should be addressed by legislation and/or amendment to the Civil Procedure Rules.

We do not consider that this important area has been adequately explored within the Governments consultation paper and this is a missed opportunity. We have attempted to address the broader issues in our response but have invited the Government to consult further in relation to this field if our proposals are not adopted.

Accommodation claims

The Government seeks to address concerns that claimants who require alternative accommodation as a result of an injury may not always receive adequate funds on payment of an award for damages to allow them to purchase the property they need. The Governments proposals involve defendants paying the capital cost of accommodation, either without any provision for recovery, or in return for charge over the property.

We do not consider that this is an area in which reform is needed. The current Roberts v Johnstone approach allows claimants to recover losses incurred through setting aside funds to purchase property and the claimant has the benefit of an investment in the form of his property. This avoids double recovery and gives both parties a "clean break" at the end of a claim. We are of the view that it should be maintained.

Aggravated, Exemplary and Restitutional damages

The Government proposed no significant changes to the law in these areas. We believe this is right. We are not aware of any difficulties or concerns that would justify a change to the law.

Intellectual Property (IP)

The government has proposed replacement of additional damages within IP legislation with the term aggravated and restitution damages. It has invited comments as to the efficacy of the IP system of damages more generally.

We consider the principles of IP damages are sound. We do not believe there is need to replace well established and well understood terms.

We are concerned, however that lower value IP rights may not receive adequate protection due to the potential cost and complexity of proceedings. We have previously proposed to the Government that an IP fast track procedure should be introduced for some such claims. We consider this should incorporate a tariff of damages to be utilised in the absence of evidence from the parties in support of a different award.

The content of this bulletin is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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