PERIODICAL PAYMENTS & SOME RELATED ISSUES

1. PERIODICAL PAYMENTS & SOME RELATED ISSUES HARRY TRUSTED OUTER TEMPLE CHAMBERS

2. PERIODICAL PAYMENTS • Power derives from Damages Act 1996 and CPR pt 41 • Court has power to order PP’s (s. 2 (1) (a) • Court must consider whether so to order. • Court must consider needs of C (s 4.1.7a)

3. Vulnerable Claimants • If the Claimant is under a disability, the Court must consider PP’s in the context of any proposed settlement (PD 21.6 (4). • Question is what form of award best meets C’s needs (4.1.7 (a) • Relevant factors include amount of payments and parties’ preferences (PD 41.B)

4. When is a PP award Likely ? • Large claims. • Long or uncertain life expectancy • Expensive care/case management needs. • Parental anxiety about the future. • Relatively constant disabilities.

5. Indexation of PP’s • Key Issue. • Damages Act s 2 (9) provides that the Court can choose to uprate PP’s by an index other than RPI. • Historically, care costs have increased much faster than RPI, which is a goods’ based index.

6. Why the Fuss ? • Assume C has lifex of 50 years. • Care need of £100,000 p.a. • Earnings index 1% more pa than RPI • Differential about £1 million in today’s money

7. Claimant’s Perspective • Costs of care relate to earnings not goods. • If the differential between earnings and goods is maintained, PP’s linked to RPI will result in certain shortfall. • Compensation should be 100% (Wells)

8. Defendant’s Perspective • The potential costs of earnings indexation are exorbitant if C experts are right. • Distributive Justice. Compensation culture. • In fact, C experts may be wrong because the indices they support fluctuate and/or do not mirror likely care costs anyway

9. Flora v Wakom • Application to Sir Michael Turner by D to strike out C’s claim for earnings indexation of PP’s. • Refused at first instance. Held, purpose of act was to provide full compensation by PP’s. They would be “dead in the water” if the Court could only use RPI. • Court of Appeal upheld this. Anticipated “basket” of case for appellate courts. • Leave to HL refused.

10. A v B • Decision of Lloyd-Jones J. Oct. 2006 • D sought order that C should be given PP’s uprated by RPI. • C preferred a lump sum. • Judge refused to force C to take PP indexed by reference to RPI

11. Thompstone v Glossop • First case in which the indexation point was argued. • Earlier cases (eg Raphael v Norfolk HA) settled on generous terms by D. • Hearing before Swift J. involved earnings and economic experts on both sides.

12. D’s Case in Thompstone • Lack of clarity about indices. • NJC rates (similar to RPI) true guide to costs of care. • Distributive justice. • Court should not have to choose an index. Up to C to choose and persuade Court.

13. C Case in Thompstone • C was young child with lifelong care needs. • Likely that care costs would rise in line with similar carers (ASHE index). • 100% compensation meant that this index should be used to uprate PP’s.

14. Decision of Swift J in Thompstone • Appropriate for Court to choose index. • Correct index was matching percentile of ASHE. • RPI was not a measure of earnings but of costs of goods. • Distributive justice did not displace 100% • Leave to appeal.

15. Corbett v S Yorkshire HA • Broadly similar arguments as in Thompstone • D did not call economic evidence re. distributive justice, but the point was argued. • Claimant won on indexation and care issues.

16. OTHER RECENT CASES • RH – decision of Mackay J. Future care costs provided by PP’s linked to earnings. • Sarwar – future costs of care and earnings provided by PP’s linked to earnings. • Ure – future care provided by PP’s linked to earnings. RTA insurer.

17. The Appeals • Four cases heardy by CA in November 2007. Thompstone, RH, Corbett, De Haas. • Permission given at first instance. • The “basket” envisaged in Flora

18. The Main Issues on Appeal • Statutory Interpretation (what powers does the court have ?) • Attack on discount rate ? • Distributive Justice • Strengths/Weaknesses of RPI • Strengths/Weaknesses of ASHE 6115

19. Statutory Interpretation • Defendants say that S 2 (9) only allows the Court to “modify” the RPI. So it does not allow for application of a different index. • Claimants say that S 2 (9) provides for modification of the effect of S 2 (8). So Court can use any index.

20. An Attack on the Discount Rate • Defendants say that in Cooke (and other cases), claimants tried unsuccessfully to reduce discount rate because costs of care would rise faster than inflation. • Therefore, by seeking to link periodical payments to earnings costs, claimants are trying to subvert Wells v Wells

21. Claimants’ Response • If Claimant has a lump sum, there is a chance of investing to “beat” the 2.5% discount rate. In parliamentary debates, this was expressly discussed. • But with a PP, Claimant is stuck. There is no chance of doing better than the RPI, which will probably be insufficient.

22. Distributive Justice (D) • Defendants (all health authorities) say that if periodical payments are uprated by reference to earnings, PP’s will be more expensive to provide. • This will reduce the money available for patients in the NHS. • And it will create unfairness between different classes of litigant. In a few cases, insurers may not be able to provide PP’s

23. Distributive Justice (C) • Claimants note that Defendants’ submissions support the argument that PP’s will be more valuable if earnings linked. • Hence C will lose out on RPI. • The actual cost to the NHS is probably insignificant in terms of patient care. • If C runs out of money, more care to be provided by NHS.

24. Distributive Justice (C) • In some cases in which the courts have applied this principle, financial loss has not been involved (Heil). • Or, if it has, the question is not whether the claimant should get a part of his loss. It has been all or nothing (Alcock, White). • Here, PP’s will be a disaster if C runs out of money.

25. RPI - Strengths • Established in 1947. • Well known to all. • Big, broad-based index. • In Section 2 (8). • Easy to calculate and use.

26. RPI - Weaknesses • Measures (almost entirely) costs of goods not services. • Care costs account for well under 1% of index. • As a matter of record, has not reliably tracked care costs.

27. What is ASHE ? • Annual Survey of Hourly Earnings. • Many different sectors of the economy. Takes 1% sample of all PAYE employees. Data available from NES since 1974 and in present form since 2004. • Information published relating to different groups. ASHE 6115 is care workers. • Also “ASHE Median”, which is an average.

28. Advantages of ASHE • Can be used to choose a group of workers (eg 6115, care). • Can be further refined to track a group within the cohort whose earnings match the claimed need (x’th percentile). • Occupational specific. • Probably the most accurate tracker that can be obtained.

29. Disadvantages of ASHE • Recent. Available as consistent series since 1998 only. • Constitution of groups may change. • Recent volatility. • No separate measures of overtime pay etc. • Differs from National Joint Council rates. Debate about why this is so.

30. Submissions from MOD • If earnings indices used, more claimants will seek PP’s. • If so, MOD no fault compensation scheme will be harder to administer. • MOD and other compensators will be forced to pay PP’s but insurers who are not “secure” will not.

31. Submissions from MPS • MPS is not a “secure” insurer. • So it cannot be forced to make PP’s. • MPS contends that if PP’s are earnings linked : - • Harder to find a suitable secure product. • More expensive (ie GP premiums rise).

32. The Court of Appeal Hearing • The Court indicated that it considered itself bound by Flora v Wakom so far as issues of statutory interpretation and distributive justice were concerned. • These issues are likely to go to the House of Lords. • The CA may give guidance about the powers of a judge to impose PP’s.

33. Practical Implications of PP’s • Be aware that PP’s must be considered in any big claim. • Court will probably refuse to approve settlement unless parties can persuade it that PP’s have been discussed. • Cases are now being settled on the basis of PP’s at RPI with indexation issue to be reconsidered once appellate courts have dealt with “basket”.

34. The Single Resident Carer • Arose in Corbett because D wanted a “live-in carer” who would be paid for 13 hours, relieved for 3 hours, sleeping for 8 hours. • Issue was whether or not this would have involved a breach of the Working Time Regulations 1998.

35. The Working Time Regulations Requirement that workers are entitled to at least 11 consecutive hours in each 24 (reg. 10 (1). • Hence D expert in Corbett asserted that 11 hours rest were 3 hrs of relief plus 8 hrs sleep.

36. “Waking Hours” • Claimant in Corbett very needy man aged 22 with mental age of 6. Epilepsy, emotional disturbances etc. • Judge accepted evidence that Claimant’s mother was often woken at night and that a carer would not enjoy 8 hrs uninterrupted rest.

37. The end of the Live In Carer ? • The Judge therefore found that D’s model was in breach of the regulations. • Also commented that, in any event, the model was not appropriate for this Claimant. • Difficult to see how defendants can advance live-in carer idea now. See HT article in Personal Injury Law Journal June 2007.

38. The Sixth Edition of the Ogden Tables • New life tables are for all UK (not just England and Wales). • After debate, it was agreed not to include tables for (eg) smokers/non-smokers or other higher/lower risk groups. • This does NOT preclude the parties from calling evidence of higher/lower lifex.

39. The New Section B • Follows new research of Dr. Wass et al. • Major features in employability are level of education and presence/absence of disability. • NOT – location, economic conditions, gender.

40. Education • Divided into three groups – D (degree), GE-A (A level or good GCSE) and O (poor GCSE or less). • Chances of employment for those in top group very much better than those in bottom group. • This is true with or without disability.

41. Disability • Defined as an illness or condition lasting more than a year which is expected to to limit substantially the ability to carry out day-to-day activities. • Of course some disabilities are so severe that claimants will never work. But often claimants do work, albeit at a reduced rate and with worse prospects.

42. Uses of the New Tables • A defendant can use the tables to show that even without disability, there is a significant life-time risk of disability – particularly for those with limited education. • A claimant can use them to show that disability substantially worsens the risks of unemployment.

43. The Limitations of the Tables • The tables are not legally binding. • They are evidence which a Judge can properly consider – but they can be rebutted by other evidence re. a particular claimant. • See HT article in September 2007 Journal of Personal Injury Law.