Personal Injury Update - June 2009
10 Jun 2009Contents
- FARRAR’S BUILDING NEWS Nigel Spencer Ley
- THE LAW OF DIMINISHING RETURNS Andrew Wille
- RECENT DEVELOPMENTS IN INTERIM PAYMENTS IN CATASTROPHIC CASES Rhiannon Jones
- CASE LAW UPDATE Edmund Townsend
FARRAR’S BUILDING NEWS
For anyone who may have missed it from 1.6.09 the Special Account Interest Rate falls from 3% to 1.5%.
Two very topical issues are covered in the articles in this month’s Update.
In her paper on Interim Payments Rhiannon Jones examines the decision in Eeles.
First Andrew Wille asks: Why hasn’t the discount rate been reduced?
The Case Law Update was prepared by Edmund Townsend.
topTHE LAW OF DIMINISHING RETURNS
The discount rate assumes a net return on claimants’ investments of 2.5%. In the current climate this is not being achieved. Is the discount rate therefore to be reduced?
About a month ago rumours were circulating that the discount rate was set to be slashed, perhaps to as low as 1%. If true this would have the effect of substantially increasing multipliers (in some cases by more than 50%) and therefore substantially increasing lump sum damages awards. Seeking to ride this wave, some claimants have been submitting schedules of loss contending for a lower discount rate than that ordered by the Lord Chancellor back in June 2001. As a consequence there has been some nervousness, particularly on the part of claimant representatives, about settling claims, given that a substantial cut in the discount rate might be imminent.
The job of setting and changing the discount rate is entrusted to the Lord Chancellor, as prescribed by section 1(1) of the Damages Act 1996. Before making an order under subsection (1) the Lord Chancellor is required to consult the Government Actuary and the Treasury (section 1(4)).
The official word from the Ministry of Justice is that it refuses to comment upon speculation about possible changes to the discount rate.
A little background
In Wells v Wells [1998] 3 WLR 329 the House of Lords adopted the use of investment in Index-Linked Government Securities (ILGS) as the most accurate method of calculating the present value of future loss, and thus of ascertaining the discount rate. The net average return of ILGS over the previous three years was about 3% and, on this basis, a discount rate of 3% was recommended.
As above, the official responsibility for setting the discount rate lay with the Lord Chancellor. He did not respond to the recommendations of the House of Lords in Wells v Wells until 2001. Since Wells v Wells the rates of return on ILGS had been falling. On 25th June 2001 the Lord Chancellor ordered the 2.5% discount rate that prevails to this day. His rationale was almost immediately called into question, requiring him to issue revised written reasons for his decision which were dated 27th July 2001, in which the same discount rate is arrived at for slightly different reasons.
The case for change
There have been some persuasive advocates for a change to the discount rate. Chris Daykin, the former Government Actuary, has been contending for a while that the discount rate should be in the region of 1% (see his PIBA lecture of October 2008 summarised in Kemp 4-033.1 and set out in full in JPIL Issue 1/09, 48-65). Robin de Wilde, General Editor of Facts & Figures, has also been arguing for change (see his Introduction to the 13th edition of Facts & Figures).
The argument is quite simple. Over the ensuing 8 years the rate of return on ILGS has never attained a 2.5% net yield. On the contrary returns have slid ever downwards. Most recent figures from the Debt Management Office (DMO) show longer term yields (i.e. those stocks maturing in 2016-2035) down to in the region of 1%. Shorter term yields are even worse, with a 0.47% yield for stock maturing in December 2009.
In short, claimants are not recovering the rate of return on their damages that the courts have been assuming. They are therefore being under compensated.
One argument aimed against the fixing of the discount rate by reference to ILGS is that it is artificial. It does not accurately reflect what claimants actually do with their money. They do not put it all in a risk-free ILGS basket. They speculate on the stock market. They invest in property. They diversify their investments and they therefore reap greater returns.
Whether claimants do in fact invest in stocks and shares (evidence suggests that the majority put their money in a bank account attracting low rates of interest) the argument that they should be expected to do so is less attractive than ever in light of the recent performance of the stock market.
A claimant who invested his damages in the FTSE-100 at the time of the Lord Chancellor’s order in June 2001 would have had just 75% of his capital left by May 2009. A claimant who invested his damages in the same stocks at the height of the market in October 2007 would have just 50% of his capital left. When judged by this yardstick, resort to the modest yields of ILGS appears to be a savvy investment strategy.
Back in 2001 the Lord Chancellor adverted to the generous rates of return achieved by claimants whose investments were overseen by the Court of Protection. Again, these rates of return are vanishing. As of 1st June 2009 the CFO special account rate for Court of Protection claimants reduced from 3% to 1.5% to reflect diminishing investment returns. The CFO basic account rate reduced to just 1%.
The case against change
Although the case for a change to the discount rate is compelling, there are some weighty, pragmatic considerations which may see the status quo preserved.
Nobody knows what is going to happen to the economy, to inflation and to interest rates over the next few years. We are in uncharted and volatile waters. Now, the argument goes, is not the right time to be aiming to predict and fix accurate discount rates for the longer term.
The impact of the credit crunch upon ILGS yields is not straightforward. Quantitative easing has tended to have the effect of depressing yields. On the other hand, the massive increase in government borrowing is likely to be beneficial for yields over the next few years.
The economic historian Niall Ferguson describes the current situation in terms of a global battle between the Godzilla of inflation and the King Kong of deflation. Who can predict which will prevail? If King Kong prevails capital will maintain its value but the yield on investments will remain at rock bottom. If Godzilla is resurgent, which Mr Ferguson expects in the longer-term given the massive expansion of the monetary base (quantitative easing etc), then the value of capital will be eroded but interest rates will be set to climb, thereby improving yields.
The Treasury, if consulted, will surely give a frosty reception to the proposal for a change in the discount rate, given that certain government departments, i.e. the MoD and the NHS, have considerable personal injury liabilities which they will not wish to see swell by as much as 50%.
Furthermore, any dramatic increase in the quantum of lump sum awards might persuade litigants away from periodic payments, whereas periodic payments are seen as the way forwards by the Ministry of Justice (and by the MoD and the NHSLA).
Insurance companies will oppose any dramatic or sudden change. Anthony Hughes, President of FOIL, emphasises the importance of consultation and fair warning before any change to the discount rate is introduced. Insurers would have to change their reserves accordingly. Any sudden change would have a damaging impact upon the capital position of insurance companies at what is a difficult time.
Advice for practitioners
Although there are compelling arguments in favour of a reduction in the discount rate, it is impossible to predict when such arguments will persuade the Lord Chancellor into action. The weight of interests naturally opposed to a reduction in the discount rate means that practitioners should not hold their breath waiting for an immediate change.
Can it be argued through the Courts that the conventional discount rate is aberrant and should no longer be applied? Certainly section 1(2) of the Damages Act 1996 allows for the possibility of the Court adopting a different discount rate than that set by the Lord Chancellor if the party shows that a different rate is more appropriate in the case in question.
Generally such attempts have failed. Reliance upon a long life expectancy or the requirement for a high level of care have not brought cases within the exceptional category: see Warriner v Warriner [2002] 1 WLR 1703 and Cooke v United Bristol Healthcare [2004] I WLR 251.
A claimant paying a higher burden of tax overseas may be better placed to come within the exceptional category when considering the discount rate, as would be consistent with the reasoning in Biesheuvel v Birrell [1999] PIQR Q40.
The advice to practitioners with more substantial claims, and who do not fall into an (as yet unprecedented) exceptional category, is to sidestep the inequities of an artificially high discount rate altogether by seeking a periodic payments order instead.
topRECENT DEVELOPMENTS IN INTERIM PAYMENTS IN CATASTROPHIC CASES
Over the past year or so, there have been a number of cases considering the correct approach on interim payment applications where the final award is likely to involve a lump sum and a periodical payments order, culminating in the decision of the Court of Appeal in Cobham Hire Services Limited v Eeles (by his Mother and litigation friend Julie Eeles) [2009] EWCA Civ 204. This article considers issues likely to arise on interim payment applications.
Jurisdication
The power to award interim payments derives from section 32 of the Supreme Court Act 1981 and section 50 of the County Courts Act 1984.
The general approach
Since the early 1990s the first authority turned to when considering these issues was Stringman v McArdle [1994] 1 WLR 1653. That established that generally speaking what the Claimant wanted the interim payment for was not strictly relevant since the Court was not concerned with what the Claimant did with his or her money. However, habitually the need for and the proposed use for the interim payment was addressed in the witness statement in support in order to persuade the court that it should exercise its discretion in the Claimant’s favour.
On such applications the judge would usually make a conservative estimate of the likely final award referring to both sides’ preliminary schedules of loss. The Judge would then make a broad assessment of the merits of each side’s contention and would err on the side of caution, ordering an interim payment which allowed a comfortable margin should his preliminary estimation turn out to be too generous.[1]
How flat does the playing field need to be?
The driving force behind applications for interim payments is usually the purchase of care or acquisition of accommodation. Those acting for Claimants seek substantial interim payments at an early stage to purchase accommodation, set up care regimes and purchase aids and appliances recommended for the Claimant. Provided the Claimant benefited from the steps taken, it made it much harder for Defendants subsequently to argue that the accommodation purchased, care regime imposed etc was unreasonable. Conversely, the imposition of the regime allowed both parties’ experts to critically appraise its efficacy. In some cases the extent of the difficulty which Defendants perceived to result from being presented with an evidential "fait accompli" led to attempts to resist the award of an interim payment in case it might prejudice the level playing field. Most notably this occurred in Campbell v Mylchreest [1999] PIQR Q17. The Claimant suffered a serious head injury. He spent part of his time in a National Health Special Unit for severely disabled people and part of his time at home with his family. An interim payment of £100,000 was sought. It was common ground that the interim payment sought would not exceed a reasonable proportion of the damages likely to be recovered by the Claimant. The issue on appeal was the indication given by the Claimant that the interim payment would be applied to the setting up and running of a home care regime on a permanent long term basis. The Defendant’s case was that the interim payment, if made and applied for this purpose, could have an effect before the hearing so as to enable the Claimant to live permanently in his parents’ home and it might therefore have an effect on the status quo for the judge’s assessment of damages in that "the playing field would have been rendered un-level prior to the trial" to the actual or perceived disadvantage of the defendant. The Court of Appeal accepted that the Judge had failed to take into account the relevant factors in the exercise of his discretion and re-exercised their discretion but having done so, reached the same conclusion and awarded an interim payment of £100,000. The Court of Appeal considered the following factors relevant; that the home care regime had already been in operation for a long time, that the Claimant’s parents had already spent substantial sums in altering their home so that it would be suitable for his needs and part of the purpose of the interim payment would be to repay their expenditure, that the Claimant was still spending a substantial part of each week in the NHS unit and a bed would still be available for him there at the date of the assessment of damages so the playing field would not have been altered in that respect and what was described as the "Stringman v McArdle" starting point that the money sought was essentially the Claimant’s money. Sir John Balcombe pointed out that Judges were trained to act as dispassionately as possible, and if the evidence were to be that it would not be in the Claimant’s interest that he should have a regime at home the Judge would take appropriate account of it. He accepted the point raised by the Claimant that the Judge at trial would be helped by knowing how the Claimant fared at home so the playing field was not slanted all one way. Crucially Sir John Balcombe accepted that the level playing field argument could be a factor which the Judge exercising his discretion should take into account. Auld LJ agreed. He considered that where the use to which the Claimant intended to put the money might pre-empt in some way the outcome of an important issue in the trial, that was a matter relevant to the exercise of the discretion, but in the circumstances of this case, it was not a relevant factor here. Interestingly the Court considered that factors which might been relevant to the exercise of the discretion but which did not apply in this case would be seeking an interim payment too close to trial, seeking a payment which was too small for it to be worthwhile exercising the discretion and where a Claimant was not getting on which the claim and simply putting off the trial by repeated applications for interim payments.
Essentially, the Court considered and balanced the right for the Claimant to have his damages, the need for accommodation, care and equipment needs to be provided whilst the litigation progressed, the impossibility of creating an evidential vacuum which would provide a truly level playing field and the need to permit steps to be taken which would prejudice a fair trial.
The CPR Framework
CPR Part 25.6 makes general provision for applications for interim payment orders and CPR 25.7 specifies the conditions to be satisfied and matters to be taken into account when the court is considering whether to make such an order. The Claimant must show first that he has obtained judgment or would, at trial, obtain judgment for a substantial amount of money against an insured defendant or public body. CPR 25.7(4) is the provision which has given rise to the issues which will be considered:
"The court must not order an interim payment of more than a reasonable proportion of the likely amount of final judgment."
CPR 25.7(5) provides that the Court must take into account contributory negligence.
The Practice Direction supplementing CPR 25 gives guidance as to the supporting evidence required on such applications at paragraphs 2.1-2.4. The evidence must deal with amongst other things, the sum of money sought by way of interim payment and the items or matters in respect of which the interim payment is sought. Need for and proposed use of the interim payment is therefore relevant. A Schedule of past and future loss should be provided. The medical reports should be exhibited to the evidence in support of the application.
Section 2 (1) of the Damages Act 1996 brought in by way of amendment by the Courts Act 2003 came into effect on 1st April 2005. Under the amended Damages Act it became possible for a Judge to make a periodical payments order (PPO) in respect of some or all of the heads of future loss, index linked to reflect future changes in the value of money and continuing for the whole of the Claimant’s actual life. PPO’s have become much more prevalent since the Court of Appeal affirmed in Tameside & Glossop Acute Services NHS Trust v Thompstone [2008] EWCA Civ 5 that in making a PPO the Court had the power to apply whatever index was most appropriate to the head of loss concerned.[2]
CPR 25.7(4) has not been amended in the light of the periodical payment provisions so until Cobham v Eeles, Judges were left to apply that provision to a case in which a PPO might be made.
When considering how to allocate the heads of future loss between a capital award and one or more PPOs the trial judge has to consider what allocation will best meet the Claimant’s needs. If a PPO is made, the capital sum ordered at the final hearing will obviously be significantly less than the capitalised full value of the claim. In theory the making of an interim payment might affect the Judge’s ability at trial to get the right balance between the lump sum element of any damages awarded and the PPOs that may be necessary.
Judicial approach pre-"Cobham v Eeles"
· Mealing v Chelsea v Westminster NHS Trust [2007] EWHC 3254 (QB). The Claimant had received over £773,000 in interim payments and now sought a further £1 million. The Claimant valued the claim at over £17M. The Defendant contended that this was grossly inflated. There was clearly concern about the dissipation of the initial interim payment and the risk of dissipation of the Claimant’s assets. This feature might have persuaded a judge that a significant proportion of the award should be by way of periodical payments. The application for the interim payment was opposed on the basis that a payment of the magnitude sought would fetter the trial judge’s freedom in deciding how to allocate the award between capital and PPO. Swift J estimated the likely value of the claim at between £6M and £9M. That valuation would justify a further payment of £1M but she found that such a payment would or might fetter the freedom of the trial judge to allocate as large a proportion of the award to PPOs as he or she considered appropriate. She awarded a further £250,000 as she was satisfied that this amount when taken along with the previous sums would not unduly fetter the trial judge’s freedom of allocation.
· Braithwaite v Homerton University Hospitals NHS Foundation Trust [2008] EWHC 353( QB) The infant Claimant has very severe quadriplegic cerebral palsy. The preliminary estimate was that she would live to about the age of 23. She was cared for by her mother and lived in local authority accommodation which was "grossly unsuitable" and inadequate to accommodate professional carers. Stanley Burnton J commented, "It needs very little imagination to assess the kind of strain that this degree of care puts on a mother who has another young child." The interim payment was sought to purchase accommodation near to the Claimant’s mother’s family. The fully capitalised value of the claim was of the order of £3.6M. If that were to be awarded as a lump sum, there would be no difficulty in ordering an interim payment of £850,000. However, the trial Judge was likely to might wish to make one or more PPOs. Stanley Burnton J’s approach was to calculate which parts of the claim were bound to be awarded as a lump sum. These were past losses and damages for pain and suffering plus interest on both. These heads did not even amount to £850,000 and taken alone were not enough to permit an interim payment of £850,000. However, on the facts of the case there was no dispute that the claimant had an urgent need for accommodation. The Judge therefore concluded that he could confidently predict that the trial judge would order a capital payment of more than £850,000 "because unless such an award is made the Claimant’s needs simply cannot adequately be satisfied, as I have already indicated the accommodation is unsuitable and she cannot access professional care. If that means there will have to be some discount to or postponement of periodical payments, in my judgment, the judge is bound so to order." The notable features of this case were the urgent immediate need for accommodation which took priority over a detailed consideration of the figures. Evidence gathering was at a very preliminary stage for both sides.
· Williams v Williams and Groupama and Syndicate 2002 [2008] EWHC 299 (QB) Mrs Justice Dobbs. In this case the issue of the Claimant’s reasonable accommodation needs was tried as a preliminary issue. Contingent on that decision was a resumed hearing of an application for an interim payment to fund the cost of meeting those needs. The Claimant, was 2 years old at the date of a road traffic accident in which he sustained severe brain injuries. The Claimant lived with his mother and brother in 2 bed Housing Association accommodation, the rent being met by housing benefit. His mother sought a transfer to more suitable accommodation but had not been offered anything. This prompted the application for an interim payment. The Claimant put substantial evidence before the Court on the housing issue. This included medical evidence, evidence from the principle re-housing officer, accommodation expert, case manager, physiotherapist, OT, educational psychologist and numerous factual witnesses. Dobbs J decided that the Claimant required 3 bed accommodation on the ground floor with a garden and the likelihood of this being provided by the local authority within a reasonable time was very low. It was agreed that the flat was to be purchased privately with a charge executed on the property in favour of the 2nd and 3rd Defendants as security for the purchase price. The award of £450,000 was determined by reference to likely purchase price of the property. There was no specific consideration of total value of the claim, save for the observation that the final claim would be worth considerably more than any interim payment the court was minded to make. It remains to be seen whether determinations of preliminary issues in relation to housing and care will become more common in this era of PPOs where there will inevitably be less flexibility on interim payment applications.
· Brewis v Heatherwood and Wexham Park Hospitals NHS Trust [2008] EWHC 2526 (QB) Mr Justice Coulson. The Claimant suffered cerebral palsy as a result of negligent treatment at birth. An interim payment of £950,000 was sought to purchase private accommodation. The Claimant produced evidence from a care expert and an accommodation expert at the hearing. A recent Schedule of Loss valued the claim at just over £5.6M, including general damages of £200,000, past loss of £280,000, accommodation adaptation of £670,000 and future loss of earnings of £310,000. All the remaining claims were connected with care and case management. Coulson J considered that the following approach should be adopted:
(i) Identify the likely award for general damages, past losses and interest and predict the likely capitalisation of the remainder of the claims.
(ii) Ensure that the amount of the interim payment does not fetter the discretion of the trial judge to make whatever order in respect of lump sum and/or periodical payments he or she considers appropriate.
(iii) Heed the general approach adopted in Stringman and Campbell and have particular regard to the Claimant’s specific needs and the requirement that damages be paid as soon as reasonable practicable.
(iv) When considering interim payments for accommodation, have regard to the need to provide the Claimant with enough capital to enable the Claimant to buy, adapt and equip a home.
Coulson J undertook a careful assessment of what the Claimant could expect to be awarded by way of general damages, past loss and accommodation costs. He also critically appraised the Claimant’s expert evidence as to the cost of proposed housing and adaptation. The Defendant offered no evidence to counter that of the Claimant. Coulson J considered that it was for the Defendant to demonstrate that there was a risk that a particular level of interim payment would adversely fetter the Judge’s discretion at trial and in this case they had not done so. He drew parallels with Braithwaite and distinguished Mealing and concluded that the Claimant was "entitled to suitable accommodation sooner rather than later." Whilst he acknowledged the possibility of an interim payment acting as an incentive to the Claimant and his family to delay the trial, he found that it was not a relevant factor in this case, particularly given that a provisional trial window had already been given. The prudent course adopted by the Claimant’s family was clearly a factor in the Judge’s mind in this case.
· Pitcher v Headstart Nursery Limited and Gooding and Mayday Hospital NHS Trust [2008] EWHC 2681 (QB) HHJ Reddihough. An interim payment of £950,000 was sought for a 5 year old Claimant who had suffered a severe head injury and required 24 hour care. Interim payments of over £1M had already been made. The additional interim payment was sought to fund adaptations to a property already purchased and to replace a PCT package with a privately paid care package. The Court was not provided with a breakdown as to how the initial interim payment had been spent but noted that all the expenditure had been approved by the Claimant’s deputy. The further interim payment was intended to cover expenditure for the 15 month period between the date of the application and trial. There was likely to be an issue as to the Claimant’s life expectancy. The Claimant valued the case at £5M on a conventional basis, whereas the Defendant valued it at £1.85M. The Defendants distinguished this case from Brewis, Mealing and Braithwaite because it was the second application for a substantial interim payment which if made, would lead to a payment being close to or exceeding their own valuation of the claim on a lump sum basis. The expert evidence on both sides was not yet finalised. Despite that, the Judge embarked on quite a detailed valuation. He considered it likely that it would be held reasonable for the Claimant to have a private care package in place of PCT provision and made a third reduction on the Claimant’s figures for care to date of trial. For the sake of the calculation he assumed that future claims for accommodation, therapies, equipment, transports and holiday costs would be capitalised in full but expressed reservation about doing so and reduced this total initially by 25% to take account of the Defendant’s arguments and still further in his final reduction. The balance produced by this calculation was just under £700,000. The Judge declined to capitalise some or all of the year 1 care and case management costs as he considered that this would result in an undue fettering of the Judge’s discretion. He ordered payment of a further £320,000. The assessment in this case was by far the most complicated and finely balanced required to date and illustrates the conservative approach which the Court is likely to take when one significant interim payment has already been made, the expenditure of which is not fully accounted for and where there are serious issues between the parties on key issues.
The decision in Cobham v Eeles
The Claimant sustained a serious head injury in a car accident when he was 9 months old. He was 11 at the time of the hearing for the interim payment application. He had already received interim payments of £450,000 which had been used to build an extension to the family home for a therapy room. The family had decided that a larger house was required and sought a further interim payment of £1.2 M to purchase Brightlingsea Hall, a 9 bedroom former hotel. For reasons which are unclear from the Judgment the Claimant’s team had not been able to quantify the claim and at the start of the hearing there was no Schedule of Loss. The Claimant’s solicitor gave a broad valuation of the total capital value of the claim at £5M in her witness statement and relied on a lump sum offer made by the Defendant in 2007 of £3.25M or £750,000 plus a PPO of £75,000 per annum. The Defendants contended for a likely capital award at trial of £1.1M and on this basis submitted that there was no scope to make a further interim payment. The Claimant submitted that there was a general discretion to award such interim payment as would best meet the Claimant’s current needs, even if the award sought might limit the trial judge’s freedom to allocate the awards of future loss to capital and PPOs as he thought would best meet the Claimant’s needs. Foskett J made a conservative valuation of the overall capital value of the claim at £3.5M, basing it on a modest increase on the offer of £3.25M. He observed that a further interim payment of £1.2M would bring the total interim payments up to just less than one half of the full value of the claim. That would not exceed a reasonable proportion of the likely award. He disposed of the argument about tying the trial judge’s hands by finding that the capital that might have been utilised to provide the PPO had not been sacrificed for all time. It would be invested in an asset which could be realised to provide an additional source of income. The Defendant appealed. On the appeal the Claimant sought to adduce evidence from an independent financial advisor. The application was refused and the Court noted that it would only be in an exceptional case that it was appropriate for reports of this type to be put before the Court on an interim payment application.
The Court of Appeal made the following key findings:
(i) The power to order an interim payment is a discretionary power and there is not an unfettered discretion. The discretion is limited at the upper end by CPR 25.7(4).
(ii) In a case in which a PPO is made the amount of the final judgment is the actual capital sum awarded. Stanley Burnton J’s approach in Braithwaite was right.
(iii) It was no longer appropriate to take the full capital value of the claim as the basis for consideration of an interim payment in a case where a PPO might be made.
(iv) The Judge misunderstood and underestimated the importance of not fettering the trial Judge’s freedom to allocate the heads of future loss. The fact that the capital sum offered might be invested wisely and might be realised later missed the point about the importance of the trial judge’s freedom to make an appropriate PPO. If the Judge makes too large an interim payment, that sum is lost for all time for the purposes of founding a PPO.
The Court of Appeal re-considered the application for an interim payment and established the following principles.
(i) They rejected the contention that the Judge must always work on the Defendant’s figures but where, as here there was a wide margin of contention and the Claimant’s figures were not supported by evidence it was reasonable to work from the Defendant’s estimates.
(ii) The first task was to ask what was likely to be awarded for the heads of damages which were bound to be awarded by lump sum, namely general damages, past losses and interest on both. They noted that accommodation costs were commonly awarded as a lump sum and it would usually be appropriate to include accommodation cost in the expected capital award. The assessment should be carried out on a conservative basis. All the other heads of loss were potentially the subject of PPOs. The Court of Appeal accepted that it was unusual for all those heads of damage to be subject to a PPO.
(iii) For the purpose of an interim payment application, the Judge should not normally begin to speculate about how the trial judge will allocate the damages. As a rule, he should stop at the figure which he is satisfied is likely to be awarded as a capital sum and he may award a reasonable proportion of that figure. It may be reasonable to award a high proportion of that figure provided that the estimate has been a conservative one.
(iv) For the above steps of the process the Judge need have no regard as to what the Claimant intends to do with the money.
(v) There will be cases (Braithwaite was one) where the Judge will be able at the interim payment stage to confidently predict that the trial judge will capitalise additional elements of the future loss so as to produce a greater lump sum. Before a Judge at the interim payment stage encroaches on the trial judge’s freedom to allocate, he should have a high degree of confidence that such a course is appropriate and that the trial judge will endorse the capitalisation undertaken. The Judge must be satisfied that there is a real need for the interim payment requested and that the need exists now as opposed to after trial.
On the facts there was clearly reservation as to whether there was a present need to purchase Brightlingsea Hall. The Court considered there was a real danger that, if the Hall was purchased, a "status quo" would have been established before the trial and the playing field rendered uneven, in the way anticipated in Mylechreest. The application for a further interim payment was refused.
Conclusions
In this era of PPOs there is clearly going to be less room for manoeuvre and less scope for error for Claimants on interim payment applications, particularly in cases where there will be a reduction in damages for contributory negligence. The guiding principles have now been established by Cobham v Eeles. The cases surveyed show that the Courts will be willing to make substantial interim payments in cases where there is good evidence regarding past losses and accommodation costs and where the Claimant is taking reasonable decisions about accommodation and care needs. Claimants may run into difficulties where several accommodation options are tried out before the final solution adopted or extravagant regimes are proposed. It will be imperative that steps are taken to assess care and accommodation needs timeously and comprehensive Schedules are drafted before an application so that the Court is as well informed at it can be. Similarly Defendants would be well advised to move more quickly to obtain preliminary expert reports so that they are able to put forward their case positively at the hearing of the application. More than ever before, from both sides’ perspective all will be in the preparation.
[1] In Spillman v The Bradfield Riding Centre [2007] EWHC 89 (QB) Langley J took 75% of 70% of the total sum claimed in a case in which there was a major issue as to whether the claim for larger accommodation would succeed in principle at trial.
[2] The relevant part is the judgment of Waller LJ at paragraphs 101-108.
topCASE LAW UPDATE
Edmund Townsend
Baker v Quantum Clothing Group, Meridian Ltd and Pretty Polly Ltd [2009] EWCA Civ 499 (Sedley, Smith and Jacob LJJ) 22/5/09
This case clarified the difference between the common law and section 29 of the Factories Act 1961.
Ms Baker was employed in the knitting industry between 1971 and 1991. She had not been provided with ear protectors until 1989 and brought a claim (together with others) for noise induced hearing loss. Research produced different opinions as to whether noise levels of between 85 and 90 decibels of daily personal noise exposure (dB) were damaging. Ms Baker had been subjected to noise at this level.
The trial judge found that the second respondent was liable at common law for exposing employees to noise levels of 85 dB from early 1985 and that Ms Baker suffered noise-induced hearing loss. However, the Judge found that the first respondent had not breached its common law duty or s29 of the Factories Act 1961. The workplace had not been unsafe because the standard under s29 was to be governed by those prevailing at the relevant time.
Ms Baker appealed and the second and third respondent cross-appealed. Lady Justice Smith (with whom Jacob and Sedley LJJ agreed) upheld Ms Baker’s appeal.
Larner v British Steel was authority that the obligation under s29 was absolute, subject to the defence of reasonable practicability which had to be pleaded and supported by evidence. There was no requirement to establish that an accident was reasonably foreseeable. What is objectively safe does not change with time. It was known that a minority of people would suffer appreciable harm as the result of prolonged exposure to 85dB. The place of work was therefore not safe because there was a risk of injury.
By the early 1970s, an employer who kept abreast of developing knowledge would have known that prolonged exposure to 85dB was potentially harmful to an undefined section of the workforce and that they were under a duty to do anything reasonably practicable to make and keep it safe.
Under s29, once a claimant establishes that their place of work was not safe the burden passes to their employer to show that it was not reasonably practicable for them to eliminate the risk. Whereas, at common law the burden remains on a claimant to show that the employer failed to take reasonable care to avoid risks that they ought reasonably to have foreseen. If an employer acted reasonably, they would avoid common law liability.
Applying this to the present case, all employers in the relevant industry would have been aware, within a short time of its publication, of the Department of Employment Code of Practice 1972. By early 1977, an average-sized employer in the knitting industry should have made an informed assessment of the quantum of risk arising from noise below 90dB. It could not therefore be said that it was not reasonably practicable to provide ear protectors. From this time an employer of average size in the knitting industry exposing its employees to 85dB without protection was in breach of its duty under s29. The first respondent was therefore liable for damage attributable to unprotected exposure from 1978.
Palmer v Cornwall County Council [2009] EWCA Civ 456 (Waller, Longmore and Richards LJJ) 21/5/09
This was an appeal against a first instance decision that a local authority was not liable in circumstances where a year 9 pupil was injured during his lunch break.
The appellant had been on the school field when he had been hit by a rock thrown at a seagull by one of his year group. At the time there was only one dinner lady on duty to supervise the children. She gave evidence at the trial that she had directed her attention to the pupils in years 7 and 8 and only occasionally glanced at pupils in years 9 and 10. Fellow pupils who witnessed the events gave evidence that they knew stone throwing was prohibited and that they would not have thrown stones if they had been aware that there was a supervisor nearby.
The judge found that it was likely that there had been about 300 children on the field but that pupils in years 9 and 10 had been adequately supervised.
The appellant submitted that with proper supervision no stone would have been thrown. The local authority argued that the fact that pupils had not been deterred by the presence of one supervisor demonstrated that they would not have been deterred by the presence of more supervisors.
Lord Justice Waller (with whom Longmore and Richards LJJ agreed) allowed the appeal. The local authority was negligent to have one dinner lady supervisor. She had been stretched supervising years 7 and 8 and was only able to occasionally glance at pupils in years 9 and 10.
The purpose of supervision was to deter children from taking part in dangerous activities, as well as to stop dangerous activities if they did occur. Against that background, a court should not readily accept that dangerous activity would have happened in any event. The judge had found that the pupil witnesses were telling the truth. There was therefore no reason not to accept their evidence that if a supervisor had been near they would not have thrown stones because they knew that stone throwing was prohibited.
Roult (A protected person by his mother and litigation friend Angela Holt) v North West Strategic Health Authority [2009] EWHC 444 (Carnwath, Smith and Hughes LJJ) 20/5/2009
This case raised the extent to which a claimant is bound by the terms of a prior settlement approved by the Court.
The claimant suffered from cerebral palsy as a result of being starved of oxygen at birth. He had a mental age of about four years old and was cared for at home by his parents. Liability was conceded by the Health Authority and a settlement was reached on the basis that a Group Home would be suitable accommodation. Some of the costs of the Group Home were uncertain at that time so the order provided for future costs of care to be quantified later. The settlement was approved by the Court.
A few months later, the claimant served a revised schedule in relation to his outstanding claim for future care. The schedule was based on the cost of privately obtained accommodation. The claimant stated that he had moved into a group home but left shortly afterwards, on the grounds that it was, and would always be, unsuitable. The Health Authority objected to the basis of the schedule and the Court was required to determine whether CPR r.3.1(7) could be used to revoke a judge's approval of a final settlement.
At first instance the judge held that the approved final settlement could not be revoked.
On appeal the claimant argued that the power under Rule 3.1(7) was a general one and could be applied in circumstances where the original order was based on erroneous information or where it is followed by an unforeseen event which destroys the assumption upon which it was made. The claimant argued that the trial of Group Home accommodation constituted an unforeseen event that destroyed the assumption that such accommodation would be suitable. In addition, the claimant argued that the circumstances of this case were analogous to those in ancillary relief cases where Barder v Calouri is applied. In that case a husband was permitted to appeal out of time against a consent order that gave up his interest in the matrimonial home, in circumstances where his wife killed herself and the children after the order was made.
Lord Justice Hughes (with whom Smith and Carnwath LJJ agreed) held that a Court’s power to vary or revoke an order under CPR r.3.1(7) could not be used to vary or revoke an order for approval of a final settlement.
Although his Lordship accepted that it was not expressly confined to procedural orders and was unwilling to provide an exhaustive list of the circumstances in which the power could be invoked, Rule 3.1(7) could not constitute a power in a Judge to hear an appeal from himself in respect of a final order, Customs and Excise Commissioners v Anchor Foods Ltd (No3), Lloyds Investment (Scandinavia) Ltd v Ager-Hanssen and Collier v Williams applied.
Whilst, in relation to case management decisions, Rule 3.1(7) will often be exercised where the decision was based on an erroneous fact or the assumption upon which it was based was subsequently destroyed, it does not follow that in such circumstances a final order can be revoked. The interests of justice, and of litigants generally, require that a final order remains final unless there are proper grounds for an appeal.
The approved settlement was a final disposal of many of the issues between the parties. It was in no sense a case management order, and the fact that there remained issues that did need managing towards future disposal did not alter that position.
The Court of Appeal left open the issue of whether an order approving a settlement could ever be one in respect of which an appellate court would be justified in granting leave to appeal out of time if there had been erroneous information or a supervening event that destroyed the basis on which the order had been made. Whatever happened in this case was incapable of being such an event. Future care claims necessarily involve predictions into the future which may or may not turn out to be correct. The most that happened in this instance was that the claimant’s parents prediction of the future had changed. Whether this was right or not was uncertain. Barder v Calouri was not applied.
The appeal was dismissed.
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