PERIODICAL PAYMENTS

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 PPs (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 PPs in the context of any proposed
  settlement (PD 21.6 (4).
• Question is what form of award best meets Cs
  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 PPs

• Key Issue.
• Damages Act s 2 (9) provides that the Court can
  choose to uprate PPs 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 todays money

7
Claimants Perspective

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

8
Defendants 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 Cs claim for earnings indexation of PPs.
• Refused at first instance. Held, purpose of act
  was to provide full compensation by PPs. 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 PPs
  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
Ds 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 PPs.

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 PPs linked to earnings.
• Sarwar future costs of care and earnings
  provided by PPs linked to earnings.
• Ure future care provided by PPs 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, PPs 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 PPs

23
Distributive Justice (C)

• Claimants note that Defendants submissions
  support the argument that PPs 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, PPs 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
  (xth 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 PPs.
• If so, MOD no fault compensation scheme will be
  harder to administer.
• MOD and other compensators will be forced to pay
  PPs 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 PPs.
• MPS contends that if PPs 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 PPs.

33
Practical Implications of PPs

• Be aware that PPs must be considered in any big
  claim.
• Court will probably refuse to approve settlement
  unless parties can persuade it that PPs have
  been discussed.
• Cases are now being settled on the basis of PPs
  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 Claimants 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 Ds 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.