Some significant developments on PPOs should be expected during 2020 across the UK & Ireland, although timings are very uncertain.
In England & Wales a strand of work largely ignored since 2017 looks likely to be taken forward. In pre-legislative consultation and during the Civil Liability Bill’s passage in 2018 the MoJ referred to work to be undertaken by the Civil Justice Council to examine the take-up of PPOs and options for their greater use. We expect this could progress later in the year and will study the terms of reference closely when they emerge.
In Scotland, the power of courts to impose PPOs has been introduced by the Damages (Investment Returns and Periodical Payments) (Scotland) Act 2019, although the necessary rules have yet to be published and commenced. The regime will be closely modelled on that which applies in England & Wales. The provisions may well emerge in the first half of the year.
There is no equivalent legislation in Northern Ireland and we are not aware of plans to that effect. The key question in catastrophic injury cases is the appropriate discount rate which, for the time being, technically remains at 2.5% despite the English and Scottish rates having been re-set (due to the legislation mentioned above) at -0.25% and -0.75% respectively in the second half of 2019. We understand that there could be a test case in which a judicially-determined rate will be sought. An additional possibility is that the Department of Justice could conduct some form of consultation about the discount rate.
In Ireland, legislation from 2017 gave courts the power to make PPOs in cases in which a plaintiff suffered “a catastrophic injury”. Once again, the overall scheme was modelled on that in England & Wales. However, two significant differences were (i) that the 2017 Act mandated that payments shall be indexed by prices inflation only (the relevant Irish index being the HCIP) and (ii) it did not provide any circumstances in which the PPO could be varied in the future. These points were examined by the Irish High Court in Hegarty v HSE in November 2019.
Despite the express purpose of the Irish legislature being to provide for court-ordered PPOs, Murphy J found herself unable to make such an order because of these two restrictions. She dryly observed that “The evidence before the court, that indexation of periodic payments by reference to the HICP, will result in under compensation of a plaintiff, is overwhelming. The five experts … are unanimous in their view that a periodic payment linked to the harmonised index of consumer prices (HICP) will not provide the plaintiff with 100% compensation in respect of his future care and medical treatment needs.”
Furthermore, she held that courts in Ireland would simply not use the legislation in its present form and would instead award either lump sums or payments on account of future damages, say for three years, on a recurring basis. Her assessment that “In its current form therefore, the legislation is regrettably, a dead letter” carries an echo of Lord Steyn’s criticism in Wells v Wells in 1998 of the Damages Act 1996 before it was amended to provide for PPOs, suitably indexed and subject to variation. She concluded starkly that “It is not in the best interests of a catastrophically injured plaintiff to apply for a PPO under the current legislative scheme.”
It is too early to say if Hegarty might lead to a reassessment of what is still a relatively new PPO regime in Ireland. What is clear, however, is that there will be relevant activity on PPOs in all three UK jurisdictions which should be followed closely by insurers and other compensators.
Alistair Kinley, director of policy & government affairs