A judicial balancing act between over and under compensation

We have to remind ourselves from time to time that the purpose of compensation is to put the injured party in the position that they would have been but for the accident, so far as money can do so. They are entitled to no more and no less, sometimes known as the 100% principle. A recent clinical negligence case covers various issues which are relevant when considering these broad principles, including issues around double recovery (of both compensation and state funding), the form of award (particularly the approach to a periodical payment order) and claims that are not recoverable (in this case, financial management through a personal injury trust).

We previously reported on the judgment in Martin v Salford Royal NHS Trust [2021] EWHC 3058 which was passed down in late 2021. The original High Court ruling dealt with damages and, in doing so, grappled with a situation where, potentially, the claimant might find himself in receipt of damages to cover his care needs whilst also still being able to claim statutory funding (and which might therefore offend the 100% principle by allowing double recovery for the same loss). Parties regularly resolve such issues in negotiation, either through a periodical payment mechanism which allows for any excess funds to be repaid to the paying party or through a reduction in the award whilst allowing the claimant to recover what they can from state funds. In this case, the court accepted that the claimant was receiving s.117 Mental Health Act state funding, and that if the claimant continued to do so in the future then this might lead to double recovery, but determined that the claimant was entitled to a fuller care package and that, even if the continued receipt of s.117 funding could not be excluded, that ‘possibility’ of a risk of double recovery was not sufficient to make any adjustment to the award. As such no ‘credit’ was given, or is required to be given going forwards, for the claimant’s entitlement to state funding. This is concerning to compensators but it is important to note that the court recognised the risk that this would provide over-compensation because of the ‘possibility’ that the claimant could seek s.117 funding in the future. The court balanced this with the risk of the claimant’s care needs in future increasing due to physical decline. By keeping the allowance for care static for life, the court said the award for care was ‘appropriate’ across the claimant’s lifetime.

Last Friday, 11 March 2022, the court handed down a further judgment in the same case – Martin v Salford Royal NHS Trust [2022] EWHC 532. This time, the court was considering the form of award and whether a variable periodical payment order was appropriate (i.e. a PPO allowing for the level of future annual payment to cover the claimant’s care needs to be changed should circumstances change in future). The claimant was arguing for a PPO, which the defendant accepted they would get. This time there was a more favourable finding on the defendant side, with the NHS’ arguments succeeding on two important points.

Firstly, the defendant NHS Trust argued for a variable PPO.  The defendant asserted that a serious deterioration in the claimant’s condition in the future would lead to the claimant having to be cared for in a residential facility, knocking out the need for home care and therefore reducing the amount of the annual payments required under the PPO. The court determined that its discretion should be exercised to order a variable PPO, allowing the defendant to apply to vary the order (and reduce the sums paid) in the event that the claimant’s care needs could not be met at home in the future. 

Secondly, the defendant successfully opposed the claim for the costs of a personal injury trust to manage the claimant’s damages. The claimant here did not lack capacity, but was vulnerable. In such cases claimants frequently plead a claim for a personal injury trust instead of Deputyship costs (which would apply if the claimant lacked capacity). The court referred to past caselaw, which supports the idea that investment advice is not recoverable. The court found it instructive that there were no reported cases of awards for the costs of managing an award for a claimant with capacity. Save for in the cases of children, or those without capacity, the court does not generally adopt a protective role. In this case, despite a real and immediate risk of suicide and a vulnerability to exploitation, no protective jurisdiction over the claimant’s affairs arose with the court. There was no separate award made for the cost of investment advice through a personal injury trust. The claimant “will be free to invest, gamble or otherwise squander his damages”.

There were wins and losses for both sides in this claim, reminding us that the court should always be mindful to balance the risks of under-compensation and over-compensation.


Andrew Williamson, Partner & member of BLM’s Actuarial Subject Matter Group
andrew.williamson@blmlaw.com

Leave a Reply