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Monthly update – September 2012
Discount rate consultation begins Ministry of Justice gives detail on Qualified One-Way Costs Shifting (QOCS) Ministry of Justice to ban Claims Management Companies Incentives Construction worker survives “Brain Skewer” 1
Unincorporated Associations may face vicarious liability claims: JGE v The Trustees of the Portsmouth Roman Catholic Diocesan Trus – Court of Appeal (2012) School not liable for Golf lesson injury: Hammersley-Gonsalves v Redcar and Cleveland Borough Council – Court of Appeal (2012)
News Discount rate consultation begins
The long awaited Ministry of Justice consultation on the UK discount rate for personal injury damages finally got under way on 1 August 2012 and will run until 23 October 2012. The consultation examines the methodology by which the Lord Chancellor (and his counterparts in Scotland and Northern Ireland) sets the discount rate and is the first of two planned consultations with a second to take place in the autumn of 2012 on the legal framework for the setting of the rate. The discount rate is used to discount damages for future losses paid on a lump sum basis, to offset the income that claimants can obtain through investing their damages. The current rate of 2.5% has been in force since 2001 (in England, Wales and Northern Ireland, since 2002 in Scotland) and is based on the estimated returns from Index-Linked Government Gilts (ILGS), a very safe form of investment. Since then the rate of return has fallen significantly leading to a campaign by claimant lawyers to reduce the rate. They argue that an unrealistically high discount rate (compared to actual ILGS returns) is leading to the under-compensation of claimants. The consultations will not take into account the impact on compensators of lowering the rate even though any reduction will greatly increase the value of lump sum settlements for future losses (especially for long term care claims) and have a huge effect on bodies like the NHS Litigation Authority and insurers.
The table below sets out the effect of decreasing the discount rate for a twenty year old female claimant with a £100,000 per annum care regime with normal longevity. Discount Rate 2.5% 2.0% 1.5% 1.0% 0.5% -0.5% -1.0% Multiplier 32.97 37.56 43.25 50.38 59.41 85.89 105.42 Lump Sum Award £3,297,000 £3,756,000 £4,325,000 £5,038,000 £5,941,000 £8,589,000 £10,542,000
Comment: Although the discount rate has been based on the return available from ILGS since 1998 (when the House of Lords set a 3% rate in Wells v Wells), the reality is that most claimants invest in a mixed portfolio with substantially higher returns. The Damages Act 1996 which gives the Lord Chancellor the power to set the rate for England and Wales does not specifically mention ILGS and it is possible that the consultations could lead to a move away from ILGS which would certainly assist compensators.
1 Technical claims brief, monthly update – September 2012
i.e. where a claimant fails to beat a defendant’s Part 36 offer they will not be asked to pay more in costs to the defendant than the sum awarded in damages • QOCS protection will apply in relation to claims that are discontinued (unless fraudulent) • QOCS protection will be allowed for all appeal proceedings (the requirement for permission to appeal will act as a control to stop unrealistic appeals) • How QOCS will operate on mixed claims with elements of non-injury related damages is yet to be decided • There will be an additional sanction of 10% of damages payable where a claimant betas their own Part 36 offer (10% of costs in non-damages claims) subject to a tapering system for claims over £500,000 so that the maximum sanction is likely to be £75,000 (only one sanction applicable for split trials). The Civil Procedure Rules Committee will be amending the rules to incorporate QOCS in time for them to come into effect in April 2013. Comment: QOCS should lead to a reduction in the cost of litigation and speed up settlement by encouraging the use of Part 36 offers and by removing the need for ATEs.
Ministry of Justice gives detail on Qualified One-Way Costs Shifting (QOCS)
Qualified One-way Costs Shifting (QOCS) is an essential part of Lord Justice Jackson’s reforms of litigation funding in England and Wales. It is designed to remove the need for a claimant to take out an After the Event insurance policy (ATE). QOCS will mean that a losing claimant who pursues a genuine claim in a reasonable way will no longer be obliged to pay the defendant’s costs except where they have failed to beat the defendant’s Part 36 offer. Although defendants will lose the right to recover costs in many cases they should be better off as they will be spared having to pay ATEs and success fees, which far outweigh the sums they are currently recovering on their own costs.
The Ministry of Justice has now provided more detail of the scheme. • QOCS will apply to all personal injury claims regardless of the claimant’s means (it may be extended to other types of claims at some point in the future) • Claimants who lose will not normally have to contribute at all towards defendants’ costs • QOCS protection would be lost if the claim is found to be fraudulent (on the balance of probabilities), the claimant fails to beat a defendant’s Part 36 offer to settle or the case is struck out for want of a reasonable cause of action or other abuse of process • The principles set out in Part 36 of the Civil Procedure Rules (CPR) override QOCS, but only up to the level of damages recovered by the claimant
2 Technical claims brief, monthly update – September 2012
Ministry of Justice to ban Claims Management Companies Incentives
The Claims Management Regulation unit (CMR) of the Ministry of Justice (MOJ) has announced that it will amend the rules governing the issue of licences to claims management companies to stop incentives being offered to the public for new claims. Currently claimants whose claims are accepted by accident management company solicitors can be given a range of rewards including cash, vouchers and goods. The incentives have been criticised as encouraging the pursuit of unjustified claims. The ban is planned to come into effect in April 2013. Comment: the implementation of the Legal Aid Punishment and Sentencing of Offenders Act in April 2013 will end the recoverability of success fees and
After the Event insurance premiums, greatly reducing the costs received by claimant solicitors and arguably making it uneconomic for them to offer incentives for new business. The outright ban on incentives may therefore be unnecessary but it demonstrates the MOJ’s determination to tackle what it describes as the poor practice rife amongst some claims management companies who are “falling over each other to get claimants’ business”.
Construction worker survives “Brain Skewer”
The remarkable survival of a Brazilian construction worker whose head was impaled by a falling metal bar has been reported around the world. Eduardo Leite told doctors that he was kneeling down working with his tools when a metal bar fell from the fifth floor of a building behind him. The six feet long bar penetrated his hard hat transfixed his brain and emerged between his eyes.
Mr Leite who was conscious throughout and able to tell doctors what had happened to him, was remarkably lucky that the bar missed areas of his brain controlling vital body functions and is expected to make a good recovery. His case has been compared to that of Phineas Gage, a US railway foreman, who in 1848 survived having a metal tamping rod being blown through his brain when an explosive charge detonated prematurely. Comment: Eduardo Leite’s remarkable story illustrates the highly unpredictable nature of brain injury. Usually far less forceful blows to the brain are fatal. In 2009, well- known screen actress Natasha Richardson, tragically died 24 hours after slipping on ice and striking her head.
3 Technical claims brief, monthly update – September 2012
Liability Unincorporated Associations may face vicarious liability claims: JGE v The Trustees of the Portsmouth Roman Catholic Diocesan Trust – Court of Appeal (2012)
The claimant alleged that she was the victim of sexual abuse by a priest. The Court of Appeal was asked to decide as a preliminary issue whether the defendants were vicariously liable for the alleged actions of the priest. The parties agreed that the priest was not an employee. The question was whether his relationship with the church was “akin” to employment.
By a two to one majority, the Court of Appeal held that the relationship of the priest to the church was “akin” to employment. The priest did not match every aspect of an employee, he was not paid a salary directly or subject to direct control on a daily basis but he could be dismissed from his office by his bishop to whom he was obliged to show reverence and obedience. In all the circumstances, it was just and fair to impose vicarious liability. Comment: The doctrine of vicarious liability in England and Wales has been described as the creation of many judges with differing ideas. Once it is established
that an employer is vicariously liable for the actions of an employee it is unnecessary for the claimant to show that the employer was at fault. This judgment has potentially serious implications for unincorporated associations like churches, thrift clubs, members clubs, voluntary organisations and the like which may now be held vicariously liable for the acts of members where a relationship akin to employment exists. .
4 Technical claims brief, monthly update – September 2012
School not liable for Golf lesson injury: HammersleyGonsalves v Redcar and Cleveland Borough Council – Court of Appeal (2012)
The claimant was an eleven-year old school-boy who was accidentally struck in the face by a golf club swung by a classmate during a school golf lesson. The claimant suffered a broken jaw and extensive damage to his teeth. He sued the local council alleging negligence on the part of the school. At first instance, the District Judge held that the school was negligent through its teacher who had failed to adequately supervise the class and awarded the claimant £21,000. The Council however, successfully appealed to the Court of Appeal. The Court of Appeal accepted the finding that the teacher could not have seen every pupil at every minute but it was difficult to see how the claim could succeed given that there was no allegation that the staffing ratio was inadequate. A lack of adequate supervision was not made out. The teacher could not have seen every action of every pupil no matter where he stood. There was no need for additional teachers given the age of the pupils and the nature of the activity. Even if the teacher had been negligent, the District Judge had not established that his negligence was causative of the accident or that the teacher could have prevented it. The class had been well behaved prior to the accident and the teacher had no reason to stop the lesson or exclude the pupil who swung the club.
Comment: Accidents can occur in schools during moderately risky activities without the teacher or the school being found liable. Redcar Council has said that this judgment encouraged sports in schools.
We are grateful to Plexus Law who acted for the defendants for their helpful note on this case.
5 Technical claims brief, monthly update – September 2012
Completed 28 August 2012 – written by and copy judgments and/or source material for the above available from John Tutton (contact no: 01245 272 756, e-mail: email@example.com).
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6 Technical claims brief, monthly update – September 2012
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