INTRODUCTION

1. GENERAL PRINCIPLES

A claim for damages in respect of personal injury arises as a result of commission of a tort or a breach of contract Matthews v Kuwait Bechtel Corporation [1959].

Where a claim is based upon commission of a tort as most of the claims under employer and public liability insurance policies are, the tort in question is usually negligence or breach of statutory duty. There are of course occasions in employer liability, public liability policies where the insured is also indemnified for other torts such as trespass to the person and nuisance which give rise to personal injury i.e. Daniels, Higson.

No matter what the legal foundations of a claim for damages for personal injury are, damages are to be assessed in the same way.

The actual assessment of damages in each case may be affected by factors individual to that case such as contributory negligence or some statutory limitation (shipping cases). These may also be affected by the terms of the contract between the injured person and the wrong-doer. However a wrong-doer cannot exclude its liability in contract for personal and/or death.

2. WHO CAN CLAIM

It is well established that only the injured person claim damages for injuries suffered. Best v Samuel Fox & Co. [1953 AC716].

In Buckley v Barrow & Another [1997 PIQROQ78] the claim for special damages was made by a son resulting from injuries suffered by his mother. The Court of Appeal agreed with Assistant Recorder Mitchell who had struck out the claim on the grounds that it was plainly unsustainable in law.

3. GENERAL PRINCIPLES OF ASSESSMENT

The only mechanism used by the courts to compensate a person who has suffered damage or loss in consequence of a wrong done to him or her is to award him or her monetary compensation. This is irrespective of the damage sustained.

In personal injury cases the pain from physical injury can never be eliminated. Nor can injuries suffered be adequately compensated by an award of money. Nonetheless the same objective of compensation applies in personal injury cases. The principle was stated by Lord Blackburn in Livingstone v Rawyards Coal Co [1880 Appeal CAS.25].

“I do not think there is any difference of opinion as to its being a general rule that, were any injuries to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get that sum of money which will put the party who has been injured, or who has suffered in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation”.

The application of the rule in financial losses is easier to understand. Lord Morris:

“A money award can be calculated so as to make good a financial loss”.

The person suffering the damage is entitled to full compensation for financial loss suffered. The difficulty the courts have in applying this rule arise in cases involving non-financial losses i.e. general damages for pain and suffering.

Earl of Holsbury LC in Mediana (1900) said that:-

“How is anybody to measure pain and suffering in monies counted? Nobody can suggest that you can by any rhythmical calculation establish what is the exact sum of money which would represent such a thing as the pain and suffering which a person has undergone by reason of an accident”.

4. HOW ARE THESE PRINCIPLES APPLIED

There is no logical basis to evaluate compensation. The answers reached by the court were set out by Megaw LJ in Fuhri v Jones [1979 CA]:

“That it should award a sum which is in the nature of a conventional award”.

It is recognised that awards for comparable injury should be comparable. In individual cases the amount of the award is influenced by the amounts of awards in previous cases in which the injuries appear to have been comparable adjusted in the light of the fall in value of the money since the award is made.

Lord Diplock in Wright v British Railways Board [1983] said of non-economic loss:-

“Such loss is not susceptible of measurements in money. Any figure at which the assessor of damages arrives cannot be other than artificial and if the aim is that justice metered out to all litigants should be even handed instead of depending on idiosyncrasies of the assessor whether jury or a judge, the figure must be basically a conventional figure derived from experience and from awards in comparable cases”.

The basis of the conventional sum is that it should be such sum that are considered to be fair and reasonable compensation in the social, economic and industrial condition which prevails in England and Wales. The aim of the court is to bring in uniformity. As was said by Lord Morris in West v Shephard [1964] AC:-

“Money cannot renew a physical frame that has been battered and shattered. All that judges and courts can do is to award sums which must be regarded as giving reasonable compensation… By common consent awards must be reasonable and must be assessed with moderation. Furthermore it is eminently desirable that as far as possible comparable injuries should be compensated by comparable awards.”

Thus the result is that however unsatisfactory it may be the court in any particular case is constrained to assess damages for personal injury losses by reference to previous awards in comparable cases or reference to a general level of awards where there are no cases which are really comparable.

In Heil v Ranking and associated Appeals [March 2000] the Court of Appeal held that the power to give guidelines in respect of appropriate current level of damages for non-pecuniary loss lies with the courts and it is not a function of Parliament. Furthermore that power lies with the Court of Appeal or conceivably with the House of Lords.

5. JUDICIAL STUDIES BOARD’S GUIDELINES (JSB)

These are composite analysis of previous judgements made by a body of practitioners with experience in this field. However, they should not be the sole criteria by which awards should be assessed. As was expressed by His Honour Judge Stevenson in lead cases on white finger vibration injuries:-

“Useful though the guidelines are, we ought to look to the sources”.

The brackets in the guidelines should be value to practitioners. In order to determine a proper award within a given bracket consideration of previous awards in similar cases should also be considered.

The adjustment of general level of award or any particular category established within a general level is a sole prerogative of the Court of Appeal or conceivably the House of Lords. It is not the function of a trial judge except in exceptional cases such as rape.

WHEN SHOULD DAMAGES BE ASSESSED

They should be assessed at the time of the trial. Finally it is worth bearing in mind the words of Dickinson Jay from Andrews v Grand & Toy Alberta Limited [1978]:-

“There is no medium of exchange for happiness. There is no market for expectation of life. The monetary evaluation of non-pecuniary losses is a philosophical and policy exercise more than a legal or logical one. The award must be fair and reasonable, fairness being gauged by earlier decisions. But the award must also of necessity be arbitrary or conventional. No money can provide true restitution. Money can provide for proper care. This is the reason that I think the paramount concern of the courts when awarding damages for personal injuries should be to assure that there will be adequate future care. In assessing damages for non-pecuniary losses 3 things are considered to be desirable: assessibility, uniformity and predictability”.
Finally the Court of Appeal in Heil v Ranking reiterated the approach to be used in assessing damages as:-

“The appropriate approach in addition to relying on the current JSB Guidelines, is that which has been generally successfully adapted hitherto. Appropriate guideline cases updated by the RPI should be used to find the appropriate level of award.”

6. NON PECUNIARY LOSSES also known as General Damages

(i) Pain and suffering and loss of amenities

There are 2 distinct heads of damages - pain and suffering and loss of amenities. It is the usual practice for the courts to make a combined award for these two distinct heads West v Shepherd [1964] which also said that it is inappropriate to separate the two. Fletcher v Autocar [1968 2QB322].

The aim is to use the above principles to arrive at a figure. The principles can be summarised as follows:-

1. To put a value on what the claimant has lost.
2. How the claimant uses the damages is irrelevant.
3. Subjective loss is compensated.
4. Objective loss (of which the claimant may not be aware) is also compensated.

Pain and suffering

The main elements under this head are as follows:-

Pain

Damages are awarded for the pain which the claimant has felt as a result of the accident both in the past and what he may feel in the future thus if the claimant is unconscious damages are not awarded for pain Wise v Kay [1962].

Suffering

 Both past and future suffering are compensated. Suffering is defined as emotional stress, anxiety, fear, worry, embarrassment and such. These are subjective and some suffer more than the others. For example if the claimant is aware that his life expectancy has been reduced and suffers anguish as a result then this will increase his damages. West & Sons v Shepherd.

 Section 1(1) of the Administration of Justice Act 1982 abolished awards for shortening of life.


 Nervous shock and neurosis are also types of suffering which may attract awards.

 In Page v Smith [1996] AC155 the claimant was involved in a road traffic accident. He was not physically injured. He did not even suffer seatbelt bruising. He claimed that the accident has caused nervous shock by re-awakening his pre-existing chronic fatigue syndrome (ME). He never worked again. He recovered damages.

 A primary victim (one who has actually involved in the accident) can recover for all of his suffering whether he has a recognised psychiatric condition or his suffering falls far short of that.

 A secondary victim (one who was not injured or in the impact zone himself) needs to prove he suffered a recognised condition from the nervous shock of the accident to recover damages.

Loss of Amenity

These are awarded whether or not the claimant is conscious.

 Damages for any one injury are increased if the claimant has been deprived of a particular sport or interest which was dear to him over and above the general population. So if the claimant was an office based computer operator with no sporting hobbies his damages for pain, suffering and loss of amenities would be lower (for severely damaged knee) than if he had led an extensive sporting life i.e. playing soccer regularly.

 Loss of enjoyment of holiday is loss of amenity. In Ichard v Frangoulis [1977] similarly loss of marriage prospects are included.

Age

In theory age is not relevant to the level of award. However, age does affect the longevity of suffering. If an injury is permanent and suffering for a younger person is for a longer period than that of an elderly person, then elderly people will receive lower awards than youngsters.

Pre-existing Condition

A claimant who is fully fit and healthy with no pre-existing condition will obtain a full award for his injury. Where a claimant has pre-existing conditions (symptomatic and/or asymptomatic) awards are likely to be reduced by as much as 50%.

Acceleration

Where issues of pre-existing conditions materialise then a medical expert should be asked to give an opinion on acceleration. It is a concept not used in clinical medical practice but does arise in medical legal work. At the heart of the method is a simple guess made by each side’s medical expert as to when if at all the claimant would have suffered symptoms if the accident had never occurred.

Quantum

The assessment of quantum for pain, suffering and loss of amenities depends on the following factors:-

1. Injury and complaints.
2. Claimant’s truthfulness.
3. Quality of the medical legal experts.
4. The trial judge.
5. Comparable previous awards.

(ii) Loss of enjoyment of a job (congenital employment)

This head of damage is awarded where the claimant is unable to return to his pre-accident occupation. If for example a police officer is unable to return to the force and has to find alternative employment he will be entitled to claim loss under this head for the inability to follow his chosen occupation.

(iii) Handicap in the labour market (Smith & Manchester)

If a claimant carries an injury from which he will not completely recover he would be at a disadvantage in the labour market if he was to lose his current employment. He is handicapped to the extent that a fully able person of similar age and experience would be preferred to him by a prospective employer. (Smith & Manchester).

(iv) Loss of ability to drive a car

If the claimant is unable to drive he is able to claim an award for being deprived of the pleasure of driving. These are assessed on the same principles as for all other types of general damages.

(v) Loss of ability to play sports

A similar principle applies to loss of congenital employment in assessing general damages under this head.

(vi) Loss of ability to do DIY work at home

This is a separate head of damage which the claimant can pursue. This needs to be separated from actual cost of purchasing these services commercially. The latter can be a head of special damage as a past and future loss .


(vii) Loss of marriage prospects

If a claimant is suffering from cosmetic or physical injuries then he/she is likely to be handicapped in finding a partner for life. In a recent case that we handled we obtained a report from an Asian Marriage Bureau to support this head of damage. An award up to £5000 can be recovered under this head.

(viii) Inability to Cook

In Duthie & Shaw a Scottish case (1995) the claimant was injured in a road traffic accident. He had a permanent restriction of mobility in his shoulder neck and arm. This limited his ability to cook for himself. He was awarded £5000 damages to meet the rise in his food bills on the grounds that convenience foods are more expensive.

Interest

The claimant is entitled to interest on some aspects of the general damage claim. These are for pain and suffering and loss of amenities. Interest is calculated at 2.5% from the date of service of the proceedings.

7. SPECIAL DAMAGES also known as Pecuniary Losses

Principles of Assessment

The principle for assessing past and future losses are the same. The court seeks to assess and award damages that are equivalent to the loss sustained by the claimant. Every head of loss is recoverable in each case. The difference between past and future losses is that past loss is certain, future losses are uncertain.

Past Pecuniary Losses

As different rates of interest apply to past losses, thus separate assessment of past losses has become mandatory in order to assess the interest to be awarded (re Jefford v Gee [1970].

Future losses are considered part of general damages and they must be separately assessed. This is so that interest can be properly calculated on general damages for pain and suffering and loss of amenities.

Assessment of Pecuniary Loss

The same principle applies namely:-

Lord Blackburn in Livingstone v Rawyards Coal & Co. [1880].

“Compensation should be as nearly as possible to put the party who has suffered in the same position as he would have been if he had not sustained the wrong”.


The law is set out in McGregor on damages as:-

“The claimant can recover, subject to the rules of remoteness and mitigation, full compensation for the pecuniary loss that he has suffered”.

Appropriate Currency for an Award

If expenses are incurred in foreign currency the claimant can recover those in the currency of the country where the expenses were incurred. Despina [1979] House of Lords.

8. PAST LOSSES

1. Loss of Income

 The claimant is entitled to recover his loss of earning from the date of the accident to the date of trial. This should be supported by medical evidence.

 If the claimant has lost benefits in kind from his employer such as free board and lodging or use of a car or a house these too can be claimed. The same principle also applies to cheap food, fuel, loans, concessionary cares, clothing allowances and medical insurance.

 Tax deductions from earning must be made in calculating the loss of income. The principle is that the claimant’s actual loss is the disposable amount left in his hand after regular deduction.

2. Medical expenses

All medical expenses reasonably incurred as a result of the injuries are recoverable. In determining reasonableness of them the possibility of avoiding those by utilising the NHS is to be disregarded.

The courts will not be very sympathetic if expensive regimes laid down by medical experts are not being followed by claimants at the time of trial. See Court of Appeal decision in Haviland v Jeffries.

3. Nursing Care and Attendance, Paid Help

In serious cases help is paid for by the claimant. The claimant should give credit for the domestic expenses saved where care is provided by a nursing home see Lim Pooh Choo v Camden & Islington Area Health Authority [House of Lords 1980.]

It is a general principle that reasonable cost of whatever paid help is reasonably required is a recoverable head of damage.

4. Unpaid Help

 Gratuitous care provided by a third party for which the claimant was legally liable are recoverable. House of Lords Hunt v Servers 1994.

 The gratuitous service extends only to services of a personal nature concerned with caring for or providing physical needs of the claimant. See Hardwick v Hudson and another.

 The claimant can recover reasonable value of the services provided and those damages are held in trust for the volunteer. How are these assessed. In Nash v Southend Health Authority Elliot Jay awarded two-thirds of the commercial rate for care provided by the volunteer.

 In Fairhurst v St. Helens and Knowsley Health Authority Judge Clark awarded three-quarters of the claimant’s rates justifying that the claimant required special skills beyond those normally possessed by commercial providers.

 Interest awards for past help attract interest at the usual rate.

 Where the service is provided by the wrong-doer the claimant cannot recover damages in respect of it. House of Lords Hunt v Servers:-

“Once this is recognised it becomes evident that there can be no grounds in public policy or otherwise for requiring the tort feasor to pay to the plaintiff, in respect of services which he himself has rendered, a sum of money which the plaintiff must then repay to him”.

5. Guide Dog

A service provided by a guide dog to a blind claimant is recoverable. The cost of buying the dog, being trained to work with it, feeding and looking after it and later similar costs in replacing the dog by a further dog or dogs is also recoverable.

6. Hospital Visits

Cost of visits to the claimant in hospital are recoverable. Kirkham v Boughey [1958]. However distinction must be made between visits which aid recovery and visits spent on social chat.

7. Special Appliances

The test as to whether or not the claimant can recover for the cost of an appliance is whether the claimant reasonably requires the appliance to aid the recovery. If the appliance does aid the recovery its reasonable cost is recoverable.

The claimant is also entitled to recover the cost of replacement and maintenance of these appliances.

8. Special Diet

If there is medical evidence that a different and more expensive diet is required the cost of the special diet will be recoverable.

Extra expenditure of a normal nature i.e. extra heating, extra laundry, cleaning, clothing is recoverable.

9. Special facilities

Installation of a lift, widened doorways, a wheelchair, lower working surfaces in the kitchen, re-positioning of the door, windows, furniture. The claimant will recover full reasonable cost of these facilities. Brown v Merton Health Authority (1982).

10. Court of Protection Fees

If a claimant is unable to look after his affairs, all costs incurred in obtaining the Court of Protection Orders are recoverable.

11. Investment and Management Advice

Where a large award is involved and the Court of Protection is not involved, the fees incurred for advice on investment and management is recoverable.

9. FUTURE LOSSES AND DISCOUNT RATES

In cases of serious injury damages for future losses, such as loss of earning capacity and cost of continuing medical and other care are likely to be by far the largest element of the lump sum awarded. These losses are difficult to value accurately, because there can be no certainty about what will happen in the future or about what would have happened but for the accident. Damages therefore have to be assessed on the basis of many assumptions about the future, as they will affect claimants personally and more widely.

The aim in assessing those damages is to provide a capital sum which can be used to yield exactly enough to cover the anticipated needs and loss of earnings every year, for as long as they are expected to continue. That period will be determined by the court and/or agreed by the parties if a case is settled. The award should cover the whole of the period, as exactly as can be determined. If the capital sum is exhausted before the period finishes, or if the claimant should be left with a capital sum when the period covered by the award has expired, the claimant will have been under or over-compensated.

The process of assessing this figure requires 3 steps to be taken. They are:

(i) The Multiplicand

The parties need to estimate the annual loss of earning or annual cost of care that the claimant is likely to need whilst he continues to suffer from the injury. This is called the multiplicand. The estimate takes into account assumptions about factors such as whether the claimant would have expected rapid advancement in his career or whether it is anticipated that there will be a rise or fall in the cost of providing the particular care he or she will need. In claims involving loss of income this is rarely a subject of substantial dispute unless promotion is an issue.

(ii) The Multiplier

The next stage is to estimate the number of years for which these losses will continue. This is the basis of the multiplier. The lump sum is awarded once and for all. Thus the judge needs to assess the value of the future loss at the date of trial. The assessment is not made by simply multiplying the annual net loss at the time of the trial with a number of years left up to retirement to work. There are 3 reasons for that:-

1. The claimant is getting his money early.

2. He will be able to invest that and make a profit from it.

3. Contingencies of life may reduce his earning in the future anyway i.e. he may give up work, he may retire, etc.

Thus this sum has to be discounted to reflect these chances. This is called the multiplier.

(iii) Ogden Tables

Actuaries work out appropriate multipliers to allow us to calculated a lump sum depending on the length of time for which the claimant will work or in the cost of care cases length of life expectancy. Michael Ogden QC chairs the working party which provides us with various useful schedules to assist in choosing the correct multiplier. These are called the Ogden Tables.

Section 10 of the Civil Evidence Act 1995 provides that the Government Actuaries Department shall be admissible evidence. The purpose of the reform is to facilitate and regularise but not compel the use of tables.

However, in Wells v Wells [1999] 1AC345376HL the court envisaged the use the Ogden Tables before Section 10 was brought into effect. It says:-

“Once the net return has been established to the nearest 0.5% it is a simple enough matter to find the correct multiplier from the Ogden Tables”

Wells also established that tables should now be regarded as the starting point.

“The Ogden Tables provides retirement at the age of 55, 60, 65 and 70 for both men and women. The tables also incorporate the contingencies of life, for example risk of future illness, unemployment which would have interrupted the claimant’s earning even had he not been injured.”.

The Damages Act 1996

Section 1(1) of the 1996 Act:

In determining the return to be expected from the investment of a sum awarded as damages for future pecuniary loss in an action for personal injury the court shall, subject to and in accordance with the rules of the court may for the purposes of this section, take into account such rate of return (if any) as may from time to time be prescribed by an order made by the Lord Chancellor.

Pursuant to the above the Lord Chancellor on 25 June 2001 fixed the discount rate at 2.5%. The Lord Chancellor’s reasoning for setting the rate at 2.5% are as follows:-

 He decided to set a single rate to cover all cases.

 He agreed with Wells that the rates should be fixed to the nearest appropriate ½ %.

 That the rate should last for the foreseeable future.

Up to 8 June 2001 the average yield on Index Linked Government Stock (ILGS) was 2.61%. He accepts that the present market in ILGS is distorted as a result of temporary factors and expected that the real rate of return on ILGS is likely to be higher than at the moment. He was persuaded by the Practice of the Court of Protection to continue to invest portfolios in a mixture of equities, gilts and cash so as to produce a real rate of return in excess of 2.5%. He believed that investment adviser will continue to follow that approach particularly with large compensation. He did not expect claimants to invest solely in ILGS.

Thus notwithstanding the House of Lords decision in Wells it is submitted that all future losses should be calculated using the Ogden Tables with a discount rate of 2.5%.

Discount Rate Enforced until 27 June 2001

 Before the Lord Chancellor set the discount rate at 2.5% following Wells a lot of cases had been decided in which parties had sought to argue various discount rates for future loss.

 Before Wells the old system was based on a discount rate of about 4-5% return net of standard rate of tax i.e. the real return for a claimant on his investment of damages would be 4.5% after tax.
 In Wells The House of Lords were presented with 3 appeals. The main issue for the court to consider was whether the courts might be constrained by the decision in the earlier cases to continue to use the conventional 4-5% discount rate. The House of Lords considered this and:-

 Concluded unanimously that the investment in ILGS was the most accurate way of calculating the present value of the loss which the claimant would actually suffer in real terms.

 Held that the courts should calculate the damages on the assumption that the claimant would invest prudently.

 Held that the courts did not have to reach any conclusions about what an individual claimant would actually do with their money (this is irrelevant).

 Held that a claimant who was not in a position to take a risk and who wished to protect himself against inflation it was clearly prudent to invest in ILGS.

 Laid down guidelines on a rate of return of 3% discount rate

 ILGS is considered to be risk free as an investment. It guarantees the investor full protection against future inflation. The capital invested is linked to the retail price index. The aim is that the investor will retain his purchasing power. It should also be noted that interest on the ILGS rises in line with retail price index so that the purchasing power of the income also remains constant.

When is the Multiplier Chosen?

The multiplier is chosen on the basis of the claimant’s circumstances as they are known at the time of trial. By delaying bringing the case the claimant may gain advantage. He will recover his loss of earning as special damage from the time of the accident to trial. Thereafter he will recover by a multiplier determined during the course of the trial.

There is of course always the possibility that the court will discount the interest on special damages for any period up to trial if the defendants are able to show that there has been an unjustified delay on the part of the claimant.

Contingencies other than Death

The Ogden Tables now take into account mortality. However, one can reduce the multiplier for other contingencies which would affect the claimant’s earning capacity i.e unemployment, illness or other accidents. Ogden Tables A, B and C provide figures to reflect these. This sum is then taken away from the multiplier chosen.

FUTURE LOSSES

1. Loss of Income

Future loss can be categorised as follows:-

(i) Total future loss.
(ii) Partial future loss.
(iii) Gap claims.

In claims where total future loss is claimed the issue is likely to be the claimant’s earning capacity and whether or not he is likely to return to any kind of gainful employment before the age of retirement.

In claims involving partial future loss the same issues arise to combine with issues about the claimant’s attempts to mitigate his loss i.e. should he have accepted alternative lower paid employment which could or may have been offered to him.

In claims involving earning gap re-training for a new position is usually an issue.

2. Loss of Future Pensions

The claimant’s pension at the age of retirement may be reduced as a result of a shortened period of employment and/or by a lower level of earning if he still has an earning capacity. He is therefore entitled to claim a loss which is known as loss of pension rights. There are a number of ways of calculating these:-

Method 1

a) Calculate the pension that he would have received had he not been injured.

b) Calculate the amount of pension that he will be entitled to on the basis of contributions already made by him and his employers up the date of the accident. The calculations are made on the basis of annual figures for loss earning at the time of trial.

c) The annual loss of pension is a shortfall between a) and b). This is the annual loss known as the multiplicand.

The best method is to use the Ogden Tables from retirement at the age of 55, 60, 65 and 70 and using now the discount rate of 2.5% work out a multiplier. The House of Lords in Wells approved the use of Ogden Tables for other purposes and it is submitted that this approval confirms the use of the tables for loss of pension calculation.


Method 2

Annuity Quotation

The second method would be to obtain a quote for the sum required to obtain the shortfall at the time of retirement. There are no reported cases on this but it has been used in negotiated settlement.

Method 3

The third method is called the Auty Calculation after Auty v National Coal Board [1985].

a) On the basis of the claimant’s age at the trial estimate his life expectancy after the date of his expected retirement (see The English Life Tables) and choose a multiplier for this period.

b) By applying the multiplier to the annual loss produces a capital value of the pension at the date of expected retirement

c) If the claimant is entitled to a lump sum gratuity on retirement, this should be added.

d) The net capital loss is the total of b) and c). This is then discounted at 2.5% to obtain the present value of the loss.

Mitigation

If the claimant has obtained or ought to reasonably obtain alternative pensionable employment then the value of the expected pension must be deducted in calculating the damages under this head.

3. Future Cost of DIY, Gardening etc.

The same principle applies to work out a sum under this head of damage. One uses an annual loss and a multiplier from the Ogden Tables discounted at 2.5%.

10. TAX TREATMENT OF DAMAGES

Awards are not subject to income tax. However income derived from the investment of the awards attract income tax at the appropriate rate. Thus larger awards will attract a higher rate of tax.

11. STRUCTURED SETTLEMENT

The use of structured settlement has been stimulated because of their tax free status. On a large sum award the claimant would save a maximum of 40% on expected income. Since 1996 periodical payments made under the order of the court or an out of court settlement are also exempt from income tax.

12. INTERIM DAMAGES

CPR25.1(1) provides that an order may be made for an interim payment. This sets down procedures where the defendants have admitted liability or a judgment has been obtained for damages to be assessed or where the court must be satisfied that the defendant would at the trial be held liable for substantial damages.

The claimant must produce evidence in support of such an application and show the items or matters in respect of which interim payment is sought i.e. the claimant has to say what the money will be used for.

Payment of interim damages crystallises liability to the Compensation Recovery Unit (CRU).

13. THE CRU

The Social Security (Recruitment of Benefits) Act 1997 provides that:-

1. Damage for pain and suffering and loss of amenities are ring fenced.
2. Damage for future losses are ring fenced.
3. This Act is retrospective
4. The burden of paying the benefit is transferred from claimant’s damages to the defendant’s purse.
5. The defendant is allowed to set off benefits against compensation paid in limited cases.
6. Small payments exemption is abolished.

Deductions

Section 8 allows the following deductions from compensation made:-

1. Past loss of earnings.
2. Past care costs.
3. Past mobility costs.

In each case past means compensation within the relevant period i.e. to the date of payment of the full compensation of 5 years whichever is shorter.

Heads of Damages Excluded

1. Loss of congenital employment and Smith and Manchester
2. Pension Loss
3. Gratuitous care
4. DIY and gardening
5. Travel and hospital visits


Review of Certificates

If it transpires that there has been an economic settlement or medical evidence indicate that there was a trivial injury it is always worth asking the DSS to review. We have recently had a large liability to the CRU reduced to nil on the basis of claimant’s medical evidence.

Appeals for review can only be made once the payment is made. If the appeal is unsuccessful one can consider having the civil servants decision reviewed by a High Court by way of judicial review.

The liability to the CRU crystallises at the time of settlement thus settlement means:-

1. Agreement approved by the court on the day of approval.
2. In any other case the day on which the agreement is entered into.

Interest on Damages and CRU

In Wisely v Fulton the House of Lords decided that a claimant who had CRU benefits did not have to give credit for them when calculating interest on his judgment.

Recent Points of Note

 Bereavement payment in fatal accidents has been increased from £7500 to £10,000 as of 1 April 2002.

 Short term investment account interest rate has been reduced to 6%.

 There is a consultation paper on discount rate and an alternative to lump sum payment. Thus there may be a change to payment of future losses in the foreseeable future.

 Preliminary assessment of the impact on the change of the prescribed rates to 2.5% shows that the insurance industry will have to increase their premium by 0.5%. The estimated additional costs to the insurance industry is about £218m.