On 5 November 2015, the Court of Appeal delivered its much
anticipated judgment in Russell v HSE1, a case which
considered the "real rate of return" discount which would
be applied to an injured plaintiff's future care costs. The HSE
had appealed the High Court decision2 of Mr Justice
Cross in which he held the real rate of return discount to be
applied in respect of the plaintiff's future care costs should
be reduced from 3% to 1%, in light of the prevailing economic
climate. The Appeal was heard by a three-judge Court of Appeal in
July 2015. Judgment was delivered by Ms Justice Irvine and upheld
the High Court decision. It is understood that the Court of
Appeal's decision is to be appealed by the HSE to the Supreme
Court.
In coming to its decision, the Court of Appeal decided that the
plaintiff, a nine year old boy who suffered brain damage at birth,
was entitled to have his damages calculated on the basis that the
lump sum award could be invested in the most risk averse manner
reasonably available. The Court also held that public policy has no
part to play in the assessment of damages for injured plaintiffs.
On that basis, the Court must consider the calculation of a future
financial loss to the plaintiff, regardless of the economic
consequences that the award may have on the defendant, the
insurance industry or the public finances.
Ms Justice Irvine also used the opportunity when delivering
judgment to remind the Government that a system to allow for
periodic payment orders3 was long overdue and must now
be implemented. The Court emphasised that Ireland must catch up
with the jurisdictions who have addressed this "fundamentally
flawed and unjust system" by the introduction of legislation
to permit awards to be made by way of periodic payment orders. The
Court noted that such legislation "would have removed all of
the risks central to these proceedings".
In light of this judgment, when quantifying future losses in
personal injuries actions, future care costs may now only be
discounted by 1% and all other future pecuniary losses by 1.5%. The
impact of the decision is that underwriters will now be ordered to
pay out higher lump sum damages awards in a wide range of injuries
actions in which there are significant claims for future care and
pecuniary costs. As a result, there is likely to be a knock on
effect which will see underwriters having to increase premiums to
cover the upward reserves that will have to be maintained.
Footnotes
1 (2015) IECA 236
2 Russell v HSE (2014) IEHC 590
3 For further information on periodic payment orders please read a
recent Matheson article -Periodic payment orders
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
