This will be the outcome following the Supreme Court’s decision not to grant liberty to the State to pursue an appeal against an earlier judgement of the Court of Appeal. The Supreme Court have rejected the Defendant’s application for leave to appeal. This brings to an end a long drawn-out legal saga which commenced when Cross J, of the High Court in a judgement of December 2014 held that the appropriate discount rate/real rate of return assumption that the Court should apply when fixing lump sum damages should be reduced from 3% to 1% - 1.5%. As a result of reducing the real rate of return assumption of the interest that could be earned on lump sum awards, the amount of the lump sum would be adjusted upwards by as much as 30% depending on the life expectancy of the affected individual.
The Defendants (the HSE/the State) were deeply unhappy with the decision of the High Court and appealed this judgement to the Court of Appeal. The Court of Appeal in a very detailed analysis of the issues upheld the decision of the High Court Judge and delivered a judgement in 2015 which in summary held as follows:
- The damages for future pecuniary loss should be assessed on a full compensation basis (i.e. 100% with no discounting for the impact that such an award would have on public finances).
- Restoring the injured party to their pre-accident position was the only approach for a Court to adopt and that the HSE submission as to the widespread economic effect on increased awards on the insurance industry, the State’s finances etc. could not be allowed to impact on this approach.
- The obligation to mitigate loss applies to the nature and extent of what care will be required into the future and what aids and appliances will be necessary and the frequency of their replacement, all of which feed into the appropriate method of actuarial calculation. However, it is not open to extend that argument either when the actuarial multiplier is being fixed or to the manner in which the award once finalised is thereafter used. Once the judgement is made it is the recipient’s award/asset beyond the influence of the wrong-doer.
- Accordingly, it is not relevant how in fact the award subsequent to its making may actually be invested by a Plaintiff/patient.
- The Plaintiff is not an ordinary prudent investor, he is a risk free prudent investor insofar as that may be reasonably achievable.
In a very clear, strong endorsement of the concept of “restitution in integrum” Irvine J in the Court of Appeal stated:
“It is thus a vital importance to state in no uncertain terms that it is mandatory for the Court to approach its calculation of future pecuniary loss on 100% basis regardless of the economic consequences that the resultant award may have on the Defendant or the insurance industry or on the public finances . . . public policy has no part to play in the assessment of damages of this nature. If large awards in respect of claims of this nature have an adverse effect on insurance premiums or place pressure on the pockets of state defendants, that is not something that the Court can take into account and as a result in some way moderate or reduce the award. The damages so awarded are after all destined to do no more than restore a Plaintiff in financial terms to as close as a position as they would have enjoyed in terms of wealth and independence had they not been the unwitting victim of the defendants wrongdoing.”
In my view it is not surprising that the Supreme Court have declined to allow the Defendant a further appeal from the Court of Appeal’s decision. The rationale for the Supreme Court’s refusal to allow further appeal has been stated as follows:
“Before leave can be obtained to have a further appeal to this Court, the constitutional threshold must be satisfied. Therefore, the applicant must demonstrate that the impugned decision discloses, 1) a matter of general public importance, or 2) that in the interest of justice, it is necessary that there should be a further appeal to this Court.”
In its decision to refuse leave to appeal, the Supreme Court went on to state:
- “It is clear. . . the function of this Court is no longer that of an appeal court standing one remove from the trial court. That road is now exclusively vested in the Court of Appeal. Therefore, where it is said that the trial court has fallen into error in some material respect, the regime now in place permits of an appeal to the Court of Appeal, but not to this Court. Its function is no longer simply to correct alleged errors made by the trial court.
- “In this constitutional setting it may therefore be said that the High Court is the finder of fact to which it applies the relevant and appropriate law. On appeal, the Court of Appeal in addition to correcting such errors as are found to exist, determines issues of law, including those not properly addressed. Where material facts are an issue it will conduct the same exercise as this Court has done in the past for several decades; it will test whether the conclusions arrived on such facts are supported by credible evidence and will otherwise where called upon apply principals such as those set out in Hay v O’Grady. This process is therefore now the essential vehicle by which appellate rights are exercised under our constitution. “
- “As is therefore apparent where this procedure has been invoked an aggrieved party will have the opportunity to have the decision of the High Court reviewed by the Court of Appeal and as a result will have had the benefit of having his case determined at both trial and appellate level. Without more as such, the wider interests of justice will rarely require further review by this Court.”
The Supreme Court went on to note that the Defendants were in effect endeavouring to raise completely novel points at the appeal stage never having raised these issues at trial court level. The Court stated:
- “Satisfying the constitutional yard stick is an essential precondition to obtaining leave. In this case it is said that the real rate of return is a matter of general public importance. In identifying what the importance is, the HSE says in effect that any new return rate less than 3% will impact on public policy, the cost of insurance indemnity, the State’s funds and the public at large. This argument was never pleaded or raised in the High Court even at the lowest level of generality. Whilst it was made and firmly rejected by the Court of Appeal, the absence of any reliance upon it in trial court is striking. As a result, the plaintiff has been deprived of an opportunity of seeking particulars of what exactly the HSE means in this respect and more importantly, of calling evidence himself in rebuttal, if necessary; in essence he has been prejudiced. In such circumstances without having been offered any acceptable explanation for what occurred, this Court is seriously doubtful that such matters can be relied upon in addressing the necessary criteria.”
In light of the foregoing, it is hardly surprising that the Supreme Court were not willing to allow the Defendants to make an entirely new public policy argument at the Supreme Court stage, it never having pursued such a case at High Court level. The Supreme Court, however, did hold out one glimmer of hope for the Defendants in that it stated that it might be willing to entertain an appeal on similar grounds in an appropriate future case at a future time. It remains to be seen whether defence interests will seek to advance such a case. In the meantime, it now means that Courts will be assessing lump sum damages using a real rate of return assumption of 1% to 1.5% when assessing future pecuniary losses. This is likely to result in a significant increase in awards for catastrophically injured patients/plaintiffs in the order of 30% depending on future life expectancy.
Augustus Cullen Law in anticipation of this decision, over the past two years have negotiated many settlements for clients allowing for uplifts in their lump sum settlements. In twelve cases settled by Augustus Cullen Law over the past two and half years, we estimate that the “Russell uplift clauses” will result in further payments of approximately €20 million to those clients. Thus, for the most catastrophically injured patients the total awards in some individual cases would amount to in excess of €15 million on a lump sum basis. Further, the State Claims Agency are on record as stating that the likely impact of a real rate of return assumption of 1% is likely to increase awards by a total of approximately €100 million per annum.
As a result of all of the foregoing it is our view that there is now an urgent need for the State to enact legislation to give effect to a scheme of so-called periodic payment orders. This will result in an annual payment to cover care costs index linked for the lifetime of the injured plaintiff/patient. The essence of such a scheme, if enacted, for it to be successful will necessitate that the indexation of the annual payment must be linked to care costs and earnings of carers. The current legislation in draft form before the Dáil has an inferior form of indexation proposed which would link the annual increase to ordinary consumer price inflation and not at care costs. This will very likely make the scheme of periodic payment orders unattractive and unacceptable to plaintiffs/patients, particularly in light of the real rate of return assumption now being applied by the Courts to lump sum damages.
If you have any further queries, please contact:
Head of Medical Negligence Group
Augustus Cullen Law
Dublin and Wicklow
02 February 2017