LHS (by his Litigation Friends and Deputies, JBO and SJB) v The First-Tier Tribunal (Criminal Injuries Compensation Chamber)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Sales,Lord Justice Patten |
| Judgment Date | 19 December 2017 |
| Neutral Citation | [2017] EWCA Civ 2138 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 December 2017 |
| Docket Number | Case No: C1/2015/1574 |
[2017] EWCA Civ 2138
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT (ADMIN COURT)
THE HON. MR JUSTICE JAY
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Patten
and
Lord Justice Sales
Case No: C1/2015/1574
The Queen on the Application of:
and
Grahame Aldous QC and Laura Begley (instructed by Withy King LLP) for the Appellant
James Eadie QC and Adam Farrer (instructed by the Government Legal Department) for the Interested Party
The Respondent did not appear and was not represented.
Hearing date: 5 December 2017
This is an appeal in judicial review proceedings brought to challenge a decision of the First-tier Tribunal (“FTT”) in relation to a claim brought on behalf of the appellant, LHS, under the Criminal Injuries Compensation Scheme 1990 (“the Scheme”). Mr Justice Jay dismissed the claim for judicial review.
The Scheme is an ex gratia compensation scheme promulgated by the government in exercise of prerogative powers. It was replaced by a compensation scheme made pursuant to primary legislation enacted in 1995. The particular issue of construction which is addressed on this appeal would not arise under the replacement scheme. The challenge to the decision of the FTT is brought by way of judicial review rather than by appeal to the Upper Tribunal for reasons to do with legislative transitional provisions which we do not need to consider.
The issue on the appeal is whether the Criminal Injuries Compensation Authority (“CICA”) which administers the Scheme, and the FTT in its turn, were correct to calculate a substantial lump sum payment to be made to the appellant under the Scheme in respect of injuries suffered by him by reference to a discount rate of 2.5% as prescribed in an order made by the Lord Chancellor in 2001 under section 1(1) of the Damages Act 1996, as applicable to claims for personal injury brought in the ordinary courts (“the 2001 Order”). This turns on the proper interpretation of the critical provision in the Scheme, namely paragraph 12, which sets out the basis on which an award of compensation is to be made: see below.
Mr Aldous QC for the appellant submits that the CICA and the FTT erred in law in applying the discount rate in the 2001 Order and that in doing so they have made an award which will leave the appellant severely under-compensated in relation to the injuries he has suffered. This is contrary to the object of the Scheme to provide full and fair compensation for injuries suffered as a result of relevant criminal acts.
Factual background
The appellant was born in 1989. He suffered life changing injuries in July 1992 as a result of the gross negligence, amounting to criminal conduct, of his mother in leaving him unsupervised in the presence of an accessible bottle of methadone. In consequence, the appellant has suffered a severe brain injury which has rendered him significantly disabled in terms of his physical, neurological and neuropsychiatric condition. He will require care for the remainder of his life. He has normal life expectancy for a person of his age, being expected to live to well over 80.
On 26 March 1993 an application was made under the Scheme on the appellant's behalf to the CICA. On 30 January 1997 the CICA accepted that he was eligible for payment of compensation under the Scheme. There was then a delay while detailed assessments were made of the appellant and expert evidence was prepared.
In March 2012 the CICA and those acting for the appellant agreed the quantum of the claim under the Scheme subject only to a dispute regarding the appropriate discount rate to be applied in relation to future losses in respect of costs of care and loss of earnings, to reflect the current receipt of money as compensation for such losses. The CICA made an interim payment of £4,498,335.58, calculated on the basis of a discount rate of 2.5%, being the rate set out in the 2001 Order. The final hearing was adjourned.
The adjourned hearing before the FTT took place on 26 September 2012, to address the outstanding issue of the discount rate to be applied. Expert evidence was adduced on behalf of the appellant, which was not challenged by the CICA, to the effect that if the 2001 Order was not treated as relevant guidance regarding the discount rate, and a fresh discount rate was devised looking at economic indicators as they stood in 2012 and by reference to principles laid down by the House of Lords in its discussion of the discount rate in Wells v Wells [1999] AC 345, the relevant rate should be 0% in respect of price-related losses and minus 1.5% in respect of earnings-related losses.
Applying these discount rates instead of the 2.5% rate has a major impact on the compensation figure for a person in the position of the appellant, who suffers losses extending several decades into the future. Using these different discount rates, the compensation figure in the appellant's case would be increased to £16,030,183. Mr Aldous emphasised that if one adopted the highly conservative approach to investment of a lump sum as identified in Wells v Wells, using index-linked government securities, the compensation fund for the appellant, as awarded by the CICA, would be exhausted by the time he reached his 48 th birthday.
However, the FTT concluded that the CICA had been right to apply the 2.5% discount rate in the 2001 Order. That is the rate which would have been applied by a court which awarded compensation by way of a lump sum award in a personal injury claim and paragraph 12 of the Scheme required the FTT to adopt the same approach. The FTT therefore confirmed as final the interim award which had already been made.
The appellant sought judicial review of the FTT's decision, being granted an extension of time in which to do so. By his judgment below, Jay J dismissed the claim for judicial review and upheld the decision of the FTT. On his interpretation of paragraph 12 of the Scheme, its objective is “to achieve a similar level of financial outcome for the victim of a crime of violence as compared with the victim of a tortfeasor with a civil claim”: [50]. The appellant now appeals with permission granted by myself.
The legal framework
The Scheme is an ex gratia scheme “for compensating victims of violence”. According to paragraph 4 of the Scheme, so far as relevant, it allows for applications for ex gratia payments of compensation in cases “where the applicant … sustained in Great Britain … personal injury directly attributable to a crime of violence (including arson or poisoning) …”. For reasons which appear below, it is relevant to note that it is common ground that the Scheme does not apply in the Channel Islands.
Paragraphs 12 to 21 of the Scheme appear in the section headed “Basis of compensation”. In relevant part, paragraph 12 states:
“Subject to the other provisions of this Scheme, compensation will be assessed on the basis of common law damages and will normally take the form of a lump sum payment, although [the CICA] may make alternative arrangements in accordance with paragraph 9 above. …”
Paragraph 9 allows for payment of the amount of any award to trustees to be held on trust for an applicant and also provides that the CICA shall have general discretion to make special arrangements for the administration of an award of compensation. The relationship between para. 12 and para. 9 is not altogether clear, and there was some debate before us whether the CICA has a discretion to make an award for a structured payment regime involving periodical payments such as may be ordered by a court in England & Wales in a personal injury claim pursuant to the 1996 Act (a periodical payment order, or “PPO”). However, it is unnecessary to consider this question because it is common ground that the CICA was entitled (even if not bound) to make a lump sum compensation award in the appellant's case pursuant to paragraph 12. The issue is what principles should govern the calculation of such an award.
Paragraphs 14 to 20 of the Scheme set out provisions which modify in various ways the approach to calculating a lump sum amount of compensation which would be followed by a court in a personal injury action, for instance in relation to bringing social security benefits into account (see paragraph 18).
Paragraph 21 provides:
“When a civil court has given judgment providing for payment of damages or a claim for damages has been settled on terms providing for payment of money, or when payment of compensation has been ordered by a criminal court, in respect of personal injuries, compensation by [the CICA] in respect of the same injuries will be reduced by the amount of any payment received under such an order or settlement. When a civil court has assessed damages, as opposed to giving judgment for damages agreed by the parties, but the person entitled to such damages has not yet received the full sum awarded, he will not be precluded from applying to [the CICA], but [the CICA's] assessment of compensation will not exceed the sum assessed by the court. Furthermore, a person who is compensated by [the CICA] will be required to undertake to repay them from any damages, settlement or compensation he may subsequently obtain in respect of his injuries. In arriving at their assessment of compensation [the CICA] will not be bound by any finding of contributory negligence by any court, but will be entirely bound by the terms of the Scheme.”
Section 1 of the 1996 Act makes provision in relation to the “Assumed rate of return on investment of damages”. Section 1(1)...
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