The Politics and Economics of Tort Law: Judicially Imposed Periodical Payments of Damages

DOIhttp://doi.org/10.1111/j.1468-2230.2006.00590.x
Published date01 May 2006
Date01 May 2006
LEGISLATION
The Politics and Economics of Tort Law: Judicially
Imposed Periodical Payments of Damages
Richard Lewis
n
Lump sum damages for personal injury are again under attack. Almost twenty
years ago the concept of a structured settlement was imported into this country
from the USA in order to provide continui ng lifetime payments for ser iously
injured claimants.
1
However, the idea was slow to develop. Proposals for a struc-
ture were easily defeated if either of the parties objected. Now, after lengthycon-
sultation,
2
that veto has been removed by amendment of the Damages Act 1996.
3
Taking into account the needs of the claimant, a judge can make a periodical pay-
ments order (PPO) even if it is against the wishes of both parties.The increasing
judicial direction of the course of litigation has thus been accentuated.
The tradition in tort damages is for there to be a clean break, with the defen-
dant givingthe claimant a once-and-for-all paymentto end matters. Incontrast, a
PPO will produce an uncertain continuing relationship that may vary over time.
This is because the periodical payments must be indexed against in£ation ^ no
n
Cardi¡ Law School,Cardi¡ University.For their comments on a draft of this article I wish to thank
the anonymous reviewers for this journal, and a number of colleagues and practitioners including,
in particular, Ian Gunn, Colin Ettinger,Vicki Wass, Dominic De Saues, Ken Oliphant and Annette
Morris.
1 R. Lewis,‘StructuredSettlements: An Emergent Study’(1994)13 Civil J Q18, R.Lewis, Structured
Settlements:The Law and Practice (London: Sweet & Maxwell,1993)chapter 4, and I. Goldrein and
M. de Haas (eds),StructuredSettlements:A Practical Guide (London: Butterworths, 2nd ed 1997).
2 Lord Chancellor’s Department, Damages for Future Loss (Consultation Paper CP 01/02, March
2002), and its Analyses of the Responses (CP (R) 01/02, November 2002). The Department made a
shorter reference in its previous paper,The Discount Rate and Alternatives to Lump Sum Payments
(Consultation Paper CP 3/00, March 2000). See also the Clinical Disputes Forum Discussion
Paper, Lump Sum Damagesand PeriodicalPayments(200 0) and the report summarising the responses
(April 2002).With structures in their infancy in 1994, the Law Commission considered it prema-
ture togive judges the powerto impose periodical payments in Structured Settlementsand Interim and
Provisional Damages (1994, Report No 224) para 3.37 et seq. In a l imited form periodical payments
were recommended by the Report of the Royal Commission on Civil Liability and Compensation for
Personal Injury(1978, cmnd 7054),chairman Lord Pearson (the Pearson report) vol1 para 573. Ear-
lier, reviewable periodical payments had been canvassed by the Law Commission (Working
Paper No 41,1971) but the response was so critical that the proposal was abandoned in its ¢nal
report, Personal Injury Litigation: Assessmentof Damages (1973, Report No 56).
3 The changes were made by s100 and s101 of the Courts Act2003, but these sections did not come
into force until April20 05, and revision of the Civil Procedure Rulesa ndof the relevant Practice
Directions did not take placeu ntil laterthat year.The most important of the delegated legislation
is the Damages (Variation of Periodical Payments)Order 2005 (SI No 841). The tax position was
updated by the IncomeTax(Trading and Other Income)Act 2005 s 731.
rThe Modern LawReview Limited 2006
Published by BlackwellPublishing, 9600 Garsington Road,Oxford OX4 2DQ,UK and 350 Main Street, Malden, MA 02148, USA
(200 6) 69(3) MLR 418^44 2
matter what this eventually costs; and the payments can be set to continue
for the claimant’s lifetime ^ no matter how inde¢nite. In addition, judges
have been given new powers to arrange for awards to bevaried, if necessary, long
after trial. It is therefore not only the form of damages that has been changed
but also the way that compensation is assessed. The result has been described as
marking
‘the most fundamental change in 150 years in the quanti¢cation of bodily injury
claims involving continuing losses. The changes will a¡ect not only the level of
damages awarded but will also require a new approach to the quanti¢cation of
claims.
4
This article describes this newapproach to claims, and analyses the needs of the
claimant upon which the legislation sets such store.The changes are set in their
practical context by lookingat their e¡ect upon the bargaining process which lies
at the heart of persona l injuries l itigation. Even though settlements, rather than
trials, account for the disposition of almost all personal injurycases, the e¡ect of
rule changes upon the negotiations between the parties has often been over-
looked. In addition to this practical perspective, the article considers the wider
economic andpolitical context. In particular, it exposes as being seriously £awed
the impact assessment upon which the legislation was founded. Although the
changes will result in substantial cash-£ow savings for the Exchequer and the
National Health Service (NHS), theywill cost insurers and premiumpayers dear.
Those pressing hardest for the reform are revealed to be neither claimant nor
defendant organisations, but Departments of State. By emphasising the e¡ect
upon public expenditure, the article thus exposes the political dimension of tort
law, a feature which has often been overlooked.
In spite of their importance, these changes have been implemented without
apparent detection by academics.
5
Tort scholarship is very partial. It is extraordin-
ary how muchattention is focused upon is sues of liability as opposedto the quan-
tum of damages. Practitioners are bemused by the pre-occupation of academics
with the rules on fault: they are aware that liability is infrequently challenged by
4 London International Insurance and Reinsurance Market Association, Third UK Bodily Injury
Awards Study (London: International Underwriting Association of London, 2003) 83. Colin
Ettinger,the former President of the Association of Personal Injury Lawyers(APIL), goes a little
further bydescribing it as‘themost important development everrelating to the law of damages’in
(2005) 155 New LJ 525.
5 By contrast, there have been a rash of notes from practitioners.They include N. Bevan and H.
Gregory,‘Periodical Payments’ (2005) 155 New LJ 565, G. Exall (2005) 149 Sol J 469,W. Norris,
‘Periodical Payments:Why We Should Bother’ [2005]2 Personal Injuries Bar Association News-
line 7, C.Truscott[2005, March] Quantum 1, N. Bevan,‘The NewPeriodical Payments Regime’
[2005] 2 Civil CourtNews 36, R. Cropper and I.Gu nn,‘PeriodicalPayments: Financial Consid-
erations’(2005) 155New LJ1160,J. Stone and A. Sands,‘PeriodicalPayments:the Need for a Prag-
matic Approach’ (2005)15 (5) PI Focus 18, D. Brahams,‘Periodical Payments for Future Financial
Loss’ (2005)73 Medico-Legal LJ 77,a ndR. De Wilde,‘Periodical Payments ^ AJourney into the
Unknown’ [2005] J Personal InjuryLaw 320. See also the detailed treatment in Kempand Kemp,
The Quantum ofDamages vol 1 chapter 23.
Richard Lewis
419rThe Modern LawReview Limited 2006

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