Anthony Tortolano V. Ogilvie Construction Limited
| Jurisdiction | Scotland |
| Judge | Lord Justice Clerk,Lady Smith,Lord McEwan |
| Judgment Date | 21 February 2013 |
| Neutral Citation | [2013] CSIH 10 |
| Court | Court of Session |
| Published date | 21 February 2013 |
| Docket Number | PD736/11 |
| Date | 21 February 2013 |
| SECOND DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Justice Clerk Lady Smith Lord McEwan | [2013] CSIH 10 PD736/11 OPINION OF LORD CARLOWAY, the LORD JUSTICE CLERK in the reclaiming motion ANTHONY STEPHEN TORTOLANO Pursuer and reclaimer; against OGILVIE CONSTRUCTION LIMITED Defenders and Respondents: _______________ |
Alt: Milligan QC, A Cowan (Solicitor Advocate); Simpson & Marwick
21 February 2013
Introduction
[1] Section 1 of the Damages Act 1996, provides:
"1. - Assumed rate of return on investment of damages
(1) 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, ..., take into account such rate of return ... as may from time to time be prescribed by an order made by [the Scottish Ministers].
(2) Subsection (1) above shall not however prevent the court taking a different rate of return into account if any party to the proceedings shows that it is more appropriate in the case in question.
(3) An order under subsection (1) above may prescribe different rates of return for different classes of case.
(4) Before making an order under subsection (1) above [the Scottish Ministers] shall consult the Government Actuary; and any order under that subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of [the Scottish] Parliament."
[2] The Damages (Personal Injury) (Scotland) Order 2002 (SSI 2002/46) which was made in terms of section 1(1) of the 1996 Act, provides:
"3. Rate of return
The rate of return referred to in section 1(1) of the Damages Act 1996 shall be 2.5 per cent."
[3] The pursuer, who is aged 23, seeks a substantial sum in damages in respect of an accident in the course of his employment with the defenders on 21 November 2008. He suffered a very severe closed head injury which has caused significant permanent neurological, cognitive and psychological disability. The pursuer claims compensation in respect of future loss, including continuing loss of earnings and the costs of future care and support.
[4] The pursuer reclaims against a decision of the Lord Ordinary dated 10 October 2012 ([2012] CSOH 162) allowing parties to amend the record with the exception of averments proposed by the pursuer relative to the "appropriate" rate of return on investment. The excluded averments are directed towards establishing facts which demonstrate that the appropriate rate, to be applied in selecting the multiplier for use in the future loss calculations, ought to be well below the rate prescribed by the Scottish Ministers having regard to the true return on current investments. The pursuer proposes to lead evidence from an actuary and a forensic accountant in support of these averments.
[5] The controversy between the parties is thus whether the averments are relevant to the issue of whether the pursuer's case can be brought within section 1(2) of the 1996 Act. The pursuer maintains that a rate of return on investment of 0% should be taken when assessing non-earnings related losses and a rate of minus 1% should apply to future loss of earnings. The defenders contend that the pursuer's claim should be dealt with under section 1(1) and that the prescribed rate of return of 2.5% should apply. The Lord Ordinary held that the pursuer had failed "to aver himself out of the generality" (Opinion, para [17]) of section 1(1) and was thus not entitled to lead evidence seeking to establish a "more appropriate" rate under section 1(2), notwithstanding that the averments would, but for the statutory provisions, be relevant for that purpose.
[6] The Lord Ordinary set out the historical background to the introduction of the prescribed rate (para [13]). The fundamental principle at common law was that a pursuer, who was found entitled to reparation, should be fully compensated for his loss and damage. The lump sum awarded is calculated, so far as the future is concerned, by reference to the estimated annual rate of loss (the multiplicand) multiplied by the number of years during which the loss would be likely to subsist, subject to a discount reflecting the opportunity, which the pursuer would have, to invest the sum and obtain an annual return on his decreasing capital. The discount rate, which leads to the selection of the multiplier, is thus key to the calculation of such damages as will adequately compensate a pursuer.
[7] In the past, the calculation was informed by an "implicit irrebuttable presumption" (para [15]) that the discount rate was of the order of 4% to 5% (O'Brien's Curator Bonis v British Steel 1991 SC 315). Following the 1996 Act, but prior to a rate being prescribed in terms of section 1(1), the House of Lords in Wells v Wells [1999] 1 AC 345 selected a substitute figure of 3% on the basis that this represented the net rate of return then available on Index Linked Government Securities. Thereafter, the Lord Chancellor, and subsequently the Scottish Ministers, adopted a similar ILGS-based approach and fixed the prescribed rate at 2.5 per cent, replacing the higher Wells' presumption. The new rate was fixed by the legislature for the generality of cases under reference to what the Lord Ordinary described (para [15]) as "a combination of quite complex factors with a component of social, financial and economic policy". By contrast, the selection of any different rate under section 1(2) was to be a judicial determination of fact "in the case in question". The Lord Ordinary rejected the notion that the circumstances, which could be relied upon by a pursuer under section 1(2), might be such as to render a different rate more appropriate "in every other conceivable case" (para [16]). Such a construction would, the Lord Ordinary reasoned, fail to give due weight to the words "in the case in question".
[8] The Lord Ordinary was reinforced in his construction of the statutory provisions by a purposive interpretation, which proposed that sections 1(1) and 1(3) were intended to fix a certain rate or rates to achieve a broadly just outcome, without the need to litigate the issue in every case. The requirement for certainty and the desirability of avoiding litigation would be defeated by an interpretation of section 1(2) which allowed reconsideration of the discount rate whenever a party sought to show that any factor relied upon, in fixing the prescribed rate, was, for whatever reason, "less than robust" (para [17]). The inevitable conclusion was that, for the time being, the Scottish Ministers intended that the rate for the generality of cases remain at 2.5%.
[9] The Lord Ordinary's view was influenced by a consideration of a number of cases in the English Court of Appeal. He followed the obiter dictum of Stuart-Smith LJ, handing down the judgment of the court, in Warren v Northern General Hospital NHS Trust (No.2) [2000] 1 WLR 1404 that:
"8. It seems clear that once the Lord Chancellor sets a rate, or one or more rates, the courts will apply that to the generality of cases, subject to the power of the court in a particular case, for good reason, applying (sic) a different rate".
The court could only determine that a rate, other than the prescribed rate, was "more appropriate" by reaching a view that "the case in question" was not one which had been in the Lord Chancellor's contemplation in fixing the prescribed rate or otherwise contained some special feature (Warriner v Warriner [2002] 1 WLR 1703, Dyson LJ at para 33). For the court to conclude that the prescribed rate should be departed from, on the basis that it no longer had an evidential basis, was "to subvert or undermine the prescribed rate" (Cooke v United Bristol Healthcare NHS Trust [2004] 1 WLR 251, Laws LJ at para 32).
Submissions
Pursuer
[10] The pursuer presented a written note of argument extending to some 74 pages. Its content contravened almost all of the principles set down in paragraph 86 of Practice Note No. 3 of 2011 relative to causes in the Inner House and caused considerable difficulty to the court in ascertaining, quickly and accurately, the precise legal propositions underlying the pursuer's appeal. This court requires notes of argument which concisely summarise the submissions and can thus be read within reasonable court preparation time. They should not contain lengthy quotations from cases or statutes and the propositions of law being advanced should be easily ascertainable from the outset and not concealed in the depths of the document.
[11] Ultimately, the pursuer advanced three broad propositions. First, the Lord Ordinary's construction of section 1 of the 1996 Act had been wrong; secondly, the English Court of Appeal cases, from which he drew support, had been wrongly decided or could, at least, be distinguished; and thirdly, he had placed too much weight on certainty and the desire to avoid litigation.
[12] The words in sections 1(1) and 1(2) of the 1996 Act required to be given their plain and ordinary meaning. Section 1 did not grant exclusive power to the Scottish Ministers to set the discount rate in every case. The rate fixed gave rise to a rebuttable presumption only, which could be displaced if a pursuer was able to prove that another rate was "appropriate". Section 1(2) should not be read narrowly, as being confined to "case specific" considerations or circumstances unique to the particular case. The words "case in question" simply meant "the case being litigated at the time". There was nothing in the statutory language to suggest that the court's power to apply a different rate was triggered only in a class of exceptional cases or where the circumstances had not been in the contemplation of the Scottish Ministers when the rate had been fixed. The clear language of section 1(2) empowered the court in any particular case to apply a more appropriate rate for "good reason"(Warren v Northern General...
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