Anthony Stephen Tortolano V. Ogilvie Construction Limited
| Jurisdiction | Scotland |
| Judge | Lord Brodie |
| Neutral Citation | [2012] CSOH 162 |
| Court | Court of Session |
| Published date | 11 October 2012 |
| Year | 2012 |
| Date | 10 October 2012 |
| Docket Number | PD736/11 |
| OUTER HOUSE, COURT OF SESSION [2012] CSOH 162 | |
| PD736/11 | OPINION OF LORD BRODIE in the cause ANTHONY STEPHEN TORTOLANO Pursuer; against OGILVIE CONSTRUCTION LIMITED Defenders: ________________ |
Pursuer: Bain QC; Fitzpatrick; Digby Brown LLP
Defenders: Hanretty QC; Cowan, Solicitor Advocate; Simpson & Marwick, solicitors
10 October 2012
Introduction
[1] The pursuer in this action was born on 19 June 1989. On 21 November 2008 he was working in the course of his employment with the defenders as an apprentice plumber. He avers that on that date he suffered very serious injury as a result of an accident when the mobile working platform on which he was located toppled over causing him to fall a distance of about 4 metres. He blames the defenders for this accident and sues for damages in respect of common law negligence and breach of statutory duty. The heads of damage include continuing loss of earnings and the cost of future care and support. An eight day diet of proof has been fixed for 21 November 2012 and the subsequent days.
[2] The defenders propose to amend. Their minute of amendment was received by the court on 6 July 2012. The pursuer has taken advantage of the amendment process by, in his answers, increasing the sum sued for to £5,000,000 and including averments directed at the question of what is the appropriate discount rate to be adopted in determining the multipliers for the calculation of future losses and costs. The defenders now move to amend in terms of their minute of amendment and the pursuer's answers but under deletion from the pursuer's answers of the averments directed at the appropriate discount rate. Broadly the defenders objections are twofold: (1) the impugned averments come too late to allow the defenders to have any confidence in being able properly to meet them at a diet of proof fixed for 21 November 2012 which, at eight days, would probably be inadequate to accommodate this additional issue; and (2) they are in any event irrelevant.
[3] The pursuer seeks to insist on the inclusion of the impugned averments in the pleadings.
Statutory provisions and associated material
[4] Section 1 of the Damages Act 1996 provides, inter alia:
"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, subject to and in accordance with rules of court made for the purposes of this section, take into account such rate of return (if any) as may from time to time be prescribed by an order made by the Lord Chancellor.
(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 Lord Chancellor shall consult the Government Actuary and the Treasury; and any order under that subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.
(5) In the application of this section to Scotland-
(a) for the reference to the Lord Chancellor in subsections (1) and (4) there is substituted a reference to the Scottish Ministers; and
(b) in subsection (4)-
(i) "and the Treasury" is omitted; and
(ii) for "either House of Parliament" there is substituted "the Scottish Parliament"."
[5] The Damages (Personal Injury) (Scotland) Order 2002, SSI 2002/46 ("the Order"), which was made in terms of section 1(1) of the 1996 Act provides:
"1.
This Order may be cited as the Damages (Personal Injury) (Scotland) Order 2002 and shall come into force on 8th February 2002
2.
This Order extends to Scotland only.
3.
The rate of return referred to in section 1(1) of the Damages Act 1996 shall be 2.5 per cent."
[6] In February 2002 the Scottish Executive Justice Department published, on behalf of the Scottish Ministers an executive note relative to the making of the Order. It was in the following terms:
"EXECUTIVE NOTE
DAMAGES (PERSONAL INJURY)(SCOTLAND) ORDER 2002 (S.S.I. 2002/46)
I. This order has been made in exercise of the power conferred by Section I of the Damages Act 1996 (1996 c. 48), as amended by the Scotland Act 1998 (Consequential Modifications) (No.2) Order 1999 (S.1. 1999/1820, articles 1(2) and 4, Schedule 2, para 126). The instrument is subject to the negative resolution procedure. It was made on 6 February, laid before Parliament on 7 February and enters into force on 8 February.
2. The order was brought into force immediately, and does not comply with the 21 day rule. This is because any delay between the making of the Order and its entry into effect would prejudice settlements of claims for damages for personal injury. This would lead to delays in the courts or in reaching settlements while one or other party sought to postpone cases so as to obtain the benefit of the new rate.
Policy objectives
3. The Order sets the rate of return (the "discount rate") to be expected from the investment of a sum awarded as damages for future pecuniary loss in an action for personal injury. The courts must take this rate into account unless a party to the action shows that another rate would be more appropriate in the case in question.
4. The objective of an award for damages for personal injury is to put the pursuer in the same position, financially, as he/she would have been if it had not been for the injury. When damages are awarded for personal injury, sometimes a one-off payment will suffice. However, if the injured person will suffer loss of earnings or need care stretching into the future, it may be more appropriate to assess damages in terms of his or her life expectancy and the losses which are expected for the future. The "discount rate" is used to determine how much cash needs to be paid at the time of the award to provide a certain level of income over a period of time. The aim in assessing damages is to provide a capital sum which can be used to yield exactly enough to cover the anticipated needs and lost earnings every year, for so long as they are expected to continue. It is not intended that the pursuer should be left with a capital sum when the period covered by the award has expired.
5. Assessment of the amount of an award is complex. It takes into account the annual cost a pursuer is likely to need, the number of years over which the losses are likely to continue and applies a discount to reflect the effects of paying the whole amount in one lump sum. The discount rate indicates how much a prudent investor should get, allowing for inflation. A high rate means that the injured person need not be paid as big a lump sum in order to achieve the desired income, and this benefits defenders. Conversely, a low rate benefits pursuers. Rather than argue at length what rate should be set in each case, it aids cases (and promotes settlements) if there is an accepted discount rate, which should be fair to both sides.
6. In the English case of Wells v Wells [1998] 3 All ER 481, the House of Lords
unanimously concluded that, in order to provide full compensation the discount rate should be taken as 3%, based on the average rate of return from investment in Index Linked Government Securities (ILGS). This was based on the assumption that the successful claimant would invest prudently, and that the prudent investor would put money into ILGS. The judgment made it clear that 3% should be used in other actions, unless there was considerable change in economic circumstances, until a rate was prescribed under Section 1 of the Damages Act 1996. The rate currently used by the courts in Scotland is the 3% laid down in Wells.
7. The general approach taken by the Executive is to set a rate which will be not need to be frequently changed, barring any major economic changes. The Lord Chancellor set the rate at 2Yz% for England and Wales in June 2001, and confirmed his reasoning for this in July 2001. The Executive accepts the reasoning, and believes that there are no particularly Scottish factors that would indicate a need for a different rate. The discount rate represents the rate of return that an award recipient can make on the financial markets. Of course, the same financial markets cover Scotland, England and Wales, so in terms of expected financial returns there is no need for a different rate. A rate of 2.5% was appropriate in June 2001 after allowing for taxation, short term supply factors affecting the ILGS rate, and the ability of pursuers to obtain a higher return in other secure investments. The all stock ILGS rates since then have risen.
Consultation
8. In setting the rate, Section 1 of the Damages Act 1996 provides that there must be consultation with the Government Actuary. His report is attached and recommends a floating rate. The Scottish Ministers believe although there is no technical reason why the rate should be set in steps of Yz%, this seems suitable both for ease of calculation and stability of the rate to promote settlements. While the Lord Chancellor must also consult the Treasury, there is no such requirement for Scottish Ministers, but they have sought the Chief Economic Adviser's advice, and his office see no reason in principle why the approach taken by the Lord Chancellor should not be followed.
9. The Executive will shortly consult interested bodies about various matters to do with damages for personal injuries, including questions about what mechanism Scottish Ministers should adopt in future changes to the rate. Consultees will include the Law Society of Scotland, the CHI, the Association of British Insurers and others concerned with all sides of personal injuries litigation.
Financial effects
10. In making their decision, Scottish Ministers were...
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