The Discount Rate Consultation closed for responses on the 11th May and we all now await further developments. In the meantime, the -0.75% rate is the new starting figure when assessing awards for future losses.
When the then Lord Chancellor, Ken Clarke, announced the commencement of the previous review, as long ago as November 2010, far sighted legal advisers argued for additional wording to be included in Final Orders, in the following terms (by way of example);
‘That the future life sum and the future earnings sum recorded in the above declaration should be varied by reference to any change to the discount rate as set in section 1(1) of the Damages Act 1996.
Following the final determination of and change to the discount rate above following the review announced on the 9th November 2010 “the present review”, the calculation of the variation shall be by application to the future life sum the percentage of increase or decrease of the change in full life multiplier following the change in discount rate (if any) and to the future earnings sum the percentage of the increase or decrease of the change in the earnings multiplier following the change in the discount rate (if any)…
It is the present review including any challenge until the present review is concluded which is the “relevant event” for any calculation and in default of agreement as between the parties as to the additional capital sum (or repayment of capital sum) there is permission for the action to be listed for further directions’.
Fully seven years later, claimants are now benefitting from these paragraphs. In many cases additional payments run into millions of pounds of damages, to help with meeting lifelong needs. Whilst claimants with such paragraphs understood the risks of inserting that wording, (the discount rate might have gone up, with the result that damages would have had to have been repaid), the economic evidence pointed strongly to a reduction in the discount rate at that time. A view that was shared, and supported by us.
By way of example, NHS Resolution is in the process of remitting additional sums to claimants, subject to issues surrounding interest entitlement. No-one however, foresaw how long this would take.
The directors at Nestor have been working closely with lawyers, claimants and deputies on these issues, ever since Liz Truss announced the conclusion of the review and subsequent rate reduction in February 2017. We strongly urge litigators, deputies and claimants to review their Orders from cases which were concluded from around January 2011 onwards, as it appears that a number of Orders with these paragraphs, may have slipped through the net. Whilst NHS Resolution appears to be adopting a pro-active approach with such payments, we are of the view that insurers may not have such comprehensive records, hence our advice to review all Orders.
The directors at Nestor are happy to help with the financial calculation of such Orders and should you have any queries, please get in touch.