The Court of Appeal has upheld a hugely significant High Court decision paving the way for higher damages awards for people who suffer catastrophic injuries.
The three judge court's unanimous ruling has significant implications for the HSE, the State and insurance companies and is expected to be appealed to a seven judge Supreme Court.
The appeal court rejected an appeal by the HSE against the basis on which the High Court awarded a total €15.9m damages to a nine-year-old boy, Gill Russell, who suffered brain damage at birth, has dyskinetic cerebral palsy and is confined to a wheelchair.
The High Court decision was ground-breaking in altering the position where money for future care and expenses is awarded on the assumption the fund will gain interest when invested at an interest rate of three per cent per annum with a built-in discount to allow for that.
Ms Justice Mary Irvine, giving the court’s judgment, said, when calculating damages for future pecuniary loss, the court must pursue the policy of providing the child with compensation “on a 100 per cent basis”.
"It is not part of the court's function, when carrying out that task, to consider the effect any such award may have on matters such as the finances of the HSE, on insurance premiums or on the State's resources," she said. "Policy matters are for the Oireachtas. "
The HSE’s likely capacity to meet any such award was also not relevant to the court’s consideration, she added.
The award to which the boy will be entitled “will undoubtedly appear high” in comparison to what it would have been had the High Court not reduced the 3 per cent discount rate used for many years, she said.
The reduction of the 3 per cent rate to 1 per cent for future care costs and 1.5 per cent for other costs is necessary to enable the boy meet his future care needs without having to take unnecessary risks with the fund provided to achieve that end, she said. To oblige a plaintiff to take such risks, which would happen if the courts took another approach to the calculation of that sum, was “both unjust and unacceptable”.
She ruled the High Court was entitled to conclude the appropriate discount rate for calculating all of the boy’s outstanding claims for future pecuniary loss is 1.5 per cent, with the exception of his claim for future care where the rate should be reduced to 1 per cent to take account of the extent to which wage inflation is likely to exceed the Consumer Price Index over his lifetime.
It said the High Court’s decision the boy’s lump sum should be calculated by reference to Index Linked Government Stocks was “well founded” on the evidence, as was the conclusion that wage inflation in the health care sector is likely to outstrip general inflation in early course and is likely to continue in that vein over his lifetime.
The reduced discount rate applies only to claims for future pecuniary loss and does not herald any change in the courts’ approach to compensation for the pain and suffering caused by the injury the subject matter of any claim, the judge stressed.
The court emphasises “once again” the “frailty and injustice” of the lump sum system of compensation regardless of whatever real rate of return, or discount, is used in its calculation, she said.
The award is calculated to meet a plaintiff’s needs to their estimated date of death and, should they outlive that date, they will run out of money for their future care, she said. If they die prematurely, the HSE would suffer a significant injustice in having paid for costs of care and appliances no longer necessary.
“It is surely time to catch up with those jurisdictions who have addressed this fundamentally flawed and unjust system by the introduction of legislation to permit awards be made by periodic payment order,” she said. A separate hearing will take place at a later date to determine the exact sum Gill Russell will receive as the HSE had argued against the costs of certain items claimed and those matters were held over pending today’s judgment.
Legal sources suggest the upholding of the basis on which the award for future pecuniary loss was calculated by the High Court means the boy is likely to retain the vast bulk of the award, intended to meet the lifelong care needs of the child.
Through his mother, Karen Russell, Aghada, Co Cork, Gill had sued the HSE alleging negligence in the circumstances of his birth at the Erinville Hospital, Cork, on July 12th, 2006. Liability was admitted and the case came before the High court for assessment of damages only.
It was claimed Gill was born after an alleged “prolonged and totally chaotic” delivery. He had a severe shoulder dystocia and was born after his mother had a symphysiotomy.
He was transferred to Cork University Hospital where he remained for two months.
Gill's case was adjourned two years ago with an interim payout of €1.4m in anticipation of legislation for periodic payments which has yet to be enacted. He secured a final additional lump sum payment of €13.5m last year. The HSE and Cork University Maternity Hospital apologised as part of the settlement
During the High Court case, his lawyers argued a three per cent rate of return on the investment of funds on his behalf was unfair and involved an investment in equities which was excessively risky.
The HSE submitted three per cent was reasonable and argued the money would be invested through the courts service in a mixed fund which historically proved to be capable of producing a three per cent return in the long term.
Fixing the rate in Gill’s case at one per cent, Mr Justice Cross said there was no doubt that by utilising a rate of one per cent, the total award to Gill will be considerably greater than otherwise.
