CICA Discount Rate Challenge Case

Mon, 15 Oct 2012

In October 2012 Adam Farrer acted for the Criminal Injuries Compensation Authority in relation to a significant brain injury case; Re S. At a hearing in March 2012, the First Tier Tribunal assessed the applicant’s award in the sum of £5,260,837 (based on multipliers using 2.5% discount rate). However, the applicant’s legal team (Laura Begley and Grahame Aldous QC of 9 Gough Square), challenged the appropriate discount rate to be applied to future loss multipliers. In March 2012 the award was assessed on the basis of a 2.5 % rate, with the discount rate issue being adjourned to be heard in October 2102. Adam was led by James Eadie QC of Blackstone Chambers in relation to the discount rate issue. This issue had been raised by a number of applicants in other similar high value CICA pre-tariff cases. This application was effectively a test case to determine the appropriate discount rate for the outstanding pre-tariff CICA cases under the 1990 Compensation Scheme. 
 
The applicant relied on expert actuarial evidence in relation to the discount rate. The expert was of the opinion that the Lord Chancellor’s current 2.5% discount rate would not achieve full compensation for the applicant. Rather, due to the prevailing economic conditions the discount rate should be:
 
a)    0.0% for categories of loss that are likely to go up in line with UK retail price inflation, such as items of equipment to be purchased; and
b)    Minus 1.5% for losses likely to go up with earnings, including the costs of employing personal carers. 
 
If this argument succeeded the effect of applying these rates on the award of £5,260,837 would be to increase it to £16,965,975. It was therefore apparent that this application could have a very significant impact on the outstanding (approximately 50) pre-tariff CICA cases.
 
The applicant relied on the decision in Simon v Helmot (2012) UKPC5. It was argued that the Damages Act 1996 does not apply to pre-tariff CICA cases. Further, it was argued that the CICA Scheme obliges the Authority to pay damages assessed on the basis of the common law, which requires a claimant to receive full compensation. Further, as the Act does not apply, it was argued that the Tribunal must set the appropriate discount rate on the basis of expert actuarial evidence.
 
The Tribunal rejected the application. It accepted our arguments that the obligation under the 1990 Scheme was to pay such damages as would be payable at common law, which by virtue of custom and practice in CICA cases, included the adoption of the Lord Chancellor’s discount rate. The Tribunal accepted that any challenge to the Lord Chancellor’s discount rate must be made by way of judicial review (following Warriner v Warriner (2002) 1WLR 1703). Other relevant factors were legal certainty, fairness to applicants who had concluded their claims and the fact that the Scheme was an ex gratia compensation scheme funded by the public. 
 

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