It is well known throughout personal injury litigation that the then Lord Chancellor caused considerable consternation within the insurance industry when on 27 February 2017 she announced a reduction in the discount rate from 2.5% to -0.75%.    A change in the discount rate was long overdue, with catastrophically injured claimants either having a negative return on their compensation or being forced toward a riskier investment profile in order to try and achieve the returns needed. Notwithstanding the fact a change (and most likely a reduction in the rate) was inevitable, it would be fair to say that those representing the insurance industry were surprised at the level of reduction and reacted somewhat angrily to the announcement.

Perhaps knowing how the insurer sector would react, when announcing the reduction in March,  the Lord Chancellor made clear there would be a prompt review of the current basis upon which the discount rate is set to ensure it remained “fit for purpose”.  Such a review was to include whether the rate should be set by an independent body; whether more regular reviews would provide more certainty and whether the methodology in setting the rate i.e. that the claimant only invests in no low risk ILGS remained appropriate for the future.

The consultation has taken place with the Lord Chancellor publishing the findings and draft legislation on 7 September 2017.  The salient points are :-

• The assumptions currently made on how claimants invest their compensation were considered unrealistic and that broadly claimants do not invest in ILGS only.  Unsurprisingly, there was a diversity of responses between those representing claimants who considered no risk investments were appropriate, with those representing the insurance sector taking the view that claimants, whilst remaining low risk investors, should not have no risk.  The government it seems, prefers the view of the insurance sector, taking the view that the current assumptions “may” lead to recovery of compensation in excess of 100% , displacing the 100% rule and resulting in “additional cost” to taxpayers (through the additional cost to the NHS and other public bodies of higher awards) and consumers in higher insurance premiums.
• There needs to be more structure to reviews to provide more certainty and predictability, with a compromise of 3 yearly reviews to take place.
• The government preferred the insurers’ stance that the setting of the rate needed ultimate government accountability, with the setting of the rate to remain with the government who will seek expert guidance from an independent panel.

In summary, the government concluded there needed to be a clearer and fair means for setting the discount rate and confirmed there would be a change in the law, with rate to be set by reference to a diverse portfolio of low risk investments, rather the present assumption of no risk investments.   The consultation paper makes clear than when the assessment is undertaken, actual claimant investments practices should be considered to enable the rate setting to be more realistic.

The principles for setting the discount rate will be set in statute and the current rate will be reviewed “promptly” once legislation is in force, with reviews to be three yearly thereafter (and being completed within 180 days of commencement).

Finally, the setting of the rate would remain the remit of the Lord Chancellor, with advice taken from an independent expert panel.

The draft legislation has already been published and is advanced for parliamentary approval

So what do these changes mean for the injured claimant who is at the centre of these arguments? These are people who are often catastrophically injured.  Claims are not brought because an injured party wants to pursue a claim at a cost to the taxpayer or consumer, but rather that they have a real need.  Injured claimants never choose to be injured leaving them with life changing injuries.  They are injured due to the fault of a third party; this simple fact is often lost in the popular press.  They are not “money grabbing”, but simply looking to recover compensation to help provide them with a better quality of life.

First indications suggest that following the ‘prompt’ review the discount rate will move upwards from the current -0.75% to somewhere between 0% to 1%.  The effect will be a reduction again in lump sum compensation awards to claimants who have the most need.  However, it is not likely to have a dramatic effect on consumer insurance premiums;  these are not likely to fall in the short term, despite insurers responding very quickly to the reduction in the discount rate in March to pass this cost onto the consumer in an average increase in premiums of £75 per policy.  It is unlikely the insurance sector will be a quick to reduce premiums when, as is likely, the discount rate is increased from the current -0.75%.

From a practical perspective are we likely to see insurers pulling away from agreeing settlements or attempting to adjourn trials in order to await the review that the Lord Chancellor has intimated will happen prompt after legislation is in force.  That could take many months and it will remain to be seen how far those representing insurers will go to avoid settlement at the current -0.75% rate.

 

In a recent Court of Appeal case, Graham Thomas v Hugh James Ford Simey Solicitors the court examined the duty of a claimant’s solicitor to carry out further enquiries into a potential head of claim for special damages.

The facts in the case were as follows.  The claimant who was a coal miner instructed solicitors to pursue a claim for damages for vibration white finger (VWF). The claim fell within a scheme set up by the Department of Trade and Industry which meant it would be dealt with expeditiously and at modest cost.  The claimant was entitled to general damages and also special damages for care and assistance of certain services, namely decorating, DIY, gardening, car washing and car maintenance. He received an offer for general damages and the solicitors advised him he may be entitled to claim for special damages, if he had been unable to carry out specific tasks.  The claimant stated that he had received help with services, but he had made cash in hand payments to these people and he did not have evidence to prove the help he had received. He advised the solicitor he “was not too bothered at all” to pursue the special damages and accepted the offer of general damages in full and final settlement of his claim. Seven years later, the claimant saw an advertisement from another firms of solicitors stating that many VWF claims had been under-settled.  He decided to bring a negligence claim against his former solicitors alleging that if he had been properly advised he would have made a claim for the special damages. At court, the judge found his former solicitors had not been in breach of duty. The claimant appealed to the Court of Appeal on the grounds that the solicitors had been in breach of duty by failing to provide an approximate valuation of the claim for services; failing to inform him of the availability of an interim payment in the event that he pursued a services claim; and treating his comment about cash in hand payments and difficulty in obtaining evidence as putting an end to the services claim.

The Court of Appeal dismissed his claim and  accepted that the above facts were true but stated that the issue of law was whether these facts constituted a breach of duty by the solicitor.

The original retainer required the solicitors to advise the claimant about his possible claims for general or special damages and to pursue such claims where appropriate. The solicitors had advised him about the possibility of a claim for special damages in respect of services and had discussed the matter with him. The solicitor had indicated that the amount of compensation payable under that head could be significant.

The claimant was an intelligent and articulate man who knew his own mind and instructed his solicitors that he had decided not to pursue a claim for special damages. The solicitors had not been under a duty to probe matters in the hope of changing his mind.

It was not the role of a solicitor to tempt the client by referring to large sums once it was clear that supporting evidence for a claim was not available. If a client instructed his solicitor that he did not wish to pursue a particular head of claim and that he did not have evidence to support it, the solicitor was not necessarily under a duty to challenge that decision or to try to change the client’s mind. If the client was an adult with full capacity, there came a point when his autonomy had to be respected.

It was significant that the claim was a modest one which the solicitors were running under a fixed costs regime and under a scheme for dealing with high volume, low value injury claims. There had to be a sensible limit upon what solicitors could be expected to do in such cases. Such schemes might be the only practicable way of facilitating access to justice in such cases at proportionate costs. The solicitors still had to exercise reasonable skill and care in advising clients and pursuing claims, but they could not be expected to turn over every stone and pursue avenues of enquiry which the client had closed down.

This is an interesting case for claimant solicitors which demonstrates the onus put on the claimants in these particular circumstances. Whilst it is essential for claimant solicitors to offer clear and robust advice on potential heads of claim which claimants may be entitled to, there is a clear onus on claimants to carefully consider and provide instructions to their solicitors on whether they wish to pursue potential heads of claim for which they will have no later comeback.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

As claimant lawyers, the initial evidence that we have in support of a case tends to come from our own clients and their family and friends.  These are the lay witnesses that ultimately go on to establish a case (hopefully) with the assistance of medical records, accident reports, expert evidence and so on.  The evidence at the start, however, comes from a lay witness.

Lay witnesses are put in a difficult position during the course of a case.  In particular, where facts and events are disputed, cases are less likely to settle.  This means that lay witnesses are more likely to give evidence in a trial than an expert and therefore more likely to come under scrutiny from the defendant’s barrister who will cross-examine.  Whilst an expert witness may be familiar with the court environment, a lay witness, of course, generally is not and the experience is intimidating and frightening.

The other issue with lay witnesses is that they rely  on their memory.  Few of us take an accurate note of events as an accident or incident unfolds.  Therefore, it is usually some years later that they are called upon to give evidence and the memory can  be problematic.

Lay witnesses, therefore, can be both a bonus to the claimant lawyer or a problem, depending on the extent of the memory, the accuracy and the way in which they present.  It is the role of a lawyer, on either side, to evaluate the witness evidence that is put forward and, in particular, to review the evidence and strength of a lay witness.

In a recent case, Legg and Another -v- Burton and Others  the issue of credibility of witnesses was looked at by HHJ Paul Matthews sitting at the High Court.  This was a case concerning  wills  but the issue about witnesses refers to all in whatever type of case.

The judge made the comment that memory was especially unreliable when it came to recording past events and that memories were fluid, malleable and constantly being re-written whenever they were retrieved.  This was the case he thought , even after a particularly distressing incident or traumatic event.

The judge noted that there was considerable interference with memory during the course of a civil case and civil litigation, particularly when preparing for trial.  The statement was made a long time after events.  The statement was usually drafted by a lawyer who was making judgments about the significance of issues.  The statement was completed after the witness had been refreshed by reading documents or going through matters in more detail.  Prior to trial, the whole procedure and statement would be reviewed again.  In particular, he bore in mind the limitations of memory and that we “all remember what we want to remember”.

What the judge  was impressed by was the fact that some of the witnesses retained the essence of the information that they had provided in their witness statement.  The fact that there were slight differences and discrepancies he did not think particularly significant. In fact he seemed to suggest this was more supportive of the statement being accurate in the first place.

In the Legg case  during the course of the trial one of the claimants was referred back to an incident many years previously which had not been put in her witness statement.  The relevance of that evidence only came about in cross-examination itself.  This is not unusual.  Issues can arise which are simply not known about previously. The evidence given however was in keeping with the overall impression and therefore consistent. It was the overall general consistency which helped the claimants.

The two issues that the judge raised which are perhaps the more pertinent are that there were two main errors when assessing witness evidence. For the uninitiated  they may come as a surprise.

The first error was believing was that the stronger and more vivid the feeling or experience of recollection, the more likely the recollection was to be accurate.  In his experience, that was not the case.  In his view people want to remember what they want to remember and they rewrite memories over time.

The second issue the judge raised was the belief that the more confident another person is in their recollection, the more likely it is to be accurate.  Again, his view was that this was not the case at all.  They may not have any sinister motive, but they may just simply wish to assist and pursue the case on a favourable basis.

It is experience that teaches lawyers how to assess witnesses.  All of us will have had a witness who has not performed well in court (generally through no fault of their own) and it has been a disaster.  Most of us would have had expert witnesses who have done much the same.  There is no greater feeling of despondency than hearing your evidence fall to pieces in court.  What is, however, an issue is the way that we, as lawyers, tend to associate stronger, vivid and confident recollections with accuracy and it is quite clear that judges do not have the same view.

This was a case in which the claimants provided good evidence, fairly consistent and the judge was satisfied with the evidence that they gave.  In doing so, however, he did identify the two problems which people associate with accuracy but are not actually connected with it at all.  The case identifies the difficulties in assessing witness evidence  and the issues a judge might find less helpful.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

The Ministry of Justice (MOJ) has today announced the results of its consultation of the discount rate.

The former Lord Chancellor, Liz Trust, announced in February 2017 that the discount rate was to be reduced from 2.5% to minus 0.75%. The insurance industry reacted with outrage and immediately had a private meeting with the Chancellor, Phillip Hammond, to express their dismay and to request an immediate review.

The MOJ obliged, announcing the start of a consultation into how the discount rate is calculated on 30 March 2017. The consultation closed on 11 May 2017. The expectation was that the MOJ would find a way to increase the discount rate to a level which was more acceptable to the insurance industry. There has been a delay in the announcement of the findings of the consultation, no doubt caused by the general election in June 2017. 

The MOJ has now published a response paper and draft legislation which will allow the discount rate to be set on the basis that personal injury claimants are ”low risk” investors rather than “very low risk” investors. The expectation is that the discount review will be reviewed and revised within 90 days of the legislation coming into force.

The MOJ has stated that if the rate were reviewed today by reference to a “low risk” investor, then it would be in the region of 0% to 1%.

There is confirmation that independent expert panel will be created with the aim of reviewing the rate every 3 years.

Today’s announcement brings no surprises but will certainly create more uncertainty especially with ongoing cases. We do not know how long will it take the draft legislation to come into force or whether the MOJ will be able to publish a review within 90 days. This will leave both claimants and insurers in a period of limbo. Negotiations will be complicated and difficult. Insurers will base settlement offers on an assumed rate change. It will be difficult for Claimants to accurately assess Part 36 offers and they will have to consider a number of potential scenarios.

I doubt the rate will be changed before Christmas given the need to change primary legislation but I expect the MOJ to try and push this through early in the New Year.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*