by Mary Hough July-08-2024 in Healthcare Law
The long-awaited report of the Expert Working Group advising the Minister for Justice in relation to the discount rate has been published. The recommendations of the Expert Group, when implemented, will provide greater certainty for plaintiffs and defendants in personal injuries litigation, in particular in relation to catastrophic injury claims. (https://www.gov.ie/en/publication/22382-setting-the-discount-rate-report-of-the-expert-working-group/)
What is the discount rate ?
Sometimes referred to as the “real rate of return” the discount rate is the rate used by the courts in cases involving catastrophic injuries to determine the size of a lump sum award necessary to compensate a person for future loss. At present, the discount rate, as determined by the High Court and the Court of Appeal in the Russell vs. HSE case, stands at 1% for future care costs and 1.5% for other economic or pecuniary losses.
Following on a consultation exercise undertaken by her Department, the policy decision was taken that the discount rate would, where appropriate, be set by the Minister for Justice by way of regulations made under Section 24 of the Civil Liability and Courts Act 2004.
To assist her in setting an appropriate discount rate for use in cases involving catastrophic injuries the Minister for Justice established the Expert Working Group in June, 2023. The Group was tasked with providing advice to the Minister on an appropriate discount rate for use in personal injury cases and was also asked to advise the Minister on the assumed risk profile of claimants.
The Group, which comprised members with actuarial, economic, investment and legal expertise, met on six occasions following its establishment. In addition, a Sub-Group on Economic Matters came together to analyse the operation of index-linked bonds in the period since the Russell judgments.
Recommendations
The Expert Working Group was established to provide advice to the Minister in relation to an appropriate discount rate for use in catastrophic injury cases.
Additionally, the Group was to advise whether a plaintiff in such cases should continue to be treated as having a risk averse investment profile.
The Group, which was chaired by Mr. Justice Brian McGovern, a retired member of the Court of Appeal, makes the following recommendations:
- The Group does not recommend, at this stage, any change in the discount rate set by the High Court, and confirmed by the Court of Appeal in Russell v HSE.
- As far as the assumed risk profile of plaintiffs is concerned, the Group takes the view that it is constrained by the judgment in the case of Russell v HSE and, recommends that plaintiffs in catastrophic injury cases should be considered as having a risk averse profile.
- The discount rate should be kept under review. The Group recommends that an expert group should meet at a maximum of every three years to reassess the discount rate.
- The Group recommends that a “trigger” mechanism should be introduced to enable the commencement of a review of the discount rate if there is a marked change in economic circumstances or the rate is successfully challenged in court.
Conclusion
Whilst the certainty that the Groups recommendations will bring is very welcome, it is somewhat disappointing to see that one of the “trigger” mechanisms to prompt a review of the discount rate is if the rate is successfully challenged in court. This will leave it open to parties to mount challenges through the courts to the current applicable discount rate. Such challenges, and threatened challenges, both prior and subsequent to the Russell decision, have served to increase uncertainty in relation to appropriate sums of compensation for those catastrophically injured and consequently have served to increase legal costs as parties negotiate resolution of claims in an uncertain landscape.
We hope that the setting of the applicable rate by the Minister on foot of the advice of the Expert Group will bring the long-awaited certainty which is much needed for those who have been catastrophically injured and their compensators. It is our hope that the fact that the applicable rates have been carefully considered by the Expert Group will indeed bring an end to the challenges and threatened challenges through the courts, which only serve to introduce fiscal uncertainty for all parties.
We believe that this change, together with recommendations made by another expert working group in relation to the rate applicable to Period Payment Orders,(https://www.gov.ie/en/publication/a8c1f-periodic-payment-orders-indexation-rate-report-of-the-inter-departmental-working-group/) has the potential to radically change for the better the manner in which those who are catastrophically injured are compensated. We embrace these positive changes, which we hope are the first of many positive changes to the clinical and personal injuries litigation landscape.
The above-mentioned developments and other related reforms to clinical litigation were discussed at the recent conference “Embracing Change: Working Better Together” on 18 June hosted by Hayes Solicitors. An audience of over 200 guests heard from distinguished and expert speakers who addressed the pressing need for changes to clinical litigation practice and shared their experience from Ireland, England and other jurisdictions, providing valuable insights from patients’ and clinicians’ perspectives. (Hayes Solicitors LLP, Dublin, Ireland - Law Firm. Hayes solicitors host conference of leading experts to discuss proposals for the reform of clinical litigation in Ireland (hayes-solicitors.ie)
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About the Author
Mary Hough
Mary is a partner and Head of the Healthcare team at Hayes solicitors. She specialises in professional indemnity defence litigation and in particular dealing with high value clinical negligence claims. Mary has extensive experience in civil litigation, acting for insurance companies, indemnifiers and plaintiffs.