Consulting on damages

In its consultation paper, The Law on Damages, the Department for Constitutional Affairs, now in the Ministry of Justice (MoJ), has sought to debate and develop recommendations made in three earlier Law Commission reports: Claims for Wrongful Death (Law Com. No. 263), Liability for Psychiatric Illness (Law Com. No. 249) and Damages for Personal Injury: Medical, Nursing and Other Expenses; Collateral Benefits (Law Com. No. 262). Owen Rees, Leeds, outlines the firm’s views on specific aspects of the paper, including care costs and collateral benefits.

In its formal response to the consultation paper, Beachcroft agreed with several of the basic principles on which the debate is based: notably that the purpose of tort law is to compensate rather than punish, and that double recovery should be avoided; that perceptions of a compensation culture must be tackled and a balance struck between the levels of compensation payable and the affordability of insurance.

However, while acknowledging that tort law can have a regulatory purpose in creating incentives for individuals to take appropriate care, we doubt that this can be achieved by ensuring that all costs (wherever possible) are recovered from the wrongdoer. We believe further consultation is required to determine the most effective means of reducing the number of accidents, injuries and their associated costs. Would training and/or more effective criminal penalties achieve the desired result? If the wrongdoer is required to pay in full wherever practicable, thereby increasing premiums, this may have a negative effect. For example, more drivers may then take the risk of driving uninsured.

If changes are to be made to the law on damages, consultation on the detail must be as wide as possible. In this way, government can work towards creating a system that better utilises both public and insurers’ money to provide a good standard of care and treatment for all injured people, whether they are entitled to compensation or not.

Psychiatric damage
In our view, the law should be developed by the courts rather than by legislation save in relation to stress-related psychiatric damage. We have proposed that in all stress cases a simple test should be applied to establish liability: that a claimant’s employer ought to have reasonably foreseen a real risk of breakdown and taken steps to prevent it. This would overcome the apparent inequity of the law between civil cases where, following Barber v Somerset (2004), the test applies and employment tribunal cases, following Sheriff (1999) and Essa (2004), where it does not.

Collateral benefits
If the purpose of tort law is to compensate rather than punish, and in order to avoid double recovery, we agreed that all payments received by an individual as a result of an accident should be taken into account. Voluntary contributions made to the injured person would be the only exception.

We disagreed strongly with the suggestion that payments received under an insurance policy should be disregarded in favour of a subsequent contractual recovery action. It would cause further litigation, associated costs and a system in which litigation is effectively run for the benefit (and profit) of others: an uncomfortable parallel with the failed business models of Claims Direct and The Accident Group.

We have argued that pension receipts should not be disregarded in assessing damages. The current system is demotivating for individuals close to retirement age who could work but are discouraged from doing so, knowing that they can still bring a claim for full loss of earnings on top of their pension payments.

Private care
Beachcroft has long held the view that Section 2(4) of the Law Reform (Personal Injuries) Act 1948 should be repealed. This section currently allows claimants to seek payments for future private treatment without considering whether that treatment is available through the NHS. What is important is to consider the best method of providing care and treatment to individuals on a holistic basis. We believe the current system of recouping NHS charges should be replaced by more direct arrangements between compensators and the NHS.

In our view, significant savings can be made by removing the considerable expense involved in arguing over care packages within litigation and replacing it with a system that uses both public and private money to benefit all individuals who have been injured. Such reform would require detailed consideration, consultation and research as to exactly what claimants spend on care packages both immediately after settlement of a claim and in the longer term.

Accommodation expenses
The current approach in Roberts v Johnstone (1988) to lump sum damages is straightforward and, we believe, provides the fairest balance to both parties. Any alternative methods of lump sum compensation, with or without a charge being placed over the property in favour of the defendant, are either too complicated or would result in over-compensation.

Conclusion
The MoJ will publish its response to the consultation in October, at about the same time as its response on claims process reform and track limits. The latter will attract more interest in the short term, but we should not lose sight of the invaluable opportunity offered by this consultation.

That comes on two levels: to examine how changes to the legal framework could improve our damages system but, perhaps more importantly, to open the door to widespread consultation and debate on how services for care and treatment can be provided to injured individuals, by combining funding from both the public and private sectors at source. For such a change to be effective, all those who work in or have an interest in this area need to voice their views.

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