Ireland: Gill Russell v HSE - The "Real Rate Of Return" Judgment

On Thursday, 5 November 2015, the Court of Appeal delivered its much anticipated Judgment in the case of Gill Russell v HSE in relation to the “real rate of return”. The real rate of return is the investment return that a Plaintiff is assumed to obtain should he invest his lump sum settlement award. Simply put, the higher the real rate of return applied to a lump sum, the lower the award, and vice versa.

The Judgment, delivered by Ms Justice Irvine, effectively upholds the High Court judgment of Mr Justice Cross, which reduced the applicable real rate of return from the traditional 3% to between 1 and 1.5%. The impact of the Judgment on the quantum of lump sum settlement awards is hugely significant. The State Claims Agency has estimated that the application of a 1 - 1.5% real rate of return would increase the cost of meeting medical negligence claims by circa €100 million per annum. It will have a similarly significant effect on private insurers and on medical negligence and non-medical negligence personal injury awards.

What “Real Rate of Return” Now Applies?

The Court held that the applicable real rate of return depends on the head of damage concerned: 

  • Cost of future non-wage related care, i.e. aids & appliances/ancillary needs: 1.5% real rate of return;
     
  • Cost of future wage related care, i.e. nursing care: 1% real rate of return; The differential reflects a further downward adjustment to account for future wage inflation relevant to this head; and
     
  • Future loss of earnings: 1.5% real rate of return - potentially see below.

A very short and theoretical case study of a 20 year old Plaintiff with a life expectancy of 71 provides a snap-shot illustration of the significance of this Judgment. An award for care costs of €6.2 million under the old 3% regime would become an award for €9.5 million using the new 1% rate.

To What Types of Cases Does it Apply?

While Gill Russell is a very seriously catastrophically injured Plaintiff, and these are medical negligence proceedings, the impact of the Judgment will be felt well beyond catastrophic injury medical negligence cases, and will likely apply to: 

  1. Medical negligence and non-medical negligence personal injury awards;
  2. Catastrophic and non-catastrophic injury cases: Commentary in the wake of Justice Cross’ initial judgment suggested that the judgment may only apply to extremely seriously catastrophically injured Plaintiffs, as Gill Russell undoubtedly is. This is because they would be considered to be especially risk averse, and therefore uniquely entitled to invest their award in the safest, and lowest-yielding, investment products available. It was argued that a Plaintiff with less serious injuries may be treated as an ordinary prudent investor who could invest in a more commercial way, and bear the risk that the market presents. However, Ms Justice Irvine did not accept that argument and commented that “most injured Plaintiffs enjoy no such comfort”. While every case will be treated on its own facts, the apparent implication is that the lower real rates of return will apply to most Plaintiffs so long as they can show that they will genuinely rely upon the award for their day to day requirements, and that they do not, for instance, have an alternative source of income that they can fall back upon should the investment of their award go wrong; and
  3. Loss of Earnings Claims: At the High Court, Justice Cross indicated that a Plaintiff with a claim for future financial loss confined to loss of earnings might be treated as less risk averse than a Plaintiff who has a claim for the cost of future care. Ms Justice Irvine did not accept this proposition and stated that while there may be arare case where a particular Plaintiff may not need their earnings to survive on a day to day basis and might thus be in a position to take risks with their investment, “most Plaintiffs do not fall into that category”.  While this is an obiterand therefore non-binding aspect of the judgment, the implication is that, in most cases, the rate of return applicable to future loss of earnings will be 1.5%, regardless of whether the Plaintiff is catastrophically injured or not.

What was the Basis for the Court’s Approach?

While it is a very detailed 62 page Judgment, the essence of the decision can be summarised as follows: 

  1. The Plaintiff is entitled to have his damages calculated on the basis that he should be entitled to pursue the most risk averse investment reasonably available to meet his needs; he is not in the same position as the ordinary investor, who has income and has surplus funds to invest; 
  2. The court must consider the calculation of future financial loss on a 100% basis regardless of the economic consequences that the award may have on the Defendant, on the insurance industry or on the public finances. Public policy has no part to play in the assessment of damages of this nature; 
  3. How the Plaintiff will probably invest, or how the Courts Service will probably invest on behalf of a minor/Ward of Court, is irrelevant to the Court’s considerations: “However, a Plaintiff is equally entitled to take their award to Las Vegas or place it on a horse in the Grand National in the hope that they may enhance it. But it is no function of the Court to conduct an enquiry as to what the Plaintiff is likely to do with their award for the purpose of deciding the level of the award”; and
  4. There is more than sufficient evidence to support the findings of the High Court Judge that the 1.5% and 1% rates of return referred to above were appropriate.

Criticism of the Oireachtas

The Court took the opportunity to renew its criticism of the Oireachtas for its failure to legislate to introduce a system of Periodic Payment Orders which “would have removed all of the risks central to these proceedings” and, while mindful of the separation of powers, it urged the Oireachtas to legislate. The court also referenced the existing ministerial power, via Section 24 of the Civil Liability and Courts Act 2004 which has not yet been utilised, to prescribe the discount rate that will apply in these cases. However, any hope that this mechanism might resolve these matters once and for all seems misplaced, as the court recognises its own jurisdiction to apply a rate different to that prescribed if it is satisfied that injustice would result from its application. Were the Minister to fix any such rate that is materially different to those approved in this Judgment, the strong implication is that the courts may exercise their discretion to apply their own rates.

While the Judgment provides some certainty to the calculation of lump sum awards, it is an expensive certainty for Defendants and indemnifiers, who remain caught in the crossfire between the judiciary and the Oireachtas. It is likely that this Judgment will increase the pressure further still on the Government to legislate for Periodic Payment Orders, heads of which legislation were drafted earlier this summer. This judgment may be appealed to the Supreme Court so this matter may not be yet at an end. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.