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
Events from this Firm
13 Nov 2018, Other, Dublin, Ireland

We will host our next Tech@MHC event on Tuesday 13 November in our offices on Barrow Street, Dublin 4.

14 Nov 2018, Seminar, Dublin, Ireland

We will host our commercial litigation seminar on Investigations and White Collar Crime on Wednesday 14 November in our offices on Barrow Street, Dublin 4.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions