The purpose of any personal injury litigation (including clinical negligence cases) is to - as far as is reasonably possible - put the injured party back in the position they would have been in but for the injury by means of financial compensation. Historically, this has meant that the court has awarded or the parties have agreed a settlement involving a one-off lump sum payment of compensation to the injured person.
In the last two years, however, we have been involved in reaching agreement with defenders to settle three multi-million pound claims on behalf of pursuers by way of a Periodical Payment Order (PPO).
This has meant that it has been agreed that the defenders will regularly pay to the pursuer an agreed sum of money, usually on an annual basis, for the remainder of their natural life, so as to provide sufficient compensation to pay for their care and needs requirements so long as they are alive.
In the three cases which we have recently settled, this relatively new means of settlement in Scotland could result in our clients receiving total compensation over their lifetime in excess of £36million between them.
Given the large figures required in order to settle high value catastrophic cases, our recent experience is that defenders are starting to prefer to settle such cases by way of a PPO rather than paying a very substantial one-off lump sum. Furthermore, although currently the Scottish courts cannot unilaterally make an award of a PPO or force parties to agree settlement by way of a PPO (as they can in England), changes to the civil justice system have recently been suggested by Lord Gill which would include the court being given this power.
In light of these two key developments, clients need to be advised on the advantages and disadvantages of a PPO as well as its suitability to their particular circumstances so they can make an informed decision as to whether or not they would prefer their settlement to be agreed using this particular method.
A PPO is a very good way of minimising the future uncertainties that can become such a big issue in negotiations and can prevent settlement by way of a lump sum.
Firstly, where there is a significant difference of opinion between medical experts instructed by parties regarding a pursuer's life expectancy, the impact of such a dispute on the value of a pursuer's claim can be more easily resolved by entering into a PPO. A PPO will pay out for as long as the pursuer survives so trying to calculate how long this is likely to be - which is necessary when settling by way of a lump sum - can be avoided, as can the need for any compromise between the different opinions of the experts.
Secondly, in relation to future care costs, a PPO gives a secure, tax-free payment each year for the life of the pursuer. Where a lump sum is awarded or negotiated, a pursuer often fears that his or her money will run out in the future and they will not be able to pay for the care that they will need for their lifetime. A PPO means that money to pay for such an important aspect of a pursuer's future will not run out. It also means that a pursuer is not as reliant upon good or risky financial planning to invest their lump sum to maximize the award. A PPO will track inflation to ensure that the annual payment continues to reflect the future increases in costs that will be incurred by the pursuer.
This means that families do not have to scrimp on paying for care or equipment in the early years nor will they require to continue providing care to the Pursuer longer than they are physically able to do so due to concerns about the lump sum running out.
In our experience, the family of a catastrophically-injured pursuer's primary concern is what will happen to their loved one when they are no longer alive or able to help. A PPO ensures that a care package can be put in place to meet the pursuer's needs and will continue long after family members are no longer able help.
The main disadvantages of a PPO are, firstly, the fact the pursuer remains "tied" to the wrongdoer for as long as they are alive and receiving annual payments, and, secondly, the pursuer is reliant upon the defender continuing to make the payments in order to retain the services of those employed on the Pursuer's behalf.
This may result in the Pursuer feeling there is no closure or no complete separation from the wrongdoer which they would get by settling with a lump sum payment. Part of the aim of settling their claim is for there to be a final and absolute resolution of dispute between the parties. However, a PPO does result in an ongoing relationship (albeit amicable) between the parties.
Although there are usually no conditions attached to the PPO payment received, some pursuers may feel they have greater independence and more freedom to invest their lump sum (with potentially better investment returns) and spend their damages as they see fit if they settle by way of a lump sum award.
Determining the suitability and advising a client of the benefits or otherwise of choosing to settle by PPO will require detailed discussion and the involvement of an actuarial expert. Each case will continue to be determined on its own facts. Whilst the court continues to have no power to award a PPO, it will remain a matter for negotiation between the parties and the pursuer will have to decide whether he or she wants to settle for a once-and-for-all lump sum or to receive periodical payments.
If you have any questions, please do not hesitate to contact any member of our litigation team.