What is the court trying to do when compensating an injured person and is it actually able to achieve this goal?

The starting point is the well-established principle that the court is aiming to provide damages (compensation) to try and put the victim back into the position that he or she would have been in had the negligence not occurred, as far as money ever can.

Despite this principle, it is unfortunately the case that the compensation will often run out before the end of the period over which it was meant to cover - but why is that, if the court is really aiming to put the person back into the position he or she would have been in but for the accident/negligence? If the money will run out too soon, then the court is arguably failing to achieve the very principle at the heart of compensating such victims and is leaving people undercompensated.

One reason for the shortfall is that the court makes a deduction from awards of compensation for heads of claim like future wage loss or the need for paid care. This is to reflect the fact that the person receiving compensation is receiving a lump sum, has the benefit of the money at that time and is, therefore, able to invest it in order to generate a return and to grow the lump sum.

The court makes an assumption that the injured party will invest (at low risk) and will achieve an annual return (growth) plus inflation. This is one of the key reasons used by the court/government to justify making a deduction from future awards but is this justified? If it is not, then it is easy to see how/why the compensation will run out before the intended period and injured people are not recovering what they should in order to protect their future (if they need care or can no longer work etc).

The difficulty with the approach taken by the court is that it is based on a false presumption. In the current market, it simply is not possible to achieve the presumed returns when investing the funds (especially not at low risk) to make up for the discount applied by the court. A pursuer is not expected to take risk with his or her damages but even investing at moderate risk, in the market today, would not make up for the discount.

To add insult to injury, the court has not, at least to date, allowed the cost of investment advice to be recovered (which over the lifetime of the injured person can be hundreds of thousands of pounds) but this is also based on the out-of-date presumption that one does not need to take any risk when investing in order to make up for the discount in the award. It assume that any risk taken is, therefore, by choice.

When this very important presumption was made, it was possible and, therefore, the discount was understandable. Anyone choosing to invest to try to get higher returns was doing so at their own risk/cost in order to try and benefit further and so could not recover, as part of their claim, the costs of doing that/taking advice, which seems fair!

The problem now is that the economic climate has changed and is very different. People must invest and take advice just to try and make up for the discount and keep up with inflation. Even with professional advice, they might not achieve that. No-one, today, would invest in the way suggested by the court/government as they would not make sufficient returns to ensure that their compensation lasted as long as they need it to.  To continue to apply a significant discount (which can reduce awards by a significant amount) based on an out-of-date system which is no longer justified has the inevitable consequence of under-compensation.  

One would have thought (unless openly accepting that the principle at the heart of the system for decades is no longer being applied) that the courts would change the way in which compensation is calculated, in order to move with the times and provide fair compensation. This is made worse by the fact that the courts have not yet awarded damages to pursuers for the cost of taking professional investment advice (although that may yet happen and the court has not yet been asked to specifically address this issue).

The courts have decided not to interfere with the discount (see the case ofTortolano) but, with that in mind, the least the court should do is either accept that they are no longer applying the very principle at the heart of the system or, alternatively, compensate pursuers for the cost of correcting the flaw by awarding an additional  sum of damages for investment advice.  

In a recent medical negligence case in which we acted for the pursuer, Drummond Miller sought to do this in order to protect our client's future. We included a claim to recover the cost of investment advice, given that any pursuer receiving a significant sum of damages, with the way the market is today, would be advised to pay for such advice. It was argued that, as the court has refused to reduce or remove the discount to future awards (based on the false presumption that it is somehow possible to invest with little risk and achieve the necessary growth plus inflation) then, applying the principle that the court is trying to put the injured person back into the position he or she was before the accident, payment should be made for the injured person to take the necessary financial investment advice. If a person is presumed to be able to achieve a certain level of return on investment, and, in order to do that, must take investment advice, then, surely, it was argued, that should be a recoverable expense . If not then the pursuer will, in reality, be even further out-of-pocket. The only reason the injured person needs to get and pay for such advice is because of the negligence so why should they have to pay for that?   

If the court (or Lord Chancellor) will not remove or reduce the discount applied and also will not allow recovery for investment advice, then the consequence is to pretend that a principle remains in place which, in reality, is no longer the case.  

At Drummond Miller, with our many years of experience in pursuing claims, we will always try to ensure that our clients receive full compensation in order to protect their future. Having been damaged by the negligence of another, it is only fair that the court applies the fundamental principle which has been in place for a long time in order to ensure that the compensation paid lasts for the period intended.

If you have suffered loss as a result of medical negligence, an accident at work, a road traffic accident or as no fault of your own, then please call and ask to speak to a member of our litigation team.