01 January 2010
Personal Injury Damages in Guernsey - Largest Ever Award
Judgment in the case of Manuel Paul Helmot -v- Dylan Simon.
The reader is advised that in Guernsey, Jurats decide questions of fact and the Judge decides questions of law. Jurats are upstanding professional members of society who are chosen to undertake the role, usually on retirement until they reach the age of 70.
The Plaintiff was a cyclist who had previously represented Guernsey at the Commonwealth Games and was involved in a head on collision with a motor vehicle on 18 November 1998. He was found unconscious in a ditch and was not wearing a helmet. Liability for the accident was admitted by the Defendant’s insurers.
The Plaintiff suffered from a number of severe injuries including cerebral injuries, cranio facial injuries, ophthalmic injuries together with a form of psychosis. He suffered a brachial plexus injury to the right upper limb rendering it permanently functionless. He experiences problems with cognitive function and memory. His life expectancy was reduced by 5 years as a result of the accident.
Prior to the accident the Plaintiff had a reasonable working history. However, it was agreed that he would not be capable of undertaking any paid employment for the rest of his life.
The Royal Court of Guernsey is not bound by decisions of the English Courts nor by UK legislation unless it is specifically extended to Guernsey. Thus the Court were invited to exercise their independent jurisdiction when assessing the level of general damages.
However, the Deputy Bailiff considered that there was a need to ensure consistency in assessing the level of awards and since there were an insufficient number of personal injury claims coming before the Royal Court such that it could set its own guidelines, there was a powerful argument for looking to the Judicial Studies Board Guidelines (JSB) and comparable English cases for guidance.
The Royal Court assessed general damages in the sum of £235,000 taking into account the fact that the Plaintiff’s brain injury was within the upper half of the ‘moderately severe brain injury’ category of the JSB Guidelines. The other injuries, and also the loss of his amateur career and loss of his enjoyment of cycling were also taken into account.
It was alleged on behalf of the Plaintiff that the Royal Court should determine multipliers appropriate to Guernsey having regard to the current rate of return on UK Index-Linked Government Securities (“IGLS”). The Plaintiff also argued that there should be two multipliers; one for earnings related losses and the other for losses that are not earnings related.
The Defendant argued that the Royal Court should follow and apply a single discount rate as was set by the Lord Chancellor in the UK pursuant to the Damages Act 1996.
It was submitted on behalf of the Plaintiff that the appropriate discount rate for earnings related losses, including the cost of care was -1.5% whilst for other losses the discount rate is 0.5%.
The Defendant submitted the discount rate to be applied is 2.5%.
The Court heard from Rowland Hogg, Roger Bootle and Chris Daykin on behalf of the Plaintiff and from Hugh Gregory on behalf of the Defendant.
It was common ground between the parties that the award for future loss was to be by way of a lump sum as Guernsey Law does not enable the Court to award periodical payments.
It is not intended to go into the background behind the setting of the 2.5% discount rate in the UK since those reading this briefing note will no doubt be familiar with this background.
The Plaintiff’s Evidence:
He stated that this left inflation as the only contentious issue in the UK which had been resolved by adopting, in respect of the costs of providing care, an indexed form of the Annual Survey of Hours and Earnings (“ASHE 6115”).
The Court referred to the Court of Appeal case of Tameside & Glossop Acute Services NHS Trust -v- Thompstone  All ER 553 where the Court was concerned with the interpretation of section 2 of the Damages Act 1996 and specifically the sections dealing with PPOs. Guernsey has no equivalent of the Damages Act and the Court has no power to order damages to be paid byway of PPOs.
Mr Hogg submitted that in Guernsey in the calculation of lump sum damages the starting point is to look at the rate of investment of ILGS, there being no Guernsey equivalent stock. As IGLS are index-linked to the UK RPI, the calculation must be adjusted for Guernsey RPI and then further adjusted for the difference between wage inflation and price inflation.
Mr Hogg informed the Court that over the period 1965 to 2008, Guernsey RPI had increased faster than UK RPI by approximately 0.5% per annum. He then relied upon the evidence of Mr Bootle that the rate of earnings inflation in Guernsey exceeds RPI by 2%. In conclusion, Mr Hogg advised that in this case the discount rate should be calculated afresh.
Following his calculations he submitted that the discount rate for damages not related to earnings should be 0.5% but that there should be a further reduction of 2% to allow for the difference between price inflation and earnings inflation to give a discount rate of -1.5% for earnings related losses.
Mr Daykin gave evidence that when the Lord Chancellor was setting the discount rate under the Damages Act he took advice from Mr Daykin as the Government Actuary, as well as from the Treasury and others, but he did not necessarily follow the advice. Mr Daykin said the rate set was controversial at the time, he considered it to be too high then, and stated that there was an urgent need to re-assess it now.
The Defendant’s Evidence:
The Defendant’s expert Mr Gregory, disagreed with a number of aspects of Mr Hogg’s evidence but he agreed with his factual statements and calculations concerning IGLS yields; that UK earnings inflation is greater than price inflation; and that the restricted data available suggests that earnings inflation in Guernsey is greater than Guernsey price inflation.
The Advocate for the Plaintiff submitted that the experts had agreed that a multiplier based on a discount rate of 2.5% would lead to compensation. He stated that in the absence of any Guernsey legislation establishing a discount rate and in the absence of any judicial decisions that the correct approach was for the Jurats to decide upon a discount rate taking into account the evidence they had heard from the Plaintiff’s experts. It was further submitted that it was significant when in approving the Projet de Loi entitled the Civil Proceedings (Guernsey and Alderney) Law 2008, the States of Deliberation (Guernsey’s Government) had provided for the admissibility of the Ogden Tables and their Explanatory Notes but had not legislated for a discount rate to be set, leaving it for the Courts to do so.
The Advocate for the Defendant submitted that as a matter of custom and practice, Guernsey has adopted and applied the discount rate of 2.5% set by the Lord Chancellor. To adopt a different rate would create uncertainty in an area where certainty is very important so that litigants and their advisors can settle personal injury claims out of court. He further submitted that as the Royal Court decisions were not binding upon the Royal Court itself, the Court could not achieve certainty by setting a rate in this case.
The Court’s Conclusions:
The Deputy Bailiff referred to the decision made in Morton -v- Paint  21 GLJ 61 where it was stated “in relation to the law of torts it has been customary for the Guernsey Courts to adopt English common law as it has been developed”. However, in the Deputy Bailiff’s view, the generality of that statement had to be subject to a number of reservations including:
a) whilst Guernsey adopts common law it does not adopt English law where it has been modified by legislation, unless Guernsey has enacted similar legislation.
b) Guernsey would not adopt a principle of English tort law if to do so would conflict with an established principle of Guernsey customary or statutory law.
c) English common law is persuasive but the decisions of the English courts are not, and cannot be, binding on Guernsey.
The Deputy Bailiff said he could think of no reason in law why we should not adjust a discount rate calculated in accordance with English common law principles in order to take account of the differences in RPI between the two jurisdictions if, as a matter of fact, there is a proven difference.
The Deputy Bailiff considered the Defence Counsel’s submission that the discount rate set by the Lord Chancellor had been adopted in Guernsey by custom and practice and noted that it was a fundamental feature of the customary law of the Bailiwick that the customary law can and does evolve. The Plaintiff’s Counsel had submitted that the rate may have been adopted in the immediate period post setting, and accepted that, in some cases counsel may have conceded the rate of 2.5% in order to achieve a negotiated settlement. Especially in those cases where the quantum of the claim was such that it would not have justified the expense of calling expert witnesses in this regard.
As there were no decisions within Guernsey or any other jurisdiction in which the issue has been argued since 2001 the Deputy Bailiff found that the discount rate of 2.5% as set by the Lord Chancellor has not, as a matter of law, been adopted by legislation or by custom and practice and it was therefore for the Court to set an appropriate rate taking into account the evidence and the submissions of the parties.
In considering what was to be the appropriate rate, the Deputy Bailiff started from the fundamental principle that the Plaintiff is to be compensated in full for his losses. He noted that there were three different options to consider:
1. to adopt the Lord Chancellor’s rate without adjustment;
2. to adopt that rate and adjust it for any specific Guernsey factors, for changes that have occurred since the rate was set or for any other relevant factors; or
3. to disregard that rate and set a new rate from first principles.
The Jurats were satisfied it was appropriate to start with the discount rate of 2.5% set by the Lord Chancellor and then adjust it for specific Guernsey factors and for changes in the net return on IGLS that have occurred since he set the rate in 2001.
The Jurats accepted the evidence that Guernsey RPI increases faster than UK RPI by 0.5% per annum. They noted that the net return to a Guernsey investor has reduced by 1.05% per annum.
The Court then considered the question of whether to adjust for difference between earnings inflation and price inflation. It was noted that the English common law has always adopted a single discount rate for all types of loss when assessing the appropriate multiplier. The Plaintiff’s Counsel submitted that decisions such as Thompstone are authority for the proposition that if the Lord Chancellor had not set a statutory rate, the common law would have developed to allow the Courts to do so.
The Deputy Bailiff stated that it was fundamental to the Court of Appeal’s decision in Thompstone that there was a suitable alternative index available. In Guernsey there was no current index of average earnings, let alone a specific index of the earnings of carers. The Deputy Bailiff therefore decided that as a matter of law there could be no basis for adopting different discount rates for different types of loss in the absence of indices measuring the respective rates of inflation.
In conclusion the Court set the discount rate in the current case as 1%.
This is an important decision for insurers who underwrite business in Guernsey. It is likely that every Plaintiff lawyer will now seek to argue for a 1% discount rate. Although it is still open to insurers to argue that the rate has only been decided as 1% in this specific case and has not been set for all cases, it is unlikely that insurers will wish to go to the expense of instructing experts in every case to argue the point. Insurers therefore need to factor this into any reserves set.
It is not yet known whether there will be an appeal. Each party has one month to file a notice of appeal and Carey Olsen will keep insurers updated in this regard.