Periodical
payments: AEI or RPI?
Flora v
Wakom (Heathrow) Ltd [2006] EWCA 1103
1. An early attempt by the Defendant to strike out a claim relying
on the Average Earnings Index as opposed to the Retail Prices Index as the
basis for varying the sums payable under a periodical payments order failed. The
substantive arguments have yet to be aired but guidance needs to be given as a
matter of urgency.
Section 2(8) and (9) of the Damages Act 1996
2. Section
2(8) of the 1996 Act provides:
“An order for periodical
payments shall be treated as providing for the amount of payments to vary by
reference to the retail prices index…at such times and in such manner as may be
determined by or in accordance with Civil Procedures Rules.”
3. Section 2(9) goes on to provide:
“But
an order for periodical payments may include provision –
(a) disapplying subsection
(8) or
(b) modifying the effect of
subsection (8).”
4. The
Claimant maintained that 2(8) was the default position but that a court may
vary the provision whenever it appeared just to do so. By way of contrast, the
Defendant asserted that exceptional circumstances would be required to
deviate from the RPI as the mode of calculation. The Claimant’s concern arose
from their contention that the RPI was not a reliable measure of wage inflation
and as the substantive claim concerned future loss of earnings and future care
(which was largely wage dependent), he would not receive full compensation if a
periodical payment order was linked to RPI, as wage inflation has historically
outstripped RPI inflation.
5. The
Court of Appeal emphasised that on the strike out application, they did not
have to express any views on the merits of the case. However, unsurprisingly,
they adopted the starting point that a periodical payments order is quite
different to a lump sum award and the case law determining which discount rate
should be used for future pecuniary loss on a lump sum basis was of no
assistance in determining the rate for a periodical payments order. In answer
to the Defendant’s contention of the undesirability of extensive evidence from
accountants, actuaries or economists, Lord Justice Brooke stated:
“We are now dealing with a different statutory provision
and, if the experience of the past is any useful guide, it is likely that there
will be a number of trials at which the expert evidence on each side can be
thoroughly tested. A group of appeals will then be brought to this court to
enable it to give definitive guidance in the light of the findings of fact made
by a number of trial judges. The armies of experts will then be able to strike
their tents and return to the offices or academic groves from which they came.”
Conclusion
6. The
Court of Appeal concluded that there was nothing in the language of s2(8) or
(9) to suggest that the power to make a variation from RPI could only be
exercised in exceptional cases. Furthermore, they recognised the force of the
Claimant’s submission, echoed by Sir Michael Turner at first instance, that to
deny significant content to s2(9) of the Act would render the periodical
payments provision dead in the water. They ducked the issue of determining
which argument should prevail and it remains to be seen what conclusions the
trial judge reaches in this case in the absence of compromise.
7. Of
lesser significance, the Court of Appeal decision is of interest for revisiting
the circumstances in which references made in Hansard can be relied upon as an
aid to statutory interpretation. They reiterated the criteria set out down by
the Lords in Pepper v Hart [1993] AC 594 and in R v
Secretary of State for Transport, the Environment and the Regions ex p Spath
Holme Ltd [2001] 2 AC 349. Namely, that reference was permissible only
where legislation was ambiguous or obscure, or led to an absurdity. That was
not the case with regard to these provisions of the Damages Act. By way of
contrast, the Explanatory Notes accompanying a Bill on introduction can be
referred to in order to understand the contextual scene in which the Act is
set.
ELIOT WOOLF
CHRISTOPHER WILSON-SMITH QC
