News In Focus
Damages warning as judge rejects discount rate adjustment
11 October 2012
A legal firm is set to appeal a judge's decision that it claims will prejudice the right of an injured person to adequate compensation.
Digby Brown, solicitors for 23-year-old Stephen Tortolano, who suffered serious brain injuries in a fall at work when aged 19, have been given leave to appeal a decision by Lord Brodie that the court could not apply a reduced discount rate to reflect current investment returns, when calculating compensation for future losses.
The discount rate is applied to lump sum compensation to calculate the number of years it will last at a set rate of investment return. The current rate of 2.5% was set in 2001 and Digby Brown had attempted to persuade the court to apply a rate of 0.5% in this action, brought against Mr Tortolano's employers Ogilvie Construction Ltd. The solicitors fear that applying a higher notional rate than the current actual rate of return on suitable investments will mean that the compensation fund runs out during Mr Tortolano's lifetime.
With a claim for loss of future earnings and the cost of future care and support said to be in the millions of pounds, the firm estimates that a rate of 0.5% opposed to the current 2.5% discounted rate would increase Mr Tortolan's damages for loss of future earnings by over £600,000.
Moira Kay, partner in the serious injury department of Digby Brown, said the firm was very disappointed with the ruling. "The decision does not just affect Anthony Stephen Tortolano, but a whole class of pursuers in Scotland who have claims for future losses", she commented. "These pursuers will have suffered serious injury and may not be able to work in the future. They might also require expensive care provision for the rest of the lives. The discount rate of 2.5%
was fixed in 2001. The economic world has changed since then.
"Claimants are being forced to take risks with their investments in order to achieve the necessary returns needed to meet expenses as they arise. Claimants are not in the same position as stock market investors. The compensation awarded needs to last the rest of their lives. We are appealing this decision.”
In his opinion, since published, Lord Brodie holds that it is not open to the court to depart from the rate set by the Lord Chancellor and the Scottish ministers under s 1 of the Damages Act 1996. He has already given leave to appeal.
The Ministry of Justice and the Scottish Government are currently consulting on whether the discount rate should be reduced.