The various approaches to indexation of periodical payments awards were considered in a defining case. Adrian Dagnall explains
Following the Court of Appeal decision in Flora v Wakom in July 2006 it was inevitable that a claimant would eventually choose to run an indexation argument to a full hearing in a periodical payment claim.
That finally occurred in October 2006 in Thompstone v Tameside and Glossop Acute Services NHS Trust.
After hearing evidence from a labour economist, an independent financial adviser, an accountant, a labour market analyst and two actuaries, Judge Swift decided to link the indexation of care and case management not to RPI, but to the 75th centile of ASHE 6115, an earnings-related measure.
Thompstone is currently the only decided case on this issue in which evidence has been heard, but further decisions are expected imminently in NHS and MIB cases. How are the arguments changing?
There was no specific evidence before the court in Thompstone demonstrating how carers' rates of pay had actually moved. Claimants' arguments rely on the assumption that earnings rates are the same as pay rates, but this is untrue.
Earnings may increase for a variety of reasons unrelated to pay rate increases (for example, improved qualifications, alteration in working hours, loyalty bonuses, pay drift etc). Many of these have no relevance to a small privately-paid care package. Further evidence on these issues is being prepared by both claimants and defendants.
In Thompstone, all heads of loss other than care/case management were agreed and had been paid on a lump sum basis. The sole issue was the indexation of the agreed care/case management periodical payment (PP). Now, cases are being considered more holistically. Why should all heads of loss other than case/case management be paid as lump sums/RPI-linked PPs, especially if there is evidence to suggest (as there does appear to be) that the prices of some elements actually increase at a lower rate than RPI?
Separate indices
If the higher courts allow claimants to apply earnings-related indices to care, perhaps the next logical step is for defendants to seek separate indices for items which may have experienced deflation, such as technology, transport and aids and appliances?
The increase in housing prices in excess of RPI has created a windfall to the estate of claimants who have purchased properties with their damages.
Not only have they been compensated under Roberts v Johnstone principles on the basis that they cannot invest the money which is put into the property, but it turns out in fact to be the best investment many of them have ever made.
The development of the equity release market potentially makes this a fruitful area for defendants.
All these issues will not be resolved for some time. Thompstone will not reach the Court of Appeal until November 2007 and final resolution may require a decision in the House of Lords.
The stakes are, on any reckoning, huge and will be felt in financial terms by claimants, the public purse and by anyone who purchases insurance.
There can be no better time for Parliament to take the initiative and consider the real impact of the cost of care and distributive justice.
Questions have already been asked in Parliament as to the financial impact of Thompstone; what Parliament's answer will be remains to be seen.. IT
Adrian Dagnall is personal injury partner at Bevan Brittan. He represented the defendant in Thompstone
