QUEENS BENCH DIVISION
London, WC2A 2LL
B e f o r e :
| THE QUEEN (on the application of RICHARD HOPLEY, a person under a disability suing by his mother and Litigation Friend, Patricia Hopley)||Claimant|
|- and -|
|LIVERPOOL HEALTH AUTHORITY|
NATIONAL HEALTH SERVICE LITIGATION AUTHORITY
DEPARTMENT OF HEALTH
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Robert Seabrook QC and Shaheen Rahman (instructed by Hill Dickinson) for the First and Second Defendants
Susan Chan (instructed by The Department of Health) for the Third Defendant
AS APPROVED BY THE COURT
Crown Copyright ©
Mr Justice Pitchford:
The Parties and Factual Background to the Dispute
"Establishment of Scheme
2. There is hereby established a scheme, to be known as the Existing Liabilities Scheme, whereby an eligible body may, in accordance with the following provisions of these Regulations, make provision to meet qualifying liabilities.
[Regulation 3 omitted]
Liabilities to which the Scheme applies
4. The Scheme applies to any liability in tort owed by an eligible body to a third party in respect of or consequent upon personal injury or loss arising out of or in connection with any breach before 1st April 1995 of a duty of care owed by that body, or a body referred to in regulation 3(b)(ii), to any person in connection with the diagnosis of any illness, or the care or treatment of any patient, in consequence of any act or omission to act on the part of a person employed or engaged by such a body in connection with any relevant function of that body.
Administration of the Scheme
5. The Scheme shall be administered by the Secretary of State.
Payments under the Scheme
6. (1) Where, in any year, a qualifying liability falls to be met by any eligible body, the Secretary of State may, subject to paragraph (2), pay to that body an amount to be determined by him in accordance with paragraph (3).
(2) No payment shall be made under paragraph (1), except to such extent as the Secretary of State may determine, in respect of –
(a) any liability admitted by the eligible body without the consent in writing of the Secretary of State;
(b) any liability determined by a Court in proceedings conducted by the eligible body otherwise than in consultation with the Secretary of State; or
(c) any payment which the eligible body has agreed to make otherwise than in the course of legal proceedings, or in consequence of its having compromised legal proceedings, without the consent in writing of the Secretary of State.
(3) The amount of any payment to an eligible body under paragraph (1) shall be determined by reference to –
(a) where an award of damages has been made against the eligible body by a Court, the amount of that award, together with the amounts of the legal and associated costs awarded to the plaintiff and of any such costs incurred by the eligible body;
(b) where legal proceedings have been compromised by the eligible body, the amount of –
(i) any sum paid by the eligible body in relation to the plaintiff's claim for damages,
(ii) the eligible body's contribution towards any legal and associated costs incurred by the plaintiff; and
(iii) any such costs incurred by the eligible body;
(c) where, in any legal proceedings, a Court has declined to award damages against the eligible body, the amount of any legal and associated costs incurred by the eligible body, to the extent that such costs are not recoverable from the plaintiff or from the Legal Aid Board under section 18 of the Legal Aid Act 1988;
(d) where the eligible body has agreed to make a payment, otherwise than in the course of legal proceedings, in settlement of the plaintiff's claim, the amount of that payment.
Provision of information
7. An eligible body shall, at such times and in such manner as the Secretary of State may require, furnish to the Secretary of State such information as he may request about –
(a) the nature of any relevant function carried on, during any period falling before 1st April 1995 which the Secretary of State may specify, by the eligible body or by any body whose liabilities have been transferred to the eligible body; and
(b) any event of which the eligible body is aware which it considers might give rise to a qualifying liability.
Availability of directions and guidance
8. The Secretary of State shall make available to eligible bodies, in such form and at such times as he may consider appropriate –
(a) any direction he may give, to any body directed under section 21(4)(b) of the Act to carry out functions in connection with the administration of the Scheme, with respect to the discharge by that body of those functions; and
(b) any guidance he may give to that body as to the manner in which the Scheme is to be administered. "
"Without prejudice to any other power of direction conferred on the Secretary of State,-
(a) if the Secretary of State so directs, a body which is eligible to participate in a scheme shall do so;
(b) where a scheme provides for it to be administered by the Secretary of State, a Health Authority, Special Health Authority, Primary Care Trust or NHS Trust shall carry out such functions in connection with the administration of the scheme by the Secretary of State as he may direct."
"Establishment of the National Health Service Litigation Authority
2. There is hereby established a Special Health Authority which shall be known as the National Health Service Litigation Authority.
Functions of the Authority
3. Subject to and in accordance with such directions as the Secretary of State may give to the Authority, the Authority shall perform on behalf of the Secretary of State such of his functions in connection with the establishment of a scheme under section 21 of the National Health Service and Community Care Act 1990 (scheme for meeting liabilities of health service bodies), and such other functions, as the Secretary of State may direct the Authority to perform on his behalf.
Constitution of the Authority
4. The Authority shall consist of-
(a) a chairman;
(b) three members who are not officers of the Authority; and
(c) three other members, being persons who for the time being hold the offices of Chief Officer, Chief Finance Officer and Clinical Director of the Authority. "
"C.1. The major reason for centralising control of claims within the NHSLA was to introduce an element of global control for the Department of Health. The organisation effectively operates upon similar lines as that of a mutual insurer with NHS Trusts and health authorities acting as members/policy holders. All claims falling under the remit of the NHSLA are managed by a team of claims handlers and a panel of appointed solicitors.
C.2. If a trust or health authority is seeking indemnity under either the existing Liabilities Scheme or the Clinical Negligence Scheme they must seek prior approval and authority for any admission or other major step throughout the litigation process. The NHSLA operates on a scheme of delegation with the overall budget manager for the NHS being the Department of Health.
C.3. In short the Department of Health delegates powers to the NHSLA to agree and make payments in respect of settlements up to and including a certain financial threshold with the requirement that any claim where the payments will exceed that threshold have to be referred back to the Department of Health for their agreement.
C.4. All major questions with regard to a claim will be dealt with by the NHSLA unless they are settled by the court. A trust or health authority cannot make any admission of breach of duty or deal with questions of causation or quantum on any matter where it seeks to make a recovery and either the Existing Liabilities Scheme or the Clinical Negligence Scheme managed by the NHSLA".
"Neither the Secretary of State nor any Health Authority, Special Health Authority, Primary Care Trust or NHS trust administering the scheme under this section shall, by virtue of their activities under the scheme, be regarded as carrying on insurance business for the purposes of the Insurance Companies Act 1992.
"…..I am not opposed in principle to NHSLA considering 'with profits' structures, but I deem the timing for implementation of this type of structure inappropriate. The Chief Medical Officer and his advisory committee are currently considering a reform of clinical negligence, and structured settlements are one aspect of this review. I am also aware that the Lord Chancellor's Department are also considering the wider usage of structured settlements. Both of these reviews may significantly change the way we use structured settlements and I do not wish to have the NHSLA change horses midstream on any 'with profits' considerations. That said, I would welcome the NHSLA's advice on any 'with profits' schemes that may be presented between now and March 2002."
"tightly constrained to pre-defined benchmark investment objectives. The product is priced such that an achieved investment return of 6% (after tax) per annum would sustain a bonus rate of 4% per annum."
He reminded Ms Blears of the protection afforded to policyholders by the Policyholders Protection Act 1975. Bonuses may not be protected, he conceded, but the product was still more attractive than an RPI linked structure. His company had structured 40 With Profits funds. He reported what he understood to be the view of Messrs. Walker and Fothergill of NHSLA that it was "not their responsibility to evaluate the merits of alternative investments that could be purchased by defendants once the settlement had been paid across as a lump sum". He was still exploring with NHSLA "how we might act as a supplier to them for structured settlements that they are unable or unwilling to provide themselves".
"In the early 1990s the Department of Health recognised the value of Structured Settlements, and together with HM Treasury, introduced criteria to enable Health Authorities and Trusts to 'self fund' such Structured Settlements. In effect where a settlement figure was agreed, and the Claimant wished to structure, a value for money exercise was carried out to determine whether the defendant Health Authority should purchase an annuity or self fund, i.e. retain the capital sum which would be paid to the Life Office to purchase the annuity, and meet the annual payment themselves.
This method has obvious attractions for the NHS since it helps cash flow considerably and has the potential for windfall benefit should the Claimants die before their expected life span. The potential downside is that should Claimants live beyond their expected life span, the NHS is committed to maintain lifetime payments. In essence, however, this system has been acceptable to Claimants and their advisors since, as far as the Claimants are concerned, all the NHS is doing is matching the best rate available. The choice of funding vehicle is largely irrelevant, and if the NHS feel that a saving can be made by self-funding, this does not present a problem."
(i) Tax exemption for structured settlements has been available for years. The recipient of a WPSS annuity is in no better position than his RPI equivalent.
(ii) For understandable reasons HM Treasury has declined to self fund WPSS arrangements but WPSSs have been purchased by other Government departments, notably the Ministry of Defence which makes, suggested Mr. Ashcroft, the NHSLA's position untenable.
(iii) An argument put forward by counsel for the defendant in Mr. Clegg's case, to the effect that WPSSs undermines their Lordships' judgment in Wells (claimants should be awarded a multiplier based upon the assumption that they will invest in gilts), was disproved by experience. The Lord Chancellor in setting the discount rate for multipliers at 2.5% rather than 1.9% was expressly moved by the fact claimants continued to invest in equities, as did the Court of Protection on behalf of infants and patients.
(iv) Any concern about the security of WPSSs was answered by the 100% protection against loss of guaranteed annuities afforded by section 4 Damages Act 1996. The probability is that any exclusion of declared bonuses would in fact be met by the Life Office which took over and stepped into the shoes of the impecunious provider.
(v) Of the working party investigations being conducted, the Chief Medical Officer was, to Mr. Ashcroft's understanding, looking not at WPSS or even structured settlements specifically but an alternative system of compensation for lower claims in clinical negligence cases. The Master of the Rolls was considering a Practice Direction or recommendation, or some other provision, requiring parties to produce evidence that a structured settlement had been considered. The Lord Chancellor's Department was undertaking the most wide ranging and radical of reviews, considering not only a judicial power to impose structured settlements but also periodical payment orders, both of income and capital. A consultation paper was to be issued in March 2002 but no proposals were expected until 2003 at the earliest.
(vi) In the meantime, claimants were being caused considerable distress because they were being deprived, by the tortfeasors' refusal to consent, of the opportunity to invest their awards of damages as the experts in the field of investment advised they should.
Mr. Ashcroft concluded that "While recognising that the NHS has a responsibility to the public purse, we would welcome a response and a full and proper explanation of the rationale for this refusal as a matter of urgency".
"The Department of Health would not wish to deny a claimant access to a structured settlement, but must be assured, however, that structures constructed 'with profits' do not disadvantage the claimant, and represent value for money to the NHS."
After referring to the need to make a full assessment it concluded:
"We hope to be in a position to advise NHSLA on the application of 'with profits' settlements later this year.
I hope that this explains the Department of Health's current position on structured settlements."
"(1) Claimant issues application for permission for judicial review within 14 days;
(2) If application for judicial review is issued, then the adjournment shall continue until the disposal of the judicial review proceedings;
(3) If no application for judicial review is made, or if such application fails, this matter to be restored for final order on the earliest available date.
Claimant do have the costs of today and 19 February 2002."
"An order requiring the Defendants to fund a With Profits Structured Settlement"
Permission to proceed was granted by the single judge on 23rd April 2002.
"(1) A court awarding damages in an action for personal injury may, with the consent of the parties, make an order under which the damages are wholly or partly to take the form of periodical payments".
The effect of the First Defendant's refusal to give that consent is to deprive the court of power to make an award of damages wholly or partly in the form of periodical payments, unless the Claimant abandons the proposal to purchase a WPSS and submits instead to an RPISS.
1. The Defendant's decision is amenable to judicial review; and
2. Is unlawful because:
(i) the Defendants have taken irrelevant considerations into account in reaching their decision; and/or
(ii) the Defendants have fettered their discretion in that they have applied a blanket policy of refusing to consent to a with profits structure and/or have given no individual consideration to the Claimant's case and/or the National Health Service Litigation Authority has given no individual consideration to the Claimant's case; and/or
(iii) the Defendants refusal to consent to a with profits structure is unreasonable in the Wednesbury sense.
Is the First Defendant's decision amenable to judicial review?
"The remedy of judicial review is only available where an issue of 'public law' is involved, but as Lord Wilberforce pointed out in Davy v Spelthorne Borough Council  AC 262, 276, the expressions 'public law and 'private law' are recent immigrants and, whilst convenient for descriptive purposes, must be used with caution, since English law traditionally fastens not so much upon principles as upon remedies. On the other hand, to concentrate on remedies would in the present context involve a degree of circularity or levitation by traction applied to shoe-strings, since the remedy of certiorari might well be available if the health authority is in breach of a 'public law' obligation, but would not be if it is only in breach of a 'private law' obligation."
"........ I do not accept that British Coal is to be equated to other major employers who are in private ownership. From the time when the coalmines first came into national ownership, s.46 of the Coal Industry Nationalisation Act 1946 has provided a regime for consultation on the matter to which it refers, including colliery closures and resulting redundancies, which is unique to the coalmining industry. In other words, the statute places express duties on British Coal which are not placed on other employers. To use Sir John Donaldson MR's phrase in R v East Berkshire Health Authority, ex parte Walsh  ICR 743, 753, Parliament has underpinned the position of coalminers by directly restricting the freedom of British Coal to dismiss them. The modified colliery review procedure, to use Woolf LJ's formulation in McClaren v Home Office  ICR 824, is a mechanism and the independent review body is a body to which the employee or the employer is entitled or required to refer disputes affecting their relationship. If therefore British Coal had not complied with their obligations under s.46 of the Act of 1946, and under the machinery established under that section, their decision not to do so is, in my judgment, a matter of public law and susceptible to judicial review".
"To qualify as a subject for judicial review the decision must have consequences which affect some person (or body of persons) other than the decision maker, although it may affect him too. It must affect such other person either:
(a) by altering rights or obligations of that person which are enforceable by or against him in private law; or
(b) by depriving him of some benefit or advantage which either (i) he had in the past been permitted by the decision-maker to enjoy and which he can legitimately expect to be permitted to continue to do until there has been communicated to him some rational grounds for withdrawing it on which he has been given the opportunity to comment; or (ii) he has received assurance from the decision-maker will not be withdrawn without giving him the opportunity of advancing reasons for contending they should not be withdrawn."
The continued authority of this passage emerges from references to it by the Court of Appeal in the 'legitimate expectation' cases of R. v Devon County Council ex parte Baker  1 All ER 73 and R. v North and East Devon Health Authority ex parte Coughlan  Q.B. 214.
"In all the reports it is possible to find enumerations of factors giving rise to the jurisdiction, but it is a fatal error to regard the presence of all those factors as essential or as being exclusive of other factors."
To similar effect was the observation of Lord Woolf C.J. in Poplar Housing Association Ltd. V. Donoghue  3 WLR 183 at page 202, paragraph 66:
"While these are the most important factors in coming to our conclusion, it is desirable to step back and look at the situation as a whole. As is the position on applications for judicial review, there is no clear demarcation line which can be drawn between public and private bodies and functions."
"It is plain that in order to determine whether the decisions of a particular body can be reviewed…it is not always sufficient to apply a single test. In many cases it will be enough to inquire whether the source of the powers of the body concerned is statutory or derived from the prerogative."
And at page 220d:
"But I am completely satisfied that judicial review is an inappropriate remedy in this case. In order to succeed in obtaining an order for judicial review it is necessary for the applicant to show not only that the body concerned is one whose decisions are susceptible to judicial review but also that the relevant decision was one which infringed or affected some public law right of the applicant." [my emphasis]
Roch J. put it similarly at page 220j:
"The first issue is whether the applicant's claim to relief can be brought by way of judicial review. The answer to that question turns on whether the applicant is seeking to enforce some public right or the performance or proper performance by some public or other similar authority of a public duty. Thus the general test seems to be the question: was the person or body performing a public duty when carrying out the act or reaching the decision in respect of which the applicant seeks judicial review?"
"It seems to me quite clear that the mere fact that a housing authority is exercising a statutory power when it decides to sell land is not enough by itself to render its decision a public law matter. I agree with the judgment of Latham J. in ex parte Hughes. In so far as the decision in R. v. Barnet London Borough Council ex parte Pardes House School  COD 512 seems to suggest otherwise, it cannot stand with authorities such as the Council of Civil Service Unions v Minister for the Civil Service  1 AC 374 (the GCHQ case) where the speeches established that the availability of judicial review depends not on the source of the power being exercised by a body in question, but on the subject matter of the exercise of power. The Pardes House School decision is understandable in the end result because of express policy decisions which applied to the disposal of land of the kind in question in that case."
And at paragraph 32:
"The appropriate test for determining whether the decision is a matter of public law or not is one whether the decision maker is performing a public function: see ex parte Datafin  1 QB 815 and R. v. Lord Chancellor ex parte Hibbit and Saunders  COD 326."
Hibbit and Saunders concerned the Lord Chancellor's decision on shorthand writers in courts.
If judicially reviewable was the decision unlawful?
"The major benefit to the Department of Health and the NHS of such an arrangement is the cash flow value of retaining the lump sum and replacing it with an annual stream of payments into the future. At inception, this approach is specifically aimed at removing the incidence of such large settlements directly from the annual budget of the Department of Health and to offer a more long term and structured approach to the cash flow requirements of such settlements."
"Reduced to its crudest elements in the instant case, the board has a duty to receive a complaint. Since the object for which it was created was the consideration of complaints I cannot see that that object is pursued if, in relation to certain complaints, it accepts as binding upon it the decision of another body, even so distinguished a person as the Director of Public Prosecutions."
"Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely-that is to say, it can validly be used only in the right and proper way which Parliament when conferring it is presumed to have intended. Although the Crown's lawyers have argued in numerous cases that unrestricted permissive language confers unfettered governmental discretion, the truth is that, in a system based on the rule of law, unfettered governmental discretion is a contradiction in terms. The real question is whether the discretion is wide or narrow, and where the legal line is to be drawn. For this purpose everything depends on the true intent and meaning of the empowering Act."
Lord Bridge continued at 873G:
"..before deciding whether a discretion has been exercised for good or bad reasons, the court must first construe the enactment by which the discretion is conferred. Some statutory discretions may be so wide that they can, for practical purposes, only be challenged if shown to have been exercised irrationally or in bad faith. But if the purpose which the discretion is intended to serve is clear, the discretion can only be validly exercised for reasons relevant to the achievement of that purpose."