England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/04/2015

Mr Justice Jay:

Introduction

1. At the outset of the hearing I made an order anonymising the parties as follows: the Claimant will be referred to as "LHS", and his litigation friends and deputies as "JOX" and "SBX".
2. The Claimant was born on 18^th March 1989. He suffered life changing injuries on or about 11^th July 1992 as a result of the gross negligence, amounting to criminal conduct, of his mother in leaving him unsupervised in the presence of an accessible bottle of methadone. In consequence, the Claimant has suffered a severe brain injury which has rendered him significantly disabled in terms of his physical, neurological and neuropsychiatric condition.
3. On 26^th March 1993 an application was made to the Criminal Injuries Compensation Authority ("the CICA") on the Claimant's behalf for compensation for criminal injury. He was held to be eligible on 30^th January 1997. As is not unusual in these cases, there was considerable delay whilst the Claimant's condition was ascertained and assessed, and a barrage of expert evidence was prepared and collated. In March 2012 there was a hearing before the Defendant. Shortly before the hearing date, the parties agreed the quantum of the claim subject only to the appropriate discount rate for future losses. On 20^th March 2012 the Defendant reviewed the agreed figures and conducted what was, in effect, an approval hearing akin to the familiar procedure in the Queen's Bench Division. The Defendant made an interim award of £4,498,335.58, which was net of state benefits and other deductions. The award was "interim" in the sense that it had been agreed that future loss could be provisionally calculated on the basis of a discount rate of 2.5%, with the issue of the appropriateness of that rate to be left for subsequent adjudication.
4. The adjourned hearing took place on 26^th September 2012. The Claimant was represented, as he is before me, by Grahame Aldous QC and Laura Begley; the CICA equally by James Eadie QC and Adam Farrer. In the intervening period, the Claimant, but not the CICA, had obtained expert evidence as to what the discount rate should be "unconstrained by statute" (see paragraph 9(1) of the Defendant's second decision dated 3^rd October 2012). It was agreed before the Defendant that on this hypothesis the rate should be 0% in respect of price-related losses, and minus 1.5% in respect of earnings-related losses. Applying those rates would yield a figure of £16,030,183. Viewing the matter in a different way, the expert evidence was to the effect that the application of a discount rate of 2.5% would mean that the funds would become exhausted before the Claimant reached his 48^th birthday, about half way through his remaining life expectancy. The operating premise for this last conclusion was that real rates of return would not change substantially over the next 20 plus years, in line with the assumptions in Wells v Wells.
5. The Defendant received detailed written and oral submissions in relation to the appropriate discount rate. I will not rehearse those at this stage because the submissions advanced before me are, broadly speaking, the same. Having said that, it is convenient to set out the Defendant's path to its conclusion that the appropriate applicable discount rate was 2.5%.
6. At paragraph 8 of its determination, the Defendant identified the three issues which it considered arose for its decision in relation to future losses:-

"(1) What is the correct interpretation of the phrase 'compensation will be assessed in accordance with common law damages' in paragraph 12 of the Criminal Injuries Compensation Scheme 1990 ('The Scheme');

(2) Is the Panel bound or entitled to take into account the discount rate determined by the Lord Chancellor under section 1(1) of the Damages Act 1996;

(3) Is it appropriate for the Panel to take a different discount rate under section 1(2) of the Damages Act 1996?"

7. I set out the key paragraphs of the Defendant's decision in full:

"58. We accept, and it was common ground, that we must approach the issues with a reasonable and literate understanding of how the award should be comprised, dealing flexibly with matters on which the Scheme is not specific and having regard to the whole object of the Scheme.

59. It is also common ground that the Damages Act does not directly apply to awards made under the 1990 CICA Scheme.

60. We decide that this leads us to an approach based on the common law quantification of damages, as if made by a court. The Scheme does not provide that an award must be identical to that which a judge would make: there are specific differences from common law quantification and there is no specific requirement for an award to be made by CICA identical (after the application of those specific changes to the circumstances of the applicant) to that which would have been made by the court.

61. We accept that full compensation is a fundamental principle of the common law and acknowledge that the interim award in this case may well (depending on the economic circumstances and market rates of return over the rest of the Applicant's life) result in under-compensation, if invested in ILGS, as assumed in Wells. It is possible that the award contended for by the Applicant would, for the same reasons, produce over-compensation. It was to avoid this uncertainty and the expense of constant re-evaluation of economic data that the Lord Chancellor determined the discount rate in 2001 after the specific power so to do was given to him by Parliament, albeit 5 years earlier.

62. In our judgment the correct interpretation of the phrase "compensation will be assessed in accordance with common law damages" in paragraph 12 of the Scheme is that the Panel should seek to follow the general principles of compensation used by courts to quantify pecuniary and non-pecuniary damages so as to provide broad equivalence to rather than identify with quantification of damages recoverable in court claims for personal injuries. In particular we do not accept that our decision on the calculation of future losses should be based solely on the decisions in Wells and Helmot."

8. Given the Defendant's approach to the first issue, it was inevitable that it should conclude that it was both necessary and appropriate that it should apply the discount rate determined by the Lord Chancellor under the Damages Act 1996, namely 2.5%. In its view, this achieved predictability and consistency as between applicants to the Scheme, and claimants in civil proceedings. Subsequently the Defendant explained why there was no coherent basis for taking a different discount rate under section 1(2) of the 1996 Act.
9. It is this decision which the Claimant challenges in these Judicial Review proceedings, permission having been granted by Collins J. In granting permission, Collins J said this:

"I am strongly of the view that the approach of the First-tier Tribunal was correct in law for the reasons set out in the Acknowledgment of Service. However, the point is of importance for many cases and I cannot say that the contrary is unarguable. I do, however, suggest the Claimant's advisers very carefully reconsider the position since I do not believe that success can in any way be guaranteed."

10. No doubt the Claimant faces the obvious forensic and presentational difficulty that, if Mr Aldous' submissions are correct, he would be entitled to an award in the form of a lump sum payment vastly in excess of his hypothetical comparable in a common law claim involving a tortfeasor. (It should be noted that, because in ordinary civil litigation a periodical payments order would be made in a case of this nature, Mr Aldous does not accept that the value, as opposed to the amount, of the two awards differs – at this stage I am just referring to the headline figures). This difficulty, however, cannot preclude the outcome that the Claimant seeks, if principle and authority so require.
11. Before summarising the parties' rival contentions in this Court, it is necessary to set out the relevant CICA scheme, to refer to the relevant statutory framework governing claims for future losses in ordinary civil litigation, and to mention what might be described as some of the landmarks of the common law in this territory.

The Criminal Injuries Compensation Scheme 1990

12. A scheme for compensating victims of crimes of violence was announced in both Houses of Parliament in 1964, and in its original form came into force on 1^st August 1964. Given that the Claimant's application was received by the CICA in 1993, the 1990 Scheme applies to this case.
13. Paragraph 12 of the 1990 Scheme provides:-

"Basis of Compensation

Subject to the other provisions of this Scheme, compensation will be assessed on the basis of common law damages and will normally take the form of a lump sum payment, although the board may make alternative arrangements in accordance with paragraph 9 above. More than one payment may be made where an Applicant's eligibility for compensation has been established but a final award cannot be calculated in the first instance – for example where only a provisional medical assessment can be given. In a case in which an interim award has been made, the Board may decide to make a reduced award, increase any reduction already made or refuse to make any further payments at any stage before receiving notification of acceptance of a final award."

14. The "alternative arrangements" specified under paragraph 9 of the Scheme are not applicable. The assessment of the Claimant's compensation fell to be carried out "on the basis of common law damages". It is the true construction of that phrase which lies at the heart of this application for judicial review.
15. The 1990 Scheme provides a number of express exceptions to the common law. For example, there is a "cap" on claims for net loss of earnings and earning capacity (in essence, at one and a half times the gross average industrial earnings rate at the date of assessment), and state benefits and insurance payments fall to be deducted. The clear policy intendment here is to iron out some of the disparities attained by conducting an assessment "on the basis of common damages", and to ensure for example that the compensation awarded to a billionaire victim is not completely out of kilter with that awarded to an individual on benefits. The common law, on the other hand, is quite prepared to treat such claimants wholly differently, or – put another way – is too blunt an instrument to treat them as similar in all relevant respects, because a tortfeasor must take a victim as he finds him. The reduction of state benefits avoids the possibility of double recovery in the context of a publicly-funded, rather than primarily insurance-based, scheme.
16. The final point to be made on the 1990 Scheme is that, subject to paragraph 9, the award of compensation must take the form of a lump sum payment. There is no power to order compensation on an annual or some other periodical basis. This is hardly surprising, given that the Damages Act 1996, conferring by section 2 jurisdiction in the Court to order periodical payments in certain circumstances, did not exist in 1990. I understand that in the past the CICA made arrangements for structured settlements, but these are not at issue here.
17. The Criminal Injuries Compensation Scheme made under the Criminal Injuries Compensation Act 1995 provides for a ceiling on the overall compensation award of £500,000. As before, there is no power in the CICA to award periodical payments. In my judgment, the subsequent legislation and scheme avail neither party before me. The effect of the presumption against retroactivity is that Parliament in 1995 had nothing to say about the workings of the previous scheme, which should therefore remain intact.

The Damages Act 1996

18. Section 1 of the Damages Act 1996 provides:-

"Assumed Rate of Return on Investment of Damages

(1) In determining the return to be expected from the investment of a sum awarded as damages for future pecuniary loss in an action for personal injury the Court shall subject to and in accordance with the Rules of the Court made for the purposes of this section, take into account such rate of return (if any) as may from time to time be prescribed by an Order made by the Lord Chancellor.

(2) Subsection (1) above shall not however prevent the Court taking a different rate of return into account if any party to the proceedings shows that it is more appropriate in the case in question.

(3) An Order under subsection (1) above may prescribe different rates of return for different classes of case

(4) Before making an Order under subsection (1) above the Lord Chancellor shall consult the Government Actuary and the Treasury, and any Order under that subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament. …"

19. After some delay, in June 2001 and acting in pursuance of his powers under section 1(1) of the Damages Act 1996, the Lord Chancellor set the discount rate for England and Wales at 2.5%, for all purposes. He refrained from prescribing different rates for return for different classes of case pursuant to his power under section 1(3). The rate has not been revisited since then, although it is understood that the Ministry of Justice is undertaking a review. In the meantime, the real yields on Index-linked Gilts ("ILGS") have fallen substantially.

Landmarks of the Common Law

20. I agree with Mr Aldous for the Claimant that the objective of an award of damages is to restore the victim, so far as money can do so, to the position he was in before the relevant tort: see Lord Blackburn in Livingstone v Raywards Coal Company [1885] App Cas 25, at 39; and Lord Hope in Wells v Wells [1999] 1 AC 345, at 390A.
21. The traditional multiplier-multiplicand approach to claims for future loss is familiar, as well as the practice that the multiplier (calculated with reference to life expectancy) should reflect the annual rate of return on investments. Following a trilogy of House of Lords decisions (Mallett v McMonagle [1970] AC 166, Cookson v Knowles [1979] AC 556 and Pickett v British Rail Engineering Limited [1980] AC 136), the multipliers conventionally applied by the courts during that period, and subsequently, reflected a discount rate of between 4-5%. Given the vastly fluctuating fortunes of the stock market during that period, and relatively high levels of inflation, this formulaic approach was subject to much criticism, but it emerged unscathed until the House of Lords returned to the issue in 1998. It should be noted that the House of Lords clearly thought that the application of a conventional discount rate in these circumstances was loyal to Lord Blackburn's general principle. It is not open to Mr Aldous to suggest otherwise.
22. In Wells v Wells [1999] 1 AC 345, the House of Lords reduced the conventional discount rate to 3%, in line with the change in market conditions and the advent of ILGS. In my view, their Lordships did not vary, or reconstitute, any of the governing principles; all they did was to reduce the rate. The House of Lords said in terms that the 3% rate should be the guideline rate for general use until the Lord Chancellor specified a new rate under section 1 of the Damages Act 1996, which as I have said occurred in June 2001.
23. The House of Lords also recognised that there was an air of unreality about this. As Lord Lloyd of Berwick put it, at 363H:-

"It is of the nature of the lump sum payment that it may, in respect of future pecuniary loss, prove to be either too little or too much. So far as the multiplier is concerned, the Plaintiff may die the next day, or he may live beyond his normal expectation of life."

24. Further, it is obvious that, in the case of a Claimant with a lengthy life expectancy, discount rates may fluctuate significantly over the relevant period, and yet there is no statutory power to re-visit the figures (cf. the position with periodical payments). Thus, the common law is obliged to adopt a rough and ready approach, with the intent to achieve a broad measure of justice. Any search for arithmetical or methodological precision would prove illusory.
25. There have been intermittent attempts to challenge the Lord Chancellor's discount rate of 2.5% in civil proceedings, to which I will return in the context of the third issue.
26. Mr Aldous placed considerable reliance on the decision of the Privy Council in Helmot v Simon [2012] UKPC 5. This case involved a road traffic accident in Guernsey, a part of the UK to which the Damages Act 1996 does not apply. The Appellant before the Privy Council, the tortfeasor, contended for a single discount rate of 2.5%. The Royal Court heard unchallenged expert evidence to the effect that the discount rate should be minus 1.5% for earnings-related losses and 0.5% for other losses. Mr Chris Daykin testified in Guernsey as he did in the present case, although variations in market conditions have led to a slight adjustment to the discount rate for the other losses. The Court of Appeal in Guernsey, reversing the Royal Court, applied discount rates which were in line with the expert evidence.
27. Sumption JA gave the sole reasoned judgment for the Guernsey Court of Appeal. He held that the Lord Chancellor's rate of 2.5 %, fixed under the Damages Act 1996, was irrelevant in Guernsey, and he repudiated the Appellant's argument that there was a custom and practice of using a discount rate of 2.5% derived from the Lord Chancellor's determination regardless of appropriateness in current economic and financial circumstances.
28. The leading judgment in the Privy Council was given by Lord Hope. At paragraphs 49 – 50 he said this:-

"49. Sumption JA said in the Court of Appeal that the Lord Chancellor's rate was irrelevant in Guernsey: para 20. He also said that it had no current evidential basis: para 21. I would prefer to adopt the second alternative. The Jurats were well aware that they were not required by any Guernsey statute to apply the rate fixed by the Lord Chancellor. That rate might have had something to offer if the Lord Chancellor had adopted the same approach as the House of Lords did in Wells v Wells. As it is, the evidential value of his determination is wholly undermined not just by the passage of time but also by the fact that, as the Jurats themselves appreciated, the Lord Chancellor took account of things that played no part in the analysis in Wells v Wells at all. He had consulted widely and he took account of the experience of the Court of Protection and, as Mr Daykin said in his evidence, of the consequences for the Ministry of Defence and the National Health Service. It is true that the Courts in England and Wales have not given any encouragement to the idea that they might be willing to take a fresh look at the issue. But that is because of the statutory context in which the determination was made.

50. The proper course in all the circumstances, would have been for the Jurats to disregard the Lord Chancellor's rate altogether. The effect of doing this would have been to start with the Guernsey net return on ILGS of 1.13%, reduce it by 0.5% for the higher rate of inflation to 0.63% and then round it down to 0.5%. The Court of Appeal said that this was what they should have done, and that 0.5% was the figure that they should have arrived at for the non-earnings related elements of the Respondent's loss. I agree with that conclusion…"

29. The reasoning of their Lordships elsewhere is along similar lines (see, for example, Lord Clarke, at paragraphs 84 – 85; and Lord Dyson at paragraphs 106-113).
30. There was some difference of view between their Lordships, irrelevant to the determination of the appeal before the Privy Council, as to whether the common law was sufficiently flexible to allow for the award of periodical payments. Lord Hope considered that it was (see paragraph 93 of his opinion), but at paragraph 105 Lord Dyson said this:-

"The Lord Chancellor's rate does not apply in Guernsey and there is no statutory power to order periodical payments in Guernsey either. The assessment of damages for future losses is determined in Guernsey by the application of common law principles. It has not been submitted that there is power at common law to make orders for periodical payments. In my view, periodical payments are obviously the most accurate (and therefore the fairest) way of taking future inflation into account in the assessment of damages. But I think that it would be a step too far to say that such an innovation should be made by the Courts in the exercise of its inherent power to develop the common law…"

31. Mr Aldous did not argue before the Defendant that it had power to award periodical payments at common law, in which circumstances the point does not strictly speaking arise. However, to the extent that it may matter, I prefer Lord Dyson's view that the legislative process, not judicial creativity, is required. Further, in R (oao) B v Criminal Injuries Compensation Appeals Panel [2007] EWHC 180 (Admin), Langstaff J noted at paragraph 18 of his judgment that it was accepted before him that there was no power in the Scheme to award periodical payments. For what it is worth, I was one of the Counsel who contributed to that concession.
32. At all events, Mr Aldous relies heavily on Helmot v Simon in support of his submission that, in a situation where the Damages Act 1996 does not apply and so the common law does apply, the relevant decision maker must have regard to expert evidence, rather than the Lord Chancellor's fiat, in determining the appropriate rate.
33. I will address the additional authorities relied on at a later stage.

The Claimant's Case Developed

34. In support of his first and second grounds, directed to the first and second issues (see paragraph 6 above), Mr Aldous sought to draw a clear dividing line between the common law on the one hand and statute on the other. If the latter was not applicable, for whatever reason, then the former must apply untrammelled. Authority for that proposition is Helmot v Simon, and the decision of Cooke J in International Energy Group Limited v Zurich Insurance Plc UK [2012] EWHC 69 (QB). Mr Aldous contended that there is no basis in principle for allowing statute to seep into the clear streams of the common law, thereby yielding the result achieved by the Defendant. If statute is properly excluded from consideration, then the exercise mandated by the Privy Council in Helmot v Simon must be undertaken, and consequently the figures on the unchallenged expert evidence are as advanced by the Claimant. Importantly, submitted Mr Aldous, the common law does not countenance an approach which takes a discount rate attained by the amalgamation of a number of factors, some of which include policy considerations; the common law, loyal always to logic and principle, requires evidence.
35. This, it seems to me, is the Claimant's best point, and I indicated as much during oral argument. To be fair to the Claimant, I now summarise the remainder of Mr Aldous' submissions. A number were directed in fortification of his best point; others raised separate arguments.
36. First, he relied on the decision of Langstaff J in B. In that case, at paragraph 44 Langstaff J said this:-

"The phrase in paragraph 12 "on the basis of common law damages" falls short of requiring the board exactly to replicate the process by which common law damages are established. However, it seems to me to provide for the way in which damages should be calculated unless there is some contrary provision expressly or implicitly within the Scheme."

37. Although the issue in B was not (as it is here) whether regard may be had to statute, Mr Aldous relies on this passage in support of his argument that, unless the Scheme provides otherwise, it is the common law to which the decision-maker must turn in assessing claims for compensation.
38. Secondly, Mr Aldous admitted that if, contrary to his main argument, it is appropriate to have regard to statutory materials, then it is clearly relevant to the present exercise that if this were a claim for compensation against a tortfeasor, the High Court would almost certainly be ordering periodical payments. Since 1^st April 2005, and the coming into force of section 100(1) of the Courts Act 2003 amending section 2 of the Damages Act 1996, there is an obligation on the court to consider making a PPO, and the current level of the Lord Chancellor's discount rate means that such orders are habitually made. On that footing the Claimant would be much better off overall, as a recipient of periodical payments, than by recovering a lump sum computed on the basis of a discount rate of 2.5%. Accepting that PPOs could not be awarded under the 1990 Scheme, Mr Aldous' submission was that the task for the Defendant should have been to capitalise the PPO which would hypothetically have been made in the civil court so as to achieve a lump sum: the resultant figure provides the true comparator. Accordingly, Mr Aldous submitted that the Defendant's approach was anathema to the full compensation principle.
39. Thirdly, Mr Aldous submitted that it is useful to consider the approach of other tribunals, in particular in an employment context, to this issue. I may say immediately that I disagree, for two reasons. First, these tribunal decisions do not turn on the wording of paragraph 12 of the Scheme. Secondly, the approach of tribunals in other areas can only be of very limited assistance.
40. On my understanding of his submissions, Mr Aldous accepted that the destiny of his second ground must pivot on the first. If achieving broad equivalence with the common law is an exercise to be performed without reference to the Lord Chancellor's discount rate, I would agree with Mr Aldous that the unchallenged expert evidence entirely supports the discount rate he advances.
41. As for Mr Aldous' third ground, directed to the third issue in this case, it is unclear to me whether this raises a discrete, solid point. If Mr Aldous is correct about his first ground, then the second ground notionally clicks into place (in his favour), and the third ground does not arise; but on the contrary hypothesis Mr Aldous valiantly submitted that I was not precluded by authority, namely Warriner v Warriner [2002] 1 WLR 1703 and Harries (a Child) v Stevenson [2012] EWHC 3447 (QB), from holding that the Defendant should have applied a different discount rate under section 1(2) of the Damages Act 1996.

The Case for the Interested Party

42. Mr Eadie for the CICA submitted that the Scheme should be interpreted with a measure of flexibility, with a reasonable and literate understanding of how an award of damages should be comprised: see R v CICB, ex. Parte Webb [1987] 1 QB 74 (at 77H) and R v CICB, ex parte Tong [1976] 1 WLR 47 (at 51A). The skeleton argument of the CICA relied on ex parte Tong in the Divisional Court, although it was reversed in the Court of Appeal. However, Wien J's dictum – "the Board ought to be free to deal with these eventualities which arise in a flexible manner, having regard to the whole object of the Scheme" – has remained unscathed, and is often cited. The object of the Scheme, read as a whole, is that eligible victims of crimes of violence should be compensated on broadly the same basis as Claimants bringing civil claims against tortfeasors. Paragraph 11 of Mr Eadie's skeleton argument is key. It reads:-

"11. The following submissions are made as to the natural meaning of the phrase "on the basis of common law damages", implying the interpretative approach set out above:
11.1 These words are descriptive. They refer to the damages that would be awarded by a Court in a common law claim.
11.2 They do not, and do not purport to, provide any detailed indication as to how the Court would go about assessing such a claim. Still less do they purport to draw dividing lines between principles applicable to such claims depending on whether their source is or is not statutory as opposed to non-statutory/judge-made.
11.3 They provide no support, express or implicit, to any contention that the Lord Chancellor's set discount rate should be excluded or ignored in conducting the discounting exercise necessary if a lump sum award is made under the Scheme."

43. In oral argument, Mr Eadie advanced five brief submissions. First, the present exercise is concerned only with lump sum awards, and periodical payments and structured settlements are irrelevant. Given that PPOs are not available in Scotland, and the Scheme is countrywide, anomalously different results would obtain north and south of the border if Mr Aldous were right. Secondly, the approach of the courts to the application of the discount rate for lump sum awards has been clear and consistent: the Lord Chancellor's guideline rate has been applied for well over a decade, and without judicial demur. The return on IGLS has been below 2.5% for many years, but the courts have resisted all attempts to revisit the rate on the basis that it is too low: see, for example, the decisions of the Court of Appeal in Warriner v Warriner [2002] 1 WLR 1703 and Cooke v United Bristol Healthcare NHS Trust [2004] 1 WLR 251. Thirdly, there are strong policy reasons favouring a rate which is applied consistently over the UK. The economic arguments currently supporting the application of a lower rate are by no means all one way, because the situation could well change over the duration of a claimant's life expectancy.
44. Mr Eadie's fourth submission was central to this case, and focused on the wording of paragraph 12 of the Scheme. The "basis of common law damages" sets out an approach of equivalence - in other words, in the attaining of a result broadly equivalent to that which would be achieved by a civil court by way of lump sum when making an award of damages in similar circumstances. The Scheme is less generous than the common law in a number of itemised respects, but subject to that its nature and intention is to achieve comparability of outcome. In order to achieve this result, the CICA must apply the Lord Chancellor's prescribed rate unless some particular circumstances obtain. This rate is applied directly, and not by analogy, in order to attain the requisite result. Mr Eadie's fifth submission, which flowed immediately from the fourth, was that the CICA's proper quest was for the application of a methodology which would achieve broad equivalence.
45. Mr Eadie touched briefly on the third issue during his oral argument. In his written submissions, he maintained that there was no basis in principle or on authority for departing from the Lord Chancellor's set rate, in purported exercise of power under section 1(2) of the Damages Act 1996. The Claimant's arguments are, on analysis, generic: he has demonstrated no particular circumstances of his case which might justify such a course. The Claimant's real ambition is not, on analysis, to justify a departure from the rate, but rather to reinforce his point that the application of the rate achieves injustice. The only proper forum for an attack on the Lord Chancellor's discount rate is judicial review; a collateral attack through the gateway of section 1(2) of the Damages Act 1996 is impermissible.

Discussion and Conclusions

46. Notwithstanding the welter of authority and written argument which has been brought to bear, the parties are agreed that this case hinges primarily on a fairly narrow point, namely the true construction of the phrase "on the basis of common law damages" in paragraph 12 of the Scheme. If this phrase should be interpreted as meaning something akin to, " [only] common law principles should govern the assessment exercise", subject always to the express exclusions elsewhere within the Scheme, I would conclude that regard could not properly be had to the Lord Chancellor's discount rate as prescribed under section 1 of the Damages Act 1996. Thereafter, as it were, all the notional chess pieces occupy the Claimant's squares, and not the Defendant's. I have placed square brackets around the adjective "only" in order to reinforce the point that statute is excluded from account, but the result would I think be the same without it.
47. There is no authority directly bearing on the true construction of paragraph 12 of the Scheme. The closest case is the decision of Langstaff J in B, but on analysis it is not particularly proximate. The issue in that case was whether, having regard to the incidence of the burden of proof applicable to the taking into account of state benefits for care needs, the panel could - in the context of the decision of the Court of Appeal in Sowden v Lodge [2005] 1 WLR 2129 - properly adjourn the case for compensation until B's majority. Langstaff J held that there would have been no basis for adjourning the case at common law, and that the panel misunderstood the application of the burden of proof on the key issue of care needs as explained by the Court of Appeal in Sowden. The panel's defence of the application for judicial review depended not on reliance upon some statutory provision, but was rather an attempt to construe the Scheme in so overly generous and flexible a manner as to accommodate the practice adopted. Langstaff J held that there was no warrant for so freewheeling and wide-ranging an approach, and deprecated counsel's attempt to recruit other provisions in the Scheme in support of it. On the facts of that case, the manner in which damages would be calculated at common law, both evidentially and substantively, provided the answer. Accordingly, I cannot accept that the reasoning in B provides support for the Claimant's case.
48. In essence, Mr Aldous' submission is that paragraph 12 of the Scheme must be read and applied in a specific, prescriptive manner. In other words, on his submission the Scheme is incorporating the common law by reference, and is treating the common law as a corpus of law unviolated by statutory overlay or intersection.
49. I tend to agree with Mr Aldous that if this narrow, prescriptive approach were correct, the effect of cases such as Helmot v Simon and IEG Limited v Zurich must be that the common law, thus characterised, should be kept apart from statute. These two bodies of law may be complementary, and may presuppose each other's existence, but they are discrete and not inextricably intertwined. The point may be put in this way. The common law evolves in broad step with the wider environment (on occasion, it may be in advance of majority opinion; on other occasions it may lag behind), but there are inherent limitations as to how far, and how deep, it may go. Reasonable people may differ as to the strength of those limitations, but these are intrinsic to the common law in the sense that logic, principle and stare decisis provide a fetter, not a free rein. Statute, being the embodiment of the will of a Sovereign Parliament, is not similarly constrained. Thus, there may well be policy reasons for adhering to the 2.5% rate over time which the common law would find anathema, because logic, principle and the evidence base militate in favour of the setting of a different rate.
50. The question arises of whether paragraph 12 of the Scheme is predicated on this last sort of jurisprudential underpinning. In my judgment, it is not. The 1990 Scheme is a practical document designed to be applied without elaboration or complexity. It is not concerned with sources of law, or with which principles happen to be purely judge-made as opposed to those which have a statutory origin. I agree with Mr Eadie that the objective of the Scheme is nothing more elaborate than to achieve a similar level of financial outcome for the victim of a crime of violence as compared to the victim of a tortfeasor with a civil claim. This is what is meant by the phrase "in accordance with common law damages" in the context of a provision which lays down the "basis of assessment". Thus construed, the only means by which this outcome may be attained is by applying the Lord Chancellor's rate, because that is the rate systematically applied by the civil courts.
51. The application of common law principles stricto sensu is not the basis of assessment laid down in the Scheme. If these principles were to be strictly applied (as Mr Aldous would have it), different outcomes would be achieved under this Scheme in comparison with the civil courts, and I would add in contravention of the objectives of the Scheme. Further, on Mr Aldous' analysis the assessment exercise would become far more technical and complex, evidence would be required, and somewhat artificial distinctions would have to be made between judge-made law and statute. Even treating the 1990 Scheme as a living instrument, it could not have been within contemplation of its makers that evidence would and could be admissible in every case to support the discount rate being contended for. The assessment exercise would, on this hypothesis, be considerably more complicated than that undertaken by judges applying the Damages Act 1996.
52. Mr Aldous submitted on a number of occasions that his client was being under-compensated by the application of the Defendant's methodology. However, the broad equivalence principle requires, or predicates, the identification of the correct comparator, to enable like to be set against like. Given that paragraph 12 of the Scheme expressly refers to a lump sum award, I simply cannot agree with Mr Aldous that it is appropriate to capitalise the notional PPO which would have been awarded in a civil court, and carry out the comparative exercise on such a footing. Not merely is this wholly strained and artificial, it is met by the obvious objection that there is no provision for PPOs under the Scheme. Further, the approach at common law has never been to capitalise PPOs so as to attain a lump sum. PPOs and lump sums are calculated in very different ways.
53. Mr Aldous' riposte – that the CICA is picking and choosing as to when to apply statute and when not to – is not an answer to the foregoing analysis. PPOs cannot be not in play, either directly or indirectly (as notionally capitalised), unless the Scheme makes provision for them. The matter goes to jurisdiction, and Mr Aldous accepts that PPOs are not within paragraph 12. On the other hand, the application of a methodology which attains broad equivalence with the common law is mandated by the Scheme, and does not require any statutory underpinning.
54. Given that the application of the Lord Chancellor's rate by the civil courts does not violate the full recoverability principle, the same logic must apply to paragraph 12 of the Scheme. This principle is only usurped if Mr Aldous were correct in his submission that the comparison must be with the capitalised, aggregate value of the notional civil claimant's PPOs. Further, if I am right in my conclusion that such a claimant would be an inappropriate comparator, the Court of Appeal decisions referred to under paragraph 43 above preclude any attempt to undermine the Lord Chancellor's rate by the invocation of generic, as opposed to case-specific, arguments.
55. The reasoning of Helmot v Simon may only avail the Claimant if paragraph 12 is to be interpreted as requiring the CICA, and thereafter the Defendant, to conceive itself as a civil court, and apply the principles of the common law on that premise. For the reasons already given, I do not accept that this fiction is mandated by the Scheme. Further, as Lord Hope explained in Helmot v Simon (see paragraphs 26 and 49 of his judgment), in Guernsey there is no equivalent statutory context. By contrast, paragraph 12 of the Scheme is a signpost to whichever methodology happens routinely to be applied by the civil courts.
56. Standing back from all these issues, I consider that paragraph 12 of the Scheme might, at least in theory, have said in terms that the discount rate should be (i) the rate then applied in the civil courts (i.e. 4.5%), (ii) whatever the rate happened to be in the civil courts at the time of assessment, (iii) a fixed rate specified at X%, or (iv) a rate supported by up-to-date evidence. Options (i) and (iii) are extremely unattractive, because the "real" rate might of course change over time and adherence to a fixed level over the lifetime of an indefinite Scheme would fail to achieve justice. Option (iv) is also extremely unattractive, because it would be complex, time-consuming and might lead to inconsistent approaches. Option (ii) is obviously the most sensible. It is not specified in terms in paragraph 12 of the Scheme, but in my judgment it emerges from the true construction of the wording which was in fact deployed.
57. Just as the chess pieces occupy all the Claimant's squares if he is right about the first issue, it seems to me that the position is exactly the same mutatis mutandis if Mr Eadie's fourth and fifth submissions are correct – as I have found them to be. The basis of assessment of common law damages requires the application of the methodology a civil court would adopt to a comparable claim. Accordingly, the first and second issues identified under paragraph 6 above stand or fall together. Furthermore, the destiny of the third issue becomes clear once this stage of the analysis has been reached. Reviewing Mr Aldous' written submissions on the third issue, I consider that they may be grouped under two heads. Either they are submissions directed to the irrelevance of statute (i.e. they are a reformulation of the first issue), or they are submissions directed to the systematic unfairness of the Lord Chancellor's rate (and, therefore, they are generic and prove too much).
58. Finally, Mr Eadie drew attention to the decision of Morgan J in Harries (A Child) v Harries and Stevenson [2012] EWHC 3447 (QB). That case was concerned with whether to order a preliminary issue on the application of section 1(2) of the Damages Act 1996. Morgan J held that it was not arguable that there were any particular features of the Claimant's case which removed it from the paradigm, and accordingly the scope of section 1(1). His reasoning, which I gratefully adopt, provides further support for my conclusions on the third issue. At paragraph 58 of his judgment, Morgan J specifically rejected a submission that the non-availability of PPOs, on the particular facts of that case, could be a reason for applying section 1(2). The tendency of this authority, with which I entirely agree, is to support Mr Eadie's submission that PPOs cannot be used in some way as the comparator, or as a proxy, for the exercise conducted under paragraph 12 of the Scheme. Ultimately, however, this aspect of Harries (A Child) is not directly on point, and my reasons for rejecting Mr Aldous' argument based on the capitalised value of a notional PPO appear under paragraph 52 above.

Conclusion

59. The Defendant rejected the Claimant's arguments for substantially the right reasons, and this application for Judicial Review must be dismissed.