Title: High Court Judgment Template
Author: Heather Watson
Last saved by: BAILII
Company: RCJ - In House Applications

Case No: 8SA90324
Neutral Citation Number: [2012] EWHC 3447 (QB)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
SWANSEA DISTRICT REGISTRY

Swansea Civil Justice Centre
Caravella House, Quay West, Quay Parade,
Swansea, SA1 1SP

Date: 30/11/2012

Before :

MR JUSTICE MORGAN
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Between :

| ROBERT DEAN HARRIES (A CHILD BY HIS MOTHER & LITIGATION FRIEND, SHARON SALLY HARRIES) | Claimant
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| DR ALAN DAVID STEVENSON | Defendant

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Gerwyn Samuel (instructed by Smith Llewelyn Solicitors) for the Claimant
James Watson QC (instructed by MDU Services Ltd) for the Defendant

Hearing date: 12 November 2012
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Judgment
Mr Justice Morgan: 
The application
1.	On 11^th September 2012, the Claimant applied for the determination of what was said to be a preliminary point of law in the following terms: “whether the Claimant is entitled to seek an award of damages based on a more appropriate discount rate than that set by the Lord Chancellor, pursuant to section 1(2) of the Damages Act 1996 for those heads of damage that would ordinarily be the subject of a periodical payments order in a case where the Defendant is unable or unwilling to make index linked periodical payments”.
2.	The Claimant’s application was argued before me on 12^th November 2012. Mr Samuel appeared on behalf of the Claimant. Mr Watson QC appeared on behalf of the Defendant. At the conclusion of the hearing, I announced that I would dismiss the application and that I would give my reasons in a later written judgment. This judgment now contains the reasons for my decision to dismiss the application.
The Claim
3.	I was not provided with the pleadings in the action. However, the nature of the claim is summarised in a witness statement by Ms Mei Li, the Claimant’s solicitor and her summary is accepted as accurate for present purposes.
4.	Dean Harries was born on 5^th July 1994. When he was 12 days old he became seriously ill. The Defendant doctor was his general practitioner. The doctor failed to diagnose Dean’s condition and Dean suffered catastrophic and irreversible brain damage. On 10^th September 2008, acting through his mother as his litigation friend, Dean issued a Claim Form claiming damages for clinical negligence from the doctor. In his Defence, the doctor admitted negligence but contended that a proper diagnosis would not have affected the final outcome. The claim was settled as to liability and causation on terms that the Defendant would pay 95% of the amount of compensation which would be determined by the court. Judgment in these terms was entered on 16^th February 2010.
5.	The court has given directions for the trial of the quantum claim. In particular directions have been given on 16^th February 2010, 26^th November 2010, 28^th September 2011 and 1^st May 2012. The trial is now due to take place in June 2013, with an estimated length of 10 days.
6.	The parties have served a schedule and a counter schedule of loss and damage. The most recent schedule from the Claimant is dated 5^th July 2012. The schedule identifies the sums claimed for past losses and for future losses. The past losses are said to be £1,783,911. The future losses are said to be either £6,176,564 or £8,405,108. The differences in relation to future losses stem from different figures being used for loss of earnings, the cost of care and management and the cost of accommodation. These differences are attributable to the discount rates which are used in the calculations. In the case of each of these differences, the lower sum claimed is calculated using a discount rate to 2.5%. The higher figures which are claimed use lower discount rates, as follows: loss of earnings – minus 1.5%; care and case management -  an amalgam of minus 1.5% and 0%; and accommodation - 0% (in some circumstances).
7.	The most recent counter schedule of loss, served by the Defendant, which was put before me is dated 21^st October 2011. The Defendant’s figures for loss are significantly lower than those put forward by the Claimant. As regards the discount rate for loss of earnings, care and case management and accommodation, the Defendant adopts a discount rate of 2.5%.
8.	On 25^th April 2012, there was a directions hearing in relation to the claim. The Claimant raised the question of a possible preliminary issue in relation to the discount rate. The court ordered that any application by the Claimant for the determination of a preliminary issue of the appropriate discount rate must be made by a specified date. It was further directed that if such an application were made, the case should be listed for further directions. The present application was made by the Claimant prior to the specified date and the application was listed for hearing on 12^th November 2012. The parties disagreed as to the nature of that hearing. The Claimant contended that the hearing was for the determination of the preliminary issue identified in his application notice. The Defendant contended that the hearing was the directions hearing referred to in the order of 25^th April 2012 and that the first matter which required attention was whether there should be an order for the determination of a preliminary issue as to the discount rate.
The Claimant’s position on the application
9.	The Claimant treated the hearing on 12^th November 2012 as if it were the effective hearing of the preliminary issue identified by the Claimant. The application notice was supported by a witness statement of the Claimant’s solicitor. The exhibits to that witness statement included a report from an independent financial adviser (Mr Cropper) and an actuary (Mr Carus). Mr Samuel had prepared a skeleton argument running to 34 pages explaining why the court should hold that this case came within section 1(2) of the Damages Act 1996, so that a discount rate different from the rate prescribed by the Lord Chancellor should be adopted. Mr Samuel submitted that the rate itself should be fixed at a later hearing.
10.	In her witness statement, the Claimant’s solicitor stated that the Claimant would prefer to have a periodical payments order (a PPO) in relation to some heads of future loss, rather than an award of a lump sum of damages. This was particularly because the present claim involved a substantial claim for care and case management and life expectancy was uncertain. She then stated that the Defendant doctor was insured by the Medical Defence Union; the claim was not against the NHS litigation authority. The MDU’s solicitors had confirmed that a PPO could not be made in this case because the MDU could not provide reasonable security for payments under such an order. 
11.	The Claimant’s solicitor then referred to the report of Mr Cropper which she summarised as stating that Mr Cropper’s advice was that a PPO was in the Claimant’s best interests. In fact, Mr Cropper’s advice was not expressed in those terms. At pages 3 to 8 of his report, he set out his “overview”. He stated on page 3, that it was “inappropriate from a financial advice perspective to have to predetermine the most appropriate form of award prior to knowing what the Claimant’s reasonable needs are”. On page 4 he said: “I consider that the most appropriate action is for the Court to hand down quantum Judgment and adjourn the matter in order that the most appropriate form of award can be formally considered in light of that Judgment”. He made similar statements on pages 6 and 8 of his report. However, he said that he was prepared to give “an initial indication” to allow the Claimant’s advisers to consider the options available and to raise queries. Later in his report he considered the risks involved for a Claimant who is awarded a conventional lump sum of damages. These risks included the risk that the Claimant might live longer than the life expectancy assumed for the purpose of calculating the lump sum and the risk that the investment return on the lump sum would not be as good as that which was assumed when calculating the lump sum. Mr Cropper then quoted earlier statements of opinion that the one thing which was certain about a lump sum award in respect of future loss was that it would inevitably either over-compensate or under-compensate a claimant. Mr Cropper then considered the advantages and the disadvantages from a claimant’s point of view of a PPO in relation to future losses. The disadvantages of a PPO included the fact that the periodical sums payable would not allow a claimant to incur capital expenditure when that might otherwise be desirable. Further, a PPO could prove to be inflexible.  Mr Cropper then stated his “initial opinion”, on the basis of certain assumptions, which might have to be reviewed when the final assessment of the Claimant’s needs had been carried out, in favour of a PPO for care and case management and for loss of earnings and in favour of a lump sum award for accommodation and certain other elements of the claim.
12.	It is also relevant to refer to Mr Cropper’s consideration as to whether, given the circumstances of the present case, there would be reasonable security as to the receipt by the Claimants of the sums ordered to be paid under any PPO. Mr Cropper pointed out that the MDU was not protected by ministerial guarantee under section 6 of, or the schedule to, the Damages Act 1996 and were not a government or health service body. He also stated that at the date of his report (16^th May 2012) it was not possible to purchase an annuity that was protected by a scheme under section 213 of the Financial Services and Markets Act 2000. He added: “[h]owever, this position may have changed prior to trial in this case”. He then pointed out that even if such an annuity were available, no annuity could be purchased on an ASHE 6115 linked basis, as earnings were a precluded link under the FSA rules.
13.	In her witness statement, the Claimant’s solicitor next referred to the report of the actuary, Mr Carus. She summarised his evidence as stating that the discount rate should be “far less” than the prescribed rate of 2.5%. Mr Carus prepared two reports, the first dated 12^th March 2012 and the second dated 27^th April 2012. In his first report, he stated that a discount rate calculated in accordance with the principles used by the Lord Chancellor in 2001 would be 0.5% and that if one took account of the market’s expectations of yields and inflation, the appropriate discount rate for discounting future losses would be 0%. In his second report, he revised these two figures to minus 1.0% and minus 1.5% respectively. He also stated, in his first report, that to use the Lord Chancellor’s discount rate of 2.5% undervalued the claim by 19% to 23%.
14.	Finally, the Claimant’s solicitor referred to the decision of the Privy Council (on appeal from the Court of Appeal in Guernsey) in Helmot v Simon [2012] UKPC 5, in support of her contention that the Lord Chancellor’s discount rate of 2.5% was “far too high”.
15.	The Claimant’s position was further explained in the written and oral submissions of Mr Samuel. He submitted that if the Claimant were awarded a lump sum calculated on the basis of a discount rate of 2.5%, he would be under compensated by a sum in excess of £2 million. He said that it was inevitable that the court would have wished to make a PPO in relation to the Claimant’s future needs, for various reasons including the fact that the 2.5% discount rate was “hopelessly inadequate”.  There was no need to wait until trial just in case it turned out that a PPO could be made with payments under it being reasonably secure (pursuant to an annuity). The application raised an issue of law, justice and public policy. The award of a lump sum using a discount rate of 2.5% would mean that many defendants would “seek to avoid” PPOs, because a lump sum based on that discount rate would result in lower compensation payments and would transfer the investment risk to claimants. The use of the prescribed discount rate would infringe the principle that 100% compensation should be awarded. The present application was not an attack on the prescribed rate which could continue to apply where a PPO was not sought by a claimant. The application was important as it was the first time that a claimant had sought to raise the injustice that is caused to a victim when a defendant is unable to fund a reasonably secure PPO for future heads of damage. 
16.	Mr Samuel submitted that a change in the discount rate would not be appropriate in every case, for example, it would not be appropriate where the recoverable damages would be reduced by high levels of contributory negligence. The point of principle was whether the Defendant’s inability to provide a reasonably secure PPO, when there is such a disparity between the Claimant’s position under a PPO and under a lump sum, was an exception within section 1(2) of the Damages Act 1996.
17.	In his submissions in reply, Mr Samuel submitted that the court should: (1) determine the preliminary issue identified in the application notice; or (2) order the trial of that preliminary issue; or (3) give directions for the exchange of expert evidence as to the appropriate rate to be determined under section 1(2) of the Damages Act 1996, in the event that the trial judge determined that the case came within section 1(2).
The Defendant’s position on the application
18.	Mr Watson submitted on behalf of the Defendant that the order for directions of 25^th April 2012 made it clear that the court has not yet acceded to the Claimant’s suggestion that there be a preliminary issue as to the discount rate. The present hearing is not a hearing of the preliminary issue but is a hearing at which it falls to be considered whether the court should order such a preliminary issue.
19.	The Defendant opposed the making of an order for the trial of a preliminary issue on grounds which were referred to as “arguability” and “prematurity”. The Defendant was prepared to oppose the application for a preliminary issue on the ground of prematurity alone. If the court dismissed the application on that ground, then the Defendant was prepared to address at a later point in the case whether the Claimant had any arguable case for invoking section 1(2) of the Damages Act 1996. Further, the Defendant did submit at this stage, to the extent that the court wished to consider the matter, that the Claimant did not have an arguable case for invoking section 1(2) of the Damages Act 1996. 
20.	As to the arguability of the Claimant’s reliance on section 1(2) of the Damages Act 1996, the Claimant assumed that (1) the case at trial would be held to be suitable for a PPO in relation to future losses (or some of them) and (2) that a PPO would not be made because payment under it would not be reasonably secure. Even if those assumptions turned out to be well founded, the case would not be an exception within section 1(2) of the 1996 Act because:
i)	It was common and not exceptional for a defendant to be unable to provide a reasonably secure PPO;
ii)	It could not seriously be argued that a defendant who could not provide a reasonably secure PPO would automatically be liable to pay an enhanced lump sum;
iii)	The circumstances relied upon by the Claimant were a disguised attack on the Lord Chancellor’s rate as the Claimant’s case depended on him saying that the current prescribed rate is unfair and leads to a shortfall in the recovery of lump sum damages;
iv)	If the non-availability of a PPO were relevant to the setting of the appropriate discount rate, then that matter would have been in the contemplation of the Lord Chancellor when setting the discount rate.
21.	As to the timing of the suggested preliminary issue, the Defendant submitted that a determination of the discount rate in advance of the trial was inappropriate. First of all, it remained to be established whether the case was one where the court would consider it appropriate in principle to make a PPO for some or all future losses. The Claimant’s own expert, Mr Cropper, had given cogent reasons why it was premature for him to advise the Claimant whether to elect for a lump sum or a PPO. Further, the Claimant’s actuary had stated that the availability (at the date of the trial) of a reasonably secure annuity, which would be the source of the periodical payments, would not be known until the trial. The Claimant’s contention that the present case was an exception within section 1(2) of the 1996 Act depended on both those matters emerging in the way that the Claimant predicted they would emerge but that was not certain at the present time.  A judgment on those matters should be made at the trial and not before. 
22.	If the court were to order the trial of a preliminary issue on the Claimant’s application, the preliminary issue would not involve a pure point of law. That was shown by the fact that the Claimant wished to rely on the evidence of Mr Cropper and Mr Carus for the purpose of the preliminary issue (as well as, later, for the purpose of fixing the discount rate, if the case did come within section 1(2)). The Defendant would wish to call expert evidence in response at the hearing of the preliminary issue. Thus the trial of the preliminary issue would involve a hearing with contested expert evidence. If the Claimant succeeded on the preliminary issue, there would then need to be a further hearing with the same or similar expert evidence for the purpose of fixing the discount rate. The determination of a preliminary issue would also be likely to lead to an appeal which would mean that the answer to the preliminary issue would not necessarily have emerged prior to the trial in June 2013.
23.	The Defendant further drew attention to the fact that the Lord Chancellor was currently consulting as to the methodology to be used to determine the appropriate discount rate. The consultation period began on 1^st August 2012 and ended on 23^rd October 2012. The Lord Chancellor has indicated he will respond to the consultation by 22^nd January 2013. The outcome of this consultation may affect the arguments as to the Claimant’s ability to rely on section 1(2) of the 1996 Act. Even if the final outcome of the Lord Chancellor’s consultation will not be known by the trial in June 2013 (and that is not clear), it would be wrong to consider the application of section 1(2) at the present time rather than having the opportunity in June 2013 to consider everything then known about the outcome of the consultation.
The nature of the hearing
24.	I need first to state my view as to the nature of the hearing before me on 12^th November 2012. The Claimant proceeded on the basis that the purpose of the hearing was to determine the answer to the preliminary issue which he had identified in his application notice. I consider that this was not, and could not have been, the nature of that hearing.
25.	It is not open to a party unilaterally to apply for the determination of a preliminary issue and thereby to produce the result that that issue must be heard and determined. There will only be a preliminary issue if the court orders that there should be a preliminary issue. Even if both parties agree that there should be a preliminary issue, it is open to court to decline to order the trial of a preliminary issue. It is equally not open to a party unilaterally to identify the preliminary issue. The court must approve the drafting of the suggested preliminary issue. 
26.	In the present case, the direction given on 25^th April 2012 was plainly not an order for the trial of a preliminary issue. It was a direction as to a possible application by the Claimant for an order that there be a preliminary issue. The fact that the Claimant’s application notice sought the determination of a preliminary issues instead of, as it should have done, seeking an order that there be the trial of a preliminary issue does not allow the Claimant unilaterally to change the nature of the application or of the hearing of that application. 
27.	Accordingly, all that the Claimant could ask for at the hearing on 12^th November 2012 was an order that there be a subsequent trial of a preliminary issue and for directions leading to that subsequent trial. In the event, Mr Samuel came fully prepared to argue the preliminary issue which the Claimant had unilaterally identified. He provided the court with a lengthy skeleton argument on that subject and a full citation of authority. He had a full opportunity in advance of the hearing and at the hearing itself to demonstrate, if he could, the arguability of his case. 
28.	Mr Watson submitted that there should not be an order for the trial of a preliminary issue, for two reasons. One was that the Claimant’s case on the suggested issue was not arguable and the second was that an order for a preliminary issue was not appropriate on case management or procedural grounds. It seems to me in those circumstances that I ought to consider whether the Claimant’s case on the suggested preliminary issue is arguable as well as the procedural points which have been raised. For this purpose, I will first refer to the legal position as regards the court’s power to adopt a discount rate different from that prescribed by the Lord Chancellor.
The law
29.	Section 1 of the Damages Act 1996 deals with the discount rate to be applied when calculating damages for future pecuniary loss in an action for personal injury. Section 1 provides:
1  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 rules of 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.
(5)     …
(6)     … 

30.	On 25^th June 2001, pursuant to section 1(1) of the 1996 Act, the Lord Chancellor made the Damages (Personal Injury) Order 2001 (SI 2001/2301). The discount rate was set at 2.5%. Following the making of that Order, and in the light of questions which had been raised as to some of the data relied upon by the Lord Chancellor, he considered whether to withdraw the Order. On 27^th July 2001, he made a written statement containing his reasons for not withdrawing the Order. The statement is available at www.lcd.gov.uk/civil/discount.htm. The statement is detailed and part of it is set out in an authority to which I will later refer. At the end of the statement, he referred to the provisions of section 1(2) of the 1996 Act.
31.	As referred to above, the Lord Chancellor has more recently issued a consultation paper (CP12/2012) entitled: “Damages Act 1996: The Discount Rate How should it be set?” The consultation period ended on 23^rd October 2012 and the consultation paper states that a response to the consultation is due to be published by 22^nd January 2013. It is not necessary in this judgment to describe the detailed discussion in the consultation paper although I note in the Executive Summary it states that the majority of awards of damages for personal injury provide for a lump sum award rather than a PPO.
32.	Section 2 of the 1996 Act provides for PPOs. The original section 2 was replaced by the present section 2 by the Courts Act 2003, section 100(1), with effect from 1^st April 2005. Thus the original section 2 was in force when the Lord Chancellor made his 2001 Order prescribing the discount rate under section 1. In view of certain submissions made to me, I will set out (in italics) the original section 2 of the 1996 Act which was in these terms: 
2  Consent orders for periodical payments
 (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.
(2)     In this section “damages” includes an interim payment which the court, by virtue of rules of court in that behalf, orders the defendant to make to the plaintiff (or, in the application of this section to Scotland, the defender to make to the pursuer).
(3)     This section is without prejudice to any powers exercisable apart from this section.

33.	The current Section 2  of the 1996 Act now provides:
 2 Periodical payments
(1)     A court awarding damages for future pecuniary loss in respect of personal injury—
(a)     may order that the damages are wholly or partly to take the form of periodical payments, and
(b)     shall consider whether to make that order.
(2)     A court awarding other damages in respect of personal injury may, if the parties consent, order that the damages are wholly or partly to take the form of periodical payments.
(3)     A court may not make an order for periodical payments unless satisfied that the continuity of payment under the order is reasonably secure.
(4)     For the purpose of subsection (3) the continuity of payment under an order is reasonably secure if—
(a)     it is protected by a guarantee given under section 6 of or the Schedule to this Act,
(b)     it is protected by a scheme under section 213 of the Financial Services and Markets Act 2000 (compensation) (whether or not as modified by section 4 of this Act), or
(c)     the source of payment is a government or health service body.
(5)     An order for periodical payments may include provision—
(a)     requiring the party responsible for the payments to use a method (selected or to be selected by him) under which the continuity of payment is reasonably secure by virtue of subsection (4);
(b)     about how the payments are to be made, if not by a method under which the continuity of payment is reasonably secure by virtue of subsection (4);
(c)     requiring the party responsible for the payments to take specified action to secure continuity of payment, where continuity is not reasonably secure by virtue of subsection (4);
(d)     enabling a party to apply for a variation of provision included under paragraph (a), (b) or (c).
(6)     Where a person has a right to receive payments under an order for periodical payments, or where an arrangement is entered into in satisfaction of an order which gives a person a right to receive periodical payments, that person's right under the order or arrangement may not be assigned or charged without the approval of the court which made the order; and—
(a)     a court shall not approve an assignment or charge unless satisfied that special circumstances make it necessary, and
(b)     a purported assignment or charge, or agreement to assign or charge, is void unless approved by the court.
(7)     Where an order is made for periodical payments, an alteration of the method by which the payments are made shall be treated as a breach of the order (whether or not the method was specified under subsection (5)(b)) unless—
(a)     the court which made the order declares its satisfaction that the continuity of payment under the new method is reasonably secure,
(b)     the new method is protected by a guarantee given under section 6 of or the Schedule to this Act,
(c)     the new method is protected by a scheme under section 213 of the Financial Services and Markets Act 2000 (compensation) (whether or not as modified by section 4 of this Act), or
(d)     the source of payment under the new method is a government or health service body.
(8)     An order for periodical payments shall be treated as providing for the amount of payments to vary by reference to the retail prices index (within the meaning of section 833(2) of the Income and Corporation Taxes Act 1988) at such times, and in such a manner, as may be determined by or in accordance with Civil Procedure Rules.
(9)     But an order for periodical payments may include provision—
(a)     disapplying subsection (8), or
(b)     modifying the effect of subsection (8).]
34.	In setting out the original and the current section 2, I have omitted section 2(A1) which deals with rail passengers’ rights and obligations under Regulation (EC) No. 1371/2007.
35.	Section 2A of the 1996 Act contains provisions supplementary to section 2. Section 2B of the 1996 Act permits the Lord Chancellor to make an order enabling a court, in specified circumstances, to vary a PPO or a settlement agreement which provides for periodical payments. This power has been exercised by the Damages (Variation of Periodical Payments) Order 2005 (SI 2005/ 841).
36.	It did not take long before the approach to be adopted in relation to the Lord Chancellor’s prescribed rate of 2.5% and, in particular, in relation to section 1(2) of the 1996 Act, came before the courts. The right approach to section 1(2) was considered by the Court of Appeal in Warriner v Warriner [2002] 1 WLR 1703. In that case, the claimant suffered serious brain damage in a road traffic accident. Liability was admitted so that only quantum was in issue. The claimant wished to call an expert who would give evidence that the prescribed discount rate of 2.5% was unfair to claimants who were awarded large sums of damages, which were expected to compensate them for future losses over a long period, and that the appropriate rate in that case should be 2%. At a case management conference, the judge gave the claimant permission to call that evidence and the defendant appealed. The appeal was allowed. 
37.	The principal judgment in Warriner v Warriner was given by Dyson LJ. At paragraphs [11] to [15], he referred to some of the reasons given by the Lord Chancellor in his statement of 27^th July 2001 in the following terms:
“11 It is necessary to refer to some passages in the Lord Chancellor's reasons. He said that he had decided to set a single rate to cover all cases: 
“It will eliminate scope for uncertainty and argument about the applicable rate. Similarly, I consider it is preferable to have a fixed rate, which promotes certainty and which avoids the complexity and extra costs that a formula would entail.”
12 He recognised that the rate would be bound to be applied in a range of different circumstances over a period of time: that was why he set the rate to the nearest half per cent. He said that he had decided that he should: 
“set a rate which should obtain for the foreseeable future. I consider it would be very detrimental to the reasonable certainty which is necessary to promote the just and efficient resolution of disputes (by settlement as well as by hearing in court) to make frequent changes to the discount rate. Therefore, whilst I will remain ready to review the discount rate whenever I find there is a significant and established change in the relevant real rates of return to be expected, I do not propose to tinker with the rate frequently to take account of every transient shift in market conditions.”
13 Later he said: 
“Setting a single rate to cover all cases, whilst highly desirable for the reasons given above, has the effect that the discount rate has to cover a wide variety of different cases, and claimants with widely differing personal and financial characteristics. Moreover, as has become clear from the consultation exercise (including responses by expert financial analysts to questions which I posed them), the real rate of return on investments of any character (including investments in index-linked government securities) involves making assumptions for the future about a wide variety of factors affecting the economy as a whole, including for example the likely rate of inflation. In these circumstances, it is inevitable that any approach to setting the discount rate must be fairly broad-brush. Put shortly, there can be no single ‘right’ answer as to what rate should be set. Since it is in the context of larger awards, intended to cover longer periods, that there is the greatest risk of serious discrepancies between the level of compensation and the actual losses incurred if the discount rate set is not appropriate, I have had this type of award particularly in mind when considering the level at which the discount rate should be set”
14 The Lord Chancellor then explained in some detail why he had alighted on 2.5% rather than any other rate. He took a simple average of ILGS yields at an assumed rate of inflation of 3%, and arrived at an average gross yield of 2.46%. He concluded, therefore, that the net average yield on ILGS as adjusted to take account of tax lies in the range of 2% and 2.5%. Given that the rate was to be set to the nearest 0.5%, the choice lay between 2% and 2.5%. He then explained in detail why he opted for 2.5% rather than 2%. In summary, he gave these reasons: (a) the market in ILGS was at present distorted so that the prevailing yields were artificially low; (b) the Court of Protection, even in the wake of the decision of the House of Lords in Wells v Wells [1999] 1 AC 345, had continued to invest on behalf of claimants in multi-asset portfolios, such that real rates of return well in excess of 2.5% could be expected; and (c) it was likely that “real” claimants with large awards of compensation would not be advised to invest solely or even primarily in ILGS, but rather in a mixed portfolio.
15 Finally the Lord Chancellor said: 
“Finally, in deciding that a single rate of 2.5% should have been set by me on 25 June 2001, I have borne in mind that it will, of course, remain open for the courts under section 1(2) of the Damages Act 1996 to adopt a different rate in any particular case if there are exceptional circumstances which justify it in doing so.” ”
38.	The central part of the reasoning of Dyson LJ in that case is set out at paragraphs [33] to [35] in these terms:
“33 We are told that this is the first time that this court has had to consider the 1996 Act, and that guidance is needed as to the meaning of 'more appropriate in the case in question' in s 1(2). The phrase 'more appropriate', if considered in isolation, is open-textured. It prompts the question: by what criteria is the court to judge whether a different rate of return is more appropriate in the case in question? But the phrase must be interpreted in its proper context, which is that Lord Irvine LC has prescribed a rate pursuant to s 1(1) and has given very detailed reasons explaining what factors he took into account in arriving at the rate that he has prescribed. I would hold that in deciding whether a different rate is more appropriate in the case in question, the court must have regard to those reasons. If the case in question falls into a category that Lord Irvine did not take into account and/or there are special features of the case which (a) are material to the choice of rate of return and (b) are shown from an examination of Lord Irvine's reasons not to have been taken into account, then a different rate of return may be 'more appropriate'.
34 [Counsel for the Claimant] criticised the Lord Chancellor for using the phrase “exceptional circumstances” at the end of his reasons when referring to section 1(2) of the 1996 Act. So did Lord Brennan in the debate in the House of Lords on 29 November 2001 (Hansard (HL Debates), col 532) when an opposition motion that the order be revoked and a rate of 2% be substituted was rejected. It is true that the phase “exceptional circumstances” does not appear in the Act. But, in my judgment, the Lord Chancellor must have meant by “exceptional circumstances” no more than special circumstances not taken into account by him in fixing the rate of 2.5%. If “exceptional circumstances” is understood in that way the phrase is, in my view, a helpful explanation of the meaning of the subsection.
35 If section 1(2) is interpreted in this way, it is likely that it will be in comparatively few cases that section 1(2) will be successfully invoked, at any rate as long as the 2.5% rate and the Lord Chancellor's reasons for it continue to apply. The construction that I have given to section 1(2) seems to me to accord with and promote the policy considerations to which I have already referred. A generous and open-ended interpretation of section 1(2) would undermine the policy that was clearly articulated by the Lord Chancellor in his reasons, and by the courts before that.”
39.	In a concurring judgment, Latham LJ said:
“41 I agree. In this area certainty is extremely important. It enables cases to be settled with confidence, and it produces fairness as between litigants.
42 Prior to the making of the 2001 Order by the Lord Chancellor under the Damages Act 1996, the court applied the conventional discount rate (for many years 4.5% and latterly 3%) across the board, save in exceptional circumstances: see Wells v Wells [1999] 1 AC 345 and Warren v Northern General Hospital NHS Trust (No 2) [2000] 1 WLR 1404. Nothing in the 1996 Act suggests to me that it was Parliament's intention that this general policy should in any way be diluted. That indeed is clearly the view of the Lord Chancellor as set out in the reasons that he gave. In that I consider him to have been correct.
43 It is against that policy background, therefore, that the words in section 1(2) fall to be construed. The phrase “more appropriate”, as explained by Dyson LJ, has to be read in conjunction with the reasons given by the Lord Chancellor for choosing the particular rate of return that he has. It follows that it is difficult to see how a case falling squarely within the category of case envisaged by the Lord Chancellor, in which he has given a reasoned justification for the prescribed rate, could be said to be one in relation to which that prescribed rate is inappropriate in the absence of special features.”
40.	Mummery LJ agreed with both judgments. Applying the test identified by Dyson LJ, the court held that it was not appropriate to take account of a discount rate different from the prescribed rate. The judge had therefore been wrong to give directions as to expert evidence directed to the possibility of the selecting a rate which was not the prescribed rate.
41.	Warriner was applied by the Court of Appeal in Cooke v United Bristol Healthcare NHS Trust [2004] 1 WLR 251.  That decision involved three separate cases where the claimants, two children and a 20-year-old man, had been severely injured and had claimed damages from the defendants and where the defendants admitted total or partial liability. The claimants applied for permission to adduce, at the trials on quantum, the evidence of an accountant to the effect that their future care costs would be grossly underestimated if the effect of inflation were only built in to the multiplier by means of the prescribed discount rate and the multiplicands were based on costs current at the date of trial. The claimants therefore contended that the multiplicands should have stepped increases over time to reflect the faster rise in care costs in comparison with general inflation. At a directions hearing in each case, the judge in each case had refused the claimant permission to adduce that evidence at the trial. The appeals were dismissed. It was a premise of the discount rate set by the Lord Chancellor that the effects of inflation in claims for future loss were to be catered for solely by means of the multiplier, conditioned as it was by the discount rate, and that the multiplicand was to be based on current costs at the date of trial. The multiplicand could not be taken as allowing for any future inflation without usurping the basis on which the multiplier had been fixed. Accordingly, the claimants’ applications amounted to an illegitimate assault on the Lord Chancellor’s discount rate and on the efficacy of the 1996 Act.
42.	Mr Samuel pointed out that the 2001 Order and the decisions in Warriner and Cooke came before the new section 2 of the 1996 Act was substituted by section 100 of the Courts Act 2003. The 2003 Act received the Royal Assent on 20^th November 2003 and the new section 2 of the 1996 Act came into force on 1^st April 2005. However, after that time, the decided cases continued to treat Warriner and Cooke as a correct statement of the approach to be adopted in relation to section 1(2) of the 1996 Act. Thus in Flora v Wakom Heathrow Ltd [2006] PIQR Q95, Sir Michael Turner said at [7]:
“If a lump sum is to be awarded where future losses have occurred, then it is now well established that the Ogden Tables should be used, applying the appropriate factor of 2.5 per cent as it is at present, as fixed by the Lord Chancellor in 2001. Section 1(2) of the Damages Act 1996 made provision for the Court to make variations to the discount rate if any party to proceedings showed that a different discount rate would be more appropriate in the case in question. As far as is known, no Court has ever done that since 1996. Unsuccessful attempts were made by claimants in two cases, namely Warriner v Warriner [2002] 1 WLR 1703 and Cooke v United Bristol Health Care [2004] 1 WLR 251, to persuade the courts, in different ways to apply a different discount rate, thus increasing the multipliers for future losses. The Court of Appeal ruled against the claimant in both cases. It must therefore be regarded as settled law that attempts to apply a different discount rate, or otherwise to get round the discount rate fixed by the Lord Chancellor, are bound to fail unless particular or exceptional circumstances arise which have not yet apparently been envisaged in any reported case. Although the discount rate has, therefore, been frequently criticised as being excessively high, on a lump sum basis it would appear that any arguments for a different rate of return, however presented, will not be accepted by the Court.”
43.	When Flora reached the Court of Appeal ([2007] 1 WLR 489), Brooke LJ recorded in his judgment (at [21]) that the court had been told that section 1(2) of the 1996 Act was “for all intents and purposes treated as a dead letter today”. Of course, that comment does not mean that section 1(2) should be treated as repealed. Instead, I need to examine the circumstances of this case to see whether it is arguable that section 1(2) might apply to the circumstances of the present case, on the basis of what was said by Dyson LJ in Warriner at [33] as to how section 1(2) is to be applied. 
44.	Flora concerned the possibility of the court indexing periodical payments by reference to an index other that the retail prices index (RPI) pursuant to sections 2(8) and (9) of the 1996 Act. In his judgment, with which the other members of the court agreed, Brooke LJ said that “an award of a lump sum is entirely different in character from an award of periodical payments as a mechanism for compensating” for loss through personal injury: see [27]. For that reason, the case law as to section 1(2) only applying in an exceptional case did not produce the result that the court’s power to index periodical payments by an index other than RPI was also confined to exceptional cases.  Instead, trial judges should select an index which they considered appropriate and fair in all the circumstances: see [37].
45.	Following Flora, trial judges applied the approach there laid down.  A number of appeals were taken by the defendants to the Court of Appeal and were the subject of the decision reported as Thompstone v Tameside and Glossop NHS Trust [2008] 1 WLR 2207. The appellants challenged the decision in Flora. Their argument was summarised at [33] in the judgment of the court delivered by Waller LJ in these terms:
“[Counsel] submitted that it should be impermissible to have two ostensibly parallel but in fact divergent systems of compensation producing different outcomes. If applying a discount calculated by reference to the RPI was consistent with the 100% principle when calculating a lump sum award, it must also be consistent with the 100% recovery principle to make PPOs indexed by reference to the RPI.”
46.	In Thompstone, this submission was rejected for the reasons given in Flora, namely, that the two regimes, of lump sum awards and PPOs, were “quite different”: see Thompstone at [35].
47.	It is clear from Flora and Thompstone that those cases were argued and decided on the basis that the decisions in Warriner and Cooke remained good law as to the approach to be adopted to section 1(2) of the 1996 Act, notwithstanding the coming into force of the new section 2 of the 1996 Act and the fact that the choice of an index, different from RPI, pursuant to section 2(9) of the 1996 Act did not require the proof of exceptional circumstances.
48.	Mr Samuel relied upon the decision of the Privy Council in Helmot v Simon [2012] UKPC 5, an appeal from Guernsey. Guernsey does not have anything equivalent to the Damages Act 1996. The award of damages for personal injury in that case had to take the form of a lump sum award. The Privy Council upholding the decision of the Court of Appeal in Guernsey fixed a “discount rate” of minus 1.5% for earnings related losses and 0.5% for other future losses. The choice of those rates was based on the detailed economic evidence which had been given to the trial judge. That evidence was described as being “powerful, consistent and unchallenged”. If the issue before me was whether, absent the Damages Act 1996, it was arguable that the trial judge in this case might hear evidence that might persuade him to adopt a discount rate different from 2.5%, then this decision would be very helpful in judging the arguability of such a case. However, that is not the issue before me. I have instead to decide whether it is arguable that the Claimant might be able to bring his case within section 1(2) of the Damages Act 1996, as that subsection has been interpreted in Warriner and  Cooke.
Discussion and conclusions
49.	The Lord Chancellor’s prescribed rate and the possible application of section 1(2) of the 1996 Act are only relevant if the trial judge makes a lump sum award in relation to future losses. Whether that will happen is not yet known. Mr Samuel submits that it is inevitable that the trial judge will make such a lump such award. He submits that it is clear that the Claimant would want a PPO rather than a lump sum award. He submits that it is inevitable that a PPO will be ruled out because payments under it would not be reasonably secure as required by section 2(3) of the 1996 Act. He also submits that it is clear that the court would make a PPO if payments under it would be reasonably secure. He therefore submits that it is now clear that the Claimant will be denied a PPO by reason of the status of the Defendant and his insurers, resulting in the court being unable to make a secure PPO against him. 
50.	I will discuss later in this judgment whether the clarity of the position and the inevitability of the result are as Mr Samuel contends. However, for the present, I will assume that he is right about these matters. In those circumstances, is it arguable that the trial judge might apply section 1(2) of the 1996 to fix a discount rate different from the prescribed rate?
51.	At times during his submissions, Mr Samuel submitted that the approach to section 1(2) laid down in Warriner and Cooke was no longer appropriate. This was said to be because those decisions came before the new section 2 of the 1996 Act was substituted by the Courts Act 2003. It was said that now that a court can make a PPO even where one or both parties do not consent to it (as compared with the position under the original section 2) a PPO became the appropriate order to make to provide 100% compensation in relation to some or all future losses. That was said to change the legislative scene against which section 1(2) was to be interpreted and applied. I do not accept that submission. It is clear from the authorities to which I have referred that the decisions in Warriner and Cooke continue to state the approach which a court should adopt to section 1(2) of the 1996 Act.
52.	The approach laid down in Warriner at [33] requires one to ask whether the instant case: (1) falls into a category which the Lord Chancellor did not take into account; or (2) has special features which (a) are material to the choice of the rate of return and (b) are shown from an examination of the Lord Chancellor’s reasons not to have been taken into account. If the instant case falls into one or both of these categories then the court “may” adopt a discount rate different from the prescribed rate.
53.	Mr Samuel submitted that economic forces today are radically different from those existing in 2001 when the Lord Chancellor prescribed a rate of 2.5%. Mr Samuel also submitted that a PPO would provide 100% compensation to the Claimant and that any lump sum award should also provide 100% compensation to the Claimant. The way in which to ensure that a lump sum award did provide 100% compensation was to make sure that the discount rate used in calculating the lump sum award reflected current economic circumstances. 
54.	However, Mr Samuel did not go so far as to submit that the change in economic forces is itself sufficient to allow a trial judge to apply section 1(2) of the 1996 Act. Such a submission would be a direct challenge to the Lord Chancellor’s prescribed rate. It is open to the Lord Chancellor to prescribe a different discount rate. Indeed, the Lord Chancellor is currently consulting as to the methodology to be used for that purpose. Whilst the current prescribed rate remains unchanged, it is not appropriate for a court in an individual case to consider whether to adopt a different rate, just because it is said that economic forces today differ from those in 2001. If that is thought to be unfair to claimants, the justification is that it is desirable as a matter of policy for the amount of the discount rate to be prescribed and fixed rather than it should be the subject of evidence and argument in some, perhaps, many cases which do not possess exceptional features. 
55.	Although Mr Samuel commended the approach of the Privy Council in Helmot v Simon [2012] UKPC 5, I do not consider that that decision on its own would allow a trial judge to depart from the prescribed rate. That decision concerned the common law position as to lump sum awards and did not decide any questions arising under the Damages Act 1996. The relevance of that decision was that if the trial judge were entitled to depart from the prescribed rate, then he might well do so.
56.	In the end, Mr Samuel’s submission was that the present case is special because: (1) the Claimant would want a PPO in relation to future losses; (2) a court would make a PPO if the payments were reasonably secure; and (3) it was the position of the Defendant which prevented the court making a PPO. In my judgment, before the Claimant can bring this case within section 1(2) of the 1996 Act, he must show, consistently with Warriner and Cooke that this case either: (1) falls into a category which the Lord Chancellor did not take into account; or (2) has special features which (a) are material to the choice of the rate of return and (b) are shown from an examination of the Lord Chancellor’s reasons not to have been taken into account.
57.	Mr Samuel essentially submitted that the present case falls into a category which the Lord Chancellor did not take into account. He says that in 2001, the possibility of periodical payments was governed by the original section 2 of the 1996 Act. It was not open to the court to make a PPO without the consent of both parties. Since 1^st April 2005 such an order is possible, otherwise than by consent. The Lord Chancellor, it is said, could not have had in contemplation a case like the present where the court is prevented from exercising its power to make a PPO, which is desired by the Claimant, because of the Defendant’s circumstances.
58.	I am not able to accept the submission that this case falls into a category not contemplated by the Lord Chancellor in 2001. In 2001, it was open to the court to make a PPO with the consent of the parties. It was therefore entirely possible that a claimant would wish to have a PPO but the court would be prevented from making a PPO by the defendant’s refusal to agree to one. The defendant might have various reasons for such refusal. One such reason might be that it was not able to provide reasonable security as to payments under the PPO and so did not wish to be bound by a PPO. Another reason might be that a defendant considered that a lump sum award was less onerous to it than a PPO. In my judgment, the fact that the circumstances where the attitude of, or the status of, a defendant might prevent a court making a PPO are much narrower today than they were in 2001 does not show that the present case is in a category not contemplated by the Lord Chancellor in 2001. 
59.	In my judgment, the case put forward by the Claimant is a direct attack on the prescribed rate. It is not even much disguised. In accordance with the authorities, that attack will not be permitted. I consider that the Claimant does not have an arguable case for invoking section 1(2) of the 1996 Act. For that reason, I will dismiss the Claimant’s application.
60.	As already explained, the Defendant submitted that even if the Claimant had an arguable case in relation to section 1(2) of the 1996 Act, the right time to argue that case (if it remained relevant) was at or subsequent to the trial on quantum. For the sake of completeness, I will deal with this submission although I have already decided that it is appropriate to dismiss the Claimant’s application on other grounds.
61.	It is not yet known whether the trial judge will make a lump sum award in relation to future losses. Whilst it seems highly likely that the trial judge will make such a lump such award, I do not think it can be regarded as inevitable. Further, it is not inevitable that the court would make a PPO if payments under it would be reasonably secure. The Claimant’s own expert, Mr Cropper, has not been prepared to express anything other than an initial opinion on whether the Claimant himself would ask for a PPO or for a lump sum award. Nor is it inevitable that a PPO will be ruled out because payments under it would not be reasonably secure, as required by section 2(3) of the 1996 Act. Accordingly, I do not accept Mr Samuel’s submission that it is now clear that the Claimant will be denied a PPO by reason of the status of the Defendant and his insurers, resulting in the court being unable to make a reasonably secure PPO against him. 
62.	Accordingly, the matters which are relied upon by the Claimant as justifying the application of section 1(2) of the 1996 Act have not yet been established. They might not be established at the trial. If they are not established, the suggested preliminary issue will not arise. It seems to me that it would be inappropriate for the parties and the court to deal with the suggested preliminary issue at a hearing involving expert evidence and legal submissions when it might later emerge that the decision of the court was irrelevant to the overall outcome of this case.
63.	In the course of argument, I pointed out that the procedural course which the claimants in Warriner and Cooke had (albeit unsuccessfully) followed was to apply for directions which would allow them to call evidence at the trial (but not at a preliminary stage) in support of their case that a different discount rate should be adopted, pursuant to section 1(2) of the 1996 Act. In his reply, Mr Samuel invited me to give such directions so that his case as to section 1(2) of the 1996 Act could be developed with expert evidence at the trial. The Claimant had not asked for such directions in his application notice nor on any earlier occasion when the court was asked to give directions. In any event, in view of my earlier conclusion that the Claimant’s case as to section 1(2) was not arguable, I decline to give the direction now sought on his behalf.