SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lady Smith Lord McEwan	[2013] CSIH 10 PD736/11 OPINION OF LORD CARLOWAY, the LORD JUSTICE CLERK in the reclaiming motion ANTHONY STEPHEN TORTOLANO Pursuer and reclaimer; against OGILVIE CONSTRUCTION LIMITED Defenders and Respondents: _______________

Act: Bain QC, Fitzpatrick; Digby Brown LLP

Alt: Milligan QC, A Cowan (Solicitor Advocate); Simpson & Marwick

21 February 2013

Introduction

[1] Section 1 of the Damages Act 1996, 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, ..., take into account such rate of return ... as may from time to time be prescribed by an order made by [the Scottish Ministers].

(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 Scottish Ministers] shall consult the Government Actuary; and any order under that subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of [the Scottish] Parliament."

[2] The Damages (Personal Injury) (Scotland) Order 2002 (SSI 2002/46) which was made in terms of section 1(1) of the 1996 Act, provides:

"3. Rate of return

The rate of return referred to in section 1(1) of the Damages Act 1996 shall be 2.5 per cent."

[3] The pursuer, who is aged 23, seeks a substantial sum in damages in respect of an accident in the course of his employment with the defenders on 21 November 2008. He suffered a very severe closed head injury which has caused significant permanent neurological, cognitive and psychological disability. The pursuer claims compensation in respect of future loss, including continuing loss of earnings and the costs of future care and support.

[4] The pursuer reclaims against a decision of the Lord Ordinary dated 10 October 2012 ([2012] CSOH 162) allowing parties to amend the record with the exception of averments proposed by the pursuer relative to the "appropriate" rate of return on investment. The excluded averments are directed towards establishing facts which demonstrate that the appropriate rate, to be applied in selecting the multiplier for use in the future loss calculations, ought to be well below the rate prescribed by the Scottish Ministers having regard to the true return on current investments. The pursuer proposes to lead evidence from an actuary and a forensic accountant in support of these averments.

[5] The controversy between the parties is thus whether the averments are relevant to the issue of whether the pursuer's case can be brought within section 1(2) of the 1996 Act. The pursuer maintains that a rate of return on investment of 0% should be taken when assessing non-earnings related losses and a rate of minus 1% should apply to future loss of earnings. The defenders contend that the pursuer's claim should be dealt with under section 1(1) and that the prescribed rate of return of 2.5% should apply. The Lord Ordinary held that the pursuer had failed "to aver himself out of the generality" (Opinion, para [17]) of section 1(1) and was thus not entitled to lead evidence seeking to establish a "more appropriate" rate under section 1(2), notwithstanding that the averments would, but for the statutory provisions, be relevant for that purpose.

[6] The Lord Ordinary set out the historical background to the introduction of the prescribed rate (para [13]). The fundamental principle at common law was that a pursuer, who was found entitled to reparation, should be fully compensated for his loss and damage. The lump sum awarded is calculated, so far as the future is concerned, by reference to the estimated annual rate of loss (the multiplicand) multiplied by the number of years during which the loss would be likely to subsist, subject to a discount reflecting the opportunity, which the pursuer would have, to invest the sum and obtain an annual return on his decreasing capital. The discount rate, which leads to the selection of the multiplier, is thus key to the calculation of such damages as will adequately compensate a pursuer.

[7] In the past, the calculation was informed by an "implicit irrebuttable presumption" (para [15]) that the discount rate was of the order of 4% to 5% (O'Brien's Curator Bonis v British Steel 1991 SC 315). Following the 1996 Act, but prior to a rate being prescribed in terms of section 1(1), the House of Lords in Wells v Wells [1999] 1 AC 345 selected a substitute figure of 3% on the basis that this represented the net rate of return then available on Index Linked Government Securities. Thereafter, the Lord Chancellor, and subsequently the Scottish Ministers, adopted a similar ILGS-based approach and fixed the prescribed rate at 2.5 per cent, replacing the higher Wells' presumption. The new rate was fixed by the legislature for the generality of cases under reference to what the Lord Ordinary described (para [15]) as "a combination of quite complex factors with a component of social, financial and economic policy". By contrast, the selection of any different rate under section 1(2) was to be a judicial determination of fact "in the case in question". The Lord Ordinary rejected the notion that the circumstances, which could be relied upon by a pursuer under section 1(2), might be such as to render a different rate more appropriate "in every other conceivable case" (para [16]). Such a construction would, the Lord Ordinary reasoned, fail to give due weight to the words "in the case in question".

[8] The Lord Ordinary was reinforced in his construction of the statutory provisions by a purposive interpretation, which proposed that sections 1(1) and 1(3) were intended to fix a certain rate or rates to achieve a broadly just outcome, without the need to litigate the issue in every case. The requirement for certainty and the desirability of avoiding litigation would be defeated by an interpretation of section 1(2) which allowed reconsideration of the discount rate whenever a party sought to show that any factor relied upon, in fixing the prescribed rate, was, for whatever reason, "less than robust" (para [17]). The inevitable conclusion was that, for the time being, the Scottish Ministers intended that the rate for the generality of cases remain at 2.5%.

[9] The Lord Ordinary's view was influenced by a consideration of a number of cases in the English Court of Appeal. He followed the obiter dictum of Stuart-Smith LJ, handing down the judgment of the court, in Warren v Northern General Hospital NHS Trust (No.2) [2000] 1 WLR 1404 that:

"8. It seems clear that once the Lord Chancellor sets a rate, or one or more rates, the courts will apply that to the generality of cases, subject to the power of the court in a particular case, for good reason, applying (sic) a different rate".

The court could only determine that a rate, other than the prescribed rate, was "more appropriate" by reaching a view that "the case in question" was not one which had been in the Lord Chancellor's contemplation in fixing the prescribed rate or otherwise contained some special feature (Warriner v Warriner [2002] 1 WLR 1703, Dyson LJ at para 33). For the court to conclude that the prescribed rate should be departed from, on the basis that it no longer had an evidential basis, was "to subvert or undermine the prescribed rate" (Cooke v United Bristol Healthcare NHS Trust [2004] 1 WLR 251, Laws LJ at para 32).

Submissions

Pursuer

[10] The pursuer presented a written note of argument extending to some 74 pages. Its content contravened almost all of the principles set down in paragraph 86 of Practice Note No. 3 of 2011 relative to causes in the Inner House and caused considerable difficulty to the court in ascertaining, quickly and accurately, the precise legal propositions underlying the pursuer's appeal. This court requires notes of argument which concisely summarise the submissions and can thus be read within reasonable court preparation time. They should not contain lengthy quotations from cases or statutes and the propositions of law being advanced should be easily ascertainable from the outset and not concealed in the depths of the document.

[11] Ultimately, the pursuer advanced three broad propositions. First, the Lord Ordinary's construction of section 1 of the 1996 Act had been wrong; secondly, the English Court of Appeal cases, from which he drew support, had been wrongly decided or could, at least, be distinguished; and thirdly, he had placed too much weight on certainty and the desire to avoid litigation.

[12] The words in sections 1(1) and 1(2) of the 1996 Act required to be given their plain and ordinary meaning. Section 1 did not grant exclusive power to the Scottish Ministers to set the discount rate in every case. The rate fixed gave rise to a rebuttable presumption only, which could be displaced if a pursuer was able to prove that another rate was "appropriate". Section 1(2) should not be read narrowly, as being confined to "case specific" considerations or circumstances unique to the particular case. The words "case in question" simply meant "the case being litigated at the time". There was nothing in the statutory language to suggest that the court's power to apply a different rate was triggered only in a class of exceptional cases or where the circumstances had not been in the contemplation of the Scottish Ministers when the rate had been fixed. The clear language of section 1(2) empowered the court in any particular case to apply a more appropriate rate for "good reason"(Warren v Northern General Hospital NHS Trust (No. 2) (supra at para 8)).

[13] There was nothing in the statutory language to suggest that Parliament had intended to depart from the well-known principle that the object of an award of damages was to place the injured party, as nearly as possible, in the same financial position as he would have been in but for the accident. Where, as in the present case, a pursuer averred a marked change in economic circumstances resulting in under-compensation, this would be "good reason" to apply a different and thus "more appropriate" rate.

[14] If the language of section 1(2) was not clear, it was permissible to have regard to background material to aid statutory interpretation. Regard could be had in such circumstances to certain Parliamentary material such as statements of ministers made at the time (Pepper v Hart [1993] AC 593; R v Environment Secretary, ex p Spath Holme [2001] 2 AC 349, Lord Bingham at 391-2, Lord Hope at 408, Lord Hutton at 413). A purposive approach could be taken (R (Quintavalle) v Secretary of State for Health [2003] 2 AC 687, Lord Bingham at para 8, Lord Steyn at para 21). However, it had not been appropriate to look at the Lord Chancellor's reasons for fixing the rate and the court in Warren v Northern General Hospital NHS Trust (No. 2) (supra) had erred in that regard (Presidential Insurance Company v Resha St Hill [2012] UKPC 33, Lord Mance at para 23, following R (Jackson) v Attorney General [2006] 1 AC 262).

[15] The Law Commission report (Structured Settlements and Interim and Provisional Damages (Law Com no 244 (Cm 2646)), which had preceded the 1996 Act, had recognised (recommendation, para 6.2) the need for a flexible system, subject to change by reference to the rates available on ILGSs, to ensure that those injured were neither over- nor under-compensated and to reflect the appropriate rate of return available in each case. The language of the Law Commission's recommendations had been reflected in the resultant legislation. In the House of Lords, a proposed amendment of section 1(2), specifically restricting its application to "exceptional circumstances", had been proposed but withdrawn (Hansard, 13 May 1996, cols 364-366) on the basis that it was for the courts to judge the appropriateness of the rate, rather than for Parliament to identify features of a case that made it exceptional.

[16] The Lord Ordinary had placed too much weight on the purposive considerations of certainty and predictability. Such considerations could not be permitted to defeat the fundamental objective of restitution (Helmot v Simon, Guernsey Court of Appeal, 14 September 2010 (31/2010) Sumption JA at para 21). Permitting pursuers to invoke section 1(2) would not lead to a proliferation of litigation. On the contrary, history demonstrated that only occasional lead cases would follow (eg Wells v Wells (supra); Flora v Wakom (Heathrow) [2007] 1 WLR 482; Simon v Helmot [2012] UKPC 5). If the prescribed rate were accurately fixed, it ought not to need frequent alteration but it was not a relevant consideration that a different rate would apply in a large number of cases. Parliament cannot have intended that the prescribed rate be adhered to so rigidly that, following a marked change in economic circumstances, it would be inevitable that the pursuer's damages would run out during his lifetime.

[17] Warriner v Warriner (supra) and Cooke v United Bristol Healthcare NHS Trust (supra) had been wrongly decided. In Warriner, the court had held that the rate of 3% identified in Wells had been intended to apply in "all but very exceptional cases" (Dyson LJ at para 31, following Warren v Northern General Hospital NHS Trust (No. 2) (supra)). The court had found "a helpful explanation of the meaning of the subsection" in the Lord Chancellor's statement in 2001 that "it remains open to the court under section 1(2) of the Act to adopt a different rate if there are exceptional circumstances which justify it in doing so" (ibid at paras 34 and 32). The whole of the court's reasoning on the policy underlying the statutory provisions was linked to the requirement to demonstrate an exceptional case. The correct approach to section 1(2) was that set out in Warren (at para 8) which made no reference to exceptional circumstances but only to "good reason". A different rate might therefore apply in the particular context of a marked change in economic circumstances (Simon v Helmot [2012] UKPC 5).

[18] Requiring a pursuer to demonstrate exceptional circumstances would render section 1(2) a "dead letter"; that is to say inoperable in practice (see Flora v Wakom (Heathrow) (supra) Brooke LJ at para 21; see also Lord Clarke in Simon v Helmot (supra) at para 80). There was a general presumption that Parliament would not readily depart from or innovate on the common law (Beynon, Statutory Interpretation, 5th Edition, pp 812 - 816). This was the guiding principle, whether the court was applying section 1, or section 2 in respect of periodical payments (Flora v Wakom (Heathrow) (supra)). These sections, found side-by-side in the same statute, were two different methods of securing the same result and the same principles ought to apply in each situation.

[19] Even if Warriner and Cooke represented the correct test applicable under section 1(2), nonetheless the Lord Ordinary had erred in determining that the proposed averments were irrelevant at the stage of the motion to amend. The pursuer wished to lead evidence demonstrating special features in his case which were material to the choice of the appropriate rate and which could be shown not to have been taken into account in the Lord Chancellor's and Scottish Ministers' published reasons for the prescribed rate (Warriner v Warriner, per Dyson LJ at para 33). The court ought not close its mind to applying different rates to different heads of loss if the evidence showed that inflation would affect them in different ways and the differential was capable of being evaluated. It would be wrong to adopt a single rate if the evidence showed that this would result in a particular head of loss not being fully compensated (Flora v Wakom (Heathrow); Sarwar v Ali [2007] EWCA 1255; Thompstone v Tameside and Glossop Acute Services NHS Trust [2008] EWCA Civ 5, [2008] 1 WLR 2207).

[20] In any event, Warriner (supra) and Cooke (supra) fell to be distinguished. It had not been claimed in either case that there had been a marked change in economic circumstances for a sustained period of time. Warriner had been decided only a matter of weeks after the Lord Chancellor had fixed the prescribed rate for England and Wales and Cooke (supra) had been decided around two years later.

Defenders

[21] The issue was one of simple statutory interpretation and the only sensible interpretation was that adopted by the Lord Ordinary, whereby section 1(1) applied to the generality of cases and section 1(2) was only triggered if there were circumstances particular to the case. Section 1(1) required that "the court shall... take into account" the prescribed rate. The heading was "assumed rate". To construe section 1(2) in the manner suggested by the pursuer would involve ignoring the words "in the case in question", which the Lord Ordinary had found indicated that the court had a "case specific" jurisdiction only.

[22] The Lord Ordinary's decision was supported by the persuasive decisions of the English Court of Appeal in respect of a statute applying to the United Kingdom. The Court of Appeal in Barry v Ablerex Construction (Midlands) Ltd [2001] EWCA Civ 433 had since applied and approved of the approach in Warren v Northern General Hospital NHS Trust (No. 2) (supra). Warren had been the basis of Warriner v Warriner (supra) and its approach had been approved in Cooke v United Bristol Healthcare NHS Trust (supra). Flora v Wakom (Heathrow) (supra) and Simon v Helmot (supra) had not criticised the Court of Appeal decisions. Flora had dealt with a different statutory provision. Simon had essentially set a rate for Guernsey, as no statutory rate had existed for that jurisdiction. It was not open to the court to do the same here.

[23] The Lord Ordinary had rightly been reinforced by his purposive construction; notably certainty and the avoidance of litigation. The policy considerations underlying the assumption of a single rate of return were considered in all the speeches in the House of Lords in Wells v Wells (supra). It had to be assumed that sections 1(1) and 1(3) had the same underlying policy considerations. The rate of return determined was for general use and any adjustments, and the timing of them, should be left to the Scottish Ministers. It was considered desirable to facilitate settlements, to eliminate the need for expensive expert evidence and to promote a reasonable degree of predictability in the outcome of litigation that a single rate be used. The principle of full compensation was not in dispute, but regard had to be had to the reality that quantification of future losses could never be an exact science. The prescribed rate did not inevitably mean that the pursuer would be under-compensated. Leaving aside other assumptions, under-compensation would only arise if the pursuer actually invested any award in ILGSs, and if ILGSs yields continued to be less than they were at the time when the prescribed rate was fixed.

[24] The same policy considerations had been recognised by the Court of Appeal in Warriner (supra). These considerations were no less important now that the prescribed rate had been fixed. It was observed (Dyson LJ at para 35) that a "generous and open-ended interpretation of section 1(2) would undermine" the policy that had been clearly articulated by the Lord Chancellor and by the courts. In Cooke v United Bristol Healthcare NHS Trust (supra), it had been recognised (Laws LJ at para 12) that "the full compensation principle will only be achieved in a rough and ready way" but nonetheless the courts were obliged to apply the rate fixed by the Lord Chancellor. Furthermore, in Simon v Helmot (supra), Lord Hope explained (para 49) that the English courts had not encouraged the taking of a fresh look at the prescribed rate because of the statutory context in which the [Lord Chancellor's] determination had been made.

[25] The pursuer's construction raised issues about the reliability of evidence in respect of future economic trends (see Hodgson v Trapp [1989] AC 807; Pennant Hills Restaurants Pty v Barrell Insurances Pty (1981) 145 CLR 625) and about consistency, where different judges may reach different conclusions on essentially the same evidence regarding the appropriate rate (Todorovic v Waller (1981) 150 CLR 402). It was not appropriate for a court in an individual case to adopt a different rate, just because it is said that economic forces today differ from those in 2001. If that was thought to be unfair to claimants, the justification was that it is desirable as a matter of policy for the amount of the discount rate to be prescribed rather than that it should be the subject of evidence and argument in some, perhaps many, cases which did not possess exceptional features (Harries v Stevenson [2012] EWHC 3447 (QB), Morgan J at para 54).

[26] The Lord Ordinary's construction did not lead to the conclusion that Parliament had intended that the prescribed rate be rigidly adhered to regardless of the extent to which circumstances may have changed. The Scottish Ministers were given the power to review the rate from time to time and such a review was presently ongoing. It may be that the Lord Ordinary's construction would result in few cases falling within the ambit of section 1(2), but that would be entirely consistent with the policy considerations. It was not accepted that his construction meant that section 1(2) could never apply or had no content in the sense of being a "dead letter".

[27] A purposive approach was appropriate only where the provision had one clear purpose. There was a potential tension between predictability and certainty on the one hand and the principle of full compensation on the other. There was more than one purpose to section 1 in trying to achieve a balance. The purposive construction advanced by the pursuer would require the leaving out the words "in the case in question".

[28] If it were permissible to have regard to background material, the content of the Parliamentary debates made it clear that the Lord Ordinary's approach was what Parliament had intended. There had been a clear distinction drawn between the generality and the particular. Far from rejecting the proposal to restrict section 1(2) to cases demonstrating exceptional circumstances, it was simply recognised that any additional wording to this end was unnecessary. The same effect had been achieved by the statutory wording now in force. This had been recognised in Warriner v Warriner (Dyson LJ at para 34).

[29] If the court allowed the pursuer's averments to go to proof, it would not be setting a new rate but would be allowing a proof before a single judge who would be asked to set the rate based on the evidence which he heard. Such a result would be absurd and contrary to the intention of Parliament, whereby the Scottish Ministers set the rate subject only to exceptional circumstances. The fundamental problem was that the pursuer's approach would result in the exception becoming the rule. The pursuer had not attempted to invoke any circumstances specific to his situation. A case might properly fall within section 1(2) if the pursuer was, for example, resident in a foreign country and thus subject to a different tax regime (Biesheuvel v Birrell [1999] PIQR Q40). By contrast, the circumstances relied upon by the pursuer, in particular the significantly reduced returns now available from ILGSs, were generic and would apply in almost all cases.

[30] In most cases, prudent investment, especially of very large awards, would prevent any under-compensation brought about by any decline in ILGSs rates. Furthermore, the Lord Chancellor's published reasons in 2001, which had been adopted by the Scottish Ministers in 2002, had made it clear that it had not been assumed that all awards of damages would be invested in ILGSs.

[31] The pursuer was effectively seeking to challenge the prescribed rate generally. If the pursuer wished to do this, his proper remedy was judicial review, based upon an alleged failure by the Scottish Ministers to exercise the power to revise the prescribed rate under section 1(1) of the 1996 Act.

Decision
Background

[32] The common law principles, which lie behind the enactment of section 1 of the Damages Act 1996, are almost too well known to bear repetition (see eg Simon v Helmot [2012] UKPC 5, Lord Hope at para 10 et seq). Damages resulting from a single cause take the form of a lump sum representing both past and future losses (Stevenson v Pontifex & Wood (1887) 15 R 125, LP (Inglis) at 129). The object of the award is to restore the victim, in monetary terms, to the same position as he would have been but for the wrong done to him. Traditionally, the courts reasoned that, in the area of personal injuries, where the task was to compensate for the consequences of loss of limb or function, estimating value involved "the exercise of a sound imagination and the practice of the broad axe" (Watson, Laidlaw & Co v Pott, Cassels & Williamson 1914 SC (HL) 18, Lord Shaw at 29). Although it could be a relatively straightforward task to assess the likely future loss in, for example, the year after the judge or jury were deciding upon the award, it was far more difficult to estimate the level of annual loss at a time well into the future or, indeed, whether, but for the injury, the pursuer would have continued to work and, if so, at a particular level, or would continue to need continuing care and, if so, at what cost.

[33] The practice was to take the continuing annual loss (the multiplicand) and multiply it by the court's estimate of how long the loss would continue (the multiplier). The latter figure would be arrived at after being discounted by a figure representing the prospect that the pursuer would be able to benefit over time from investing his diminishing capital sum in exchange for a reasonable rate of return. Again traditionally, in the years of stable currency, there was a general assumption that a pursuer could obtain a rate of return of between 4 and 5 per cent. Future loss could be calculated upon that basis (see eg McKechnie v Henderson (1858) 20 D 551, quoted in O'Brien's Curator Bonis v British Steel 1991 SC 315, LP (Hope) at 320). However, it is not unreasonable to suggest that, in practice, awards for future loss were not, by the time of O'Brien, being assessed on mathematically precise calculations, but rather by the judicial adoption of multipliers selected from past cases. It was this inexact approach that was reclaimed in O'Brien, partly with a view to demonstrating that, if reality were to be a guide in judicial thinking, multipliers ought to be calculated on the basis of what a pursuer could actually achieve, were he to invest his damages in the relatively safe, and inflation proof, medium of the recently created ILGSs. Such investment dispensed with the very real worry, then current, that any award of damages would be rapidly diminished as a result of the effects of rampant inflation.

[34] There were continuing concerns over the adequacy of future loss awards based on the traditional assumption that a real rate of return (ie one achieved after inflation had been taken into account) of 4 to 5 per cent could be achieved. The short point advanced by pressure groups acting on behalf of pursuers was that such a rate could not be achieved without subjecting damages awards to unnecessary risk. This all resulted in the recommendation of the Law Commission in England (Structured Settlements and Interim and Provisional Damages (1994) (Law Com no 224 (Cmnd 2646)) that the courts should have regard to the rates available on ILGSs from time to time before setting the multiplier in a given case (see recommendation 6.2). An alternative prescribed rate could be set if no appropriate ILGS existed (Clause 6 of the draft Bill). At the time, the rates were in the vicinity of 3 to 3.5 per cent and their adoption by the courts would have increased awards of damages, especially in high value cases, dramatically.

[35] The Government did not entirely follow the terms of the Law Commission recommendation but, as has already been noted, provided that the Secretary of State for Scotland could, after consulting with the Government Actuary and the Treasury, prescribe the rate of return to be expected from the investment of a sum awarded of which the court would, subject to exception under section 1(2), require to take account. Before that power was exercised, Wells v Wells [1999] 1 AC 345 effectively imposed 3 per cent as an appropriate net rate of return; a decision which did, as predicted, substantially increase loss of earnings and future care calculations. In determining that the rate should follow that available in an ILGS, Lord Steyn regarded it as helpful to treat the recipient of an award of damages as if he were a "cautious and conservative" rather than an "ordinary" investor (p 385-6) for whom investment in an ILGS would be reasonable.

[36] It is of some import to note what was said in Wells about the future of this judicial prescription, for England and Wales and in practice Scotland too, of a new rate of return significantly less than that which had, in theory, been applied in the past. In relation to the new 3 per cent rate, Lord Steyn continued (p 388):

"...until the Lord Chancellor takes action under his statutory powers it is essential that there should be a firm and workable principle. It should be general and simple in order to enable settlement negotiations and litigation to be conducted with the benefit of a reasonable degree of predictability of the likely outcome of a case. While acknowledging an element of arbitrariness in any figure, I am content to adopt about 3 per cent. as the best present net figure... While this figure... should not be regarded as immutable, I would suggest that only a marked change in economic circumstances should entitle any party to reopen the debate in advance of a decision by the Lord Chancellor. The effect of the decision... should be to eliminate the need in future to call actuaries, accountants and economists in such cases".

Lord Hope echoed this approach (at 393) where he stated that adjustments, and the timing of them, might have to be made to the rate in light of any significant changes in ILGS yields, but that these changes "should now be left to the ... Secretary of State for Scotland in the exercise of the power ... [in] section 1 ..." (see also Simon v Helmot (supra), Lord Hope at para 18).

[37] The 2.5% rate fixed by the Lord Chancellor in 2001, and adopted by the Scottish Ministers in 2002, was derived (rounded up) from an assumed net return on ILGSs of 2.09%. It was made explicit that the Lord Chancellor did not accept that the ILGS return rate was the exact equivalent of the real rate of return available to investors exposed only to minimum risk. He had regard to the practice of the Court of Protection in England and had formed the view that 2.5% was achievable as a rate of return for a person adopting a low risk investment strategy, which would include some element of investment in equities. This was also the view of the Scottish Ministers (Executive Note - Damages (Personal Injury) (Scotland) Order 2002). The Scottish Ministers also expressed the view that they were setting a rate which would not need to be frequently changed "barring any major economic changes" (ibid para 7).

[38] As Lord Hope pointed out in Simon v Helmot (supra, para 22), under reference to the English Court of Appeal cases of Warriner v Warriner [2002] 1 WLR 1703 and Cooke v United Bristol Healthcare NHS Trust [2004] 1 WLR 251:

"Section 1(2)... provides that the fixing of a rate...shall not prevent the court taking a different rate of return if any party to the proceedings shows that it is more appropriate in the case in question. But attempts to persuade the courts to take a fresh look at the issue did not meet with success".

Although he made reference to the lower rate of return applied by the courts in England when assessing damages payable in instalments (eg Flora v Wakom (Heathrow) [2007] 1 WLR 482 ), there is no discernible hint from Lord Hope that he considered the approach of the Court of Appeal to section 1 to be in error. Such a hint may conceivably be found in Lord Clarke's description of that approach as involving a somewhat narrow construction of the section (Simon v Helmot (supra), at para 80) but it would be unwise for this court to place too much reliance on any possible hidden meaning in this remark given the context of that case.

[39] The court has already noticed the Lord Ordinary's citation of the obiter dictum of Stuart-Smith LJ in Warren v Northern General Hospital NHS Trust (No 2) [2000] 1 WLR 1404. Warren, however, was not directly concerned with the statutory prescribed rate, but with whether the Wells rate of 3 per cent could be varied by an individual court. The answer to that was in the negative, unless there were exceptional circumstances, standing the clear statements to the contrary in Wells itself. This was confirmed shortly afterwards in Barry v Ablerex Construction (Midlands) [2001] EWCA Civ 433, in which an application to lead new evidence about new economic trends was refused (see Judge LJ, issuing the judgment of the court, at para 18).

[40] Warriner v Warriner [2002] 1 WLR 1703 appears to have been the first significant reported attempt in England to apply a rate different from that by then fixed by the Lord Chancellor. The court had regard at some length to the reasons published by the Lord Chancellor for selecting a single 2.5 per cent applicable for the foreseeable future (see Dyson LJ at paras 11 to 15). These included the elimination of the scope for uncertainty and argument and the promotion of the just and efficient resolution of disputes. The court noted the Lord Chancellor's view that there was no single "right" answer to what the rate should be but he had fixed the rate with larger awards in contemplation. It quoted the Lord Chancellor bearing in mind that it was open to the court to adopt a different rate "in any particular case if there are exceptional circumstances which justify it in doing so". Having regard to these reasons, and in refusing to allow the evidence of forensic experts on the issue of the appropriate discount rate to be led, Dyson LJ, delivering the first judgment of the court, concluded (para 33) that the court had to have regard to what the Lord Chancellor had said and that:

"If the case in question falls into a category that the Lord Chancellor did not take into account and/or there are special features of the case 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, then a different rate of return may be 'more appropriate'."

[41] In Cooke v United Bristol Healthcare NHS Trust [2004] 1 WLR 251, the Court of Appeal again refused to grant an application to lead evidence, this time from an accountant, that a pursuer would, in practical terms, be under-compensated if the prescribed rate were used. The court had regard once more to the statement of the Lord Chancellor. Laws LJ considered (para 30) that what was being attempted, except in relation to an argument on section1(2) which was rejected as the circumstances were not exceptional, was an "illegitimate assault on the Lord Chancellor's discount rate, and on the efficacy of the 1996 Act itself". He continued (para 32):

"The court is obliged by ordinary constitutional principles to act... conformably with the discount rate set by the Lord Chancellor, who is Parliament's delegate under the 1996 Act. He may be persuaded at the political level to set a different rate. He may (I encourage nothing) be amenable to judicial review. But so long as the rate he has set is extant, the courts cannot in the adjudication of personal injury claims subvert or undermine it".

Dyson LJ added (para 42) that it was recognised that a single rate was a "somewhat crude instrument" which was adopted for "public policy reasons that certainty was necessary in order to facilitate settlements and save costs". He concluded also (para 44) that what was being attempted was the subversion of the rate itself.

[42] In Harries v Stevenson [2012] EWHC 3447 (QB), it was argued that the scheme for periodical payments orders in England and Wales had superseded the approach in both Warriner and Cooke. The High Court in Wales disagreed and followed Dyson LJ in Warriner (at para 33 supra). Morgan J said (para 54):

"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."

Statutory Interpretation
[43] Notwithstanding the extensive canvassing of authorities and extraneous material during the course of the hearing, it was the contention of both parties that the correct interpretation of the terms of section 1 involved simply giving effect to the ordinary and natural meaning of the words used. This is correct. The section is not ambiguous. It has only one natural, manifest meaning. That is that, under section 1(1), it is the prescribed rate, and none other, that is to be taken into account by the court; subject to the existence of a case specific exception under section 1(2). Section 1(1) applies to the "generality" of cases. Section 1(2) is "case specific" because, by this ordinary canon of statutory construction, the words "in the case in question" denote the need for factors specific to the particular case. The factors need not be unique to the case, but they cannot be features present in the vast generality of cases. A simple instance of a case falling under section 1(2) would be that of a pursuer who is a non-UK taxpayer, but many other examples could be proffered.

[44] The pursuer objected to use of the word "exceptional", in the Court of Appeal cases cited, to describe the circumstances justifying the application of a "more appropriate" rate. However, any references to the need for "exceptional circumstances" merely recognise that cases falling under section 1(2) are the exception to the general rule laid down by section 1(1). It is going too far to suggest that the Lord Ordinary required anything more. Indeed, he expressly adopted (Opinion, para [18]) the test in Warren v Northern General Hospital NHS Trust (No. 2) [2001] 1 WLR 1404 (Stuart-Smith LJ at para 8) in terms of which section 1(2) could be invoked "in a particular case" if there were "good reason".

[45] There must then be something special or exceptional in the case in order to justify the application of a different rate under section 1(2). In this respect, the conclusion on the interpretation of the section in Harries v Stevenson (supra, Morgan J at para 54) appears sound. The pursuer's averments seek to highlight the reasons why a different rate should apply. Broadly those reasons are that there has been a marked change in economic circumstances since the Scottish Ministers fixed the prescribed rate in 2002. In particular it is averred that ILGSs have suffered a sustained period of negative or minimal average yield. Therefore, if the pursuer invests a lump sum award of damages in a risk free manner (ie in an ILGS) there will be under-compensation in respect of future losses. It was accepted by the parties that ILGSs are not necessarily the only guide and there may be other and better ways to make a "safe" investment. In any event, general changes in the economic climate are not features special to the pursuer's case justifying the application of section 1(2).

[46] The pursuer sought to distinguish his case from the generality of cases under section 1(1) on the basis that it concerned a catastrophic injury sustained by a young man and consequently that the future losses over the pursuer's lifetime were anticipated to be substantial. This is not a special or exceptional case specific factor. Although the prescribed rate is not absolute in its applicability, the same principles must apply in determining the appropriate rate under section 1(1) or 1(2). It would thus not be appropriate to fix a rate on the basis of the range or scale of anticipated damages in catastrophic injury cases, for example, from which other pursuers, who may be seeking smaller, but no less important, amounts of compensation in respect of future losses, would not stand to benefit.

Alternative Statutory Interpretation
[47] If, contrary to the above, it is not possible to determine the issue by giving the terms of the statute their ordinary and natural meaning, because they contain some ambiguity in expression, the same result is reached upon a purposive approach to interpretation (R (Quintavalle) v Secretary of State for Health [2003] 2 AC 687, Lord Bingham at para 9, Lord Steyn at para 21). Leaving aside the Parliamentary material, to which reference was made, it is plain from the background existing at the time of the legislation, as revealed in O'Brien's Curator Bonis v British Steel (supra) and Wells v Wells (supra), that the problem which existed was the ascertainment in personal injury cases of the appropriate rate of return, upon which a full term multiplier could be discounted, having regard to what was available in reality. If individual courts were to hear evidence on that matter, as they were being asked to do, several different results may have been produced. It was in the face of this mildly chaotic state of affairs that Wells v Wells (supra) selected the 3 per cent figure in order to create certainty in personal injuries practice and litigation (ie "predictability", Lord Steyn at 388, supra) and to eliminate the need for such evidence. Any changes to the rate would be a matter for government (Lord Hope at para 18, supra). The purpose of the legislation, which was enacted before Wells was, in terms of the Law Commission report, to allow the government to fix the "right" rate for use in the courts and by doing so, to achieve the same level of predictability. The latter could only exist if the rate was applied to the generality of cases. That is what section 1(1) is designed to do, with section 1(2) available only in exceptional situations specific to the case or, perhaps, small group of cases.

[48] The court must be conscious of the strictures applicable to the use of Parliamentary material in determining the meaning of words used in a statute or the purpose behind a legislative provision. The scope for enquiry into extraneous records, following Pepper v Hart [1993] AC 593, is broadly limited to situations where the legislation is ambiguous, the material relied upon is a ministerial or similar statement, which is made at the time of the relative Bill's passage through Parliament and is clear in its terms (R v Environment Secretary, ex p Spath Holme [2001] 2 AC 349, Lord Bingham at 391; Presidential Insurance Co v Resha St Hill [2012] UKPC 33, Lord Mance at 23). In light of these constraints, it could be said with some force that the material from Hansard should not be considered. Be that as it may, it is apparent, from looking at the debates, that Parliament's intended purpose in enacting section 1 was to achieve the same balance, between the principle of affording full compensation in individual cases and the need for certainty in both facilitating settlements and determining different suits, already alluded to. A purposive approach to interpretation based on this material leads to the same conclusion on the distinction between the generality of cases under section 1(1) and the requirement for "exceptional" circumstances for cases to be brought within section 1(2).

[49] For similar reasons, it may be doubtful whether it is legitimate to look at the Lord Chancellor's/Scottish Ministers' published reasons for fixing the prescribed rate in 2001 as an aid to interpretation of the terms of an Act passed five years previously. However, this was done extensively in Warriner v Warriner (supra) and Cooke v United Bristol Healthcare NHS Trust (supra) and by the Lord Ordinary, not as a method of construing the legislation, but as a means of discovering what range of case were in the contemplation of the Lord Chancellor/Scottish Ministers when the order was made and thus to instruct the court in its ascertainment of what might constitute a legitimate case specific exception for the purposes of section 1(2). This does not seem unreasonable, but, in any event, such an exercise is unnecessary for present purposes and the Lord Ordinary's decision is not dependent upon it.

[50] The purpose of section 1 is to allow the Scottish Ministers to fix a rate with a view to achieving the certainty described above. It is important not to underestimate the importance of certainty in the calculation of future losses given the large numbers of personal injury cases processed by the courts, or settled extra judicially, on a daily basis. Although the pursuer seemed content that substantial disruption could await the determination of lead cases, such an approach perhaps forgets the historical background which made it so important, especially for pursuers, to secure a prescribed rate in the first place rather than having to argue for a high multiplier in each individual case. Thus it was that it was intended that the method of changing the rate would be an occasional, but not frequent, Parliamentary process involving formal consultation with interested parties on the appropriate methodology. That process is ongoing (Damages Act 1996: The Discount Rate-Review of the Legal Framework Consultation Paper MOJ CP 3/2013), if apparently slow in its progress.

[51] It is not competent to seek to challenge the factors underlying the rate prescribed in an action for damages between private individuals. A pursuer might argue that a different rate is "more appropriate" without adverse reference to the validity of the prescribed rate. However, the substance of the pursuer's arguments cannot be construed as anything other than an attack on the prescribed rate itself. Put shortly, the pursuer contends that there is no longer an evidential basis for that rate. This argument must apply to almost every case involving future losses brought before the court in the current economic climate or at least that prevailing when the application to introduce the averments was made. Insofar as that may be deemed to be the practical effect of the pursuer's construction of sections 1(1) and 1(2), the court cannot and should not entertain it in this type of process in the face of Parliament's clearly stated intention. The Lord Ordinary is thus correct in his analysis that section 1(2) cannot apply where the reasons for a "more appropriate" rate might arise "in every conceivable case". If the pursuer wishes to have the rate changed, he should do so through the political process or by way of judicial review (see M v Scottish Ministers 2013 SLT 57).

[52] For all of these reasons, the pursuer's proposed averments are not relevant to justify the application of a different rate under section 1(2). It follows that the Lord Ordinary was correct in excluding the averments directed towards this purpose. This reclaiming motion must accordingly be refused and the court should adhere to the interlocutor of the Lord Ordinary dated 10 October 2012.

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lady Smith Lord McEwan	[2013] CSIH 10 PD736/11 OPINION OF LADY SMITH in the reclaiming motion ANTHONY STEPHEN TORTOLANO Pursuer and reclaimer; against OGILVIE CONSTRUCTION LIMITED Defenders and Respondents: _______________

Act: Bain QC, Fitzpatrick; Digby Brown LLP

Alt: Milligan QC, A Cowan (Solicitor Advocate); Simpson & Marwick

21 February 2013

[53] I agree that this appeal should be refused for the reasons given by Your Lordship in the chair.

[54] I would add the following observations.

[55] When, by SSI 2002/46 (the Damages (Personal Injury) (Scotland) Order , the discount rate to be used when awarding damages for future losses was fixed at 2.5%, it was welcomed, particularly by pursuers. The Lord Chancellor had fixed a discount rate for England and Wales on 25 June 2001, also 2.5%, and there had been a keen desire for similar provision to be made by Scottish Ministers. Questions had been asked in the Scottish Parliament on 5 December 2001 and 23 January 2002 with a view to finding out when an order prescribing the assumed rate of return would be brought forward so as to ensure that victims of personal injury in Scotland would not be disadvantaged as compared to their counterparts in the remainder of the United Kingdom.

[56] That fixed rate is, however, no longer flavour of the month. It is now derided. It is said to be too high. It is said that the three year average on ILGS has declined to the extent that the average yield on that stock in the year to January 2012 was a paltry minus 0.1% and that current yields in the market are 0.01%. It is said that pursuers will require to take investment risks, rather than rely on ILGS. Its continued use is said to be unfair.

[57] Miss Bain's argument was, essentially, that the fundamental objective of damages is restitution, which she referred to as being "100% compensation". It was, she said, enough for a pursuer to aver that there has been a marked change in the country's economic circumstances such that if the 2.5 % rate were to be used, the pursuer would be undercompensated; therefore, the court should hear evidence about that change in economic circumstances and the implications for pursuers with a view to arriving at a discount rate significantly lower than 2.5%.

[58] Miss Bain did not shrink from it being an inevitable feature of her submission that it applied to the wide generality of cases. That did not, however, matter. It was, on her approach, enough that in the case being litigated, under compensation would result if 2.5% were used because the pursuer could now not invest in a risk free manner and achieve that return.

[59] That approach ignores three important matters.

[60] The first is that the terms of section 1(2) of the 1996 Act are clear and unambiguous; it is only where some feature of the "case in question" shows that a different rate of return is more appropriate that the court is relieved of the obligation to proceed on the basis of the rate prescribed by Scottish Ministers (see: sec 1(1) of the 1996 Act). I have no doubt that whatever the feature is that is relied on, it requires to be case specific. The fact that market forces have altered the economic landscape in a manner which affects all investors is about as far removed from a case specific feature as one could get. Insofar as Ms Bain's submission was that the pursuer's normal life expectancy, his serious injuries, his continuing loss of earnings and his need for future care and services amounted to features of "the case in question", without in any way seeking to diminish or trivialise what, on the averments, has been substantial suffering by the pursuer with serious lasting consequences, these are, sadly, simply regular features of many routine personal injury claims. The pursuer's may be a sympathetic case - which seemed to be the thrust of the submission - but that alone cannot demonstrate that there is something about the "case in question" which shows that a different discount rate would be more appropriate. Many if not all pursuers who are entitled to damages for personal injury are deserving of sympathy.

[61] Secondly, when setting the rate, Scottish Ministers adopted the reasons given by the Lord Chancellor for having fixed it at 2.5% for England and Wales (see: Executive Note to Damages ( Personal Injury) (Scotland) Order 2002, para 7). Those reasons showed that the understandable policy intention was to promote just and efficient resolution of disputes whether by settlement or where the court requires to determine damages, and to eliminate arguments about the applicable rate. There is, plainly, considerable value in certainty and efficient dispute resolution - even if it comes at a price - which, in the case of the setting of the rate included, as the Lord Chancellor explained, that, given the complex compound of fact and assumption that was involved, a broad brush approach was appropriate. It was never promised that the set rate would produce a perfect result in every case; it was not the policy of the Lord Chancellor or of Scottish Ministers to do so. Given the regularity of market fluctuations, that is not at all surprising.

[62] Thirdly, it would be too simplistic to refer to 2.5% as being what was, at that time, identified as being a 'risk free' return. Even in the case of ILGS, the Executive Note to the 2002 Order only went as far as to refer to them as involving 'very little risk' ( para 4.3) and, moreover, the Lord Chancellor's reasons, as adopted by Scottish Ministers, made it clear that he had had regard to (a) that markets in ILGS at that time were distorted so that prevailing yields were artificially low, (b) the Court of Protection had, notwithstanding the decision in Wells v Wells, continued to invest on behalf of claimants in multi-asset portfolios such that returns well in excess of 2.5% could be expected, and (c ) that it was likely that claimants who received large awards of compensation would not be advised to invest solely in ILGS but, rather, in a mixed portfolio; it must be doubtful whether any competent investment adviser would advise a client to invest only in ILGS. It would, accordingly, be wrong to say that the intention was to enable pursuers to invest on a wholly risk free basis (assuming that such an investment does in fact exist which, given the economic events of recent years, may seem questionable).

[63] I see this as being, in reality, nothing other than a very thinly veiled assault on the statutory discount rate but that is an attack which the pursuer is not entitled to launch in the context of this personal injury litigation between him and the defenders.

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lady Smith Lord McEwan	[2012] CSIH 10 PD736/11 OPINION OF LORD McEWAN in the reclaiming motion ANTHONY STEPHEN TORTOLANO Pursuer and Reclaimer; against OGILVIE CONSTRUCTION LIMITED Defenders and Respondents: _______________

Act: Bain QC, Fitzpatrick; Digby Brown LLP

Alt: Milligan QC, A Cowan (Solicitor Advocate); Simpson & Marwick

21 February 2013

[64] I am in full agreement with your Lordship in the Chair and concur both in his opinion and in the result.

[65] I wish to add only a few words of my own on two points.

[66] Firstly, in my opinion the scheme of the Statute is simple and straightforward. Section 1(1) is intended to create a rule and is in mandatory terms. The words "... shall ... take into account ..." in my opinion means that the Court, in determining the assumed rate of return, must take into account the rate prescribed by whatever Order is in force at the time. That in my view is the rule. It is there for a practical reason; to promote fairness and balance and to provide a degree of certainty so that settlement can be encouraged. The prevailing rule is a matter for the Executive to fix. It comes about after wide consultation of many interests and it is not for the Court to enquire what these are.

[67] The only exception to the rule is section 1(2) and taking any different rate has to depend solely on the circumstances of "... the case in question ..." and the party seeking a different rate must demonstrate that it is "... more appropriate ...". It must apply to the (my emphasis) case not just to any case. It is unwise to speculate what might be an appropriate case; but merely to point to serious injuries and a high value is in my opinion not enough. If it were so it would arise in many cases and the consequences would be dire. The Court would be asked to do what the Ministers should be doing and the exception would become the rule. The purpose and the consistency of the rule would be overthrown.

[68] Secondly, I wish to remark on the English authorities cited to us. Although these are not binding on us they are highly persuasive and consistent. A reference to Barry v Ablenex Construction (Midlands) Ltd [2001] EWCA Civ 433 will suffice. In the first place it was a strong bench which was unanimous. The injuries to the plaintiff were severe (not very different from the facts before us). A reading of paragraphs 15 to 18 shows the need to adhere to the prevailing rate and not alter it as Latham J. had done.

[69] In my opinion this Court should adopt the approach which has commended itself to the Court of Appeal in Barry and other like cases.