Wednesday, 7 November 2012

Variable Periodical Payment Orders

Variable PPOs are available to litigants but rarely used. A quick look at the law behind these orders. Unlike with provisional damages, a variable PPO may allow a defendant to apply for a reduction in damages in the event of a significant improvement in the claimant's condition.  When might that power be exercised?

Variable PPOs

By article 2 of the Damages (Variation of Periodical Payments) Order 2005, if there is a chance that at some time in the future the claimant will, as a result of the act or omission which gave rise to the cause of action, develop some serious disease or suffer some serious deterioration; or that the claimant will enjoy some signficant improvement in his physical or mental condition, where that condition had been adversely affected as a result of that act or omission, the court may provide in an order for periodical payments that it may be varied.

Article  4 of the Order provides that the court may make a variable order in addition to an award of provisional damages.

By article 5 the variable order must specify one or more disease or type of deterioration or improvement and may specify the period within which an application to vary may be made.

Whilst repeat applications may be made to vary the period specified in the order (article 6) only one application to vary the amount may be made in respect of each specified disease etc. (article 7).

On varying the order the Court may vary the amount of annual payments and/or order that a lump sum be paid in addition to the existing periodical payments.


The Order mirrors section 32A if the Senior Courts Act 1981 and CPR 41 APD concerning provisional damages awards save that, unlike with provisional damages orders, variation of periodical payment orders may be triggered by an improvement. Thus, although article 4 envisages variations to both the lump sum and periodical payments, the lump sum could not be reduced in the event of an improvement. The practical reasons for this difference are evident - most or all of the lump sum may have been spent, whereas future periodical payments are yet to be received and so could be varied downwards without disastrous implications for the claimant.



In Kotula-v-EDF [2011] EWHC 1546 (QB) Irwin J approved in principle provisional damages and variable PPO awards for a claimant who had a chance of suffering syringomyelia at some time in the future. He followed the guidance in Wilson-v-MOD [1991] 1All ER 638 and Curi-v-Colina The Times 14 October 1998 (also on Lawtel), namely a three stage test as to whether provisional damages were appropriate. First was the chance of a disease or deterioration more than fanciful? Second, if it materialised would it be serious? Third, weighing the benefits and disadvantages of a once and for all award against reserving the claimant's right to reserve, would justice be done by making a provisional award. A provisional award would be more likely to be suitable where there would be some clear cut event triggering future entitlement. Anticipated difficulties in establishing causation were not conclusive against making a provisional award (but the claimant might not want to press for a provisional award in such cases). 

Irwin J accepted that the same considerations applied to the question of whether there ought to be a variable PPO. However, the third stage is of less obvious relevance to a variable PPO. Once a decision has been made to make a PPO, then the defendant (or its insurers) will not have finality in any event - they will continue to be involved in the claim for so long as the periodical payments are to be made and whether they are variable or not. So, the third stage above should not have as much relevance as it does to a provisional damages decision.

In any claim where provisional damages would be appropriate, but the claim is suitable for a PPO, then a variable PPO as well as a provisional lump sum should be the order of choice. Are variable PPOs being under-deployed? 


Improvement


There is, so far as I am aware, no authority on the use of variable PPOs for a potential improvement in the claimant's condition. At seminars and on twitter I have now asked about 300 solicitors whether they have come across such an order or agreement, but so far no-one has done. Any suggestions as to how the courts would approach such orders are therefore speculative. However the principles which govern provisional damages would surely apply, with suitable modification: the chance of improvement should be more than fanciful, it would make a significant difference if it did occur, and the balance of justice should weigh in favour of allowing the defendant to reserve.

As a generality there is always some chance that future progress in medical science, treatments or equipment will produce significant improvements in the condition of injured claimants. But the courts will be looking for a more focused, clearly identifiable chance of improvement. Arguably the improvement must be in the claimant's physical or mental condition, not necessarily in the functional consequences of his condition, although it is sometimes difficult to distinguish the condition from its consequences.

Variable PPOs with a view to a future improvement might be appropriate in cases where a period of rehabilitation might bring about a significant improvement. Expert evidence might be that the claimant's psychiatric condition, or chronic pain condition may improve following long term or intensive therapy or even upon the conclusion of proceedings. 

In present practice, rightly or wrongly, PPOs tend to be used only in very serious injury cases - less so in cases where the periodical payments would be less than about £30,000 per annum - and in the great majority of such cases the claimant's injuries are permanent and unlikely to improve.  

Whilst non-variable PPOs will include provision for future medical assessment of the claimant, the prospect of a PPO being varied because of a significant improvement in the claimant's condition might tempt defendants to insist on more frequent assessments or even future covert surveillance. 


Those defendants who are adverse to PPOs generally, will miss out on the potential, in some few cases, to reduce damages in the future in the event of a significant improvement in the claimant's condition. On the other hand, the threat of a variable PPO reducing damages on future improvement might persuade a claimant to prefer a lump sum award.







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