The Discount Rate in Clinical Negligence and Personal Injury Claims
The discount rate is a concept that the Clinical Negligence team deal with on a daily basis. Following a successful claim, a client can often expect to receive a lump sum payment as part of the damages awarded to them. This figure is then adjusted in relation to the ‘discount rate’.

What is the discount rate?

Any lump sum payment is calculated using a multiplicand and a multiplier.

Multiplicand – the future annual loss the claimant can be expected to suffer.
Multiplier – a figure determined by reference to the discount rate.
When the ‘multiplicand’ and ‘multiplier’ are multiplied together they produce a figure which is the present value of the prospective loss over the claimant’s life time taking into account the interest the claimant can earn by investing their money.

The Courts treat the claimants as risk adverse investors. Lord Steyn reinforced in Wells v Wells that claimants shouldn’t have to gamble with investment opportunities to make enough money to support them for the rest of their life. Therefore, the discount rate is linked to the returns generated by low risk investments, namely, Index Linked Government Securities (“IGLS”).

The discount rate pre 20.03.17

The discount rate was set at 2.5% by the Lord Chancellor, Lord Irvine, in 2001. This reflected the returns in IGLS at that time.

This discount rate was not reviewed until 2012 and by this time it had attracted a significant amount of criticism from claimants and their legal representatives. Interest rates had plummeted since the financial crash of 2008, meaning that it was now impossible for a claimant to secure a safe investment with a discount rate of 2.5%.

In the case of Simon v Helmot, the judge departed from the discount rate and set lower discount rates which differed for different heads of damage. He worked on the presumption that a return on an investment would lag behind inflation and so using a 2.5% discount rate would have been grossly unfair. Both this judgement and the review in 2012 indicated change might be on the horizon.

The discount rate post 20.03.17

On the 20th March 2017, the Lord Chancellor, Liz Truss, reduced the discount rate to -0.75%. This change was of course welcomed by claimants and criticised heavily by defendant insurers. It was expected for some time by both sides that the discount rate would be lowered, as it had not been changed in sixteen years, however, no one expected a negative figure.

Within 24 hours of the announcement, sixteen executives of the UK’s largest insurance companies had called a meeting with Philip Hammond, the Chancellor of the Exchequer to request a U-turn. They warned that this would lead to increased lump sum payments to claimants which would push insurance premiums up for millions of UK businesses and people.

Claimants saw this as a long awaited change and felt the new discount rate finally reflected the fact that claimants were risk adverse investors. They felt that the defendants had benefitted for too long from undercompensating the claimants and welcomed the change.

It must be noted that although the overall effect of a lower discount rate has been to benefit claimants, accommodation claims have produced troubling results for claimants (see MWB blog 24/01/18).

What has been the impact?

Defendant insurers and public services with large liabilities such as the NHS have been impacted in the way they feared. Profits have decreased as pay-outs to claimants have increased. Allianz UK revealed that their profits for the year following the change were £22 million down on what they would have been had the discount rate remained at 2.5%. Catastrophic injury claims and clinical negligence claims involving children now produced pay-outs that were 30% and 50% higher.

The table below shows a comparison of the compensation received with a discount rate of 2.5% and then of -0.75% for a woman who is 25 years old when her catastrophic injury occurs. The difference is staggering.

DISCOUNT RATE

MULTIPLIER

ANNUAL LOSS

TOTAL LOSS

2.5%

26.1

£22,000

£574,200

-0.75%

49.66

£22,000

£1,092,520

Despite the ongoing criticisms by the defendants, the discount rate has not yet been reviewed and remains at -0.75%. The effect of a clinical negligence or personal injury action is to put the claimant back in the position they would have been had the negligence not occurred (Wells v Wells). The maintenance of the discount rate at -0.75% ensures this. It is important to remember that the reason for these payments in the first place is the negligence of the defendant

The change in discount rate has created an understandable state of limbo with regards to settlement. Defendant insurers are hesitant to settle whilst they fight for reform, in the hope that they will get a reduce rate and so make a lower pay-out. Conversely claimants want to settle as soon as possible due to their advantageous position.

Future change to the discount rate

Opinion is clearly divided on the way forward with claimants satisfied with the current position and defendants eager for change.

Claimants point out that the increase in payment merely provides them with the money they are entitled to. They emphasise that the risk of overcompensation can never be fully eliminated due to the following factors impacting the lump sum in a number of ways and meaning a shortfall or deficit of funds is inevitable:

People living longer or shorter than their life expectancy prediction
Assumptions as to future needs never being completely accurate
Uncertainty over investment outcomes
Inflation fluctuations
The Government Actuary Department commented in 2017 that if the discount rate was to be raised to 0.5% then 41% of claimants would become undercompensated. If this was the case then it would become unsustainable for firms to take on clinical negligence work and more claimants would have to represent themselves. This would create real problems for access to justice in cases which are so complex in nature.

The Civil Liability Bill went before Parliament in 2018 and received royal assent on 20 December 2018. This lead to the creation of the Civil Liability Act 2018 which sets out a new model for setting the discount rate based on ‘low-risk’ rather than ‘very low risk’ with reviews imposed at three yearly intervals. This will ensure that, should changes in the investment market mean that claimants are being overcompensated; the discount rate should be reviewed and changed. This should be of some comfort to defendants.

Defendant insurers will continue to be unhappy until an increase in the discount rate increases leads to reduced claims and smaller compensation payments. They are concerned that any improvement in the economy will lead to claimants in fact profiting from their claims.

Christian Louboutin used his assistant’s red nail varnish to paint the sole of a pair of shoes in 1992 and from this developed a world famous brand which is somewhat of a phenomenon.

As Louboutin’s shoes became increasingly popular, and instantly recognisable, many high street stores across the globe started to copy the design.

Louboutin needed to do something to protect his brand – if he could not prevent others from selling shoes with red soles his brand and image would be damaged, he would no longer be able to rely on his signature sole.

Louboutin registered the red soles (Pantone 18-1663TP, to be precise) as a trademark in 2010 and specifically for high heels in 2013.

The use of colour in a trademark in the fashion industry is not uncommon, for example Levi’s jeans are instantly recognised by their red tab.

Louboutin took unauthorised use of his trademarked red sole extremely seriously. In 2012 Louboutin brought a case against the Dutch high street company Van Haren who had been selling similar, but much cheaper, red soled shoes. He also took action against the retailer, Zara, in France.

The same year Louboutin battled Yves Saint Laurent in a New York court over similar trademark issues, and won the US trademark as a result. The US courts required Louboutin to demonstrate that the colour had a secondary meaning and proof that the public associated the coloured sole with the Louboutin brand – it had a ‘source-identifying’ function.

The question in the Dutch court was whether the trademark should be the shape or the colour of the sole of the shoe.

Throughout the case the Dutch company argued that EU law prohibits the trademark of products which are common shapes such as the sole of a shoe.

At a previous hearing it was decided that the combination of a colour and shape could not be afforded trademark protection and in February an Advocate General, Macjej Szpunar, expressed doubt as to whether the red colour could perform the essential function of a trademark.

The reason behind this initial opinion was that the red soles were not separate from the shape of the high heeled shoe and shapes cannot usually be trademarked under European law.

The purpose of a trademark is to identify the brand instantly and it was considered that this would not be possible if the colour was used out of context, for example separately from the shape of a sole.

The Dutch court referred the matter to the ECJ to determine whether the prohibition on the registration of shapes as trademarks also applied to shapes combining three-dimensional properties of a product and other characteristics such as colours.

It was noted in the ECJ ruling that Louboutin was not seeking to protect the shape of the shoe but the application of a colour to a specific part of it. The shape of the shoes merely identified the positioning of the colour.

On 12 June 2018 The European Court of Justice ruled, in contradiction with the advice of the Advocate General, that the Dutch company had infringed the Louboutin trademark by selling shoes with red soles.

This was unexpected as it is unusual for the court not to follow the advice of the Advocate General, but was very much welcome news to Christian Louboutin. If Louboutin had been unsuccessful in this case it is likely that the flood of imitation products would have caused irreparable damage to this niche brand.

The matter will now be referred back to the Dutch court which is expected to confirm that the red sole trademark is valid.

It is becoming increasingly common for brands in the fashion industry to seek to protect their designs through the courts. It is interesting to note that it is not just the well known fashion houses who take this initiative. Recently the designer behind Indian brand People Tree, Orijit Sen, complained that Dior had plagiarized his block print design of a man doing yoga poses from 2000.

It will be interesting to see how the courts adapt to protect brands which have moved away from traditional logos to make their products recognisable and distinctive.

The Medical Negligence team at Mayo Wynne Baxter frequently deal with claims involving brain damage sustained at birth as a result of the hospital’s negligence. Such claims usually take many years to reach settlement negotiations, at which point we carefully consider all the possible heads of damage that may be claimed from the Defendant in order to maximise the compensation paid to our client.

Negotiations will often include a claim for specially adapted accommodation to meet the needs of the Claimant, who may require single storey accommodation with wide spaces and accessibility for their wheelchair. There may be a need for additional accommodation for professional carers, and space to store equipment, or a separate therapy room.

Background to accommodation claims

It has long been established that where a Claimant needs specially adapted accommodation as a result of the negligence of a Defendant, they are not given the full capital cost of the property because to do so would give them a windfall over and above proper compensation. It is assumed that a Claimant would ordinarily have used their earnings to purchase a property in any event, and the Claimant’s loss of earnings is also compensated for in the claim. It is also assumed that the value of the property would increase over the Claimant’s lifetime, resulting in a windfall to their estate upon their death.

The decision in Roberts v Johnstone QB 878 sought to address this issue. Alliott J. considered himself bound by an earlier authority, George v Pinnock, which established that the capital cost of a new house could not be awarded as compensation. The Court of Appeal agreed but refined his application of it and held that the Claimant would have to “borrow” other parts of the compensation (for example compensation for pain and suffering or loss of earnings) in order to pay for a property and, had he not needed to do so, such sums would otherwise have been invested and provided him with an annual investment income of which the Claimant was effectively being deprived. The compensation was therefore based upon the loss of interest on the extra money that the Claimant must invest in order to pay for the required accommodation. The loss of interest was calculated using a multiplier based upon life expectancy, and assuming a net rate of return of 2.5% per annum.

At that time the rate of interest adopted by the courts was a healthy 7 – 9 per cent net but in a different climate of low interest rates the rationale became increasingly difficult to justify. Despite a number of reviews of this position it has remained unchanged. In 1999 the Law Commission concluded that “in most cases” the Roberts approach was “inappropriate”. In 2011 the Injury Committee of the Civil Justice Council reported to the Ministry of Justice on the question. The majority felt there was a case for reform; even the dissenting members described it as “imperfect perfection”.

Change to the discount rate

Last year the Lord Chancellor exercised her power to revise the discount rate used in the calculation of future losses in personal injury claims from 2.5% to -0.75% (see MWB blog 15.03.17). This had the result of dramatically increasing the multipliers in such cases. Applying a minus discount rate not only produces a nil figure for the costs of accommodation but also produces a theoretical liability upon the Claimant to pay money to the Defendant. This is because, with a negative rate of return upon investments, not only would the money equal to the capital costs of property no longer be producing any income, it would in fact be reducing in value.

It is helpful to look at an example to see the true extent of the impact of the discount rate. Imagine a 20 year old female Claimant with an unimpaired life expectancy. The life multiplier at a discount rate of 2.5% is 32.97 and at a discount rate of -0.75% is 94.99.

2.5% -0.75%

Cost of suitable property £600,000 £600,000

Less price of home Claimant

would otherwise have bought £100,000 £100,000

Difference £500,000 £500,000

x multiplicand (2.5% or -0.75%) £12,500 -£3,750

x multiplier (32.97 or 94.99) £412,125 -£356,213

The problems arising from the change in discount rate are readily apparent. It simply cannot be right that a badly injured Claimant owes the Defendant money for the privilege of needing appropriate housing.

JR v Sheffield Teaching Hospitals NHS Foundation Trust

The Claimant in JR v Sheffield Teaching Hospitals NHS Trust had significant accommodation needs arising from severe spastic cerebral palsy. JR had been cared for by his parents in inadequate accommodation for over 20 years and a claim was made for alternative accommodation. The need for such accommodation was not in issue; the question was whether and to what extent there was a loss.

The judge recognised that there had been numerous criticisms and attacks on the Roberts v Johnstone approach. However, he was bound by Roberts v Johnstone and, given the negative discount rate, he had to consider the return on a risk free investment as representing JR’s loss. On the evidence (and discount rates) there was thus no loss.

The Claimant tried to argue that awarding no sum would require him to use capitalised sums from other heads of damage, thus depriving him of monies intended to compensate him for other losses and that solution meant that he would not recover his full loss. The Judge rejected that argument, reminding the Claimant that “this submission ignores the long accepted consequence of the Roberts v Johnstone approach. JR in the long run will recover his full loss because his estate will have the benefit of the full value of the accommodation.” He did however go on to add that there was an urgent need to “find a proper solution to the accommodation conundrum“.

It is important to note that this did not mean that the accommodation claim was zero. £840,000 was awarded under this head of damages. This included the costs of converting and adapting a property to the Claimant’s needs, increased running costs (for life), and relocation costs.

The future

There has been extensive discussion since the discount rate decision as to the effects on accommodation claims and alternative methods of ‘filling the gap’ for Claimants. There can be little doubt that in the current climate the higher courts will need to revisit the approach to housing claims. It may be that the Roberts v Johnstone approach is departed from entirely. What then are the other possible options to fairly meet this need?

The Claimant makes no claim for the capital cost of the property but claims for adaptations and increased running costs.
Although this solves the problem of the Defendant having to fund the total purchase of a property, it still leaves the issue of betterment as the Claimant and his estate would benefit from the increase in value of the property. Furthermore, the initial capital would have to be borrowed from other heads of damage.

Full recovery of capital sum required for purchase and adaptation with the Defendant either owning the property or having a charge on the property to recover its capital on the death of the Claimant.
The difficulty with this option is that it envisages an on-going relationship between the Claimant and Defendant, which most Claimants wish to avoid. What happens if the Claimant wants to move?

There is also the issue of any increase in the value of the property; who gets the benefit of the appreciating asset? Should the NHS profit from owning a portfolio of properties housing injured Claimants?

A further issue arises in that the Claimant’s family often provides significant levels of care and, as such, they tend to reside in the Claimant’s house. Therefore there is inherent uncertainty as to what would happen to family members once the Claimant has passed away.

A claim for the cost of borrowing to fund the property purchase (essentially the interest element of the cost of a mortgage). In reality, the propensity of interest only mortgages has declined in recent years as lenders tighten their lending criteria. Lenders also seek to establish how the capital loan is to be repaid at the end of the mortgage term. Therefore it may be difficulty to secure a lender in these circumstances.
Full rent paid for a suitable property on the basis of a periodical payment order. There are unlikely to be many residential landlords willing to rent out a property for the duration of the Claimant’s lifetime and who would be content for significant adaptations to be made to the property. The Claimant would also have to give credit for the lifetime cost of renting a smaller property which they would have incurred but for the Defendant’s negligence.
Permission has been granted for an appeal in the JR v Sheffield case and the judge recommended that the appeal be expedited. Even with expedition, it would take some time for the Court of Appeal’s original decision in Roberts v Johnstone to be overturned: technically this could only be done by the Supreme Court. As no evidence was put before the judge in JR as to an alternative approach, it may not be the best case for Claimants to test the point.

Furthermore, the discount rate is the subject of a government consultation, which closed on 11 May 2017, and further developments in this area should be expected.

In order to maintain, and ensure that the maximum amount of damages is recovered in the future for accommodation claims, it is vital that Claimants are appropriately advised in respect of that by specialist clinical negligence lawyers, such as our experienced team at Mayo Wynne Baxter.

Earlier this year the Court of Appeal gave judgment in the case of Oraki and another v Bramston and another. The case involved the Court considering the liability of the Trustee in Bankruptcy for an alleged breach of duty to the bankrupts in the conduct of their respective bankruptcies, in particular it was alleged that they had prolonged the administration of the bankruptcy estates and that the bankrupts had been frustrated by them when they were seeking to annul the bankruptcies. Following a seven day trial the claims were dismissed, it was that decision which led to the Appeal.

Dr Oraki and her husband were made bankrupt in quick succession following judgment against them by a firm of solicitors in 2004. A payment in full had been offered but was not accepted as they had refused to withdraw a complaint made by them to the Law Society regarding the solicitors

The Bankruptcy Orders were made in late 2005 and early 2006. In October 2012 it was ruled that the judgment should be set aside and the bankruptcies annulled. The annulment was ordered in January 2013 and was conditional; one condition being the payment of costs and expenses of the bankruptcies, a time limit was also set as a back stop for any application to challenge the conduct of the Trustees.

In the Appeal the claims being pursued were that Dr Oraki and Mr Oraki were due damages for loss allegedly caused to them personally for breach of duty owed to them personally by their Trustees. In the lead judgment of Lord Justice David Richards he described the claims as raising “some novel and difficult issues of law on first, the duties, if any, owed by a trustee in bankruptcy to the bankrupt personally, and, second, if such duties exist, on the effect of a release under section 299 of the Act of a trustee who had ceased to hold office.” The history of the matter was fully set out in the judgment, essentially the claims were for professional negligence in that the trustee in bankruptcy through their acts and omissions failed to carry out their duties to the standard required of insolvency practitioners. It was argued that they ought to have known that the bankruptcy orders ought not to have been made and should have taken steps to bring the bankruptcies to an early end. In not doing so it was alleged that they had prolonged the duration of the bankruptcies and caused the bankrupts loss and mental distress. The Appeal failed on the facts in that there was no breach of duty, nor loss caused as a result of their actions. The section 299 issue was not therefore determined.

Whilst the findings of the Court meant that no investigation of the scope and limit of a trustee’s duty was carried out the Court observed that section 304 of the Insolvency Act provides a framework for claims for the benefit of the bankruptcy estate and whilst it is concerned with, and confined to, acts or omissions on the part of the trustee that have caused loss or damage to the estate and that the bankrupt may only apply under that section with leave of the court. What is of particular not is that it was stated this does not explain why it should be that no duty was owed to the bankrupt or “why section 304(1) provides that the sub-section is ‘without prejudice to any liability arising apart from this section’. Those words are apt to extend any claim for any common law or other duty not falling within the express terms of section 304.”

In observing that that the duties of the trustee may extend beyond section 304 the potential for claims by bankrupts against their trustees for liability arising from breach of duties has been recognised and may well lead to further litigation on the point.

Mayo Wynne Baxter have specialists who can give advice on all matters arising from insolvency of individuals or companies, should you wish to discuss any issues arising from the above please contact Darren Stone, Head of Insolvency at Mayo Wynne Baxter.

The employment rate for disabled adults is 48% in the UK. While the percentage of those in work is gradually increasing, the abled percentage in work is 74.6%. This discrepancy may in part be due to illnesses preventing people with disabilities working, but it could also reflect a more widespread prejudice that prevents many willing and capable applicants from finding work.

Ex-Army Veteran Mark Cock made the headlines in 2012 when he revealed that he had been turned down for a staggering 2,600 jobs. He was qualified in Plumbing and Information Technology and could drive a vehicle but despite being fit for work and able to do the jobs he applied for, he kept being rejected – rejections he thought were triggered by him having only one leg, the other having been lost after a car accident. His difficulty in getting back into work after he became disabled is sadly not an isolated incident.

Elizabeth Green, a young mother with arthritis, wanted to re-train as a nursery nurse after the birth of her first child so that she could take her child to work with her so she attempted to enrol in the local college on a course that offered a two days a week placement in a childcare centre. The staff member told her the course wasn’t just academic, she would actually have to care for children and that with her ‘problems’, they didn’t think it was a good idea. Elizabeth explained she was already a mother and was caring for her six month old infant but the admissions team wouldn’t be swayed and she was denied entry to the course.

Protection from Discrimination

The Equality Act 2010 offers some protection against discrimination when finding work and while at work. It is illegal for an employer or potential employer to discriminate against someone due to disability, if they are capable of doing the tasks that are required of the job and it wouldn’t present a health and safety risk (for example, alcohol or drug usage in a driving job).

As a disabled applicant, you can receive help to fill out your application form from your local jobcentre or access to work course. You might also be entitled to help getting to job interviews.

An interviewer is allowed to ask about disability to establish if the person is able to complete the interview, if any ‘reasonable adjustments’ should be made during the interview process, if the applicant will be able to carry out job tasks or if the company want to increase the number of disabled workers on their books. They aren’t allowed to use information about disability to reject an application for a job that an applicant is capable of doing.

In reality, though, most prospective employers don’t give a reason for rejecting an applicant so it is difficult for the disabled job seeker to prove that discrimination has occurred. In Mark Cock’s case, he was frequently told his rejection was down to the Health and Safety Act or because he would make their insurance too expensive. None of this, however, was put in writing where it would have come under the Equality Act as discrimination.

If you believe that you have been discriminated against during the recruitment process or when accessing further education, you can make a complaint to the Employment Tribunal. They are an independent tribunal that settles legal disputes between potential employers or employers and applicants or workers. They look at discrimination, unfair dismissal, pay disputes and other unlawful treatment claims. There is a fee for making a claim and a court fee too.

Reasonable Adjustments

If you are accepted for a job, your employer is required to make ‘reasonable adjustments’ so that you don’t encounter any difficulties during the course of your working day. Adjustments could be the installation of a stair lift so you can reach the first floor, a chair with lumbar support so you don’t experience pain or modification of your working hours to fit around hospital appointments. Failure to reasonably accommodate you is illegal.

Unfair Dismissal or Redundancy

If you become disabled during your career (only 17% of disabled people are born with their disability) then your boss cannot fire you or make you redundant if you can still carry out the job. They can’t choose to make you redundant or force you to leave just because you have a disability.

If you believe you have been the victim of disability discrimination in the workplace or during the recruitment process, contact the team at Mayo Wynne Baxter Solicitors for no nonsense legal advice.

By Gemma Abrahams- Freelance Contributor

The number of people claiming compensation in the case of a flight delay is on the increase, regardless as to the reason of the delay. Being a private pilot myself, there is always a sentence in my mind “Better late than never”. I want to believe that airlines and commercial pilots have also clear in their minds their priorities and in particular their obligation to ensure safety and security of its passengers, without rushing the aircraft checks and maintenance requirements.

The aviation industry has had a long time dispute as the events which may or may not give a right to compensation, in particular in cases of long delays. In 2009, the European Court of Justice (ECJ) defined long delays as a delay of more than 3 hours. Therefore, air passengers who suffer a delay in a flight of 3 hours or more, are entitled to claim compensation for the delay.

Air carriers, however, can still avoid paying compensation if they could prove extraordinary circumstances. The meaning of extraordinary circumstances has been ambiguous and for a long time without a uniform interpretation.

To summarise the law, in the case of delay of more than 3 hours, the air carrier is liable for compensation unless it took all reasonable measures to avoid the damage or it was impossible to take such measures. Reg No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights (“Reg 261/2004”), states that the obligations on the air carriers should be limited or excluded in cases where an event has been caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. On general terms, those circumstances can be identified with events such as political instability, some meteorological conditions, security risks, unexpected flight safety deficiencies and strikes which may affect the operations of the aircraft. Reg 261/2004 continues to say that extraordinary circumstances should be deemed to exist where the impact of an air traffic management decision in relation to a particular aircraft on a particular day gives rise to a long delay, an overnight delay, or the cancellation of one or more flights by that aircraft, even though all reasonable measures had been taken by the air carrier concentered to avoid the delays or cancellations.

Reg 261/2004 therefore expressly excludes the right to compensation if the air carrier can prove that the cancellation or delay was caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.

In a previous article, we reviewed the Court of Appeal decision in the case of Huzar v Jet2.com Limited of June 2014. The court held that when determining whether a delay or cancellation was caused by extraordinary circumstances, the circumstances must be out of the ordinary. To be out of the ordinary, it must come from events which by the nature or origin are not inherent in the normal exercise of the activities of the air carrier concerned. If therefore, the cause of the delay is one which can be linked to the normal exercise of the activity of the air carrier concerned, then it can be considered that it is in the control of the carrier and therefore not extraordinary. Events caused by acts of third parties, such as terrorism, strikes or air traffic control problems, or because they result from freak weather conditions, cannot be characterised as inherent in the normal activities of the carrier.

Despite the above clarification of the Court of Appeal, the English courts have been making decisions for every taste. Recently, there has been some discussion regarding the extraordinary circumstances in relation to bird strikes. This is a point which we would like to review.

In April 2015, an air carrier lost a compensation claim in the Manchester County Court when the court stated that bird strikes did not count as extraordinary circumstances. The judge’s opinion was that bird strikes happen every day and he highlighted that the word used was “extraordinary” rather than “unexpected”, “unforeseeable”, “unusual” or even “rare”. He therefore decided that extraordinary to him connoted something beyond unusual and the bird strikes were not unusual.

One year later, another English court in Uxbridge decided that the fact that bird strikes were frequent, did not mean they cannot be extraordinary. He compared this situation with the number of cars and bikes in London at rush hour and the fact that incidents are still rare and collisions cannot be considered as “inherent in the normal exercise of the activity”. This was a positive outcome for the airlines and allowed them to reject many claims.

We had to wait until May 2017, when a court from Prague referred a matter for preliminary ruling to the European Court of Justice (ECJ). The ECJ published the decision in the case of Peskova v Travel Service (C-315/15) which seems to clarify whether the air carriers can rely on the extraordinary circumstances defence in order to reject cancellation or delay claims in cases of bird strikes. The short answer is that yes, they can, but with caution.

Surprisely, the ECJ published its decision against the recommendation of the Advocate General which had stated that bird strikes should be regarded as an inherent risk of operating an aircraft and therefore not an extraordinary circumstance. He considered that the airlines have control as they could minimise or prevent somehow collisions with birds but putting measures in place.

Despite the recommendations, the decision of the ECJ was in favour of the air carrier. The court recognised that events may be considered as extraordinary if they are not inherent in the normal exercise of the activity of the air carrier and are outside its control.

The aircraft in the case in question initially showed a technical failure in a valve, which was initially repaired. The aircraft continued its journey and in another flight leg, it collided with a bird requiring safety checks. A local technician did the checks finding no damage, however the airline insisted in a further check by one of its own technicians. The airline’s technician flew to the area and inspected the aircraft, so the delay increased considerably. The outcome of the inspection was again satisfactory.

The ECJ made it clear that a failure with certain parts of an aircraft cannot be considered extraordinary circumstances, as it is intrinsically linked to the operating system of the aircraft and not outside the airline’s control, as they are required to maintain the aircraft and guarantee a proper functioning. Therefore, he considered that the delay in respect of the repair of the valve would have counted towards the right of compensation.

However, the ECJ also decided that a collision between an aircraft and a bird is not intrinsically linked to the operating systems of the aircraft and therefore no inherent in the normal exercise of the activity of the air carrier concerned and outside its control. Accordingly, the bird collision must be considered as an extraordinary circumstance according to Reg 261/2014. Any delay as a consequence of the bird strike therefore would be excluded towards the right of compensation.

The judge also considered whether the measures taken by the air carrier, basically refusing to rely on the first expert’s finding and wanting to obtain a second opinion before allowing the aircraft to be airborne, were appropriate measures to avoid paying compensation. The ECJ considered that reasonable measures according to Reg 261/2004, which an air carrier must take in order to reduce or even prevent the risk of collision with a bird and thus be released from its obligation to compensate, include control measures preventing the presence of birds, provided that such measures can actually be taken by that air carrier, that those measures do not require it to make intolerable sacrifices in the light of the capacities of its undertaking, and that that carrier has shown that those measures were actually taken as regards the flight affected by the collision with a bird.

The ECJ also decided that the time of a further delay caused by another event, not considered extraordinary circumstances, must be deducted from the total length of the delay in arrival of the flight concerned in order to assess whether compensation for the delay in arrival must be paid. In this particular case, the judge decided that the decision of the air carrier not to rely on the local expert and insisting in a second opinion causing a longer delay, was not a reasonable measure. Therefore, the time spent waiting for the second expert would count towards the right of compensation.

Compensation claims will continue to be popular, however this case has identified a further defence for the airline in cases of bird strikes.

Although we hope that flight safety will always be a paramount, it is always a concern that air carriers are somehow penalised for trying to obtain a second opinion when they feel that it is more important to do a further check than having a risky flight.

There is a well-known shortage of housing in this country and there is a lot of new build housing being pushed in all parts of the country. Much of the building is being built by the big builders who often share the risk of a big development.

However, they often have one thing in common. Inevitably on a new development new roads and new drainage systems have to be built as part of the development and the aim is the roads should be adopted by the highways authority and the drains by the correct authority, usually, but not always, the local water authority.

New developments come with all sorts of restrictions, either payment for local services are due under what is known as a Section 106 agreement or alternatively if the local authority has implemented the scheme, payments are made under a scheme known as Community Infrastructure Levy. Either way it means developers have to contribute to local services. On purchasing a new property it is imperative to ensure that these payments have been made by the developer and if due to be paid in the near future it is important that these cannot be passed onto the future purchaser of any house on the estate.

Now that is not the time bomb.

When an estate is being developed the developers are supposed to enter into a Section 38 Agreement with the local highways authority. If it is intended the roads are to become public highways to build the road up to an adoptable standard and to pay for a bond (ie financial guarantee) so that if the developer goes into liquidation then the bond is sufficient to cover the cost to the highway authority to make the roads up to an adoptable standard and eventually adopting the same.

However, there is a greater tendency for the builders to indicate whilst they are selling the new houses that they are negotiating the terms of the agreement. Frequently no mention is ever made for the financial bond to guarantee the money for the highways authority to complete the works.

So a competent solicitor should at this point ask for retention from the purchase price to cover this and any possible future cost. However, most of the big builders refuse point blank to even countenance such retention. Likewise a competent solicitor should at that point ask the Mortgage Company if the position is acceptable. Such mortgage companies usual response is to place the opinion squarely back on the solicitor’s opinion.

Any solicitor at that point is usually under pressure from the client purchasing the new property. The clients have usually put down a cash deposit of at least £1000 and often much higher with a 28 day window to exchange so that the clients are desperate to go ahead otherwise they could lose a substantial amount of money.

Often in the transfer of the house the developers insert a covenant i.e. A promise which they say purchasers can rely on. It says the developers covenant is to make the roads and sewers up to an adoptable standard. They do not always covenant that the developers will get the roads and sewers adopted, so people buy a new house expecting that in due course the roads and sewers are adopted. When the development is finished the Developers go off site and the new house owner assumes the road has been finished.

However, it is becoming increasingly common that when that house owner comes to sell, the road hasn’t been adopted. Of course over the first five to ten years little maintenance of the road is required and it never occurs to the house owner until they come to sell that there may be a problem.

What can then happen? Well if an original owner, they can go back to the developer and ask them to comply with their covenant, but the developers may well have done so when the road was made up to adoptable standard so that may be not the way forward. So in purchasing a new property buyers should be aware of this potential risk.

So what happens now? Well everyone in the road is facing the same problem and in those circumstances if the road is just left it will deteriorate, so some roads form private residents associations for the maintenance of the road, but unlike developments where it was always intended that any road is to remain private, membership of the resident’s association is not compulsory and there will nearly always be one awkward person who says that he hasn’t got to pay and therefore won’t. This puts a greater burden on the rest of the residents.

In theory, the highways authority could make up the road and ask the frontagers to pay for it. The cost effectively is secured as a local land charge on the property, which would have to be paid off when the property is sold. However, this could be many years away and cash strapped councils are not, unless absolutely necessary, going to put the money up front. The writer has never come across a council do this. The highways authorities don’t have enough money to maintain adopted roads as it is.

The problem could be solved in the terms of the planning agreement and documentation if it was a condition of the development that no house could be sold or occupied until all the agreements and supporting bonds are in place, but the writer has never seen this either as there is always pressure on getting the estate finished.

As years go by, roads age and deteriorate to the detriment of the house owners.

The time bomb is ticking.

Last year the headlines were flooded with news on Brexit, the migration crisis and most notably, the US elections. The ongoing struggles of the NHS has also emerged as the hot topic of the day with various charities, organisations and even NHS employees sharing their opinions on the matter. It comes as no surprise then that, in the legal world, the spotlight has shifted to clinical negligence claims brought against the NHS each year.

I would like to take a step back from the headlines in the media and focus on what a clinical negligence claim entails from the perspective of an injured patient and the changes in the legal framework in which clinical negligence law now operates. But first, a bit of history…

Clinical negligence claims, which are known to be complex and challenging in most cases, find their roots in tort law (the law of civil wrongs) which provides legal remedies to those who have unfairly suffered loss or harm as a result of negligence. It all started with the case of Donoghue v Stevenson (1932) in which a decomposed snail was found in a bottle of ginger beer: “The rule that you are to love your neighbour becomes in law you must not injure your neighbour”

About 30 years later the case of Bolam v Friern Hospital Management Committee (1957) established the test for negligence (i.e. whether there has been a breach of duty of care) in the context of patients receiving medical treatment. The so-called Bolam test provides a defence for medical professionals if they have ‘acted in accordance with a practice accepted as proper by a responsible body of medical opinion’. In other words, they have taken the same action that their peers would have taken. The ‘10 per cent rule’ applies here: if 10 per cent of the doctors in the country would have taken the same course of action and that action is logical, then it will not be negligent. If negligence is established, the Claimant then has to prove that those actions (or omissions) caused the injury on the balance of probabilities. Claimant lawyers normally instruct medical experts to advise on this.

To deal with clinical negligence claims, the government set up the NHS Litigation Authority (NHSLA) in 1995 to defend cases. Claims brought against GPs and private medical professionals on the other hand are dealt with by medical indemnity organisations such as the MDU or MPS.

In 2003 the Department of Health published a paper ‘Making Amends – Clinical Negligence Reform’ which set out to prevent clinical negligence by reducing risks, preventing harm to patients and promoting best practice. The NHS Redress Scheme also proposed a more predictable and affordable system for legal claims.

The review highlighted the lengthy time it took for cases to conclude and the significant costs incurred in doing so. However clinicians also professed to practising ‘defensive medicine’ and avoiding certain high risk procedures for fear of being sued. Whether this can be considered as acting in the best interests of the patient is another matter.

On the other hand, one can take the view that litigation can drive the development of better practice and hold institutions accountable for mistakes made. It can also help to identify systematic failings and lead to improvements in healthcare.

It all sounds well in theory, but the practice of litigation is where the problems begin. The NHSLA has been criticised for denying liability too readily and driving up significant legal costs, even where an admission could be made earlier. A National Audit Office review in 2003 found that the costs of bringing a claim exceeded the damages in the majority of claims valued under £45,000; 95 per cent of cases were settled out of court, with only 5 per cent of claims reaching trial.

The Department of Health has acknowledged the serious shortcomings within the NHS. It is thought that this is down to a lack of funding, a shortage of doctors, population growth and an ageing population.

Presently there are many reports in the press of clinical staff working in less than ideal conditions due to shortages of staff, no time for breaks, overuse of locum staff and a lack of proper training and supervision. This year A&E departments need at least 8,000 doctors, 50 per cent more than the number of staff currently employed to deal with the demands of emergency admissions.

NHS figures show that between 2005 and 2015 the number of patient Hospital attendances caused by ‘unintentional cut, puncture, perforation or haemorrhage during surgical and medical care’ rose from 2,193 to 6,082. Peter Walsh of charity AvMA stated that more complex procedures and a better reporting of incidents may account for this rise in figures but not account for figures trebling and suspected that inadequate staffing and increased pressure at work were also factors. There is particularly concern among surgeons that their training is not as thorough and adequate as it used to be.

If mistakes are made, it is often overlooked that organisational problems may have contributed to the events. For example, where a serious incident leads to an avoidable death, an investigation is started during which staff are suspended from duty and, if found to be negligent, face disciplinary action, a report to their professional bodies and potentially being struck off the register.

It is also concerning that almost a quarter of midwives are considering leaving the profession in the next year because of resentment over pay and conditions. The Royal College of Midwives found that staff were ‘demoralised, disillusioned and burnt out’ due to excessive workloads and shortage of staff – there is currently a shortage of 3,500 midwives across the NHS. More worryingly, it was also reported that midwives were not satisfied with the quality of care provided to patients.

The focus of the government and the media has therefore shifted to what is hyperbolically referred to as an ‘out of control claims culture’ with ‘escalating costs’ driven by ‘vulture lawyers’. It comes as no surprise then that Lord Justice Jackson proposed substantial reforms to the area of personal injury and clinical negligence. The reforms took effect from April 2013 and mark a historic turning point in litigation.

The Legal Aid Sentencing and Punishment of Offenders Act (LASPO) 2012 was enacted by Parliament and essentially withdrew legal aid, with exception to certain birth injury cases.

The claimant’s lawyer’s success fee (an uplift on the base costs to reflect the risk of losing a case) is also no longer recoverable from the opponent and is now deducted from the Claimant’s damages, subject to a cap of 25 per cent of all damages (excluding future losses).

The part of the insurance premium that is in place to cover expenses such as medical records, court fees and barrister’s fees (but not the costs of obtaining a medical report) is no longer recoverable from the opponent and is also now deducted from the Claimant’s damages.

The reforms also require the parties to file costs budgets, essentially budgeting for the total amount of costs spent in a given case. Litigation is very unpredictable and it is difficult to assess what a client’s exposure to costs will be at the outset of a claim.

The Jackson reforms were criticised for being weighted too heavily in favour of defendants. Not all Judges have experience in clinical negligence cases and there is a resulting lack of consistency in the management of costs. The situation is not helped by the strain on Court resources, with Courts already understaffed and overburdened leading to substantial delays in getting a court hearing.

A new test of ‘proportionality’ was introduced within the package of Jackson reforms, but with very little guidance in the Civil Procedure Rules and interpretation from the Courts as to how this is applied on practice. In a recent case Albert Carder v The University of Exeter EWCA Civ 790 the Court did offer a helpful comment on the ratio of damages to costs:

“… I recognise that Mr Carder has been awarded a sum which is small when compared with the costs of this litigation. That is regrettable. But litigation of this kind is often necessarily factually complex. Defendants faced with claims whose costs are likely to be out of proportion to the damages likely to be awarded after a trial should try to settle them early.”

Whilst the NHSLA has always challenged excessive costs, the Courts now have the power to strike out further costs if it takes the view that the costs are excessive or disproportionate.

So what is the real driver behind the costs of clinical negligence cases?

In its 2015-16 report the NHSLA stated that the costs paid to Claimants had increased from £292 million to £419 million. This new figure however includes both cases that had concluded and payments made on account of costs in cases that were due to be closed the following year. Differentiating between the costs awarded on payment of account and total costs paid in closed cases results in different figures: £249m in 2014/2015 and £279m in 2015/2016, a very different scenario to the one above.

The rise in costs could be better explained by the lack of early admissions of liability, a 600% per cent increase in the Court fees and increase in Insurance Premium Tax.

When the NHSLA denies liability on a case, this forces lawyers to issue costly Court proceedings before the NHSLA admits liability or makes an offer of settlement where negligence is established.

It was also shown that the Claimant won damages in about 76 per cent of cases where proceedings were issued, rising from 72 per cent in 2015/16. Average costs were £20,000 in cases settled before the issue of Court proceedings and £85,000 for cases settled after the issue of Court proceedings.

Is there any explanation for the delays caused by defendants dragging a case out to the issue of court proceedings in complex and high value claims?

The NHSLA instructs its own panel of solicitors who work on a fixed costs basis. Solicitors undertake work up to and including service of the Defence for £2,000, including payments made to medical experts and barristers. They operate on a budget of £4,000 for claims valued over £50,000 but under £100,000.

Although Defendants generally incur less cost than Claimant lawyers, the above budgets are quite low and it begs the question as to whether the NHSLA has the means to conduct an adequate investigation at an early stage of a case.

The notion of having fixed costs in place for claimant lawyers has been widely debated and would also be problematic. This is particularly problematic for serious but low value clinical negligence claims where the costs of running the case far outweigh the damages awarded. It is unfortunate that the most challenging of cases and yet low in value involve the elderly, the disabled and psychiatric victims.

After a long fought out period of consultations and discussions, the government is considering setting the limit for fixed fees to apply to cases valued up to £25,000. The Department of Health has confirmed that a final decision has not been made and the issue of limit will be one of the questions in a future consultation, the date of which is currently unknown.

Given that the recoverability of fees is already limited and tightly controlled by the Jackson reforms, this is likely to have an impact on the sorts of cases that firms take on resulting in a ‘cherry picking’ culture. It is feared that this in turn will lead to injured patients attempting to take matters into their own hands, causing additional strain on court time and resources.

There is also an alarming increase in the number of non-specialist law firms entering the clinical negligence field, racking up unnecessary costs as well as being to the disadvantage of claimants. Clinical negligence claims should be dealt with by accredited specialist clinical negligence solicitors.

There appear to be, then, many factors contributing to the escalating costs of clinical negligence claims. It is a question of balance but perhaps more thought is needed to address the areas which have not always received as much attention in the press and where better lessons could be ‘learned’…

As a general rule a bankruptcy petition should be presented to the appropriate court closest to the debtor’s home or place of business. In the event that the debtor is subject to an individual voluntary arrangement the petition should be presented in the court which has conduct of the individual voluntary arrangement.

Prior to April 2011 the High Court had jurisdiction over all bankruptcy cases within the London Insolvency District. With effect from 6 April 2011 jurisdiction over lower value bankruptcy matters (£50,000) was transferred to the Central London County Court.

Bankruptcy proceedings must be commenced in the High Court if:

the petition is presented by a Government department and the petition is based upon an unsatisfied execution or it is indicated in the statutory demand their intention to petition in the High Court; or
the debtor against whom the petition is presented has resided or carried on business within the London insolvency district for the greater part of the 6 months immediately preceding the presentation of the petition or for a greater part of those 6 months than any other insolvency district; or
the debtor is no longer resident in England or Wales but was resident or carried on business in England and Wales within the 6 months immediately preceding the presentation of the petition and the debtor either carried on business or resided in the London insolvency district for a longer period in those 6 months than in any other insolvency district; or
the debtor is not resident in England or Wales and has not carried on business in England and Wales within the 6 months immediately preceding the presentation of the petition; or
the petitioning creditor is unable to ascertain the residence or place of business of the debtor.
The High Court Registrars were concerned that the use of the C-File system in court for petitions in the multiple bankruptcy list was not operating satisfactorily, accordingly the Chief Bankruptcy Registrar has issued guidance to be followed for petitions in the multiple bankruptcy list. Bankruptcy hearings in the multiple lists should be dealt with in line with Practice Direction 51O – The Electronic Working Pilot Scheme.

Practice Direction 51O came into operation on 16 November 2015, initially for two years. As a result Chief Bankruptcy Registrar Stephen Baister sent out a note entitled “Electronic filing in the Bankruptcy and Companies Court (Rolls Building) to give guidance to practitioners to the Practice Direction. However from 1 November 2016 bankruptcy hearings and multiple lists in the Bankruptcy and Companies Court (Rolls Building) should now be dealt with in line with Practice Direction 51O and the new guidance referred to above which took effect on 1 November 2016.

Anyone presenting a petition pursuant to Practice Direction 51O will need to follow the guidance summarised below.

First Hearing

Three working days before the first hearing of any bankruptcy petition, the petitioning creditor should lodge a bundle containing the statutory demand and evidence of service, the petition and evidence of service (including any order for substituted service and any extension order served).

The petitioning creditor will also need to provide the Registrar at the hearing with an attendance sheet incorporating the certificate of continuing debt. The list of supporting creditors and opposing creditors along with any relevant documents will also need to be provided at the hearing. The court will retain the bundle for any adjourned hearing until the petition is either dismissed or a Bankruptcy Order is made.

Subsequent Hearings

It will not be necessary to file a further bundle if the papers were in order at the first hearing, additional papers may be filed to complete the bundle.

Anyone issuing a bankruptcy petition in the High Court to which Practice Direction 51O applies should follow the guidance to ensure that the petition can be dealt with expeditiously.

Mayo Wynne Baxter have experience of issuing petitions in the High Court for both bankruptcy and winding up of companies and can offer a fixed fee service. Should you wish to discuss the above please do not hesitate to contact either Darren Stone or William Backhouse at Mayo Wynne Baxter on 01273 775533.

In the normal course of events when a company becomes insolvent it will be placed into an insolvency regime where the office holder will look to realise its assets and make a distribution to creditors, usually the highest bidder wins.

In relation to a Housing Association they will normally own property which if sold to the highest bidder would mean a sale to a party outside of the housing association sector, thereby reducing the availability of social housing. To date there has only been one reported case of an English Housing Association entering into an insolvency procedure. As a result it was apparent that greater powers needed to be given to the regulator.

When the Homes and Communities Agency (the current regulator) came into being they commissioned a report to look into their powers when it came to dealing with the insolvency of a large scale provider of Social Housing. The conclusion was that powers at their disposal were not sufficient. In particular the 28 day moratorium period, provided for by the Housing and Regeneration Act 2008, preventing disposals of land did not provide sufficient time to allow a deal to be agreed with the secured creditors to allow a transfer of the housing stock to an alternative provider.

The Housing and Planning Act 2016, which became law on 12 May 2016 provides for a new special administration regime for private registered providers of social housing (“Housing Associations”) in England. When in force in its entirety there are likely to be changes to who leads the insolvency procedure as well as to the possible returns to creditors.

The Act introduces the ability for the Secretary of State (or the regulator with the approval of the Secretary of State) to intervene by applying within a 28 day period for a new housing administration order (HAO) before any other insolvency processes can commence.

Upon hearing an application for a housing administration order, the court may make the order or an interim order, dismiss the application, adjourn the hearing or treat the application as a winding-up petition. The court may only make a housing administration order if it is satisfied that the Housing Association is unable, or likely to be unable, to pay its debts, or that it would be just and equitable to wind up the Housing Association in the public interest. Finally the court has no power to make a housing administration order in relation to a Housing Association which is in administration under Schedule B1 to the Insolvency Act 1986 or has gone into liquidation.

The effect of the HAO is that the the Housing Administrator has the same objectives as would apply in a normal administration process (“the Normal Objectives”), namely (a) rescue the registered provider as a going concern, (b) achieve a better result for the unsecured creditors of the registered provider as a whole than would be likely in a liquidation of the registered provider, or (c) realise property in order make a distribution to one or more secured or preferential creditors. Each of the above must be considered in order and unless the objective it is not reasonably practical to achieve the subsequent objective cannot be considered.

In addition to the Normal Objectives the new regime introduces ‘Objective 2’. The Normal Objectives retain priority but the new Objective 2 looks to keep social housing within the regulated sector, so that the housing stock remains owned by a Housing Association.

As suggested at the start of the article a sale to the highest bidder could well result in a sale to a bidder outside of the regulated sector, the Housing Administrator therefore has to work towards the Normal Objectives and the new Objective 2. To do this they have the following powers:

They are not required to hold creditors’ meetings, and it follows that there is no requirement therefore that the Housing Administrator’s proposals are subject to creditor approval;
Where a section 106 agreement contains a mortgagee exclusion clause, this is automatically extended to cover a disposal by a housing administrator.
As set out above, the new regime does not prohibit the use of the current insolvency processes available to creditors and housing associations. The social housing regulator and ultimately the Secretary of State will have 28 days to intervene by applying for a Housing Administration Order before such other insolvency processes can commence.

As with any Administrator the Housing Administrator must not only act in the best interests of creditors they will also have to, so far as possible, keep the social housing in the regulated housing sector. It will be a difficult balancing exercise to justify acceptance of a lower offer within the sector against higher offers from outside. Where the difference is small creditors are unlikely to take issue, however where the difference is significant they may not be so ready to accept the decision with disputes ultimately going to Court. There is also the question as to how lenders will react to the new regime when it comes to making a lending decision.