Legislation in the United Kingdom
3.1 Following recommendations of the Law Commission1 and the Pearson Commission,2 legislation3 was enacted in England and Wales giving the High Court power to award provisional damages to a plaintiff in the more serious common law personal injury cases. This power has since been extended to the County Court.4
3.2 A provisional damage award can only be made on the application of the plaintiff. The court determines the issue of liability, but where the court accepts, or the parties agree that there is a chance of a specific event occurring in the future (either a disease associated with or a deterioration of, the injured plaintiff’s present condition) the Court will not make any award for that possibility, but authorises the plaintiff to return to court for a further assessment of damages if and when that disease or deterioration actually occurs. The scheme was seen as a solution to the dilemma faced by the courts when awarding damages to a plaintiff who will suffer serious physical or mental deterioration in the long term.
3.3 The Law Commission’s recommendations were made within the framework of the fault-based common law system and were in response to the defects that exist in a system that attempts to compensate for future loss based on present estimations.5 The Law Commission felt that a court should be allowed to adjust an award if the plaintiff’s circumstances changed. Such review was to be limited to serious injury cases and only where there was a chance of the plaintiff’s circumstances changing. A further limitation on the courts’ power to review is that any award of provisional damages must specify the disease or type of deterioration in respect of which an application may be made at a future date.6 This limitation also applies to offers by a defendant to submit to an award of provisional damages.7
3.4 The word “chance” is not defined in the legislation. However, in recommending that legislation should be enacted, the Law Commission equated the term “chance” with “possibility”.8 The decided cases have not addressed this issue, but where the medical prognosis has approximated the risk of a plaintiff developing an associated disease or suffering deterioration in his or her present condition, in the region of 2-3% 9 and 3%10, the courts have held that to be sufficient to constitute a “chance” within the meaning of s32A(1) of the Supreme Court Act 1981.
3.5 The types of diseases associated with provisional damages or the circumstances in which or deterioration of a present injury has led to an award of provisional damages include lung cancer and mesothelioma,11 epilepsy,12 and blindness.13 To fall within the exception provided for under s32A (1) of the the Supreme Court Act 1981, the court requires a clear and severable risk of serious disease or deterioration, not simply an aspect of the progression of the disease.14
3.6 Both the Law Commission and the Pearson Commission recommended that provisional awards should be made where:
(a) the defendant is a public authority;
(b) the defendant is insured in respect of the plaintiff’s claim; or
(c) in road accident cases the defendant is a person exempt from the requirements as to insurance of section 143 of the Road Traffic Act 1972 by reason of his making a deposit with the Accountant General of the Supreme Court or otherwise.
The Lord Chancellor’s Department did not include these proposals in the ultimate legislation. Reasons for the omission were not specifically stated, however, it appears that the Lord Chancellor did not envisage the legislation would be employed very often because the application must be made by the plaintiff and the court must be satisfied that the defendant would not be seriously disadvantaged by such an award.15
3.7 This position has proved correct. Since the introduction of the legislation in 1982 there have been relatively few cases in which provisional damages have been awarded. Plaintiffs generally seem to prefer the lump sum option. It is also possible that the option or threat of provisional damages may have facilitated a better lump sum settlement than the plaintiff would have otherwise achieved.
3.8 It is important to note that the provisional award is final and cannot be reopened, whether or not the plaintiff applies for further damages. The provisional award must ignore any facts relating to the chance condition and any further damages awarded should be reduced where there is an overlap with the provisional award. As a consequence, in respect of the injuries for which a plaintiff has claimed provisional damages, a plaintiff will only receive damages for his or her condition as at the date of trial. The majority of reported cases reveal the damages received at trial have been small amounts for general damages.
3.9 The intended result of the Law Commission’s recommendations was to introduce greater accuracy in the damages awarded to a seriously injured plaintiff. The Law Commission has stated16 that it considers the scheme to be a valuable addition to the powers of the court in personal injury matters. It is not possible at this stage to consider the overall success of the legislation because of the periods of time which the court has allowed for applications for further damages - for example twenty years from the date of trial or any time during the plaintiff’s lifetime.
Shortcomings of provisional damages awards
3.10 This legislation has attempted to remove some of the problems associated with the lump sum award at common law. The Commission does however, see some practical problems associated with such a scheme.
(a) Any system of review will inevitably incur additional costs: those associated with further court applications, consultations with lawyers and doctors; the administrative costs of keeping files open; and the cost to the court system itself due to further hearings of the particular matter.
(b) Financial uncertainty will exist for a defendant who will not be sure for a number of years whether a further payment will need to be made to a plaintiff.
(c) There is the possibility that after an award of provisional damages has been made, but before any further award is made, the defendant may become bankrupt or insolvent. The consequences of such a situation might be avoided by establishing an indemnity fund to which the defendant could contribute to, to relieve any ultimate burden if a further award of damages is made. The question also arises whether provisional damage awards should only be made in circumstances where the defendant is insured. No doubt a defendant’s financial status would be taken into account by a plaintiff when making an application for provisional damages.
(d) The possible adverse psychological effects on both the plaintiff and defendant of protracted litigation.
(e) The words “chance” and “serious” are not specifically defined, and despite the reasons put forward by the Law Commission for their incorporation in the legislation, the scope for interpretation is very wide. It may be prudent, if similar legislation were introduced in New South Wales, to define those words more precisely to avoid unnecessary litigation.
3.11 The Commission recognizes that in those cases which make use of a provisional damages award, a greater degree of justice may well be achieved. However, based on the experience in England to date, the number of those cases will be limited. It is therefore necessary to consider carefully whether there is a justified need for the introduction of a system of provisional damages.
Proposals for Provisional Damages in New South Wales
3.12 In New South Wales there are currently two systems of assessing damages in personal injury matters: the common law, and for those injury matters occurring as a result of a motor accident, the Motor Accidents Act 1988. As outlined in Chapter Two, a number of problems exist within the common law system, but before modifying this system, any shortcomings the Commission has identified with a scheme of provisional damages would have to be addressed.
3.13 In respect of the Motor Accidents Act (and due to its similarities, the Personal Injury Damages Bill) the Commission queries whether provisional damages could operate within those systems.
3.14 For instance, awards of provisional damages in the majority of reported cases have been below the deduction threshold existing under the Motor Accidents Act (and that proposed by the Personal Injury Damages Bill) and have been almost exclusively in respect of general damages. As a consequence, a provisional damages award of a similar amount would mean that a plaintiff would not be awarded any amount provisionally, but only an entitlement to claim further damages if the specified disease or deterioration occurs.
3.15 Further, payments and subsidies that an injured plaintiff may receive from the National Health Scheme or the Department of Social Security, prior to and post trial, to an extent removes the need for a provisional damage scheme to compensate for anything else but non-economic loss.
3.16 An application for provisional damages in England may only be made by a plaintiff. The question arises as to whether a defendant should also be able to apply to the court for an award of provisional damages. In circumstances where there is medical evidence at trial that there is only a chance of the plaintiff developing a serious disease on suffering serious deterioration in his or her condition, a defendant may not wish to have the matter settled on a once-and-for-all basis, but may want to pay a provisional amount of damages at the time of trial and approach the court again if and when the disease or deterioration occurs.
3.17 The English experience reveals the partial success of provisional damages in the limited number of cases in which they have been awarded. Partial in the sense, that although provisional awards have been made, it will be several years due to the length of time allowed for further applications before the true value of such an award can be measured. The Commission is concerned that this uncertainty, combined with the small number of cases where an award of provisional damages has been applied for and granted, raises serious practical problems.
Submissions
3.18 The Commission would like to receive comments or submissions on the following issues:
- the suitability of incorporating a scheme of provisional damages into the current common law personal injury system in New South Wales;
- the suitability of incorporating a scheme of provisional damages under the Personal Injury Damages Bill 1991 (in the form contained in Appendix A to this paper).
FOOTNOTES
1. The Law Commission, Report on Personal Injury Litigation - Assessment of Damages, (Law Com 56), paras 231-244.
2. The Royal Commission on Civil Liability and Compensation for Personal Injury, (“The Pearson Commission”) Volume One, paragraphs 584-585.
3. The power to award provisional damages is contained in s32A of the Supreme Court Act 1981 (E&W). This section was inserted by s6(1) of the Administration of Justice Act 1982. Rules of the court have been made and are contained in RSC ORD 37, rr7-10. RSC ORD 37 r9 was recently amended, following the decision in Hurditch v Sheffield Health Authority [1982] 2 All ER 869 to now require a defendant to specify in an offer to submit to a provisional damages award, to the type of disease for which an application for an award for further damages may be made. A practice direction relating to procedure for further damages at a future date is found at [1985] 2 All ER 895. A copy of the legislation and rules are found in Appendix B to this paper.
4. Although this section of the Supreme Court Act is also applied to County Courts by the Administration of Justice Act 1982, s6(3), it was consolidated in the County Courts Act 1984, s51.
5. Law Commission No 56 para 231.
6. RSC ORD 37, r8 (2).
7. See footnote 3 above.
8. Law Commission No 56 para 232, 239.
9. Patterson v Ministry of Defence, 29 July 1986, unreported, Queens Bench, 85/NJ/3463, pg 12.
10. Barratt v Furniss, 13 October 1987 unreported, Queens Bench, p13.
11. Phillips v Ministry of Defence 29 July 1988, unreported, Queens Bench, 87/NJ/2339.
12. Barratt v Furniss., op cit
13. Cronin v Redbridge London Borough Council , The Times, 20 May 1987.
14. Wilson v Ministry of Defence [1991] 1 All ER 638.
15. HANSARD H L Vol 428, cols 28-29.
16. Letter dated 19 October 1990 from Law Commission (UK) to New South Wales Law Reform Commission.
