Simon -v- Helmot - Discount Rates for Lump Sum Awards
In 1998, Mr Helmot was struck by a car driven by Mr Simon whilst riding his bike on Guernsey. As a consequence of the incident, Mr Helmot suffered serious, long-term injuries. Liability was admitted by Mr Simon’s insurers when court action was intimated but damages could not be agreed between parties.
An action of damages was thereafter raised and the case went to trial in late 2009. Following a lengthy trial, the Court in Guernsey awarded Mr Helmot £9.3m in damages, using a discount factor (which are used in calculating awards to take account of the fact that money is paid now to cover loses will not arise until some date in the future) of 1% to calculate his loss of earnings, a marked reduction of the 2.5% figure previously used.
Lawyers for both parties appealed the decision. Mr Helmot’s agents argued that damages should be calculated using a discount rate of -1.5% for earnings related losses and 0.5% for other losses to properly reflect the current economic climate, whereas Mr Simon’s agents argued that the prescribed discount rate of 2.5% ought to be used.
The appeal was recently considered by 5 Judges sitting in the Privy Counsel and their judgement has now been released. Following a detailed examination of the initial decision, all 5 Judges considered that the Appeal should be dismissed and that the 1% discount factor that was applied had been properly considered and appropriate in the circumstances.
As matters stands, the discount rate in Scotland is fixed by Statute. However, we have recently seen a sharp increase in the number of firms arguing that a revised discount factor ought to be applied to reflect the present economic climate and the government have also indicated that they are to consult on this matter.
The decision from Guernsey is of course not binding in Scotland, but it will certainly encourage more pursuers to make an application to the Court to set aside the prescribed discount rate and substitute one which is more favourable to any award they may receive.
Although the 1.5% alteration in Helmot may not seem particularly significant, it would have a dramatic effect on awards, increasing them substantially. Whilst at the moment it is clearly arguable that the 2.5% statutory discount must be applied by the court, insurers should be aware of the potential for a further increase to the value of awards.
If you would like more information on this matter please contact Lewis McDonald.
To download a copy of the judgement, please click here.