Have your say on the future of damages for personal injury in Scotland

On 23 February 2022 the Scottish Law Commission (“SLC”) published a Discussion Paper (“the Paper”) on Damages for Personal Injury in Scotland. Responses to the Paper are invited by 15 June 2022.

The Paper covers four main topics:

• the law relating to damages for services provided to and by an injured person in terms of sections 8 and 9 of Administration of Justice Act 1982 (“the 1982 Act”);
• the deductions that ought to be applied to an award of damages pursuant to section 10 of the 1982 Act;
• awards of provisional damages under section 12 of the 1982 Act; and
• management of awards of damages made for the benefit of children.

Of the four topics covered in the Paper, three relate to the 1982 Act. The Paper notes this to be desirable given the substantial changes that have taken place in Scottish society since 1982 and one of the tasks of the Scottish Law Commission is to ensure that the law keeps pace with societal change.

Damages for services

Considering the topic of services claims, the SLC has invited discussion as to whether the definition of the word ‘relative’ in the 1982 Act is appropriate. For compensation to be paid for services, the assistance must have been provided either by a relative or by the injured person to a relative. The definition of relative is:-

• spouse (including divorced spouse);
• civil partner;
• someone living with the injured person as husband, wife or civil partner of the injured person;
• any ascendant or descendant;
• any brother, sister, uncle, aunt or issue of any such person; and
• any person accepted by the injured person as a child of his family.

The Paper identifies that the definition of ‘relative’ for an award of services in a fatal accident claim is broader (section 14(1) of the Damages (Scotland) Act 2011 (“the 2011 Act”)). In addition to the categories in the 1982 Act, the definition in the 2011 Act includes persons who were accepted as a child of the family or who were accepted by the deceased person as a child of theirs and the same applies to grandchildren and grandparents. The definition of sibling is also wider in the 2011 Act and includes those brought up in the same household as, and accepted as, a child of the family in which the deceased was a child. By contrast, the 1982 Act only extends the definition to a person accepted as a child of the family. The question is therefore asked whether the definition should be amended to reflect the wider definition in the 2011 Act which applies to relatives’ awards for services in a fatal claim. Moreover, should any other category of ‘relative’ be included?

In addition to the definition of ‘relative’, the question is mooted of whether it is appropriate to restrict awards for gratuitous services to relatives at all and, if such a restriction were lifted, how such a scheme would operate and how damages should be assessed.

The Paper considers whether there should be an extension of section 9 services awards for personal services which have been rendered by the injured person to a third party beyond the family group. If so, should the injured person be under an obligation to account to such a third party for those damages?

Services claims emerge in almost every personal injury claim and thus any extension of the definitions could have a significant financial impact for insurers underwriting Scottish risks across the board.

Deductions to damages

The second topic considered by the Paper is deductions to damages. Views are sought on whether there are any problems with the deduction of certain social security benefits from awards for damages and whether benevolent payments or payments from insurance policies which the injured person has wholly arranged and contributed to should continue to be non-deductible.

Section 2(4) of the Law Reform (Personal Injuries) Act 1948 (“the 1948 Act”) provides that in determining the reasonableness of any expenses, to disregard the availability of NHS provision. Over the years, there have been mixed suggestions from the English Law Commission on whether this section should be repealed. Initially, it was proposed that it should be, with only private medical expenses being recoverable if it was reasonable on medical grounds for the injured person to have incurred them. However, more latterly, the English Law Commission performed a U-turn, arguing that an injured person should have freedom of choice in this matter, with there being a risk that an injured person might incur irrecoverable private treatment costs if the section were to be repealed. Overall, it was concluded that to allow an injured person to choose between private and NHS treatment did not conflict with the injured person’s duty to mitigate his loss. The Paper invites discussion on whether section 2(4) of the 1948 Act should remain in force or be repealed in Scotland. Similarly, the question is mooted whether the availability of state input for both care and accommodation claims is something that should be taken into account when assessing damages for these heads of claim?

On this topic, it is noteworthy that at the time of consultation on the Paper, one of the topics for discussion was the law applying to damages in respect of accommodation claims when a negative discount rate prevails. Since that consultation, the Court of Appeal has handed down its decision in the case of Swift v Carpenter [2018] EWHC 2060.This case set a formula which establishes the capital amount required to purchase the required accommodation, before deducting the value of the reversionary interest in the windfall at the assumed date of the injured person’s death. Whilst the SLC accepts that this approach is not perfect in every case and leaves some questions unanswered, the SLC believed that, since the Scottish courts are following the Swift v Carpenter approach, it was not productive to review the quantification of accommodation claims again. This topic does not therefore appear in the Paper.

Provisional damages

Turning to provisional damages, it is proposed that, with the exception of asbestos-related disease, there is no need for reform of the law on provisional damages and views are sought on whether practitioners agree with this. For asbestos-related disease claims, specific comments are sought on whether the current method for seeking provisional damages is satisfactory. If so, questions are asked in relation to time bar in pleural plaques, pleural thickening, and asbestosis cases and whether claims arising from such diagnoses should not preclude by way of time bar further action for any subsequent related disease such as mesothelioma. Views are invited on how a system waiving time bar for the development of more significant asbestos disease might operate in practice.

Payments of damages to children

The final topic considered is the management of damages awarded to children. This is an area where the law has diverged north and south of the border for many years, often to the surprise of those practising south of the border. In Scotland, there is no requirement for damages payments due to a child to be paid into court. Section 13 of the Children (Scotland) Act 1995 (“the 1995 Act) is the relevant legislation. This provides that a judicial factor can be appointed to manage the money for the benefit of the child or the money can be paid to either (i) the sheriff clerk or Accountant of Court (ii) to the child’s parent or guardian, to be invested, applied or otherwise under the direction of the court for the benefit of the child, or (iii) directly to the child.

In the period from 2007-2021, there have been only 14 referrals to the Accountant of Court requesting payment of the child’s damages to the court and judicial factors have been appointed infrequently. The normal practice is for the damages to be paid to the parent which bestows a considerable degree of trust on the parent that he/she will appropriately invest the funds, especially where the compensation payment is significant. The SLC is of the provisional view in the Paper that there is merit in the court being obliged, prior to decree, to inquire into the future administration of the child’s damages and, if the court considers it necessary, to remit the cause to the Accountant of Court for advice.

In relation to section 13(2)(c) of the 1995 Act which allows the court to make an order that the damages can be paid directly to the child, views are also sought on whether this discretion should remain with the court and whether the court ought to be required to take account of specific factors in coming to its decision.

In practice, in the case of a large damages payment to a child, personal injury trusts (“PIT”) are set up for the benefit of the child and the child’s parents are normally appointed as trustees, often alongside a professional trustee. However, a professional trustee is not a requirement and such a trustee is likely to be in a minority amongst the parents or other family members who are appointed trustees. The effectiveness of such a trust thus depends largely on who the trustees are. There is no independent oversight of either the terms of the trust or of who is to be appointed trustee. The Paper invites discussion in relation to the need for independent oversight of PITs set up to manage large damages payments on behalf of a child and whether there is a need for greater scrutiny, in what circumstances, who by, etc. There is also a catch-all question at the end of the Paper as to whether there are any other issues in relation to the management and safeguarding of awards of damages to children.

Overview

The Paper is clearly comprehensive and raises relevant issues for personal injury practitioners and their clients on both sides of the table. Given the financial implications for those funding Scottish personal injuries claims, the Paper will be of interest to insurers, to some insured bodies and to other defence organisations who may have an interest in lodging a response. Should you wish to discuss this topic with us further, please contact Joanne Farrell.

Read the full 'Discussion paper on damages for personal injury in Scotland'.