Periodical payments and discount rates: Jersey – all change!

Draft proposals have been published in Jersey with a view to new law being introduced to change the way the discount rate is set.

Summary

Draft proposals have now been published by the States Greffe in Jersey (which provides support to the Jersey parliament, the States Assembly) with a view to new law being introduced to change the way the discount rate is set on the island.

Jersey is not part of the UK and has a distinct legal jurisdiction. The Damages Act 1996 under which the Lord Chancellor currently sets the discount rate in England and Wales has no application in the Channel Islands.

The draft law put forward in Jersey would introduce the setting of the discount rate by its parliament. It will also allow the courts to order PPOs in Jersey without the need for the parties’ agreement.

Currently, the court sets the discount rate in each case. Although, leading cases provide guidance, it is open to the parties to argue for a different figure.

The rate

The Draft Damages (Jersey) Law 201 proposes setting dual discount rates:

  • Where the whole of the award is to cover a period of 20 years or less, the rate will be 1% reduced by the inflationary difference between Jersey and the UK (currently 0.5%) resulting in a discount rate of +0.5%.
  • Where the award is to cover a period of more than 20 years, the whole of the award will be subject to a discount rate of +1.8% (applicable to the whole of the award not just the costs arising after the first 20 years).

When reviewing how the rate should be set the consultation included review of the detailed analysis of likely investment returns in personal injury cases undertaken by the UK Government Actuary’s Department. It was recommended that claimants be viewed as low risk investors likely to use a diversified portfolio rather than Index Linked Government Stocks. The higher inflation rate in Jersey than in the UK was also taken into account.

The draft law has been lodged by the Chief Minister for debate in December 2018. If adopted by the States and sanctioned by the Privy Council, the new rate will come into effect 7 days after the law is registered. The new rates may come into effect as soon as the early part of 2019 and will be applied to all awards of damages after the commencement date unless there are ECHR issues.

The rates may be varied in the future by the Chief Minister after consultation, but the rates cannot become negative.

PPOs

In contrast to the position in the UK where, under the Damages (Variation of Periodical Payments) Order 2005, a provision allowing future amendment can be included in a PPO if there is a chance of serious deterioration or significant improvement in the claimant’s condition, under the Jersey draft law anyone with an interest in the payments will be able to apply for a variation on the basis of a “material change in circumstances”. There is also no limit proposed on the number of times the Order can be varied whereas under the Damages (Variation of Periodical Payments) Order 2005, an application can only be made once.

Comment

Jersey appears to be setting the pace in terms of change. The draft law is intended to bring Jersey into line with the UK and a number of other jurisdictions with regard to setting a statutory discount rate and Periodic Payment Orders but goes a stage further with enhanced provisions relating to revisions of such Orders.

The draft law represents a significant change in the way in which the discount rate is set in Jersey and will introduce rates very different to the negative discount rates applied at present resulting in reduced awards for future losses.

It will be interesting to see how the proposed use of dual discount rates in Jersey and the more flexible approach to the variation of PPOs will have an impact in the UK. The Civil Liability Bill makes provision for the Lord Chancellor to have the power to set more than one discount rate for different classes of cases – will the proposed approach in Jersey in terms of dual discount rates encourage a similar approach in the UK? Jersey’s more flexible approach towards PPOs is also likely to form part of the government’s consideration on whether the law on PPOs could be improved. Watch this space.

Weightmans offers a Periodical Payments Management Service to assist in the management of PPOs as well as having a wealth of experience in advising on the wider issues that arise in PPO cases.

If you have any questions or would like to know more about our update, please contact Dave Cottam (Partner) or Wendy Fox (Associate and author of this update), on 0151 242 6948, or wendy.fox@weightmans.com. 

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