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The first structured settlement in a High Court personal injury case was in 1989 and it irrevocably changed the world of PI litigation. Structuring immediately became the buzz word on the lips of all involved in the field.
Since then, although the structuring bubble has not burst it has become somewhat deflated. An unpredictable financial world and fluctuating interest rates have brought about the realisation that structuring, while still having a major role to play in concluding PI cases, is no all-encompassing alternative to conventional lump sum awards.
In moves which follow a lead from PI litigators on the other side of the Atlantic, a refinement to structuring has been added which promises to make it more widely attractive. The new element takes the form of what practitioners in the field call 'bottom-up' structuring as opposed to the 'top-down' system usually used.
Under top-down structuring damages are assessed as a conventional lump sum and an investment figure is reached which will enable a structured settlement to provide on-going regular income for the the rest of the claimant's life.
However, under the bottom-up system, agreement is reached for the claimant's annual needs.
This development has just been used in the settlement of the case of 10-year-old cerebral palsy victim Shahela Begum who was at the centre of a medical negligence claim against the Royal Free Hampstead HNS Trust.
Begum's solicitor Paul McNeil, a partner in the medical litigation group at City firm Field Fisher Waterhouse, and Richard Frazer, of Birmingham-based structuring market leaders Frankel Topping, have no doubt that PI cases will see a lot more bottom-up structuring in the future.
They played a major role in the negotiations leading to settlement of Begum's case on terms which involved a £420,000 lump sum to cover her immediate needs and then commitment from the Health Trust to provide her with an inflation proofed £30,000 a year to the age of 19 and £60,000 a year from then on.
Whether the Health Trust will save money by doing things this way instead of entering a top down structuring arrangement remains to be seen and depends on the length of time Shahela lives.
But one of the main attractions of the scheme is that it allows more efficient cash management. A commitment to on-going instalments ties up far less immediate capital and can result in a considerably reduced overall outlay compared with that needed for top-down structuring, depending on the length of life of the claimant.
When Shahela's case was settled Mrs Justice Steel, who enthusiastically approved it, was told a lump sum of at least £1.3 million would be needed for top-down structuring to provide the level of income this settlement will provide.