Irwin Mitchell to challenge Irvine on PI discount rate

Irwin Mitchell is looking at the possibility of judicially reviewing the Lord Chancellor for his failure to set a discount rate in personal injury (PI) cases, which solicitors claim is leaving PI victims short of millions of pounds.

Essentially, a discount rate is the amount taken off victims’ damages to account for any profit gleaned from investment of the award.

Lord Irvine was given a statutory power in 1999 under the terms of the Damages Act 1998 to set the rate, but has so far failed to do so.

Claimants want the rate below 3 per cent as a result of the House of Lords’ decision in Wells & Wells, which ruled that it should be set according to the yield on Index-Linked Government Stock (ILGS) in which the average competent person would invest.

The Lords said that the 3 per cent rate could be altered by a significant change in circumstances. Claimants’ lawyers across the UK believe such circumstances have arrived, as at the time of the ruling ILGS yield was 3 per cent but is now below 2 per cent. Before Wells the discount rate was 4.5 per cent.

However, defence lawyers, as well as insurers, want the rate raised, largely because claimants invest their damages awards in high-profit-making stock such as equities, not ILGS.

John Pickering, head of PI at Irwin Mitchell, who acted in last year’s Appeal Court landmark case Warren v Northern General Hospital NHS Trust, in which he called for the discount rate to be reduced, says: “We’re considering whether there’s any potential cause of action against the Lord Chancellor and his failure to set a rate. Theoretically, this may be by way of judicial review. The other possibility is to review afresh the Warren challenge by challenging the rate through the courts.” He expects the latter to be unsuccessful.

He adds: “From the claimants’ perspective, the value of their future damages is being unduly discounted, and therefore they’re losing out on substantial sums of money.”

Pickering says that the Lord Chancellor should have published his consultation paper on discount rates and other matters by autumn 2000, particularly as he received responses in May that year. It is unlikely that anything will emerge before the general election.

A bar source says: “It’s a mix of the Lord Chancellor feeling there are better things to do and a feeling in the run-up to the election that his decision is going to annoy some groups, be it the insurer or the claimant.”

A spokesman for the Lord Chancellor says: “Responses to last year’s consultation expressed a wide and contrasting range of opinion. The Lord Chancellor is giving careful consideration to the many difficult and detailed points raised.”