Court of Appeal uphold CICA Damages Act Discount Rate
The Court of Appeal has upheld the application of the Lord Chancellor's Prescribed Discount Rate by the CICA in assessing future care costs in a pre-tariff case under the 1990 Scheme. The rate had been used even though the CICA is not subject to the Damages Act 1996, under which the rate is set.
The CICA tribunal applied the then 2.5% Discount Rate prescribed by the Lord Chancellor under the Damages Act 1996, even though the Damages Act does not apply to the CICA. The award was to a brain-damaged young man who needs the award to provide life-long care. The agreed evidence of the former government actuary before the tribunal in 2012 was that in order to provide for full compensation, the CICA needed to apply Discount Rates of 0% for RPI related losses and minus 1.5% for earnings related losses.
This meant the award that the CICA made was £5.6 million instead of the £16 million that was needed to provide full compensation under the scheme. The effect of the award is that it will run out by the time the now 28 year old claimant is 48, only halfway through his remaining expected life, and he and those caring for him will not be able to afford any care for the rest of his life.
In April 2015, Mr Justice Jay upheld the decision of the CICA on judicial review. After hearing arguments on 5th December 2017 Lord Justice Patten and Lord Justice Sales rejected an appeal from that decision in judgment handed down on 19th December 2017. They have concluded that as a court assessing a lump sum would use the prescribed rate the CICA should do the same, even though the CICA is not subject to the Damages Act and cannot mitigate its effect by making a periodical payment order under the Damages Act.
The effect of this decision will be to leave CICA claimants under the 1990 scheme undercompensated and worse off than claimants who could benefit from a PPO before the courts.