High Court rejects discount rate review challenge

The High Court has dismissed a legal challenge from the Association of British Insurers over the Lord Chancellor’s review of the discount rate for personal injury damages.

In December 2016, Liz Truss announced the discount rate of 2.5 per cent would be reviewed by 31 January 2017 and said any change could have ‘profound financial consequences’.

With the current rate calculated at between -0.5 and -1 per cent based on gilt markets, according to the Association of Personal Injury Lawyers, the ABI sought permission for a judicial review to change the methodology being used.

Handing down his judgment this morning, Mr Justice Andrew Baker ruled against the ABI on two grounds. Peter Todd, a partner at Hodge Jones & Allen, which represented APIL as an interested party, sat in the court during the proceedings and spoke to Solicitors Journal about the case.

On the first ground, the ABI argued it had a legitimate expectation to see the responses to the consultation so it could make further representations before a final decision was made.

‘The judge held there was no right to make further submissions after the responses were published,’ said Todd. ‘If, for example, [Truss] just published the responses and immediately made the decision then they couldn’t have argued with that at all and, therefore, it wasn’t arguable to say there was a legitimate expectation to make further submissions because she had never said there would be further submissions and that she would consider them.’

On the second ground, Todd explained: ‘The ABI said it was unlawful for the Lord Chancellor not to make transitional provisions for the new rate so that it did not apply retrospectively to existing proceedings or causes of action which had already accrued. The Lord Chancellor contended she had no power to do so. The judge found the ABI challenge was premature and held it was not arguable.’

The ABI is seeking permission to appeal. The Lord Chancellor will announce the result of the review on 31 January unless the Court of Appeal intervenes and stays it.

James Dalton, the ABI's director of general insurance policy, said: ‘We are disappointed with today’s ruling and will appeal. It is vital that claimants get the compensation they are entitled to. Insurers are open to a proper dialogue on how to reform the system, but caving in to legal threats from personal injury lawyers is not the way for the Ministry of Justice to do it.’

In December, APIL threatened the MoJ with legal action unless it reviewed the discount rate. The rate has not been amended since being set by the then Lord Chancellor, Lord Irvine of Lairg, in 2001.

According to ABI, the ministry published two public consultations three years ago but did not share their findings. Dalton called on the Lord Chancellor not to ‘rush out a new discount rate at a time of significant global financial uncertainty’.

‘While we welcome today’s commitment not to make an announcement before 31 January,’ he said, ‘we call on the Lord Chancellor to provide a considered timeline which gives all stakeholders the opportunity to engage in a constructive dialogue on the way forward.’

APIL's president, Neil Sugarman, called the ABI’s challenge ‘callous’ and welcomed the court’s ruling.

‘For far too long, people with life-long and life-altering injuries have faced running out of compensation, or had to risk their compensation on uncertain investments to try to make up the shortfall because insurers do not have to pay the full amount needed.’

Despite the favourable ruling, Sugarman admitted there was still an element of uncertainty for claimants given the ABI’s plans to appeal the decision. ‘This desperate attempt to stall the review shows the insurance industry would rather see seriously injured people face hardship than honour its responsibility to pay full and fair compensation.

‘We hope the Lord Chancellor makes the correct decision and reduces the discount rate substantially. In fact, this is the only acceptable option. An increase in the rate is unthinkable.’

Matthew Rogers is a reporter at Solicitors Journal

matthew.rogers@solicitorsjournal.co.uk | @lex_progress