Marian Fogarty

A Periodic Payment Order (PPO) is meant to provide financial security to a catastrophically injured plaintiff and is (in theory at least) designed to meet the cost of care and therapy needs over the course of their lifetime. In short, a PPO is supposed to give the catastrophically injured claimant more certainty and less risk compared to the lump sum option (which can result in a plaintiff being over or under compensated). The PPO legislation is set out in Section 2 of the Civil Liability (Amendment) Act 2017 and was commenced on the 1 October 2018.

However, in the case of Hegarty v HSE, the High Court in November 2019, noted the plaintiff’s experts’ evidence in that case was unanimous that the indexation chosen (Harmonised Index of Consumer Prices (HICP)) by the legislature in the PPO legislation would, as a matter of probability, not meet the future care needs of catastrophically injured persons. HICP is a consumer price index and is not an index linked to wages and generally care costs rise faster than consumer goods costs. Therefore, under the current legislation as the PPO for future care is to increase with HICP, a catastrophically injured plaintiff, who is completely reliant on professional care, would lose out because the PPO payments would not increase in line with care costs and a deficit would arise in the funding of the care over time. As a result, in the Hegarty case, the Court (charged with protecting the best interests of the plaintiff), could not approve of a PPO in its current legislative form. 

What has happened since the Hegarty case?

Three years on from the Hegarty case, in 2022, the Minister for Justice stated she intended to address the issue by (a) bringing forward necessary legislative amendments, enabling the minister to make regulations to set the indexation rate and (b) by establishing an Inter-Departmental Group to advise on an appropriate indexation rate.

A. Legislative amendments

Four years post the Hegarty decision, Part 3 of the Courts and Civil Law (Miscellaneous Provisions) Act 2023 was introduced and it provides for the setting of the indexation rate for PPOs by ministerial regulations. It states the minister shall, with the consent of the minister for finance, make regulations specifying an index for the purposes of that section and such regulations may make provision for the specification of different indices for different goods and services in respect of which a PPO may be made and a fixed percentage increase for the purposes of providing that the amount of a payment under a PPO reflects the rate of inflation, including wage inflation, in the State. In determining the choice of indexation regard should be had to the relevance of the goods and services on which an index is based to the loss or expenditure, including cost of care and medical expenses, for which plaintiffs who are the subject of periodic payments orders are compensated.

Ultimately while these amendments allow for greater flexibility, the real test as to whether a PPO will be workable will depend on the indexation ultimately chosen by the Legislature.

B. Establishment of another Group to advise on an appropriate indexation rate

It is hard to understand why a decision on the appropriate indexation to use in the PPO legislation has still not been made when stakeholders have available to them the knowledge from similar groups established in the past, judicial comments on the subject together with the knowledge of what has occurred in other jurisdictions on the same issue previously. For example:

• In 1999, the English Court of Appeal in Wells v Wells established damages should achieve full compensation for a plaintiff’s injuries.
• Sixteen years ago, the English Court of Appeal in Thompstone v Tameside & Ors (2008) ruled that an alternative index to the retail price index should be used (an earnings-related index) to calculate future care costs. That Court accepted that ASHE 6115 was appropriate to provide for increases in the PPO as it more accurately reflected pay increases which the claimant’s carers would receive.
• The decision in Thompstone was followed in other English cases including Corbett v South Yorkshire Strategic Health Authority, Sarwar v Ali & MIB and RH v United Bristol Healthcare NHS Trust.
• Fourteen years ago, in 2010, the Working Group on Medical Negligence and Periodic Payments in Ireland recommended, in terms of indexation, “the introduction of earnings and costs-related indices which will allow periodic payments to be index-linked to the levels of earnings of treatment and care personnel and to changes in costs of medical and assistive aids and appliances. This will ensure that plaintiffs will be able to afford the cost of treatment and care into the future. The Group further believes that the competence and independent status of the Central Statistics Office uniquely qualify it to compile and maintain the indices required.” It is clear from the above Report that data could be collected by the CSO to provide for such an index that was recommended.
• Ten years ago, a report commissioned by the State from Towers Watson recognised that HICP on its own would be inadequate and stated “we believe that there may be an option to use a more simplified formula based on CPI/HICP or CPI/HICP + a fixed percentage indexation.”
• Also, ten years ago, a Department of Finance paper on an indexation method for PPO’s dated 2014 confirmed the Department had consulted with the CSO. Their paper noted that an index based purely on either the Consumer Price Index (CPI) or HICP would not be appropriate as it would not take account of wages.
• Eight years ago, the Report of a Working Group on Legislation on PPO’s (published in 2015) considered the matter and ultimately recommended indexation tied to HICP. The basis for the recommendation appeared to have been the requirement for certainty for budgetary purposes. The Report acknowledged the disadvantage of using HICP stating “it does not measure specifically increases in costs of medical appliances or of care-worker earnings, leading to the risk that the value of claimants’ payments may not keep pace with the costs of care or of medical supports.”
• The Judgment of the Court of Appeal in Russell v HSE in 2015 stated: “In calculating the plaintiff’s claim for future pecuniary loss, allowance has to be made for any inflation in excess of ordinary inflation that will likely affect any particular expense to which he may be exposed over the period of the loss. In this case, the cost of his care over future years is what is at issue.   As the real rate of return is calculated by adjusting nominal yields for inflation, customarily measured against the Consumer Price Index (CPI) or its European equivalent, the Harmonised Index of Consumer Prices (HICP), if wage inflation in the care sector is likely to exceed ordinary inflation, then an adjustment in the real rate of return is required to meet that extra cost.”
• The same Judgment stated in calculating damages for future pecuniary loss, the Court must pursue the policy of providing the plaintiff with compensation on a 100 per cent basis (following the Wells decision). It stated it is no part of the Court’s function, when carrying out that task, to consider the effect that any such award may have on matters such as the finances of the defendant, on insurance premiums or on the State’s resources (relevant in relation to the recommendation made in the 2015 Report of the Working Group on Legislation on PPO’s cited above).

Section 2 of the Civil Liability (Amendment) Act 2017

Notwithstanding the foregoing knowledge available to the State, it went ahead in 2017, and chose HICP (an index which excluded wage growth and therefore could not deliver compensation at 100 per cent contrary to Wells and Russell) as the indexation for the (even at that point) long awaited PPO legislation.

Hegarty v HSE

Not surprisingly, just over a year after the introduction of the PPO legislation the High Court concluded in Hegarty v HSE that a PPO was not in the best interests of the plaintiff based on the choice of indexation made by the Legislature. The plaintiff’s economic expert evidence was to the effect that the components that make up HICP have little resemblance to the usual heads of claim in a catastrophic injury case such as care, therapies and medical costs. These costs increase more rapidly than prices generally. The economic experts retained, on behalf of the plaintiff, in that case, cited wage related indices and other data that would work as an alternative to HICP collected by the CSO. Therefore, even though the plaintiff was not obliged in the Hegarty case to proffer an alternative form of indexation as part of the case, those economic experts confirmed there were equivalents to the ASHE survey (in England) that could be offered as alternatives to HICP in this jurisdiction and furthermore those indices are linked, where appropriate, to wages as opposed to consumer prices. The defendant (the State), who did not oppose the evidence delivered by the plaintiff’s experts at the time, has the benefit of this information now for nearly five years.

Conclusion

It is not known when the Report of the most recent Group to advise on an appropriate indexation rate will be published. The introduction of any new indexation will then need to be set by regulation and approved by the Oireachtas. The ongoing delay in putting in place a workable PPO is at the expense of some of the most vulnerable people in our society. As a result, and unlike their counterparts in other jurisdictions, catastrophically injured plaintiffs in this jurisdiction are being deprived of the option of electing for a PPO (and deriving the benefits that come from it) for as long as the indexation deficit remains.

• Marian Fogarty is a solicitor at Cantillons and represented the plaintiff in Hegarty v HSE.