High Court Judgment of Murphy J dated 14.11.2019 in the case of JH – a test case addressing the indexation attached to PPO’s – Periodic Payment Orders

Cantillons Solicitors (acting for the Plaintiff JH in this case), welcome the Judgment of Ms. Justice Murphy, in particular, the Court’s determination on HICP (Harmonised Index of Consumer Prices) attached to the PPO legislation.  Ms. Justice Murphy noted the Plaintiff’s experts’ evidence was unanimous that the indexation chosen (HICP) by the legislature will as a matter of probability, not meet the future care needs of catastrophically injured persons.  Therefore, the Court (charged with protecting the best interests of the Plaintiff), could not approve of a periodical payment order in its current legislative form.  Ms. Justice Murphy stated the PPO legislation is a ‘dead letter’.

Background information re the case of JH:

JH (a minor and ward of court) suffered catastrophic personal injuries as a result of the admitted negligence of the Defendant (Cork University Maternity Hospital) represented by the State Claims Agency in the care provided to him in the immediate aftermath of his birth in December 2014. These injuries have left him in a position where he will have ongoing disabilities and associated care needs, for the remainder of his life.

A 3-year interim settlement was reached on the October 25th 2016. The assessment of the remainder of the Plaintiff’s claim was adjourned for hearing on October 22nd 2019.  Prior to the matter coming on for hearing, the Plaintiff’s legal representatives – Cantillons Solicitors – engaged with those of the Defendant seeking the making of another interim agreement for a further 3-year period given the Plaintiff’s young age and the uncertainty regarding his care requirements beyond 3 years i.e. up to 2022.

The Defendant stated that because of the coming into force of the Periodic Payment Order (PPO) legislation in October 2018, the Defendant would no longer deal with catastrophically injured Plaintiffs on the basis of interim payments, as had applied prior to the commencement of the Act.

The issue of whether, or to what extent, it was permissible to proceed, other than by way of the statutory PPO demanded by the Defendant, was canvassed before the President of the High Court in June and July 2019. The Defendant maintained their position in this regard that it would not agree to an interim arrangement following the coming into force of the PPO Act.

Therefore, the President of the High Court Mr. Justice Peter Kelly, directed that certain questions relating to this issue be specially fixed for determination in October 2019. He stated that issues relating to the Defendant’s position on PPOs were arising in many cases and that it was necessary to have these determined. He stated therefore, that these questions should be fixed for hearing in these proceedings as a “test case” for their determination.

Issues tried at October 2019 hearing:

The questions fixed were as follows:

Whether or not the legislation itself ousts the inherent jurisdiction of the Court to assess damages for the Ward’s needs for 3 years from next October without imposing the PPO regime under the 2017 Act, whether by reference to the best interests of the Ward or otherwise.
If jurisdiction is not ousted, a determination as to what are the best interests of the Plaintiff herein (interim 3-year assessment or PPO).
Whether the Court is precluded by the 2017 Act from fixing an increase other than the amount specified in the HICP;
Whether and to what extent, the Court retains a jurisdiction to identify a means by which indexation of the recurring payment can be achieved that would avoid the risks of recurring compensation falling behind having regard to wage and medical inflation.

The High Court hearing in respect of the above issues commenced before Ms. Justice Deirdre Murphy on the 22nd October 2019.  Judgment was delivered on the 14th November 2019.

Outcome of Judgment:

In summary Ms. Justice Murphy who delivered her Judgment on Thursday the 14th November 2019 answered the four questions as follows:

The PPO legislation does not oust the inherent jurisdiction of the Court to assess damages for the Ward’s needs for 3 years on an interim basis.
The best interests of the Plaintiff are for a 3-year interim assessment.
The Court is precluded by the 2017 PPO Act from fixing an increase other than the amount specified in the HICP (form of consumer price indexation attached to the PPO legislation).
The Court retains a jurisdiction to award a lump sum, interim payment or payment on account notwithstanding the PPO legislation.

A Periodic Payment Order (PPO) is designed to meet the care and therapy needs of a catastrophically injured Plaintiff over the course of their lifetime. It is a full and final settlement similar to a lump sum, but paid out periodically. The PPO legislation is set out in Section 2 of the Civil Liability (Amendment) Act 2017 and was commenced on the 1st October 2018.

HICP Indexation and the PPO legislation

If a Plaintiff accepts a PPO, they will be undercompensated due to the legislature’s choice of indexation in the PPO legislation.   The PPO legislation provides that the annual amount to be paid to a Plaintiff is to be adjusted in accordance with the Harmonised Index of Consumer Prices (HICP).

The choice of HICP indexation is incorrect for a PPO.  HICP is a measure of price inflation.  The items that comprise of HICP are almost entirely unrelated to the aspects of the award in a catastrophic injury case as the vast majority of a Plaintiff’s expenditure will be on the wages paid to their Carers. 

An appropriate index for PPOs ought to be a wage-based index (or an index that takes account of wage inflation) as carer wages form the major aspect of a catastrophically injured Plaintiff’s claim.  HICP as a method indexation will result in a shortfall between the Plaintiff’s annual expenses (wages of carers) and the periodic payment (linked to HICP/price inflation).  This is because wages generally rise faster than HICP/price inflation.  The result is that catastrophically injured persons will, in the later years of their lives, not be able to pay their Carers.  Their compensation will run out. 

For more information on PPO’s please see Marian Fogarty’s article published in the Irish Examiner:

21.11.2019 Irish Examiner Article on PPOs

Contact us at Cantillons Solicitors at +353 (0)21 -4275673 or info@cantillons.com if you would like more information.

* In contentious business, a solicitor may not calculate fees or other charges as a percentage of any award or settlement.