There have been discussions about the discount rates which are applied in personal injury cases to calculate the appropriate level of compensation for future losses. Indeed, the Ministry of Justice and its Scottish and Northern Irish counterparts are currently consulting on this question (see our article about this).
This week, in a case before the Scottish Courts the discount rate was considered. The case was brought by Antony Tortolano who was injured when he was 19 years old. He sustained a serious brain injury and sought damages. The discount rate applicable to his future earnings and cost of his future care and support was considered by Lord Brodie at a procedural hearing. The pursuer argued that he should be allowed to increase his claim to state that the discount rate should be reduced from the standard 2.5% which has historically been applied. He argued that reduction in the discount rate would create an equitable solution as a lower discount rate would be required to ensure that when the pursuer invested the money he got a sufficient rate of return in the current financial market, so would be properly compensated.
Lord Brodie was not persuaded by this and considered that the 2.5% discount rate remained appropriate. The legislation clearly sets out that the discount rate can be altered. Until the consultation is concluded and any revision made to the discount rate set out by the Scottish or UK Governments, Lord Brodie considered he was bound by the rate previously set. The effect of this is that the pursuer’s damages will be considerably less when the case is concluded than if the discount rate had been reduced.
It remains to be seen what the Government’s consultation will determine in relation to the appropriate level of discount rate. Claimants will argue that it should be reduced, to result in more generous awards of damages. This decision means that, until then, we have certainty over the level of the discount rate to be applied in Scottish cases.