In the first reported case of its kind, the High Court has approved a periodical payment order (PPO) linked to a foreign economy, including payment in a foreign currency and indexation according to a foreign index.

In Oliva v Mahmood and Liverpool Victoria [2013], the 26 year old Claimant, a Brazilian national, was riding as a pillion passenger on a motorbike when she suffered a brain injury in a road traffic accident in the UK. Liability was admitted.

After 22 months in hospital she was repatriated to a Brazilian hospital by air ambulance and a 24 hour privately funded care team is in place in hospital.

The Court approved a negotiated settlement of £2,338,383 plus periodical payments of R$325,000 (Brazilian Real) per annum for the remainder of her life. The payments were linked to the Brazilian Inflationary Table IPCA62 with the annual increase recalculated in February each year.

The Defendant insurer agreed to hold harmless should the Brazilian tax authorities level interest against the Claimant in respect of lump sum payments and, additionally, to bear the annual costs of currency conversion and funds transmission.

Analysis

It has been previously argued by defendants in other cases that a PPO is contraindicated for foreign domiciled claimants, as the risk of currency fluctuations diminishes the local value of any award in UK Pounds, and a lump sum award may offer greater investment flexibility to protect against volatility in the currency markets.

In the current case, the exchange rate between the Brazilian Real and UK Pound has itself fluctuated in recent years. The foreign currency PPO transfers the risk of any fluctuations to the Defendant and guarantees the Claimant will be placed in sufficient funds each year to meet her assessed needs at their local cost in Brazil.

The correct basis to calculate the annual increase of a care and case management PPO was considered by the Court of Appeal in the indexation test litigation of Thompstone v Tameside & Glossop Acute Services NHS Trust [2008]. The Court held that the Retail Prices Index, an inflation based index measuring the cost of a basket of goods, should be substituted with an earnings related index, the Annual Survey of Hours and Earnings (ASHE 6115).

The Court of Appeal also endorsed the following criteria when testing the suitability of an index to calculate the increase of an annual periodical payment:

  • Accuracy of match to the particular data series to the loss or expenditure being compensated.
  • Authority of the collector data.
  • Statistical reliability.
  • Accessibility.
  • Consistency over time.
  • Reproducibility in the future.
  • Simplicity and consistency in application.

We understand the Claimant’s annual periodical payments are to meet her annual care costs based on a 24 hour care package in a Brazilian hospital. We assume the court, when approving the settlement, will have applied the above criteria to the Brazilian Inflationary Table and also ensured it is an accurate match to the loss or expenditure being compensated. We understand the index to be used to calculate the annual increase tracks health costs in Brazil and not inflation and is, therefore, consistent with the Thompstone judgment.