In Anthony Tortolano v Ogilivie Construction Ltd [2013] CSIH 10, the Inner House of the Court of Session (i.e. the highest civil appeal court sitting in Scotland) followed the approach of the English Court of Appeal when it decided that the assumed rate of return on investments of damages received in personal injury actions should not deviate from the 2.5% rate fixed by statutory instrument.

By way of background, section 1 of the Damages Act 1996 provides that future pecuniary losses in a personal injury action shall be reduced to reflect that interest will be earned on the compensation after it has been paid to the pursuer. This section obliges the Scottish Ministers to take an order determining the rate of return in Scotland. The rate in Scotland is 2.5% as per the Damages (Personal Injuries) (Scotland) Order 2002, and is the same as the rate in the rest of the UK.

In Tortolano, the pursuer sustained a very serious head injury which has left him disabled and accordingly he sought compensation for future loss of earnings and future care and support. He argued that the 2.5% rate of return was no longer appropriate given the reduction in anticipated yields due to the ongoing difficulties in the global economy. It was his position that a rate of return on investment of 0% should be taken when assessing non-earnings related losses and a rate of minus 1% should apply to future loss of earnings.

Unfortunately for Mr Tortolano, the Inner House did not accept his argument that it would be appropriate for the Court to take a different rate of return into account. Section 1(2) of the 1996 Act empowers the Court to do this, if it is more appropriate in the case in question.  Without setting out when it would be appropriate to do deviate from the 2.5% rate fixed by the Scottish Ministers, the Court made it clear that the appropriateness must be related to the specific set of circumstances in the case in question. The prevailing economic circumstances, which would, of course, effect all cases, would not justify a departure from the 2.5% rate. It is difficult to conceive of circumstances where a deviation from the 2.5% rate would be appropriate other than that suggested by the defender's counsel in this case, namely that the pursuer was resident in a foreign country and therefore subject to a different tax regime.

The Inner House indicated that using the political process or judicial review would be the way to seek to change the rate of return. Commenting on the prospects of mounting a successful challenge by judicially reviewing the Scottish Minister's decision not to amend the 2.5% rate is beyond the scope of this article. However, those who successfully lobbied the Scottish Parliament to reverse the effects of the House of Lords decision of Rothwell v Chemical Insulating Company Ltd (this held that pleural plaques was not compensable) are no doubt steeling themselves for another foray into the political arena…