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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Wallace v Follett [2013] EWCA Civ 146 (07 March 2013) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2013/146.html Cite as: [2013] EWCA Civ 146

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BIRMINGHAM DISTRICT REGISTRY
His Honour Judge McKenna
9BM09431

		Royal Courts of Justice Strand, London, WC2A 2LL
		07/03/2013

Lord Justice Leveson :

1. The calculation of damages in catastrophic injury cases involves substantial sums of money and is or can be extremely complex. The court inevitably relies on experienced counsel, familiar not only with the calculation of damages in personal injury cases but also with the financial structures that can be put in place to ensure that the needs of the injured person are met while, at the same time, providing a measure of assurance for insurers that uncovenanted windfalls do not result should the estimates at trial have proved to be over-optimistic from the claimant's perspective.
2. On 18 April 2007, David Follett was involved in a road traffic accident suffering catastrophic injuries; on 15 March 2010, judgment was later entered in his favour for damages to be assessed subject to a discount of 30% in respect of contributory negligence. The parties then sought to amass all the necessary evidence to establish quantum. On 21 September 2011, those advising Mr Follett served a Schedule of Loss covering some 51 pages.
3. As is now commonplace in cases of this nature, on 12 December 2011, a joint meeting of the parties' advisers was held in order to explore the prospects of settlement and the type of structure most suited to this case. An agreement was reached on the payment of a lump sum and of periodical payments thereafter. Unfortunately, however, certain aspects of the compromise were not agreed and, as a result, a dispute arose over the appropriate wording of the order of the court which it was intended should enshrine the settlement.
4. Looked at from one perspective, if an agreement was not reached, it was open to the parties simply to set the issue of the assessment down for trial but, in that event, the court would expect them to settle such areas of the claim as were open to compromise leaving only the disputed parts for resolution by the court. In reality, that is what has happened. On 2 March 2012, District Judge Baddeley ordered that, in default of an agreed order, the parties should submit alternative drafts and that the court should adjudicate upon the wording of the provisions which remained in dispute. The parties consented to this approach and no issue was taken as to the jurisdiction of the court.
5. So it was that on 8 May 2012, His Honour Judge McKenna, sitting as a High Court judge came to adjudicate on two issues between the parties. The first concerned the extent to which it was reasonable to permit the insurer to require the injured person to undergo a medical examination (at its cost); the second concerns the consequences to the injured person of a failure to provide written confirmation from his general practitioner, prior to the commencement of each payment year, that the injured person is still alive. Judge McKenna decided both these issues in favour of the injured person; with his leave the insurers appeal to this court.

Jurisdiction

6. During the course of the hearing, Judge McKenna raised the question whether he had jurisdiction to determine what was, in effect, a disagreement about the terms on which the parties should settle the litigation. He said:

"Both parties want me to resolve the issue and I am persuaded that I do in fact have jurisdiction to do so, whether that be so because the parties have effectively submitted to my making a ruling in this case as a result of submitting the draft orders or because they have argued the point before me this morning."

7. In argument, Mummery LJ raised the entirely legitimate concern that neither the agreement of the parties nor the fact that the point was argued is sufficient to provide the court with jurisdiction: either the parties had come to terms or they had not and, if not, it was invidious to bind the court with part of an agreement.
8. In many types of litigation, it is not difficult to see that partial agreement between the parties could create difficulties for the trial judge when seeking to resolve issues that remain in dispute. In claims for damages for personal injuries, however, it is commonplace (and essential) that the parties seek to resolve as many issues as they can while, at the same time, leaving the court with the responsibility of determining others that are beyond agreement. That possibility is clearly envisaged by s. 2A of the Damages Act 1996 in relation to the consideration to be given to an order for periodical payments, the security of the continuity of payments and whether to approve an assignment or charge. It is also consistent with the overriding objective and the general obligations of the parties to reduce the issues to such extent as is possible.
9. Thus, in this case, it was agreed that there should be an order for periodical payments; unlike final 'one-off' payments, this provided the court with the necessary jurisdiction to deal with disputes on a continuing basis. In the circumstances, albeit not for the reasons advanced by the judge, it was entirely appropriate that the court resolve the issues which remained the subject of dispute.

Medical Examination

10. The first dispute relates to the concerns of the insurers that they have an ability to arrange for a medical examination of the injured person at infrequent intervals. In previous cases (eg. IB v CB [2010] EWHC 3815), such a provision has been inserted in the event that insurers wish to find an appropriate annuity provider who, not surprisingly, would require an up-to-date medical picture of the injured person. In this case, the insurers wish to go further and have the facility (at their own cost including meeting any loss of earnings etc) to obtain an up to date life expectancy figure for the different purpose of calculating reserves so as to be able to set aside capital to cover future periodical payments. The Head of Actuarial for the insurers has made a statement pointing out the company's obligations pursuant to FSA rules, the Companies Act and the professional duties governing actuaries.
11. Mr Horlock Q.C. for the insurers points to the observations of MacKay J in Long v Norwich Union Insurance Ltd [2009] EWHC 715 when he said:

"17. ... in these forms of settlement which comprise of or include periodical payment orders there is a balance of benefits and burdens for both sides. The paying party bears a very substantial burden of funding the periodical payments and administering their recalculation and payment on the specified dates, but at least has no minimum obligation, should death occur earlier than predicted, unlike the ancestor of this type of award, the structured settlement. The Claimant loses a degree of autonomy and the ability to control her own financial future but receives in return the very considerable benefit of being relieved against the future effects of inflation and any uncertainties as to her expectation of life."

12. He argues that a similar balanced approach should be taken to the respective duties and obligations of the two parties. If an injured person is to receive substantial periodical payments, the calculation (and updating) of reserves will require current information on life expectancy. That task can be undertaken at the time of assessment because of the available medical evidence but, over time, such information falls out of date.
13. Mr Killalea Q.C. for the injured person argues to contrary effect. He suggests that decisions such as IB represented a cautious and reluctant interference with that person's autonomy (as Maddison J observed) but accepted that the need for a possible future medical examination for the purpose of purchasing an annuity (subject to there ever being such a product on the market) is on the basis that to do so gives potential force to that part of the order which permits the insurers, in appropriate circumstances, to discharge their obligations under the order by procuring an undertaking by an annuity provider. He argues that this is fundamentally different to being required to undergo a future medical examination where the stated and only purpose is to facilitate a preferred method of the insurers running their own commercial business. He put to the Judge that there was no reason of necessity in terms of the settlement between the parties and pointed out that no other insurer ('so far as either party has been able to ascertain') has required a similar provision.
14. Judge McKenna clearly agreed with the latter approach. He said:

"I am not persuaded that it is either reasonable or proportionate to extend the requirement for a claimant in the position of this claimant to submit to medical examinations for the purpose envisaged by Aviva. It is plain and obvious that such a medical report is necessary, reasonable and proportionate if an insurer is seeking to purchase an annuity. .... I am not persuaded that it is reasonable and proportionate that I should impose upon the claimant a requirement to submit to any number of medical examinations over the period of his life simply for the purpose of enabling the defendant to review its provisioning."

15. Mr Horlock complains that this conclusion is in the nature of a verdict rather than a judgment and that the insurers are entitled to know why the judge took that view. The judge should have asked himself a series of questions. First, is an insurer obliged or expected to maintain a reasonably accurate reserve? Secondly, if 'yes', is the insurer at a disadvantage in not having accurate information regarding the medical condition of the injured person? In a case where the life expectation is presently assessed at different terms in excess of 45 years, he contends the answer is 'yes'. Finally, what would a medical examination entail and what is the potential adverse effect on the injured person? All the judge said was:

"I am not persuaded that it is reasonable and proportionate that I should impose upon the [injured person] a requirement to submit to any number of medical examinations over the period of his life simply for the purpose of enabling the [insurer] to review its provisioning. "

16. Mr Horlock argues that had the judge broken down the issue in the way he suggests, he should have been driven to recognise that although a medical examination might give rise to anxiety, its purpose was of real significance to insurers responsible for funding very large regular payments. He did not accept that access to medical records would provide as useful an insight and submitted that the impact on the Article 8 rights to private life of the injured person was more than met by the necessity to have regard to the rights of others (in this case the insurer's need to ensure compliance with regulatory provisions relating to reserves).
17. Mr Killalea submitted that there was a fundamental difference between a medical report for the purposes of making the agreement work (i.e. for the possible one off purchase of an annuity) and a regular requirement to undergo a medical examination for a purpose which imparts no benefit to the injured person (although a failure to maintain sufficient reserves might have an effect on long term viability of the insurer which is obviously of real importance to anyone who depends on that insurer). It would be intrusive and, even if limited to once every five years, could involve 9 or 10 such examinations. In the circumstances, it is not reasonably necessary to make the agreement work.
18. It is clear that both arguments are tenable depending on the perspective adopted. The injured party is perfectly able to say, I am not prepared to put myself through medical examinations simply to help the insurers maintain adequate reserves; the insurers can say that proper calculation of reserves are critical especially in high value catastrophic awards where financial prudence requires an assessment of reserves against the background of the changes to the health fortunes of those who benefit from them. It is different from a normal actuarial calculation because the sub-set of people involved (ie the catastrophically injured) is different from the wider universal set of the population at large.
19. In my judgment, Mr Horlock is correct to criticise the rather limited approach adopted by the judge although he, in turn, did not pay sufficient attention to the concerns expressed by Mr Killalea. In the circumstances, I would answer each of Mr Horlock's questions in the affirmative but I would admit of the possibility of the insurer being provided with sufficient material short of a medical examination sufficient for its purposes. I would propose the following clause (which modifies that suggested by the insurer):

"The Defence Insurer shall be entitled to require the Claimant to undergo medical examination at its request upon reasonable notice being given to the Claimant at any time during the Claimant's life time, such medical examinations to be limited to obtaining a medical opinion as to the Claimant's general health in order to obtain a quotation for the purchase cost of an annuity to fund the periodical payments and/or (not more frequently than once every seven years) for the express purposes of reviewing its reserve. The cost of any such examination, to include any reasonable costs and any loss of earnings incurred by the Claimant in attending the examination, shall be paid by the defence insurer. The Claimant shall have permission to apply to the court in the event of reasonable concern as to the nature or extent of any such examination."

Written Confirmation

20. The second issue concerned a provision which Mr Horlock asserts is standard Aviva wording adopted in all its periodical payments orders for a considerable time without objection, which is to the effect that the injured person must obtain and provide to the insurer, at least 14 days before the start of each payment year, written confirmation from his GP dated not more than one month earlier confirming, first, that the GP had seen the injured person on or after that date and that he or she was still alive. The term goes on to provide that in default the insurers are entitled to suspend payments until 14 days after the provision of written confirmation. Counsel for the injured party seeks a provision that the insurers are only entitled to suspend payment if they obtain an order from the court.
21. The insurers contend that the rationale is that to require the insurer to obtain an order is likely unnecessarily to increase costs and expense; the overriding objective is better fulfilled by an arrangement which does not involve the court. If the alternative approach is adopted, due to the short period between the last date for providing written confirmation and the start of the next payment year (14 days) the insurer would have no option but immediately to make an application to suspend payment; this would be wholly disproportionate. We are told that in practice only very rarely are payments suspended in the absence of written confirmation: those cases are generally limited to persistent and prolonged non-compliance on the part of the injured person or his deputy.
22. Mr Killalea argues that suspending payment for failure to provide confirmation of life from a GP should involve the court: this is consistent with the general power to enable the parties to apply to the court for the purposes of implementing the terms of the Order. He argues that there could be a variety of reasons for non-compliance (not the least being ill health of the injured person or the fact that he or she might have fallen out with their GP) and that the safeguard of the court is or should be required before future care costs are withheld.
23. The judge concluded that it would be disproportionate to enable the insurer to withhold payment without a court order. He expressed his view succinctly:

"If it is the [insurer's] case that it wants written confirmation from the GP each year, I suspect the thing to do is to put it in those terms rather than a request. The Claimant knows he is going to have to get a GP's report every year. There can be no justification, one would hope, with no recall being provided. What happens if the defendant asks for a report? The claimant does not actually receive the letter and therefore does not provide the report and the defendant then comes to court and says "We want to stop payments because we have not had a report". The claimant is going to say "Well you never asked for one because the letter went astray" or whatever. So, if the claimant knows at the outset that he has to produce a report every year, then he can do that. But you have to come to court to stop payments."

24. In my view, rather more is being made of this issue than it deserves. The insurers are undoubtedly entitled to be reassured that the person to whom periodic payments (which may be in substantial sums) is alive as at the date on which the payment is to be made and I see no reason why that confirmation should not be made available on an annual basis in advance of the payment which follows reassessment of the payment in the light of up to date statistical indices dealing with the cost of living. The task should, of course, be made as straightforward as possible and I would require the insurer to provide a reminder of the obligation but, if there is no confirmation, I see no virtue in requiring the insurer to return to court: if failure to provide the confirmation is due only to oversight it will be corrected within hours rather than days.
25. In the circumstances, I would include within the order the following term:

"Following a request by the Defence Insurer in writing on or before 1 November each year, the Claimant shall obtain and provide to the Defence Insurer by 1 December each year, commencing 01/12/2012, written confirmation from his GP or other medical adviser dated not before 1 November of the same year confirming that the GP or medical adviser has seen the Claimant on or after that date and that the Claimant is still alive, in default of which the obligation of the Defence Insurer to make instalment payments to the Claimant shall be suspended until 7 days after the written confirmation (dated not more than one month before the date of its submission) is provided to the Defence Insurer."

26. To such extent as it is in issue, I would also approve the suggested clause that those acting on behalf of the Claimant or his estate shall notify the Defence Insurer upon the death of the Claimant.

Conclusion

27. To the extent that I have indicated, I would allow this appeal on both grounds advanced by Mr Horlock and invite counsel to agree an appropriate order to reflect the terms of this judgment.

Lord Justice Richards :

28. I agree.

Lord Justice Mummery :

29. I also agree.