The Case of Gill Russell and the Real Rate of Return

In February 2017, the Supreme Court refused to allow the HSE to bring a further appeal in the case of Gill Russell, A Minor v HSE. Mr. Justice Cross’s original ruling in the High Court, in this case, was substantially upheld by the Court of Appeal in November 2015 and has significant implications for awards of compensations to Plaintiffs who have suffered catastrophic injuries.

Background

Gill Russell suffered catastrophic injuries* at birth at Erinville Hospital in 2006 and requires constant care for the rest of his life.

His mother sued the HSE on his behalf and liability was admitted. The only issue to be decided therefore was quantum.  Mr. Justice Cross in the High Court was asked to assess the compensation that should be awarded to provide for Gill’s future medical and care needs for the rest of his life, his life expectancy being estimated as a further 45 years from that time. He was also asked to establish the investment return that the trustees of the compensation monies could earn over the period of his expected lifetime.

Before this decision, the expected rate of return had been set at 3% in the case of Boyne v Dublin Bus in 2003. In the Russell case, Mr. Justice Cross found that the real rate of return should be based on the assumption that the Plaintiff was entitled to invest his compensation in as risk free or low risks investments as possible and that he could not afford to lose any part of the award as it was required for his future care and medical needs.

It was argued by Gill Russell’s lawyers that due to the changes in the economic climate in recent years, a rate of 3% return is not achievable in a low risk investment and that applying this rate was unfair to Plaintiffs as it would mean that their lump sum would not be sufficient to meet the needs for the remainder of their lives.

Decision of Mr. Justice Cross and the new Real Rate of Return

Mr. Justice Cross agreed with this argument and decided that the while the rate of return on appropriately low risk investments was 0% at that time, the appropriate rate of return to be applied was 1.5% for future pecuniary losses such as aids and appliances and 1% for future nursing care and other wage related care. The effect of this decision was to substantially increase the amount of compensation awarded to Gill Russell for his future needs – he was awarded €13 million based on this new lower rate, however, if the 3% rate of return had been applied he would have been awarded in the region of €9 million.

The Court noted the existing ministerial power pursuant to Section 24 of the Civil Liability and Courts Act 2004 to prescribe the discount rate that will apply in these cases which has not been utilised. Under s.24(3) of the Act, a Court may use a different discount rate if it considers an injustice would result.

Court of Appeal Decision

The HSE appealed the decision of Mr. Justice Cross to the Court of Appeal which upheld almost the entire High Court decision. The Court stated that the 100% compensation rule and that the HSE’s argument about the widespread economic effects of increased awards could not be allowed to affect the Court’s approach.

The Court of Appeal found that unless the rate of was reduced, a catastrophically injured person would have to take “unjust and unacceptable” investment risks with funds to be able to pay for their care costs over their lifetime.

Supreme Court Decision

The HSE sought leave to appeal this decision to the Supreme Court in respect of the issue of the real rate of return only. It argued that the decision was of general public importance with implications for other awards.

The Supreme Court judgement stated that the HSE’s argument that the financial consequences of the High Court decision were “very significant indeed” had not been made in the High Court and was dismissed by the Court of Appeal. The Supreme Court stated that on the facts of this case, the HSE had not raised an issue which, in the interests of justice, it was necessary to have further reviewed.

In light of the Supreme Court’s refusal to allow a further appeal by the State, this decision will continue to have a significant impact on lump sum awards made to Plaintiffs who have sustained catastrophic injuries.

If you have any questions in relation to catastrophic injuries at birth, please contact Ralph McMahon of McMahon Goldrick Solicitors on 01 6770044 or info@rmcm.ie.