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Court allows defendant to ditch settlement reached three days before discount rate change

Discount rate: Cut would have seen damages rocket

The High Court has upheld the right of a defendant in a personal injury claim to resile from a settlement agreement made three days before the discount rate was cut earlier this year.

As the claimant was a protected party, the compromise of the action was not binding as it had yet to be approved by the court.

Mr Justice Dingemans held that this requirement in CPR 21.10 was not incompatible with the claimant’s rights as protected by article 14 of the European Convention on Human Rights – protection from discrimination, even though there was no such provision for non-protected parties.

In Revill v Damiani [2017] EWHC 2630 (QB) [1], the claimant motorcyclist was severely injured by the defendant, who was imprisoned after being found guilty of causing serious injury by dangerous driving. He was treated as a protected party because he lacked capacity to conduct the litigation.

Zurich Insurance admitted liability on Mr Damiani’s behalf. There was a joint settlement meeting on 24 February 2017 leading to a memorandum of agreement of the same date.

This provided for a lump sum payment for all of Mr Revill’s losses, including his future losses. The calculations for Mr Revill’s future losses used a multiplier for future losses based on a discount rate of 2.5%.

The rate was changed to -0.75% on 27 February. Counsel for the claimant recalculated the future losses, which had substantially increased as a result. The defendant’s solicitors then wrote to say that he was withdrawing from the compromise, adding: “You will appreciate my client’s legal entitlement to resile from the agreement.”

Dingemans J concluded that the approach taken by CPR 21.10 to compromises and court approval was “a proportionate means of achieving the legitimate aim of ensuring the protection of protected parties from: other parties; from themselves; and from legal representatives”.

He observed that the CPR could have been rewritten to mirror the approach in family law cases, where the words “subject to the approval of the court” did not prevent a binding agreement being made or entitle one party to resile from its terms before the court had been asked to approve it.

But the approach taken by the CPR was proportionate for two reasons, the judge continued.

“First, the decision whether to continue with the ‘civil cases’ approach set out in CPR 21.10 or the ‘family proceedings’ approach was within the discretionary area of judgment for the rule-making committee.

“There are factors in favour of the family proceedings approach. In this case it would have meant that Mr Damiani would have been held to the compromise, assuming that the court approved the compromise.

“However there are factors in favour of the approach taken by CPR 21.10. These include the facts that: (1) the compromise rule now set out in CPR 21.10 is long established so that all practitioners know where they stand, meaning that everyone can enter into negotiations to attempt to compromise the action knowing the legal position; and (2) permitting all parties, including the protected party, to withdraw from a compromise before it had been approved maintained a fair balance between protected parties and the other party who might want to withdraw.

“The family proceedings approach requires permission from the court to withdraw from a compromise, and such permission might not be provided. This could create uncertainty with all the attendant worry and cost.”

Secondly, he said, CPR 21.10 formed part of a series of rules which, among other matters, included the duty on the court to provide active case management.

“In this case, as appears below, it enabled the court to set a trial date for a four-day hearing commencing on Monday 11 December 2017. The powers of active case management permit the court to ensure that cases involving protected and unprotected parties are managed in a proportionate and efficient manner, thereby securing the good administration of justice and protecting the relevant rights.”

Dingemans J recorded that, as it happened, a further comprise was reached ahead of the trial.