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All is not lost over periodical payments and RPI

Flora v Wakom (Heathrow) (Court of Appeal - 28 July 2006)

The defendant applied to strike out that part of the claimant's statement of case that advanced a claim for a periodical payment order to be linked to an index other than the retail prices index, and to disallow the evidence of an expert who the claimant wished to call in support of that case.

It was common ground that there was nothing out of the ordinary in this particular case and the defendant, therefore, argued that any order for a periodical payment would be bound to be linked to the RPI in accordance with Section 2(8) of the Damages Act 1996 and that s2(9) would have no application in this case. S2(8) provides that an order for periodical payments shall be treated as providing for payments to vary by reference to the RPI. S2(9) provides that an order for periodical payments may disapply or modify the effect of s2(8). There has been considerable debate as to precisely what s2(9) means in practice.

The defendant's application was dismissed at first instance and its appeal was also dismissed by the Court of Appeal. Lord Justice Brooke held that: (a) the wording of the statute was clear, so it was illegitimate to rely on what was said by the minister while the Bill was passing through parliament, the explanatory note to the Act, or the regulatory impact assessment; (b) if anything, the explanatory notes assisted the claimant's case because the intention was "to ensure that the real value of periodical payments is preserved over the whole period for which they are payable"; (c) the cases of Warriner v Warriner (2002) and Cooke v United Bristol Health Care NHS Trust (2003) were not relevant as they related to conventional lump sum awards, where (unlike with periodical payments) a claimant has the opportunity of investing all their damages so as to beat the rate of inflation.

COMMENT: This was a bold attempt by defendants to win the indexation argument at an early stage. The fact that it was unsuccessful does not, of course, mean that periodical payments should be linked to anything other than the RPI in the usual case. This case simply means that claimants are at liberty to advance an argument at trial that the court should link periodical payments to another index. Although a setback for defendants, the point is certainly not lost and should still be contested where appropriate. - Jenny Moates, BLM London.

- These law reports are contributed by insurance law firm Berrymans Lace Mawer (

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