Flora v Wakom (Heathrow) Ltd

Section 2(8) of the Damages Act 1996 makes indexation by the retail prices index the default for a periodical payments order. Section 2(9) nevertheless gives the court a general power to disapply or modify that default. The power is not confined to exceptional cases.

The choice of an alternative index must be determined on the evidence and by reference to fair and appropriate compensation. The statutory scheme remains informed by the principle that a claimant should receive full compensation for future pecuniary loss. Government expectations expressed in Explanatory Notes cannot narrow the enacted language, and affordability is not a basis for reducing such compensation.

The claimant suffered serious injuries in a workplace accident. Liability was admitted. The remaining issues included the amount and form of compensation for future loss of earnings and care.

The defendant applied to strike out the claimant’s case for linking periodical payments to the Average Earnings Index rather than the retail prices index, and to exclude supporting expert evidence. Sir Michael Turner, sitting in the Queen’s Bench Division, dismissed that application on 7 December 2005.

The defendant appealed. The central issue was whether section 2(9) of the Damages Act 1996 permits departure from retail-prices-index linkage only in exceptional circumstances.

1. Appeal dismissed unanimously. Brooke LJ, with whom Moore-Bick LJ and the President agreed, held that the claimant could maintain his pleaded case and rely on the proposed expert evidence at trial.

2. Section 2(8) of the Damages Act 1996 supplies the default mechanism: where the order does not itself specify a variation mechanism, it is treated as linked to the retail prices index. Section 2(9) permits the court to disapply or modify that effect. Nothing in the statutory language confines that power to exceptional circumstances. Civil Procedure Rules 1998, rule 41.8(1)(d), was consistent with that neutral construction.

3. Reference to parliamentary debates was impermissible. The statutory language was neither ambiguous nor obscure and did not produce an absurdity, so the threshold in Pepper v Hart [1993] AC 594 was not met. Explanatory Notes could identify the statutory context and mischief, but could not convert the Government’s expectations about the scope of the legislation into Parliament’s intention.

4. The purpose of the substituted provisions was to preserve the real value of periodical payments and to achieve compensation as nearly as possible in full for future pecuniary loss. The fixed discount-rate regime for lump-sum awards did not justify importing a lower-compensation approach into periodical payments. Nor could affordability justify a reduction in compensation for future pecuniary loss.

5. It was therefore for the trial judge, after hearing evidence, to decide whether a periodical payments order should be made and, if so, whether an alternative index was appropriate and fair in all the circumstances. The claimant was not required first to establish exceptional circumstances.

• Court of Appeal (Civil Division): dismissed the defendant’s appeal and upheld the refusal to strike out the claimant’s index-linking case or exclude the proposed expert evidence: [2006] EWCA Civ 1103.

• High Court, Queen’s Bench Division: Sir Michael Turner dismissed the defendant’s application on 7 December 2005. No citation for that order is stated in the judgment.