A v B Hospitals NHS Trust

When choosing between a lump sum and periodical payments for future care, the court must consider all the circumstances and identify the form of award that best meets the claimant’s needs. Relevant considerations include the claimant’s preference and financial advice, the defendant’s preference, the security of periodical payments, the likely relationship between indexation and actual care-cost increases, investment returns, taxation, charges, risk and flexibility. A payment stream linked to the retail prices index may be inappropriate where care costs are likely to rise faster, particularly where that divergence would create a substantial and entrenched shortfall. Benefits to a health service body from periodical payments are legitimate considerations, provided they are not advanced merely as an argument of affordability.

A child suffered catastrophic brain injury during birth at the defendant’s hospital. Liability was admitted. The parties agreed all damages except the cost of future care, which the court assessed at £3,995,818 on a lump-sum basis before considering the alternative of periodical payments.

The claimant obtained independent financial advice and preferred a conventional lump sum. The defendant sought periodical payments linked to the retail prices index. The issue was which form of award best met the claimant’s future care needs, having regard to the statutory provisions, the Practice Direction, the evidence about care-cost inflation and the investment prospects of a lump sum.

1. Statutory framework. Under section 2 of the Damages Act 1996, the court had to consider whether to order periodical payments. Continuity of payment was reasonably secure because the defendant was a health service body. Under CPR 41.7 and Practice Direction B in Part 41, the court had to consider all the circumstances, particularly the form of award that best met the claimant’s needs, the claimant’s preference and advice, and the defendant’s preference and reasons.
2. Comparison of the awards. Periodical payments offered security for life, but an RPI-linked award risked under-provision if care costs increased faster than RPI. The evidence supported a likely long-term divergence. Because the care award was large, the resulting shortfall would be substantial and would become entrenched even if the rates later converged.
3. Lump-sum assessment. The court considered the likely investment return after tax and charges, the risk that the fund might run out, the agreed life expectancy, the claimant’s willingness to accept moderate investment risk and the flexibility to use capital when annual costs exceeded income. Although life expectancy remained uncertain, the evidence established a good prospect that a lump sum would keep pace with RPI and a realistic prospect that it would meet actual care costs more effectively than RPI-linked payments.
4. Defendant’s institutional interests. The Department of Health’s advantages in retaining capital within the health system and replacing a large settlement with an annual income stream were legitimate considerations. They were distinct from an impermissible argument that the award should be shaped by affordability.
5. Disposition. Having considered the factors in the round, the court concluded that a lump sum best met the claimant’s needs. The award for future care was therefore made as a lump sum.