The long-awaited reform on awarding future pecuniary loss
Introduction
The Law Reform Commission (“LRC”) of Hong Kong has recently
published a report on Periodical Payments for Future Pecuniary Loss in Personal
Injury Cases in mid-January 2023. Pursuant
to the proposed legislation, the court is recommended to be given the power to
make periodical payment orders (“PPOs”)
in relation to future pecuniary loss in personal injury cases.
Background
In Hong Kong, the court awards pecuniary
damages in personal injury cases in a lump sum, whereas the damages for future
pecuniary losses may be awarded on the same basis. As a result, the claimant’s
past and future losses are assessed and crystallised into one lump sum payment,
which is determined at the date of the hearing. However, it is difficult for
court to accurately assess damages in one lump sum as any assessment of damages
for future pecuniary loss must take into account the claimant’s earning capacity
but for and after the injury as well as any additional expenses incurred
following the injury. Therefore, such one-off payment cannot precisely reflect
the present value of the claimant’s prospective loss, including but not limited
to future lost earnings and expenses.
In view of the above, the current approach
has been widely criticised and considered as problematic. Legal practitioners
have been urging for reform on the existing conventional approach.
Proposed reform
The LRC has made the following recommendations
after taking into account the responses to the public consultation:
Power of the
court to award periodical payments
The court is recommended to be given the
power to make PPOs in respect of damages for future pecuniary
loss. Such power is subject to the following limitations:
1.
The power to make PPOs should be determined by the court irrespective of
the consent of the parties to the proceedings in respect of future pecuniary
loss, be referable to costs of care and accommodation;
2.
be limited to catastrophic cases; and
3.
without prejudice to (1) above, may cover all heads of future pecuniary
loss subject to the consent of the parties to the proceedings.
By catastrophic cases, Clause 2 of the
draft bill defines “catastrophic injury”
as a personal injury which is of such severity that it results in a permanent
disability to the person requiring the person to receive long-term care and
assistance in all activities of daily living or a substantial part.
Discount rate
It is recommended that the Financial Secretary
shall be the person empowered to formulate and promulgate the discount rate (i.e. the presumed net rate(s) of
return on investment). The LRC also suggests that the discount rate should be
reviewed every six (6) years and the Financial Secretary should consult an
expert panel for each review of the discount rate.
Review of PPOs
Upon consideration of the responses and
taking into account the development and experience from the United Kingdom
regarding the implementation of PPOs, the LRC recommends that the original PPOs should be open to review by the
court, subject to the following limited circumstances:
1.
changes in the need for and level of future care as a result of
significant medical deterioration or improvement, which is foreseen at the time
of the original order, with specific criteria pertinent to the nature of
deterioration or improvement, as well as the duration during which a review can
be applied for, being stipulated in that order; and
2.
the review should be restricted to only one application subject to
extension of time for the application as the court may allow in appropriate
circumstances.
Additionally, the LRC recommends that if
the periodical payment ceased to be effective due to the fact that the
recipient passed away prematurely, the dependants of the recipient should be
afforded one last opportunity to pursue a claim against the paying party for
(i) loss of dependency; (ii) or the amount that
the deceased recipient would have contributed to his dependants from the
periodical payments and the dependants have not received any compensation from
the paying party who was liable to the deceased recipient.
Security of the
periodical payments
Under the current compensation schemes in
Hong Kong, there is an absence of a suitable annuity market as well as the lack
of readiness expressed by the insurance sector, the award of a PPO would likely be restricted to certain classes of defendants (including
those funded by the Government or quasi-Government institutions or statutory
bodies) which are able to provide security or guarantee of the long-term
periodical payments.
As such, the LRC recommends that the court
should have a discretion to make a PPO after taking into account the security
of the periodical payments to ensure the continuity of payments and the court should satisfy itself that a PPO is able to secure
the full scope of the claimant’s award.
Conclusion
In view of the urgency
of the reform on assessing damages for future pecuniary loss, with the LRC
proposing a draft bill to empower the court to make PPOs, it is anticipated
that the PPOs will be introduced by way of legislation in the near future and
refinements being made afterwards. It is foreseeable that there will be
significant impact on personal injury claims that involve serious injuries.
However, it remains to be seen the extent to which the court will make a PPO.
We shall continue to keep track of any further developments on the proposed
legislation and provide constant updates and new information regarding the
matter.
For enquiries,
please feel free to contact us at: |
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E: insurance_pi@onc.hk T: (852) 2810
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Place, Central, Hong Kong |
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Important: The law and procedure on
this subject are very specialised and
complicated. This article is just a very general outline for reference and
cannot be relied upon as legal advice in any individual case. If any advice
or assistance is needed, please contact our solicitors. |
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Published by ONC Lawyers © 2023 |
