Colm Burke (Fine Gael)
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I welcome the Minister of State to the House and I apologise for keeping him in the House for so long this evening. My Adjournment matter concerns the issuance of lump sum awards and the payment of awards by instalment. This matter arises in relation to the Quirke report which arose from an expert group that was set up in 2010 to give advice on this matter. This question arose recently in the High Court when an award of €11 million was made and the judge asked whether the payment of awards by instalment would be more appropriate. However, there is no such procedure in place at this stage.

As the Minister of State knows, the way awards are made out is based on: pain and suffering to date - that is, from the date of the accident to the trial date; pain and suffering into the future; loss of earnings to date, namely, to the date of the trial; and loss of earnings into the future.

The big issues concerning loss of earnings into the future, especially in a severe case, is that it is not always possible to determine what period of time will be involved. The Quirke report stated that the present method of awarding damages for future pecuniary loss - in this jurisdiction, the single lump sum award - is inadequate and inappropriate in cases where a plaintiff has sustained major injuries, and there are major, long-term consequences that will require ongoing care. The report said the expert group believed that a seriously injured plaintiff should not be deprived of a right to claim within the courts that damages which are intended to pay for the cost of his or her future care and future treatment, and medical and assistive aids and appliances, should be paid periodically and not by way of a single lump sum.

The group also believes that defendants facing such substantial claims should be entitled to claim within the courts that damages which are intended to pay for the cost of future care, treatment and medical equipment, should in the interests of justice be paid periodically at the appropriate time when the care, treatment and equipment are required. The reason this is raised in relation to defendants as well, concerns the payment from a lump sum. If the recipient dies within a short period, the lump sum passes to the next of kin. In that context there is an advantage, for both a plaintiff and a defendant, to have periodic payments as opposed to one lump sum. Given the report's advice, is it proposed to bring forward the necessary legislation and, if so, what is the timescale involved?

Dinny McGinley (Donegal South West, Fine Gael)
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I am standing in for my colleague, the Minister for Justice and Equality, who unfortunately cannot attend the House. On behalf of the Minister, I would like to thank Senator Colm Burke for raising this important matter.

As the Senator will be aware, the programme for Government includes a commitment to introduce legislation to facilitate the courts in making provision for structured settlements in circumstances where, currently, large sums are awarded as a consequence of individuals suffering catastrophic injury because of the negligence of another.

The High Court working group on medical negligence and periodic payments, to which the Senator has referred, was established by the President of the High Court, Mr. Justice Nicholas Kearns, in February 2010.

The group's terms of reference included considering and reporting on whether certain categories of damages for catastrophic personal injuries can or should be awarded by way of periodic payments orders, as opposed to once-off, lump-sum orders, and to make recommendations and provide draft legislation, regulations and rules as may be necessary.

In the course of its deliberations the working group extended its examination to all personal injuries not just medical injuries. The working group was chaired by a High Court judge, Mr. Justice Quirke, and membership included High Court judges, practising solicitors and barristers, officials from the State Claims Agency, the Courts Service, the HSE, the Department of Justice and Equality, and representatives from the insurance industry and Patient Focus, a patient advocacy group.

In the report of its first module completed in October 2010, the working group recommended that legislation be enacted to empower the courts to make periodic payment orders as an alternative to lump sum awards to compensate injured persons in cases of catastrophic injury where long-term permanent care will be required. The working group also recommended that periodic payment orders should only be made where the court is satisfied that continuity of payment under the periodic payments order is reasonably secure.

As the law stands damages awarded to compensate for personal injuries are intended to put injured parties in the same position as they would have been if they had not sustained the wrong for which they are getting compensation.

The application of this principle can present practical difficulties. Damages are assessed at a certain point in time and a lump sum is awarded, which is intended to compensate for all past and future losses, including the cost of care, medication, medical and assistive aids, and treatment. The lump sum is intended to represent the capital value of future loss.

There has been much debate in recent years as to the appropriateness and adequacy of the lump sum system in cases where the plaintiff has been catastrophically incapacitated in the long term or permanently incapacitated. The effectiveness of the current method of assessing damages for future loss can be seriously undermined by uncertainties affecting assumptions made as to the plaintiff's future personal circumstances, future investment returns and inflation rates. The system encourages a conflict of evidence with both parties seeking the best possible outcome. The court is required to determine the level of future damages by seeking to resolve conflicting expert medical and other evidence. This presents the court with the difficult task of providing fair and just compensation where life expectancy is uncertain or disputed.

The lump sum approach results in there being no recourse for a plaintiff who may exhaust his or her fund by exceeding his or her projected life expectancy perhaps owing to advances in medical science. Lump sum awards can also create a risk for the Exchequer because if the return on investment is insufficient to meet the needs of the plaintiff, the State may be required to fund provision for those needs.

There are, however, a number of advantages to the lump sum system such as finality and certainty for the parties in the resolution of the claim. Lump sums enable the insurer to close the book on a claim and facilitate the operation of standard reinsurance arrangements. They also give autonomy to the plaintiff, allowing him or her to decide how to manage the award. However, in catastrophic injury cases these arguments in favour of lump sums do not hold so strong, hence the calls for providing the courts with the power to make periodic payments orders.

The successful operation of any new statutory scheme for periodic payments requires the establishment of a financial infrastructure to ensure that continuity of payment is secure. In this regard, the working group recommended that the State, through the agency of the National Treasury Management Agency, be empowered to provide injured victims with the necessary security for periodic payments either by the provision of annuities to insurers and others or in such other manner as may be appropriate. Alternatively, it was recommended that consideration be given to the introduction of a statutory scheme whereby payments made under periodic payment orders will be statutorily protected and guaranteed. The security of payment is key to any legislative changes that may be required and, based on the experience for example in the UK, it would appear that a good deal of financial infrastructure will be necessary to make the legislation workable.

With respect to security of payment, the NTMA is conducting an actuarial review to examine the feasibility and cost-effectiveness of periodic payment orders as an alternative to lump sum payments or other options. The review will examine in particular the feasibility of the State acting as an annuity provider to insurers and indemnity providers in personal injury actions to enable compliance with the security of payments principle. The outcome of the review will inform the development of proposals under way in the Department of Justice and Equality to meet the Government's commitment to legislate in this area. The review is expected to be completed in June 2012.

The working group, now chaired by Ms Justice Mary Irvine of the High Court, has recently completed its report on its second module concerning the introduction on pre-action protocols in clinical negligence cases. In view of the particular difficulties and challenges presented by the conduct of clinical negligence litigation, the Minister looks forward to examining any recommendations made in the second report once it has been published. The group is now engaged on the third and final module relating to the potential of case management to expedite and minimise the costs of clinical negligence. On behalf of the Minister, I would like to thank the working group for its invaluable work in this area.

Denis O'Donovan (Fianna Fail)
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An bhfuil an Seanadóir sásta?

Colm Burke (Fine Gael)
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I thank the Minister of State for a very comprehensive response to the matter.

Denis O'Donovan (Fianna Fail)
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It is a very interesting topic. I thank the Minister of State and apologise for the blunt substitution.