The Discount Rate in Personal Injury Awards » Robert Tarren
The courts considered the 2.5 per cent discount rate and examined whether or not, on the 100 per cent principle, it should be amended for Guernsey (see para. 188). Given lack of compulsion, the 100 per cent starting point and the agreement between all the experts that 2.5 per cent would probably leave the claimant under-compensated (para.169), it was inevitable that the court would make a reduction from 2.5 per cent. The court adopted the same form of calculation as was undertaken by the House of Lords in 1998 and the by the Lord Chancellor in 2001. The discount rate is calculated as the annual average yield on ILGS over the preceding three years on the assumption that RPI inflation was 3 per cent in each year. It is widely recognised that yields on ILGS have declined since the discount rate was set in 2001. Experts for the plaintiff calculated that a Guernsey resident investing in ILGS in 2001 would have earned a yield of 2.18 per cent pa net of Guernsey tax. At the time of trial the same calculation produced a net annual yield of 1.13 per cent. The difference, entirely due to falling yields on ILGS, is 1.05 percentage points (see para. 194). For me this is the more interesting issue. In England and Wales the Lord Chancellor sets a single discount rate for all heads of damages and any consideration of different rates for different heads, or a lower single rate to account for real earnings growth under some heads, was ruled out in the cases of Cooke and Warriner (see above). We have already seen that the Royal Court of Guernsey is not similarly bound. However, although over three quarters of the plaintiff’s future losses were earnings-based in this case, the court did not in fact consider whether or not it ought to and, if so, how to include the differential between earnings inflation and prices inflation when determining the discount rate. The discount rate was calculated only in relation to the UK RPI, the Guernsey RPI, Guernsey tax rates and the yield on ILGS over the period 2007-2009. The reason that real earnings growth was not considered is a simple one. There was and is no suitable measure for the wage inflation for carers, or even for general wage inflation. The States of Guernsey Government does not collect data and/or does not publish statistics on the earnings of its citizens and, without a suitable measure, the court decided that it was unable to answer either question. The evidence in relation to the setting of the discount rate has now been scutinised in a court of law, albeit one which lies outside the jurisdiction of English Law, and on the same basis as has previously been undertaken for the UK (in 1998 and 2001). The judgment appears to be one which is well-founded on the evidence presented to the court. The evidence concerned the relevance of declining yields on ILGS and wage inflation in excess of price inflation to the setting of the discount rate which, if allowed, would have been the same as would have been heard in an English...
