Economic data to be used in review of injury payouts

The changing financial landscape will figure in a legal challenge to discounted compensation

PUBLISHED : Wednesday, 19 September, 2012, 12:00am
UPDATED : Wednesday, 19 September, 2012, 4:09am

The High Court yesterday allowed the filing of economic evidence to challenge a long-held assumption on investment profits that claimants of compensation can make on their payouts.

In a landmark decision, Mr Justice Mohan Bharwaney, of the Court of First Instance, permitted a joint application from three severely disabled people who argued the court should stop reducing payouts for expected yields.

The trio - all quadriplegics - say there should be no discount as investment returns barely covered inflation in the past decade.

Based on a current assumed rate of return of 4.5 per cent above inflation, their one-off payouts may be depleted at a faster pace, they say.

A lawyer said the case would carry implications not only on calculations for injury compensation but also maintenance provision in matrimonial cases.

Bharwaney said: "I am persuaded that there is sufficient evidence to show that there is a substantial change in economic landscape" since a 1996 Court of Appeal ruling that set the 4.5 per cent rate in stone.

"I should permit economic evidence to be adduced to test whether the return of 4.5 per cent remains valid today." The judge will then decide whether to adjust the assumed rate.

To support the claimants' case, Professor Chan Wai-sum, an actuary and a Chinese University chartered statistician, and another financial expert will each prepare a report on economic data between 1995 and now.

The two will then produce a joint report to be filed with the court by October 22. Bharwaney said the report should include low-risk financial products and also the average return rate in the Mandatory Provident Fund. Financial products cited must be representative, he said.

The judge will hear arguments on reviewing the investment return rate on November 6 and 7.

Solicitor Eliza Chan Lai-shan, who had 20 years' experience in handling personal injury claims, said the ruling would affect injury claimants, the Hospital Authority, insurers and car owners.

If the investment return rate was lowered, claimants would receive a bigger lump sum, Chan said. The likely consequence was that insurers would have to raise their premiums.

Barrister Nicholas Pirie said the impact of the ruling would extend to matrimonial cases, because dependent divorcees were granted maintenance on the same assumed rate of return.

In March, Britain's Privy Council allowed the use of economic evidence and ruled that the plaintiff at the time should get more than the conventionally calculated amount of damages.

A Privy Council judgment is persuasive for, but not binding on, Hong Kong courts.