Commentary on Sections The structure of the Act Part two – Periodical payments of damages Section 4 – Variation or suspension of settlement
41.Section 4 of the Act inserts a series of sections (2E to 2I) into the 1996 Act concerning the variation and suspension of orders and agreements under which damages for future pecuniary loss are paid in the form of periodical payments. These provisions do not apply to orders which only include provision for payment of lump sums, or to orders which make provision for periodical payments in respect of other types of loss (i.e. those made under section 2(1) of the 1996 Act with the consent of the parties).
42.New section 2E describes the circumstances in which a court may make a periodical payment order that is capable of being varied or suspended by the court in the future. (For shorthand, such an order is referred to here as a “variable order”.) To do this the original order must include provision which paves the way for a subsequent application to be made to the court for variation of the order or suspension of the rights to payment under it (or both variation and suspension). Without such a paving provision it will not be possible for an application to be made to the court under the following provisions inserted into the 1996 Act. (This is distinct from the provisions of section 2C(4) concerning applications for variation of the method of payment.)
43.Subsection (2) of inserted section 2E provides that a court may only include such provision if it is satisfied that there is a significant deterioration or improvement in the pursuer’s medical condition which can be foreseen at the time of the original order and that as a consequence of that change the pursuer would end up being either significantly over- or under-compensated.
44.Subsection (3) of inserted section 2E sets out what must be specified in a variable order including details about the type of change in condition which would trigger any application to vary and the period within which an application must be made.
45.New section 2F describes the manner in which a court may vary a variable order which includes: altering the amount of payment, its indexation, the frequency of payment, the method of payment and period of payment as well as providing for a lump sum instead of or in addition to periodical payments. Whilst in general the court may not vary an order more than once in respect of any specified change, or outside the application period specified in the original order (subsection (5)), it may do so where there are exceptional circumstances. This is intended to provide the courts with the necessary flexibility to take account of a range of circumstances. The court will also be able to vary a variable order on an application made outside the application period if the party making the application shows cause for the lateness of the application linked to a delay in the party being made aware of relevant information (subsection (6)). (For example, this would cover a situation where the defender has been unable to make an application within the period specified in the original order because the pursuer failed to make the defender aware of a relevant change of circumstances, so long as the defender did not then delay in making the application.) The court will not be able to vary the order unless the continuity of payment remains reasonably secure (subsection (4)).
46.New section 2G enables the court to suspend the right to receive periodical payments under a variable order. This provision reflects the judgement in AA v CC [2013] EWHC 3679 (QB) that the 1996 Act and the Civil Procedure Rules in relation to England and Wales did not provide courts with the power to make an order for “periodical payments which are expected to stop at some uncertain time and to re-start again at some uncertain time later” and recognises that suspension goes further than variation. There is no limit to the number of occasions payments may be suspended under this section. The criteria which must be met before a court decides to suspend payments are otherwise the same as those for variation.
47.New section 2H extends the court’s power to vary and suspend to agreements made between parties which settle personal injury claims or actions and which make provision for periodical payment in respect of future pecuniary loss. The power can only be exercised when the agreement includes provision corresponding to that required in a variable order. Section 2H does not limit the number of occasions on which a right to a payment under an agreement can be suspended. Otherwise, and subject to the terms of the agreement restricting this, the court will have the same power to vary an agreement, or suspend the right to receive payments under one, as it would to vary an order, or suspend a right, under section 2F or 2G.
48.New section 2I sets out the circumstances in which a suspension under either section 2G or 2H may be lifted. The court must be satisfied that the injured person’s physical and/or mental condition has altered since the time of the suspension and that the person would be significantly under-compensated should the suspension continue.