22 March 2019
This week saw The Damages (Investment Returns and Periodical Payments) (Scotland) Bill being unanimously passed by the Scottish Parliament following the third stage of debate. The purpose of the legislation is to put in place a statutory methodology for calculating the discount rate and to provide the Scottish courts with the power to impose periodical payments for certain future losses.
Going into the third stage of debate, the main issues outstanding related to the level of the standard adjustment to be made to the rate of return to represent the impact of taxation and the costs of investment advice and management, and whether the court ought to have regard to the pursuer’s own preference s when considering whether a periodical payments order should be made.
The Act, as it will now become, provides that in addition to a 0.5% standard adjustment to the discount rate to reflect that there is risk inherent in any invested portfolio, an additional further standard adjustment of 0.75% (increased from the originally proposed 0.5%) will be applied to reflect the impact of taxation and the costs of investment advice and management, thus making a combined total standard adjustment of 1.25%.
The Act retains the requirement for the discount rate to be reviewed on a regular basis, namely every five years.
The Act also imposes a requirement upon the courts to consider whether awarding damages by way of periodical payments is appropriate and provides the power to make an order for periodical payments without the consent of the parties. The amendment inserted at the stage 3 debate, requiring the court to have ‘special regard to the pursuer’s needs and preferences when considering whether to make such an order, was also adopted.
The Bill will now become law as The Damages (Investment Returns and Periodical Payments) (Scotland) Act 2019, although the precise commencement date will be the subject of secondary legislation in due course. A link to the Bill as passed can be found here.
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