Welcome to the latest edition of the Hong Kong Medical Law Brief.

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1 27 April 2012 Hong Kong Medical Law Brief Welcome to the latest edition of the Hong Kong Medical Law Brief. We discuss three interesting cases that may impact upon discount rates to be applied in damage awards, privilege issues arising from investigation of hospital incidents, and the care of mental patients. We hope you enjoy reading this edition and we welcome your feedback. Julian Wallace and Christine Tsang Case reviews Discount rates in personal injury awards Simon v Helmot [2012] UKPC 5 The recent Privy Council s decision in Simon v Helmot [2012] UKPC 5 sets out important principles in the assessment of the discount rates in personal injury awards in Guernsey. The claimant was a former Commonwealth Games cyclist who sustained severe permanent injuries in a road traffic accident and cannot undertake gainful employment as a result. He further requires specially adapted accommodation and 24-hour care for the rest of his life. Liability was admitted leaving damages to be assessed. The issues in dispute were: (i) The proper discount rate to be applied in assessing the multipliers. (ii) Whether there could be different discount rates for different heads of damages. In Guernsey, the system only allows the award of damages to be in the form of a single lump sum. Accordingly, the award of damages includes future losses, and to which a discount rate has to be applied to take into account the inflation over the years and the returns gained from investments. Unlike in England and Wales, where the discount rate was fixed at 2.5 percent by statute, there is no statutory discount rate in Guernsey. The Privy Council upheld the decision of the Guernsey s Court of Appeal and ruled that there could be different discount rates for different heads of damages if there was expert evidence in support of such findings. The correct discount rate for earnings-related losses, i.e. the claimant s own lost 1

2 earnings and the cost of employing his carers was assessed to be negative 1.5 percent, while for non-earnings related losses, the discount rate was held to be 0.5 percent. In reaching its decision, the Privy Council and the courts in Guernsey referred to English common law for guidance, which is generally applied and followed in Guernsey. The fundamental principle in the assessment of the awards is that the victim is entitled to full compensation for the injuries suffered. The starting point in assessing the discount rate was to use the rate of return of around 1.5 percent derived from investing in the UK index-linked gilts. After allowing for Guernsey tax and taking into account higher inflation in Guernsey than in UK, the discount rate for non-earnings related losses was set at 0.5 percent. As for earnings-related losses, the discount rate had to be further reduced by 2 percent to take into account the expert evidence adduced, which indicated that the rate of inflation of average earnings would outpace the rate of price inflation by 2 percent. The discount rate then came out to be a negative figure, which resulted in a higher multiplier and a substantially higher amount of damages. The Privy Council further suggested that personal injury awards should be made by way of periodic payments, which is considered to be the most accurate way of taking inflation into account in the assessment of damages. Comments Although the decision in this case is not binding on Hong Kong courts, claimants are likely to rely on this judgment to argue for a higher multiplier in the assessment of future losses. Hong Kong courts adopt the conventional discount rate of 4.5 percent since the Court of Appeal decision in Chan Pui Ki (an infant) v Leung On & the Kowloon Motor Bus Co. (1933) Ltd. However, there is already a debate to revisit the Chan Pui Ki's case and a move towards higher multipliers following the UK's application of a 2.5 percent discount rate fixed in Given the volatile inflation rates in recent years, this judgment will certainly heat up the debate to review the discount rate to be adopted in Hong Kong. 2

3 Principles of legal professional privilege CITIC Pacific Ltd. v Secretary for Justice and Commissioner of Police HCMP797/2010 The recent judgment by the Court of First Instance provides a useful reminder of the principles of the two categories of legal professional privilege (LPP), litigation privilege and legal advice privilege. Background The plaintiff was under an investigation by the Securities and Futures Commission as a result of the company s delay in disclosing substantial losses from foreign trading contracts. The investigation led to the seizure of thousands of documents and files, which the company argued were all subject to LPP and should therefore be protected from disclosure. The court restated the law on LPP and made a finding on whether each of the documents in question was entitled to privilege. Litigation privilege Litigation privilege protects documents and/or communications from disclosure if they are brought into existence for the sole or dominant purpose of actual or contemplated litigation. The court emphasised that litigation must be a real likelihood rather than a mere possibility before a claim for litigation privilege could succeed. It was held in the CITIC case, that the seizing of documents marked only the beginning of the investigation and could not be regarded as being a stage where litigation was in real prospect. Accordingly, the documents were not covered by litigation privilege even though some were marked as prepared in contemplation of litigation. Legal advice privilege Legal advice privilege applies to communications made in confidence between a client and a lawyer for the purpose of giving or obtaining legal advice, notwithstanding whether or not litigation is in contemplation. Legal advice, in this context, is not confined to advising on legal issues, but also includes advice as to what should prudently and sensibly be done in the relevant legal context. The court referred to the landmark case in the area, Three Rivers District Council v Bank of England (No 5) [2004] 3 WLR 1274 which set out the restrictive definition of client for the purpose of legal advice privilege. Three Rivers involved an inquiry into the collapse of BCCI in July 1991, where BCCI's internal lawyers were tasked with answering questions from the inquiry. It was 3

4 decided in Three Rivers that client was limited only to the in-house lawyers delegated with the task of instructing or communicating with the company s external lawyers, while all the other remaining employees in the company were regarded as third parties. Applying the law laid down in Three Rivers, the court ruled that the communications made with or by employees other than those employed in the plaintiff s in-house legal department would not be privileged, even if those communications were intended for submission to the legal advisors or prepared at the request of the plaintiff or its legal advisors. It should also be noted that in-house legal advisors, at times, carried out other managerial or administrative duties. In such circumstances, communications made by them in that capacity would not be protected by privilege. Categories of documents not subject to LPP The court ruled on the following categories of documents which could not be protected by LPP, documents: 1. unrelated to legal advice, containing a reference only to the fact that legal advice was being sought/obtained, or working drafts without input of legal advice; 2. relating to the gathering of information from other employees not belonging to the legal department; 3. relating to the gathering/receipt of information from, or provision to third parties external to the plaintiff; 4. including disclosure of legal advice circulated to employees outside the legal department, to third parties external to the plaintiff in circumstances which constituted a waiver of LPP, or documents generated as a result of or amended consequently upon the legal advice; or 5. not generated or created by the plaintiff, with the result that the plaintiff was not entitled to assert privilege. Comments This case succinctly summarises Hong Kong s approach on LPP. It can be seen from the judgment that the application of LPP is restrictive. In a medico-legal context, hospitals and medical clinics should take note that any correspondence, document or report produced for the purpose of investigations and/or inquiries may not be able to invoke litigation privilege. Before a claim for this class of privilege can succeed, litigation must exist or must be a real likelihood. As for legal advice privilege, protection from disclosure can easily be lost if privileged documents 4

5 are sent indiscriminately amongst employees within the hospital. In-house legal or, in their absence, the employee(s) assigned to investigate incidents should handle all the key documents between the hospital and external lawyers to try and preserve privilege as far as possible. It must be remembered that documents created between the hospital in-house lawyer and other employees may not benefit from privilege and so careful thought should be given to how hospital incidents are investigated. Feature Article Duty of care owed to mental patients Rabone v Pennine Care NHS Foundation Trust (2012) UKSC 2, (2012) MHLO 6 (Rabone) The recent Supreme Court judgment in Rabone ruled that the hospital owed an operational duty of care under Article 2 of the European Convention on Human Rights to a mental patient who committed suicide during her home release from a psychiatric unit. The ruling in Rabone may have significant impact in Hong Kong. Similar to Article 2 of the European Convention on Human Rights, the Hong Kong Basic Law and the Hong Kong Bill of Rights contain provisions for the protection of a right to life. Article 28 of the Basic Law guarantees a right to life by providing that arbitrary or unlawful deprivation of the life of any resident shall be prohibited, and Article 2 of the Hong Kong Bill of Rights declares that every human being has the inherent right to life and no one shall be arbitrarily deprived of his life. Following the judgment, Articles relating to right to life may have the effect of imposing an additional duty on hospitals to take appropriate measures to protect the lives of their mental patients, in particular those who pose a potential risk of suicide. As concluded in Rabone s case, the standard demanded of the operational duty is one of reasonableness. An obvious reasonable step the hospital in Rabone s case could have taken to prevent the suicide was to not allow the patient to go on leave. The question would be, what assessment took place before the decision was made to allow the release? For avoidance of a breach of its operational duty under the right to life Articles, it is advisable for hospitals in Hong Kong providing care for mental patients to conduct a detailed risk assessment of their mental patients before discharging them. For additional information on Rabone, please see our publication Duty of care: operational obligation to protect. 5

6 For more information on the Hong Kong healthcare practice, please contact: Julian Wallace Partner Christine Tsang Partner Kennedys 11/F Hong Kong Club Building 3A Chater Road, Central Hong Kong T F

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