The payment of moral damages could have a detrimental effect on the economy and needs to be handled with great sensitivity, according to Paul Cachia, the head of the commission set up to recommend changes to the way in which compensation is awarded by the courts.

“In Malta at present, moral damages are only awarded in exceptional situations – such as when there is a breach of human rights. There were two judgments recently which awarded moral damages but they are still subject to appeal,” Dr Cachia said.

“This is a very thorny issue. Should you compensate for moral damages at all? How do you quantify pain and suffering? And what about the effect of moral damages on the economy? At the end of the day, policyholders will end up paying for any compensation awards through their motor insurance premium, for example. It is not in the interest of Malta to go to the extremes seen in other countries.”

The commission, which was set up in April, is taking as a starting point the Bill presented by the previous government, which had some very controversial aspects as well as some very positive ones.

Dr Cachia intends to do much more than just present a Bill. As an academic, he is preparing a comprehensive report to accompany the commission’s suggestions, outlining international practice and case law, among other things.

The government opened up a consultation process to run in parallel with the commission’s work. Dr Cachia said one thing that clearly emerged was that the amount of the compensation was not nearly as important as the time it took to actually get it – often years and years. He gave two examples: a claimant who ended up in a wheelchair and a mother with three children whose husband was killed in a traffic accident.

“The man was self-employed and lost his income. He had to use up his savings for ramps and stairlifts inside his house. After some time, the bank started pressing him to pay his mortgage and he may lose his house. By the time he gets compensation, he will be completely ruined.

“The woman’s children are in a private school. What is the use of getting compensation once they have grown up?”

Dr Cachia believes that there are solutions. One of these is the concept of provisional damages, which would only be awarded in extreme cases, but where a minimal amount is given to when there is prima facie liability.

The commission wants other ways to reduce delays.

“Should there be an obligation on an insurer to reply to your claim within a specified period of time? And if they do not, should there be consequences?” he said.

There are also many pleas filed by insurers that he thinks are time-wasting tactics.

“The insurer tries to escape liability because the driver was drunk, or because a car was leased against the conditions applied to the policy, or because there was a transfer of interest when a car is sold.

You have to balance discretion and the uncertainty that this causes with the need to ensure justice. You cannot impose hard and fast rules

“But both Maltese law and EU law say that these kinds of pleas cannot be raised against the victim. It should be up to the insurer to sue the insured person for breach of policy,” he said.

The amount of compensation is currently calculated on the basis on a formula created in the 1960s which has since then been repeatedly refined and expanded. However, there is always an element of judicial discretion.

“The loss of three fingers would be more serious for a pianist than for a teacher, for example,” he said.

“You have to consider the individual circumstances of the claimant as otherwise there could be injustice.”

The problem is that discretion results in uncertainty for the insurance company trying to calculate its risks and makes it much more unlikely for out-of-court settlements to be reached.

“You have to balance discretion and the uncertainty that this causes with the need to ensure justice. You cannot impose hard and fast rules,” he shrugged.

The issue is complex and relies on informed guesses. For example, how do you quantify future medical expenses?

“What if you are awarded compensation for 10 years of nursing care but die after five? Could you refund the balance? No!” he explained.

“We must never forget that the justice needs to be done not only with the claimant but also with the defendant. And we also have to look at the broader impact on the economy.”

The commission is due to complete its report by the end of the year. The other members are Charmaine Cristiano and Frederick Zammit Maempel.