"LIFE
CHOICES" AND LUMP SUM AWARDS
Future
uncertainties in loss of earnings claims are a familiar challenge to personal
injury lawyers. Most claims do not, however, involve impossible predictions and
are capable of assessment using a simple, or customised, multiplier/multiplicand
approach.
Cases
often not susceptible to such an approach include those in which a claimant
takes a “life choice” in the wake of an injury, which choice may have financial
repercussions for the rest of their career. Examples include: having children,
changing careers, re-training, or going to university with no particular vision
beyond graduation.
Two
types of lump sum award present themselves to the practitioner when a
multiplier/multiplicand approach looks to be out of the question.
The
first, and perhaps most obvious, is a Smith v Manchester award for handicap
on the open labour market.
The
second is the (slightly less) well-known type of award demonstrated by Blamire
v South Cumbria HA, in
which a lump-sum award was made in respect of future loss of earnings to a
young nurse who had been forced to give up nursing for a secretarial career and
had, by the date of trial, ceased to work following the birth of her first
child. It was impossible to predict with any clarity the pattern her life and
career would have taken had the accident not occurred. Steyn LJ observed:
“It
seems to me that the judge carefully assessed the prospects and the risks for
the plaintiff. He had well in mind that it was his duty to look at the matter
globally and to ask himself what was the present value of risk of future
financial loss. He had in mind that there was no perfect arithmetical way of
calculating compensation in such a case. Inevitably one is driven to a broad
brush approach. The law is concerned with practical affairs and as Lord Reid
said in British Transport Commission v Gourley [1956] AC 185 at page
212, very often one is driven to making a very rough estimate of the damages.”
On first
examination, the two types of award might – mistakenly – be thought to be materially
the same. Both are, after all, lump sum awards dealing with unpredictable
future loss of earnings claims.
But what
is the precise difference between them? And is it important?
In Ronan
v Sainsbury’s Supermarkets, the
Court of Appeal turned its mind to both questions. Both the statements of
principle and the rulings on the facts are highly instructive.
The
Claimant broke his femur in 1999, when aged 19 and working at one of the
Defendant’s stores. He recovered well until 2001, when complications set in and
further surgery was necessary. He was still using a crutch and suffered from
intrusive bowel symptoms until 2002. He became depressed and that condition
persisted into 2004. At the time of the accident, he had been doing a 1-year
foundation study at art college, with a view to doing a degree such as graphic
design. The course finished in 2000, and the Claimant elected – for reasons
unrelated to the accident – not to go on to university as originally planned,
but rather to work for Abbey National as a branch customer manager, starting in
August 2000.
The
Claimant returned to that job following surgery in August 2001, but was unable
to cope and took sick leave in November 2001. He did not return, due to his
ongoing symptoms, and instead enrolled at university to read sports
rehabilitation and injury prevention. After the first year of that degree he
modified it to sports science. By the time of trial in September 2005 he had
just completed the degree, and he had settled on a plan to teach physical
education, with a second string to his bow in special needs education and
possibly a third in performance art teaching. He was just about to start a job
as a learning support assistant and proposed to follow it with a 1-year PGCE course
to qualify as a teacher.
When dealing
with the claim for future loss of earnings, the judge had declared his
intention to make “some allowance in monetary terms for the upheaval in [the
Claimant’s] life, whether dealt with by Smith v Manchester or some
calculation as to future loss”. The judge went on to award £50,000,
declaring that he was “approaching it in an all round way in a Blamire sense.”
The
Court of Appeal was deeply uncomfortable with the vagueness of that approach.
Hughes LJ clarified matters thus:
“A Blamire award and a Smith v Manchester award may be combined but they are quite
distinct. The former is appropriate where the evidence shows that there is a
continuing loss of earnings, but there are too many uncertainties to adopt the
conventional multiplier and multiplicand approach to its quantification. The
latter is nothing to do with a continuing loss. It is an award for a contingent
future loss, in the event of the claimant losing his current job, where, as a
result of the accident, he would then be at a handicap on the labour market at
which he would not have been but for the accident… (T)he judgment lumps the two
together without any kind of analysis and indeed… appears to treat them as
alternatives.”
Turning
to the question of whether there was a future loss of earnings claim, the Court
noted that there was an ongoing shortfall between what the Claimant would have
earned if still at Abbey National and what he would in future earn as a
teacher. However, there was no suggestion that the Claimant was unfit to return
to work for Abbey National, and there was evidence that they would take him
back at any time. In fact, the Claimant had not returned because he had decided
to stick with the life choice he had made after going off sick in 2001. Hughes
LJ commented:
“A Blamire award is not a substitute for showing that there is a continuing loss of
earnings attributable to the accident. It is merely a means of quantifying it
when such a continuing loss is shown to exist. It is one thing to say that it
was reasonable and the result of the accident for the Claimant to requalify and
not to abandon his degree part way through. It is quite another to say that,
for the rest of his life, a man in his mid-twenties could properly say that the
fact that he was earning less than if he had chosen to go back to retail
banking, which was available to him, was something for which the Defendants had
to pay.”
Except
in one respect, the Court held, there was no continuing loss of earnings
attributable to the accident which fell to be approximated by the Blamire process or any other. The solitary respect in which a claim lay related to the
delay in promotion that would have been experienced by the Claimant as a result
of his accident-related sick leave had he stayed with Abbey National. Were he
ever to return, it would be a year to 18 months before he attained the position
of financial adviser. An award of £12,000 was made on that basis (based on a
shortfall of £9,500 per annum).
Turning
to handicap on the labour market, the Court reminded itself of the basis for a Smith
v Manchester award:
“This
involves assessing two risks. The first is that the Claimant will be out of
work in the future for any reason and the second is, if he should be, that
because of the accident he will be less able to obtain fresh employment or
employment at equivalent pay.”
Observing
that the risk of losing a job in teaching was not high, the Court set this against
the fact that the Claimant would have to declare a past episode of depression
in the event that he were to lose his job, and the fact that the Claimant was
only in his mid-twenties and had virtually his whole working life before him.
An award of £15,000 was made.
The Ronan decision provides a salutary reminder of the hard boundaries of this “soft”
area. The principled basis for a future loss of earnings claim must first be
carefully identified, even if it is impossible accurately to assess its value.
Once identified, the claim must then be categorised: is it a continuing or a contingent
loss? If the former, a Blamire award may be appropriate; if the latter a Smith v Manchester award must be considered. Both may, of course, be
present in a single case but, if so, they will be entirely distinct.
Needless
to say, observing the boundaries may not remove the difficulty of assessing the
amount of the relevant award. That will inevitably continue to be to a great
extent a matter of “feel”. It should, however, ensure that the judge is not
invited, as was the first instance judge in Ronan, to make an
unprincipled assessment, thereby provoking an expensive appeal.
NIAZI
FETTO
2 Temple Gardens
5th September 2006
