PI Brief Update

The Ogden Tables -v- Smith & Manchester: A Court of Appeal Decision on Loss of Earnings - Gordon Exall, Zenith Chambers

07/10/15. In Billett -v- Ministry of Defence [2015] EWCA Civ 773 the Court of Appeal overturned a decision that future loss of earnings should be determined by the “Ogden tables” approach and replaced it with the more traditional Smith -v- Manchester approach. Lord Justice Jackson sets out a detailed explanation of the “calculation” of a Smith award and  the “Ogden Tables” approach. The Court of Appeal  held that the “Ogden” approach should not be applied in the current case.

THE CASE

The claimant was a soldier who suffered a non-freezing cold injury to his feet. He subsequently left the army and found employment as a driver. Liability had been agreed at 75%. The trial judge awarded damages on the basis of the Ogden Tables A & B approach and awarded damages for future loss of earnings in the sum of £99,062.04.

THE APPEAL

The Court of Appeal upheld the award of damages for pain and suffering of £12,500.

JUDGMENT OF JACKSON L.J.

Part 6. Damages for loss of future earning capacity

(i) loss of future earnings and future earning capacity

49.Where at the date of trial the effect of the claimant’s injury continues to inhibit his ability to work, the court needs to compensate him for the difference between his predicted future earnings and his notional future earnings if he were uninjured. The court does this by calculating the annual loss (the multiplicand) and then applying an appropriate multiplier. The court derives the multiplier by subtracting the claimant’s actual age from his retirement age, then making reductions to take account of accelerated receipt and contingencies. The contingencies are all the hazards of life which might have prevented the claimant from working continuously from the date of trial to retirement age, even if he had not sustained the injury for which he is now being compensated.

50. When I started at the Bar, judges derived the appropriate multiplier on the basis of judicial experience and citation of authority. As I will explain in the next section, that approach has been replaced by a more scientific method. Judgment

51. In addition to the difference between the claimant’s current rate of earnings and his notional (uninjured) rate of earnings, there is a separate head of loss to consider. That is the claimant’s handicap on the labour market on those future occasions when he may be seeking employment. He may be unemployed for a longer period or he may be forced to accept a less attractive job offer than would otherwise be the case.

52. Even if the claimant’s current rate of earnings is the same as his pre-accident rate, he may still have a claim for loss of future earning capacity. The claimant is entitled to a lump sum as compensation for the losses which he is likely to suffer in the future by reason of increased difficulty in obtaining or retaining employment.

53. In Fairley v John Thompson (Design and Contracting Division) Ltd [1973] 2 Lloyd’s Rep 40 Lord Denning MR explained the difference between loss of earnings and loss of earning capacity in this way: “It is important to realize that there is a difference between an award for loss of earnings as distinct from compensation for loss of earning capacity. Compensation for loss of future earnings is awarded for real assessable loss proved by evidence. Compensation for diminution in earning capacity is awarded as part of general damages.”

54. In Smith v Manchester Corporation (1974) 17 KIR 1 the plaintiff developed a frozen shoulder as a result of an accident caused by her employer’s negligence. At the date of trial the plaintiff was undertaking work for the same employer and at the same rate of pay as before (£16.50 per week), so that she had no current loss of earnings. Her employer undertook to continue employing her as long as it could properly do so. The Court of Appeal increased the plaintiff’s award of damages so as to include £1,000 for future loss of earning capacity. The court explained that this sum was to compensate the plaintiff for the fact that, if she became unemployed, she would find it more difficult than uninjured persons to obtain employment. Both Edmund Davies LJ and Scarman LJ explained that they could not calculate this award using a multiplier and multiplicand. Instead they were looking at the matter in the round and making a general assessment. Stamp LJ agreed.

55. In Moeliker v A. Reyrolle & Co. Ltd [1977] 1WLR 132, Browne LJ said that a plaintiff’s loss of earning capacity arises where “as a result of his injury his chances in the future of getting in the labour market work (or work as well paid as before the accident) have been diminished by his injury”.

56. Browne LJ said that the first question to consider was whether there was a real or substantial risk that the claimant would lose his current job before the end of his working life. If the answer is yes, then Browne LJ gave the following guidance as to how the court should assess that head of damages: “Clearly no mathematical calculation is possible. Edmund Davies LJ and Scarman LJ said in Smith v Manchester Corporation, 17 K.I.R. 1, 6, 8, that the multiplier/multiplicand approach was impossible or “inappropriate,” but I do not think that they meant that the court should have no regard to the amount of earnings which a plaintiff may lose in the future, nor Judgment Approved by the court for handing down. Billett v MOD to the period during which he may lose them. What I think they meant was that the multiplier/multiplicand method cannot provide a complete answer to this problem because of the many uncertainties involved. The court must start somewhere, and I think the starting point should be the amount which a plaintiff is earning at the time of the trial and an estimate of the length of the rest of his working life. This stage of the assessment will not have been reached unless the court has already decided that there is a “substantial” or “real” risk that the plaintiff will lose his present job at some time before the end of his working life, but it will now be necessary to go on and consider–(a) how great this risk is; and (b) when it may materialise–remembering that he may lose a job and be thrown on the labour market more than once (for example, if he takes a job then finds he cannot manage it because of his disabilities). The next stage is to consider how far he would be handicapped by his disability if he was thrown on the labour market–that is, what would be his chances of getting a job, and an equally well paid job. Again, all sorts of variable factors will, or may, be relevant in particular cases–for example, a plaintiff’s age; his skills; the nature of his disability; whether he is only capable of one type of work, or whether he is, or could become, capable of others; whether he is tied to working in one particular area; the general employment situation in his trade or his area, or both. The court will have to make the usual discounts for the immediate receipt of a lump sum and for the general chances of life.”

57. As a matter of convention a claim for damages on this basis is commonly referred to as a Smith v Manchester claim. In practice such awards usually range between six months’ and two years’ earnings: see Court Awards of Damages for Loss of Future Earnings: an Empirical Study and an Alternative Method of Calculation by R Lewis and others, [2002] Journal of Law and Society, Vol.29, pages 406-435 at 414. (ii) The Ogden Tables

58. In the 1980s Sir Michael Ogden QC chaired a working party which developed the well known Ogden Tables. These tables enable the court to derive an appropriate multiplier, which takes into account the risk of certain contingencies and the benefit of accelerated receipt.

59. The Ogden Tables received the imprimatur of approval by the House of Lords in Wells v Wells [1999] 1 AC 345. Lord Lloyd observed at 379 that these tables should be regarded as a starting point; a judge should be slow to depart from them either on impressionistic grounds or by reference to the multipliers used in comparable cases.

60. Section 10 of the Civil Evidence Act 1995 provides that the Ogden Tables are admissible in evidence in personal injury litigation for the purpose of assessing damages for future pecuniary loss. However, contrary to paragraphs 43 to 44 of the judge’s judgment, that provision has never been bought into force. Judgment Approved by the court for handing down.

61. The main Ogden Tables fall into separate parts. The first part sets out whole-life multipliers. Judges and lawyers use these for calculating future care costs. The second part sets out multipliers for loss of earnings. These tables show the multipliers appropriate to different retirement ages. In each table a series of different multipliers are set out, to show the effect of taking different discount rates. For some years the discount rate fixed by the Lord Chancellor pursuant to section 1 of the Damages Act 1996 has been 2.5%.

62. The original Ogden Tables took into account two factors. The first factor was the benefit of early receipt. The claimant was receiving a lump sum (which he could invest if he wished) as compensation for losses which he would suffer in the future. The second factor was mortality. That was the risk that the claimant might die prematurely.

63. Later editions of the Ogden Tables have provided ways of taking into account risks and contingencies other than mortality.

64. In due course Sir Michael Ogden retired. He died in 2003. The working party which he had established remained in being. It continued to be known as the Ogden Working Party. Its membership changed over time, but it always included actuaries, lawyers, accountants and others with relevant expertise.

65. In the sixth edition of the Ogden Tables (2007) and the seventh edition (2011) the working party introduced four new tables known as Tables A, B, C and D (“Tables AD”). The purpose of these tables is to take into account contingencies other than mortality, which may reduce a claim for loss of earnings.

66. Tables A-D set out a series of reduction factors (“RFs”) which range between .93 at the highest and .06 at the lowest. The RF indicates the amount by which a multiplier for loss of earnings (derived from the main tables) should be reduced in order to take account of contingences other than mortality.

67. As Mr Poole explained during his submissions, the object of Tables A-D is to make the results of relevant research available for use by the courts. Amongst other things, Tables A-D attach numerical values to the general considerations which, according to Moeliker, the courts should consider when assessing loss of future earning capacity. 68. The operation of Tables A-D may be illustrated by taking examples at the two extremes. According to Table A, in the case of a fit man in employment aged 25-29 with high educational qualifications the RF is .93. So his multiplier for loss of future earnings is only reduced by 7% in order to allow for contingencies other than mortality. According to Tables B and D, in the case of an unemployed disabled person, aged 54, with low educational qualifications, his/her RF is .06. So the multiplier for loss of future earnings of such a person is reduced by 94% in order to allow for contingencies other than mortality.

69. The current members of the Ogden Working Party in their Explanatory Notes identify the research upon which Tables A-D are based. Some of the literature about that research is included in the authorities bundle. Judgment Approved by the court for handing down.

70. Neither party has suggested that Tables A-D are unreliable. Nevertheless, for the avoidance of doubt, I should place on record that there has been no argument in the present case as to the adequacy of the research base or as to the correctness of Tables A-D. Therefore I am in no position to endorse Tables A-D (in the same way that other courts have endorsed the main Ogden Tables). Nor am I in any position to criticise Tables A-D. I do not criticise them.

71. Argument in the present appeal has proceeded on the assumption that Ogden Tables A-D are properly derived from a sufficiently broad statistical base. I am content to proceed on that assumption.

72. The principal issue in this appeal is whether Tables A-D are applicable to Mr Billett and, if so, whether the judge applied them correctly.

73. The variables which Tables A-D take into account are the following: i) The claimant’s age at the date of trial; ii) Whether the claimant is male or female; iii) Whether the claimant is employed or unemployed at the date of trial; iv) The claimant’s educational attainment; v) Whether or not the claimant is disabled.

74. Factors (iv) and (v) involve considering broad bands of educational attainment and broad bands of disability. Therefore the user may need to adjust the RF in order to reflect where a particular individual falls within those bands.

75. The working party explains the need for adjustment of the RF in paragraph 32 of the Explanatory Notes as follows: “The suggestions which follow are intended as a ‘ready reckoner’ which provides an initial adjustment to the multipliers according to the employment status, disability status and educational attainment of the claimant when calculating awards for loss of earnings and for any mitigation of this loss in respect of potential future post-injury earnings. Such a ready reckoner cannot take into account all circumstances and it may be appropriate to argue for higher or lower adjustments in particular cases. In particular, it can be difficult to place a value on the possible mitigating income when considering the potential range of disabilities and their effect on post work capability, even within the interpretation of disability set out in paragraph 35. However, the methodology does offer a framework for consideration of a range of possible figures with the maximum being effectively provided by the post injury multiplier assuming the claimant was not disabled and the minimum being the case where there is no realistic prospect of post injury employment”. Judgment Approved by the court for handing down.

 76. For the purposes of Tables A-D the working party define disability as follows in paragraph 35 of the Explanatory Notes: “Disabled: A person is classified as being disabled if all three of the following conditions in relation to the ill-health or disability are met: i) has an illness or a disability which has or is expected to last for over a year or is a progressive illness ii) satisfies the Equality Act 2010 definition that the impact of the disability substantially limits the person’s ability to carry out normal day-to-day activities iii) their condition affects either the kind or the amount of paid work they can do Not disabled: All others Normal day-to-day activities are those which are carried out by most people on a daily basis, and we are interested in disabilities/health problems which have a substantial adverse effect on respondent’s ability to carry out these activities. There are several ways in which a disability or health problem may affect the respondent’s day to day activities: Mobility – for example, unable to travel short journeys as a passenger in a car, unable to walk other that at a slow pace or with jerky movements, difficulty negotiating stairs, unable to use one or more forms of public transport, unable to go out of doors unaccompanied. Manual Dexterity – for example, loss of functioning in one or both hands, inability to use a knife and fork at the same time, or difficulty in pressing buttons on a keyboard. Physical co-ordination – for example, the inability to feed or dress oneself; or to pour liquid from one vessel to another except with unusual slowness or concentration. Problems with bowel/bladder control – for example, frequent or regular loss of control of the bladder or bowel. Occasional bedwetting is not considered a disability Ability to list, carry or otherwise move everyday objects (for example, books, kettles, light furniture) – for example, Judgment Approved by the court for handing down. inability to pick up a weight with one hand but not the other, or to carry a tray steadily. Speech – for example, unable to communicate (clearly) orally with others, taking significantly longer to say things. A minor stutter, difficulty in speaking in front of an audience, inability to speak a foreign language would not be considered impairments. Hearing – for example, not being able to hear without the use of hearing aid, the inability to understand speech under normal conditions or over the telephone. Eyesight – for example, while wearing spectacles or contact lenses – being unable to pass the standard driving eyesight test, total inability to distinguish colours (excluding ordinary red/green colour blindness), or inability to read newsprint. Memory or ability to concentrate, learn or understand – for example, intermittent loss of consciousness or confused behaviour, inability to remember names of family or friends, unable to write a cheque without assistance, or an inability to follow a recipe. Perception of risk of physical danger – for example, reckless behaviour putting oneself or others at risk, mobility to cross the road safely. This excludes (significant) fear of heights or underestimating risk of dangerous hobbies.”

77. The reference in that passage to “the Equality Act 2010 definition” is a reference to the provisions of the Equality Act which I have set out in Part 1 above.

78. In paragraph 45 of the Explanatory Notes the working party states that Tables A-D provide one way of assessing damages for the claimant’s future handicap on the labour market. They add that “there may still be cases where a conventional Smith v Manchester award is appropriate”.

(iii) The present case

79. As noted in Part 3 above, the judge held that the claimant was “disabled” as that term is defined in paragraph 35 of the Explanatory Notes to the Ogden Tables. The judge rejected the submission that he should make a general assessment of damages for loss of future earning capacity in accordance with the Smith v Manchester guidance. Instead he used the Ogden Tables as a tool for calculating a precise award of damages under this head. The judge’s actual calculation was as follows:

i) At the date of trial the claimant is a man aged 25-29. He is in the middle range of educational attainment. He is employed. Therefore if uninjured his RF derived from Table A would be .

ii) Because he is disabled, his RF derived from Table B is .54. That should be adjusted to .73 because the claimant’s disability is minor.

iii) The claimant’s retirement age will be 68. Therefore his multiplier for loss of future earnings derived from the main Ogden Tables is 24.29. That figure only allows for accelerated receipt and mortality risk. An appropriate reduction factor must be applied to allow for other contingencies.

iv) Absent NFCI the claimant’s multiplier would be 24.29 x .92 = 22.35. Because of the claimant’s NFCI his multiplier is 24.29 x .73 = 17.73. Therefore the claimant’s multiplier is reduced by 4.62 (i.e. 22.35 – 17.73) as a result of his NFCI. v) 4.62 x £21,442 (the claimant’s current earnings) = £99,062.04. Therefore that is the proper quantification of the claimant’s loss of earning capacity.

80. Mr Browne for the defendant mounts three attacks on the judge’s assessment of damages under this head.

i) The claimant is not “disabled” within the definition set out in the Ogden Tables.

ii) Even if the claimant falls within the definition of “disabled”, Smith v Manchester provides a better method of assessing damages for loss of future earning capacity than the Ogden Tables in the particular circumstances of this case.

iii) Even if the judge was correct to use the Ogden Tables, he erred by taking too low a reduction factor.

81. I must first address the question whether the claimant was “disabled” within the definition in paragraph 35 of the Explanatory Notes to the Ogden Tables. The judge held that he was disabled and Mr Browne attacks that conclusion.

82. Mr Browne points out that before the claimant left the army he had been upgraded to MFD, which means Medically Fully Deployable. That is true, but Major General Craig in his agreed medical report is critical of the INM’s assessment of the claimant in June 2010 when the claimant was discharged from the clinic in respect of NFCI.

83. Referring to paragraph 35 of the Explanatory Notes, Mr Browne concedes that requirements (i) and (iii) are satisfied. The claimant’s NFCI has already lasted for more than a year. Also the claimant’s NFCI does affect the kind of paid work that he can do. This is because the claimant cannot spend long periods outside in cold weather.

84. Mr Browne focuses his attack on requirement (ii). He submits that the claimant’s NFCI does not substantially limit his ability to carry out normal day to day activities, within the meaning of the Equality Act.

85. I have looked at the Guidance Notes issued by the Secretary of State pursuant to section 6 (5) of the Act. The examples of disability and non-disability given in those notes are of limited assistance, because they tend towards the extreme on both sides. Judgment Approved by the court for handing down.

86. The issue of what constitutes a “substantial adverse effect” on a person’s “ability to carry out normal day to day activities” within the meaning of section 6 arose in Aderemi v London and South Eastern Railway Ltd [2013] ICR 591. Langstaff J, delivering the judgment of the appeal tribunal, stated at paragraph 14:

“Because the effect is adverse, the focus of a tribunal must necessarily be upon that which a claimant maintains he cannot do as a result of his physical or mental impairment. Once he has established that there is an effect, that it is adverse, that it is an effect upon his ability, that is to carry out normal day-to-day activities, a tribunal has then to assess whether that is or is not substantial. Here, however, it has to bear in mind the definitions of substantial which is contained in section 212(1) of the Act. It means more than minor or trivial. In other words, the Act itself does not create a spectrum running smoothly from those matters which are clearly of substantial effect to those matters which are clearly trivial but provides for a bifurcation: unless a matter can be classified as within the heading “trivial” or “insubstantial”, it must be treated as substantial. There is therefore little room for any form of sliding scale between one and the other.”

87. That is an extremely helpful statement of how the test in section 6 (1) (b) should be applied. I propose to adopt the approach which Langstaff J set out in that paragraph.

88. Mr Browne points to all the activities which the claimant can still do. He can go fishing all the year round, provided the weather is good. He can go clay pigeon shooting all the year round, provided the weather is good. The claimant has no difficulty working full time as a lorry driver.

89. Those statements are all true. But, as Mr Poole points out, those submissions fall into the trap which Langstaff J identified in Aderemi. They are directed to what the claimant can do. The focus of the inquiry should be upon what he cannot do as a result of the injury to his feet.

90. The judge has accepted the claimant’s evidence as to the things which he cannot do. These include DIY and gardening in cold weather; playing rugby and swimming regularly; playing with his children outside when it is cold.

91. The judge concluded that the claimant’s NFCI had a substantial adverse effect on his ability to carry out normal activities. In view of the factual evidence which the claimant and Ms Knight gave and which the judge accepted, he was entitled to reach that conclusion.

92. The judge’s overall conclusion on the disability issue at paragraph 59 of the judgment was:

“His condition qualifies as a disability…, but only just”. The judge was entitled to reach that conclusion. I therefore reject Mr Browne’s first argument.

93. I turn now to Mr Browne’s second argument. This is that the judge should have adopted the Smith v Manchester approach to assessing damages for loss of future earning capacity, rather than doing a mathematical calculation based upon the Ogden Tables.

94. Here I am bound to say that I see more force in the appellant’s arguments. Some of the bands used in Tables A-D are, of necessity, extremely wide. Disability, as defined in paragraph 35 of the Explanatory Notes, covers a very broad spectrum.In their article Ogden Reduction Factor adjustments since Conner v Bradman: Part 1 [2013] Journal of Personal Injury Law, pages 219-230, the authors point out that the Health and Disability Survey 1996-7 measured severity of disablement on a scale of 1 to 10, where 10 denotes the greatest severity. 42.9% of those classified as disabled fall within categories 1 to 3. 43.9% of those disabled fall within categories 4 to 7. 13.2 % of the disabled population fall within categories 8 to 10.

95. There is no evidence as to how the claimant would be classified within that scale. The natural inference, however, from the judge’s findings of fact is that the claimant would fall towards the bottom of category 1.

96. If one applied Ogden Tables A and B in the present case without any adjustment, the result would be an award of about £200,000 for future loss of earning capacity. That is hopelessly unrealistic for the claimant. He is pursuing his chosen career as lorry driver, with virtually no hindrance from his disability. He secured employment with Framptons within one week of leaving the army. He has strong qualifications for lorry driving and an excellent CV. Furthermore the judge held that the claimant was “a hard working and capable man, who is likely to be sought after by employers” (judgment paragraph 38 (a)). In order to bring a sense of reality to the present exercise, it is necessary to make a swingeing increase to the RF shown in Table B (.54). But what should that increase be? Determining an appropriate adjustment to the RF is a matter of broad judgment. In the present case that exercise is no more scientific than the broad brush judgment which the court makes when carrying out a Smith v Manchester assessment.

97. Mr Poole draws attention to a number of articles which argue the case for using Tables A-D, suitably adjusted, in preference to making a Smith v Manchester award. See Ogden Reduction Factor adjustments since Conner v Bradman: Part 1 by Latimer-Sayer and Wass [2012] Journal of Personal Injury Law, pages 219-230 and Ask the expert: William Latimer-Sawyer asks Victoria Wass some questions about the practical application of the Ogden Reduction Factors by Latimer-Sawyer and Wass [2015] Journal of Personal Injury Law, pages 36-45.

98. I accept that in many instances the use of Tables A-D will be a valuable aid to valuing the claimant’s loss of earning capacity. But the present is not such a case. I reach this conclusion for three reasons:

i) Disability covers a broad spectrum. The claimant is at the outer fringe of that spectrum. Judgment Approved by the court for handing down.

ii) The claimant’s disability affects his ability to pursue his chosen career much less than it affects his activities outside work.

iii) Because of (i) and (ii) in this case there is no rational basis for determining how the reduction factor should be adjusted.

99. The Ogden Working Party acknowledge in their Explanatory Notes that in some instances the Smith v Manchester approach remains appropriate. In my view this is a classic example of such a case. The best that the court can do is to make a broad assessment of the present value of the claimant’s likely future loss as a result of handicap on the labour market, following the guidance given in Smith v Manchester and Moeliker.

100. Reviewing all the factors which I have previously set out, I conclude that an appropriate award on that basis would be two years’ earnings. I would be prepared to round that up to £45,000. In my view £45,000 would be just and fair compensation for the claimant’s loss of future earning capacity.

101. In those circumstances, the appellant’s third line of attack on the judge’s decision does not arise. If I am wrong, however, on the previous issue, I would certainly accept that an RF of .73 is too low.

102. The claimant only just scrapes into Table B. That is the effect of the judge’s finding in paragraph 59 of his judgment. Therefore I do not think that the judge was correct to take an RF half way between that stated in Table A (.92) and that stated in Table B (.54). The judge should have taken an RF much closer to that in Table A. The result would be to produce an award in the region of two years’ loss of earnings. That is the same conclusion as I have reached by the Smith v Manchester route.

103. Let me now draw the threads together. For the reasons stated above, I would reduce the judge’s award of damages for future loss of earning capacity to £45,000.

104. Finally, I note that Dr Wass (a member of the Ogden Working Party and a co-author of all the articles referred to above) is critical of the judge’s decision in the present case. Dr Wass argues that Mr Billett was not “disabled”, so he does not fall within Table B at all. See Billett v MOD and the meaning of disability in the Ogden Tables by Victoria Wass [2015] Journal of Personal Injury Law, 37. Dr Wass’ article does not form any part of my reasoning. Nevertheless both she and I, by different routes, conclude that a direct application of the Ogden Tables is not appropriate for assessing loss of future earning capacity in the present case.

THE RESULT

107. In my view the judge’s award of £12,500 as general damages for pain, suffering and loss of amenity should stand. In relation to loss of future earning capacity, I believe that the judge’s assessment of £99,062.04 based upon the Ogden Tables was incorrect. In the particular circumstances of this case the court cannot do better than carry out a general assessment in accordance with the guidance given in Smith v Manchester Corporation (1974) 17 KIR 1 and Moeliker v A. Reyrolle & Co Ltd [1977] 1 WLR 132. On that basis I would assess general damages for loss of future earning capacity at £45,000.

Gordon Exall
Zenith Chambers

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