England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE QBENF 95/1117/C

COURT OF APPEAL (CIVIL DIVISION) QBENF 96/0081/C

ON APPEAL FROM THE HIGH COURT QBENF 96/0236/C

Royal Courts of Justice

Wednesday, 23rd October 1996

B e f o r e:

LORD JUSTICE HIRST

LORD JUSTICE AULD

LORD JUSTICE THORPE

- - - - - - - -

CASE 1

MARGARET THELMA WELLS

(Suing by her daughter and Next Friend SUSAN SMITH )

-v-

DEREK SYDNEY WELLS

and

CASE 2

JAMES OLIVER THOMAS

-v-

BRIGHTON HEALTH AUTHORITY

and

CASE 3

KELVIN PAGE

- v-

SHEERNESS STEEL COMPANY LIMITED

- - - - - - - -

(Handed Down Transcript of Smith Bernal Reporting Limited

180 Fleet, London, EC4A 2HD.

Telephone No: 0171-831 3183/0171-404 1400

Fax No: 0171-404 1424

Official Shorthand Writers to the Court.)

- - - - - - - -

MR. J. LEIGHTON-WILLIAMS Q.C. and MR. R. METHUEN (instructed by

ITT London & Edinburgh Insurance, Legal Department 4, Worthing, Sussex) appeared on behalf of the Appellant/Defendants.

MR. C. PURCHAS Q.C. and MR. G. GADNEY (instructed by Messrs Waterson Hicks, London, EC3M 8AJ) appeared on behalf of the Respondent/Plaintiff.

MR. K. COONAN Q.C. and MISS C. LAMBERT (instructed by Messrs

Hempsons, London, WC2E 8NH) appeared on behalf of the Appellant/Defendant.

MR. R. OWEN Q.C. and MR. P. HAVERS Q.C. (instructed by Messrs

Compton Carr, London, EC1N 2JT) appeared on behalf of the Respondent/Plaintiff.

MR. J. LEIGHTON-WILLIAMS Q.C. and MR. R. METHUEN (instructed by Messrs Lawrence Graham, London, WC2R 1JN) appeared on behalf of the Appellant/Defendant.

MR. C. PURCHAS Q.C. and MR. M. KELLY (instructed by Messrs Russell Jones & Walker, London, WC1X 8DX) appeared on behalf of the Respondent/Plaintiff.

J U D G M E N T

(As approved by the Court )

Crown Copyright

INDEX

INTRODUCTION Pages 2-5

PART I The General Point of Principle Pages 6-48

PART II The Individual Cases:

WELLS v WELLS Pages 49-78

THOMAS v BRIGHTON HEALTH AUTH Pages 78-100

PAGE v SHEERNESS STEEL Pages 100-112

APPENDIX Pages 113-125

Lord Justice Hirst:

INTRODUCTION

These three appeals raise matters of considerable importance concerning the assessment of damages for anticipated future losses and expenses in personal injuries litigation. This is the judgment of the court, to which we have each contributed.

All three cases are tragic ones, and nothing we say in this judgment in any way diminishes their inherent gravity.

Mrs Thelma Wells, then aged nearly 58, sustained very grievous head injuries in a road accident in which her husband, the appellant, was the driver, and for which he admitted liability. She was awarded approximately £1.619m by Judge Wilcox sitting as a Deputy Judge of the High Court on 13th June 1995.

James Thomas was born suffering from cerebral palsy in the Royal Sussex County Hospital, which is under the aegis of the Brighton Health Authority, who admitted liability for maladministration of a drug to his mother, during labour. He is now aged 7 and was awarded approximately £1.285m by Collins J on 7th November 1995.

Mr Kelvin Page, then aged 28, suffered brain damage as a result of an accident at work when in the employment of Sheerness Steel plc, who admitted liability. He was awarded approximately £906,000 damages by Dyson J on 4th December 1995.

The respective appellants appeal against the quantum of damages awarded. The three cases are reported successively starting at 1996 PIQR page Q26.

Each appeal raises detailed questions in relation to individual items of assessment, with which we will deal in Part II of this judgment, where we set out in greater detail the individual circumstances of each case. There are also a number of similar detailed issues raised by respondents' notices on behalf of each respondent.

However, over-arching all three cases is a general point of principle as to the appropriate multiplier to be applied to the annual amount assessed for future losses and expenses (the multiplicand). In each case the judge, having heard expert evidence from both sides, departed from the well-established conventional approach of awarding a multiplier consistent with a return of 4 - 5% per annum on the capital sum, and fixed the multiplier by reference to the return on Index Linked Government Securities (ILGS) at 3% per annum, with the result that the multiplier was very significantly higher, and the damages greatly increased.

During the same period, the same point arose in a number of similar cases, but the judges declined to apply the ILGS multiplier and adhered to the conventional guidelines. As a result the law on this point has been thrown into the melting pot, with the very severe consequence that there is presently a stalemate in major personal injuries claims due to uncertainty as to the appropriate multiplier.

The adoption of the ILGS yardstick followed the recommendations of the Ogden Working Party (2nd Edition November 1993) and of the Law Commission Report No 224 (September 1994), to both of which we refer in detail below.

The Damages Act 1996 received the Royal Assent on 24th July 1996. In the debates during the passage of the Bill through the House of Lords, the Lord Chancellor stated that he awaits the outcome of this appeal, both in relation to the exercise of his powers under section 1 of the Act, and also in connection with the implementation of section 10 of the Civil Evidence Act 1995, which is not yet in force.

Section 1 of the 1996 Act provides:

"1(1) In determining the return to be expected from the investment of a sum awarded as damages for future pecuniary loss in an action for personal injury the court shall, subject to and in accordance with rules of court made for the purposes of this section, take into account such rate of return (if any) as may from time to time be prescribed by an order made by the Lord Chancellor.

(2) Subsection (1) above shall not however prevent the court taking a different rate of return into account if any party to the proceedings shows that it is more appropriate in the case in question.

(3) An order under subsection (1) above may prescribe different rates of return for different classes of case.

(4) Before making an order under subsection (1) above the Lord Chancellor shall consult the Government Actuary and the Treasury; and any order under that subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

(5) In the application of this section to Scotland for references to the Lord Chancellor there shall be substituted references to the Secretary of State."

Section 10 of the 1995 Act provides:

"10 Admissibility and proof of Ogden Tables

(1) The actuarial tables (together with explanatory notes) for use in personal injury and fatal accident cases issued from time to time by the Government Actuary's Department are admissible in evidence for the purpose of assessing, in an action for personal injury, the sum to be awarded as general damages for future pecuniary loss.

(2) They may be proved by the production of a copy published by Her Majesty's Stationery Office.

(3) For the purposes of this section -

(a) 'personal injury' includes any disease and any impairment of a person's physical or mental condition; and

(b) 'action for personal injury' includes an action brought by virtue of the Law Reform (Miscellaneous Provisions) Act 1934 or the Fatal Accidents Act 1976."

PART I - THE GENERAL POINT OF PRINCIPLE

The Present Guidelines - The Conventional Approach

The basic rule, which has stood for over a century, and which is accepted on all sides in the present appeals, is that the damages are to be assessed on the basis that the fundamental purpose of an award is to achieve as nearly as possible full compensation to the plaintiff for the injuries sustained. (Livingstone v Rawyards Coal Co [1880] 5 AC 25 at 39 per Blackburn J, quoted with approval by Lord Scarman in Lim Poh Choo v Camden Health Authority [1980] AC 174 at 187, and also in Pickett v British Rail Engineering [1978] 3 WLR 955 at 979.)

Later in his judgment in the Lim case, at page 198, Lord Scarman also stated that the court must be vigilant to avoid "not only duplication of damages but the award of a surplus exceeding true compensation for the plaintiff's deprivation or loss". (See also per Lord Bridge in Hodgson v Trapp [1989] 1 AC 807 at 819.)

In Hodgson's case at page 826 Lord Oliver of Aylmerton, with whom the other members of the Appellate Committee agreed, stated as follows:

"The underlying principle is, of course, that damages are compensatory. They are not designed to put the respondent, or his estate in the event of his death, in a better financial position than that in which he would otherwise have been if the accident had not occurred. At the same time, the principle of making a once-for-all award necessarily involves an assessment both of the probable duration and extent of the financial disadvantages resulting from the accident which the respondent will suffer in the future and of the present advantage which will accrue to him from payment in the present of a capital sum which he would not otherwise have and which represents his future income loss. In the making of that assessment, account has also to be taken of a number of unpredictable contingencies and in particular that the life expectancy from which the calculation starts may be falsified in the event by supervening illness or accident entirely unconnected with the event for which compensation is being awarded. Such an assessment cannot, therefore, by its nature be a precise science. The presence of so many imponderable factors necessarily renders the process a complex and imprecise one and one which is incapable of producing anything better than an approximate result. Essentially what the court has to do is to calculate as best it can the sum of money which will on the one hand be adequate, by its capital and income, to provide annually for the injured person a sum equal to his estimated annual loss over the whole of the period during which that loss is likely to continue, but which, on the other hand, will not, at the end of that period, leave him in a better financial position than he would have been apart from the accident. Hence the conventional approach is to assess the amount notionally required to be laid out in the purchase of an annuity which will provide the annual amount needed for the whole period of loss."

Later in the same speech he said at page 833:

"There are, I think, four considerations which have to be borne in mind at the outset. First and foremost is the fact that the exercise upon which the court has to embark is one which is inherently unscientific and in which expert evidence can be of only the most limited assistance. Average life expectations can be actuarially ascertained, but to assess the probabilities of future political, economic and fiscal policies requires not the services of an actuary or an accountant but those of a prophet. Secondly, the question is not whether the impact of taxation is a factor legitimately to be taken into account at all but to what extent, if at all, it is right to treat it as a separate, individual and independent consideration which justifies the making of additional provision conditioned not by the loss sustained but by the way in which the provision made for that loss is assumed to be dealt with by the recipient. Thirdly, what the court is concerned with is the adequacy of a fund of damages specifically designed to meet the loss of future earnings and the cost of future care. It cannot, I think, be right in assessing the adequacy of that fund to take in to account what the respondent may choose to do with other resources at his command, including any sums which he may receive by way of compensation for other loss or injury. If he chooses, for instance, to retain other sums awarded to him for, for example, loss of amenity or pain and suffering, and to supplement his income by investing them so as, incidentally, to put himself into a higher tax bracket, that cannot, in my judgment, constitute a legitimate ground for increasing the compensatory fund for loss of future earnings and future care. That fund must, in my judgment, be treated as a fund on its own for the purposes of assessing its adequacy. Fourthly, it must not be assumed that there is only one way in which the respondent can deal with the award and there has, I think, to be borne in mind Lord Diplock's analysis of the underlying basis of the method by which the multiplier is selected. In practice, of course, the probability is that the respondent who receives a high award will treat the fund as a capital fund to be retained and invested in the most advantageous way. But the award has been calculated by reference to the cost of purchasing an appropriate annuity; and since the fund is at his complete disposal it is open to the respondent actually so to apply it either in whole or in part. If that were done, the capital proportion of each annual payment, calculated by dividing the cost of the annuity by the life expectation of the annuitant at the date of purchase, would be free from tax and the balance alone would be taxable. It is, I suppose, conceivable that that proportion could attract tax at the higher rate but it would require a very large annuity before a significant additional fiscal burden was attracted.

.... In my opinion, the incidence of taxation in the future should ordinarily be assumed to be satisfactorily taken care of in the conventional assumption of an interest rate applicable to a stable currency and the selection of multiplier appropriate to that rate.

Both in Cookson v Knowles [1979] AC 556 and in

Lim's case [1980] AC 174 this House was prepared to envisage that there might be very exceptional cases where it could be positively shown by evidence that justice required it, in which special allowance might have to be made for inflation and, inferentially, for tax. Such cases are not, I suppose, impossible, although for my part I do not find it easy to envisage circumstances in which evidence could satisfactorily establish that which is inherently uncertain."

In order to meet these criteria the court had over the years developed the conventional approach described by Lord Diplock in Cookson v Knowles [1979] AC 556 at 567 and 571 (in the comparable fatal accidents field) as follows:

"When the first Fatal Accidents Act was passed in 1846 its purpose was to put the dependants of the deceased, who had been the bread-winner of the family, in the same position financially as if he had lived his natural span of life. In times of steady money values, wages levels and interest rates this could be achieved in the case of the ordinary working man by awarding to his dependants the capital sum required to purchase an annuity of an amount equal to the annual value of the benefits with which he had provided them while he lived, and for such period as it could reasonably be estimated they would have continued to enjoy them but for his premature death. Although this does not represent the way in which it is calculated such a capital sum may be expressed as the product of multiplying an annual sum which represents the 'dependency' by a number of years' purchase. This latter figure is less than the number of years which represents the period for which it is estimated that the dependants would have continued to enjoy the benefit of the dependency, since the capital sum will not be exhausted until the end of that period and in the meantime so much of it as is not yet exhausted in each year will earn interest from which the dependency for that year could in part be met.

The number of years' purchase to be used in order to calculate the capital value of an annuity for a given period of years thus depends upon the rate of interest which it is assumed that money would earn, during that period. The higher the rate of interest, the lower the number of years' purchase. Thus to give an illustration that is relevant to the instant case, the capital value of an annuity for the full 16 years which would have elapsed if the deceased had lived to work until he was 65 would require the 11 years' purchase adopted as multiplier by the judge at an assumed interest rate (whether he worked it out or not) of 4.75%; whereas it would need only seven years as multiplier if the assumed interest rate were 12%.

.... Quite apart from the prospects of future inflation, the assessment of damages in fatal accidents can at best be only rough and ready because of the conjectural nature of so many of the other assumptions upon which it has to be based. The conventional method of calculating it has been to apply to what is found upon the evidence to be a sum representing 'the dependency', a multiplier representing what the judge considers in the circumstances particular to the deceased to be the appropriate number of years' purchase. In times of stable currency the multipliers that were used by judges were appropriate to interest rates at 4% to 5% whether the judges using them were conscious of this or not. For the reasons I have given I adhere to the opinion Lord Pearson and I had previously expressed which was applied by the Court of Appeal in Young v Percival [1975] 1 WLR 17 27-29, that the likelihood of continuing inflation after the date of trial should not affect either the figure for the dependency or the multiplier used. Inflation is taken care of in a rough and ready way by the higher rates if interest obtainable as one of the consequences of it and no other practical basis of calculation has been suggested that is capable of dealing with so conjectural factor with greater precision."

In the same case at page 576 Lord Fraser of Tullybelton

described the correct method as follows:

"I pass to the second question, which is whether the award should be increased to make allowance for inflation after the date of trial. What is relevant here is not inflation in general, but simply increases in the rate of earnings for the job in which the deceased person would probably have been employed. The reason for the increase is irrelevant. There would be no justification for attempting to protect dependants against the effects of general inflation, except to the extent that they might reasonably expect to have been protected by increases in the deceased person's earnings. At first sight it might seem reasonable that the award for the period after the date of trial should be increased in some way 'to allow for inflation in the future'. But I am not satisfied that an increase on that ground would not merely be impossible to calculate on any rational basis, but would also be wrong in principle. The measure of the proper award to a widow (who is generally the main dependant and to whom alone I refer, brevitatis causa) is a sum which, prudently invested, would provide her with an annuity equal in amount to the support that she has probably lost through the death of her husband, during the period that she would probably have been supported by him. The assumed annuity will be made up partly of income on the principal sum awarded, and partly of capital obtained by gradual encroachment on the principal. The income element will be at its largest at the beginning of the period and will tend to decline, while the capital element will tend to increase until the principal is exhausted. The multipliers which are generally adopted in practice are based on the assumption (rarely mentioned and perhaps rarely appreciated) that the principal sum of damages will earn interest at about 4 or 5 per cent which are rates that would be appropriate in time of stable currency, as my noble and learned friend Lord Diplock pointed out in Mallett v McMonagle [1970] AC 166, 176D. But in time of rapid inflation the rate of interest that can be earned by prudent investment in fixed interest securities tends to be high, as investors seek to protect their capital and also to obtain a positive rate of interest. At the date of the trial in this case (May 1976) it was possible to obtain interest at a rate of approximately 14% in gilt edged securities, and so long as inflation continues at its present rate of approximately 10% experience suggests that the interest element in the widow's assumed annuity will be appreciably higher than the 4 or 5 per cent on which the multiplier is based. What she loses by inflation will thus be roughly equivalent to what she gains by the high rate of interest, provided she is not liable for a high rate of income tax. In that sense it is possible to obtain a large measure of protection against inflation by prudent investment, although the theory that protection was to be had by investment in equities is now largely exploded. I have referred to the 'assumed' annuity because of course the widow may not choose to apply her award in the way I have mentioned; it is for her to decide and she may invest it so as to make a profit or she may squander it. But the appellant's liability should be calculated on the basis of an assumed annuity."

Viscount Dilhorne and Lord Scarman agreed with Lords Diplock and Fraser.

Thus the discount rate of 4 - 5% has become generally established, and it has also been settled that the court should ignore both inflation, and also the incidence of tax, save perhaps in the case of very high levels of damages (per Lord Oliver in Hodgson's case supra).

The assumption in cases where very large awards are involved has been that the respondent will seek advice as to the ways in which the money can be managed to the best advantage, and that there will be a normal spread of investments (Taylor v O'Connor [1971] AC 115 at 134 per Lord Morris of Borth-Y-Gest and at 143 per Lord Pearson.)

Lim's case (supra) is the culmination of the above series of House of Lords authorities in the period 1970 - 1980, and, in addition to the passages already quoted, contains a further passage at 193 in the speech of Lord Scarman, (with whom Lords Diplock, Dilhorne, and Simon of Glaisdale agreed) which seems to us of particular relevance in the present case:

"The law appears to me to be now settled that only in exceptional cases, where justice can be shown to require it, will the risk of future inflation be brought into account in the assessment of damages for future loss. Of the several cases to this effect I would cite as of particular importance Taylor v O'Connor [1971] AC 115 and Young v Percival [1975] 1 WLR 17. It is perhaps incorrect to call this rule a rule of law. It is better described as a sensible rule of practice, a matter of common sense. Lump sum compensation cannot be a perfect compensation for the future. An attempt to build it into a protection against future inflation is seeking after perfection which is beyond the inherent limitations of the system. While there is wisdom in Lord Reid's comment (Taylor v O'Connor at 130) that it would be unrealistic to refuse to take inflation into account at all, the better course in the great majority of cases is to disregard it. And this for several reasons. First, it is pure speculation whether inflation will continue at present, or higher, rates, or even disappear. The only sure comment one may make upon any inflation prediction is that it is as likely to be falsified as to be borne out by the event. Secondly, as Lord Pearson said in Taylor v O'Connor at 143, inflation is best left to be dealt with by investment policy. It is not unrealistic in modern social conditions, nor is it unjust, to assume that the recipient of a large capital sum by way of damages will take advice as to its investment and use. Thirdly, it is inherent in a system of compensation by way of a lump sum immediately payable, and, I would think, just, that the sum be calculated at current money values, leaving the recipient in the same position as others, who have to rely on capital for their support to face the future.

The correct approach should be, therefore, in the first place to assess damages without regard to the risk of future inflation. If it can be demonstrated that, upon the particular facts of a case, such an assessment would not result in a fair compensation (bearing in mind the investment opportunity that a lump sum award offers), some increase is permissible. But the victims of tort who receive a lump sum award are entitled to no better protection against inflation than others who have to rely on capital for their future support. To attempt such protection would be to put them into a privileged position at the expense of the tortfeasor, and so to impose upon him an excessive burden, which might go far beyond compensation for loss."

Time and again the courts have emphasised that this exercise is not a precise science. Thus, in the very recent case of Hunt v Severs [1994] AC 350 at 365 Lord Bridge of Harwich, with whom the other members of the Appellate Committee agreed, stated as follows with reference to the Ogden Tables (1st Edition) which were referred to in argument:

"The assessment of damages is not and never can be an exact science. There are too many imponderables. For this reason, the courts have been traditionally mistrustful of reliance on actuarial tables as the primary basis of calculation, approving their use only as a check on assessment arrived at by the familiar conventional methods; see, for example, Taylor v O'Connor [1971] AC 115, 140, per Lord Pearson. We are told by counsel that the practice has changed in recent years and that actuarial tables tend to figure more prominently in the evidence on which courts rely. This may well be so. But before a judge's assessment of the appropriate multiplier for future loss, which he has arrived at by the conventional method of assessment and which is not attacked as being wrong in principle, can properly be adjusted by an appellate court by reference to actuarial calculations, it is essential, in my judgment, that the particular calculation relied on should be precisely in point and should be seen as demonstrably giving a more accurate assessment than the figure used by the judge.

The passage I have cited from the judgment of the Court of Appeal appears to show the court as treating the circumstance that both doctors in evidence estimated the respondent's expectation of life at 25 years as establishing the 'fact' or 'assumption' that she would live for 25 years and thus converting the process of assessing future loss into 'a simple arithmetical calculation'. I cannot think that this was a correct approach to the evidence. A man or woman in normal health, at a given age, no doubt has an ascertainable statistical life expectancy. But in using such a figure as the basis for assessment of damages with respect to future losses, some discount in respect of life's manifold contingencies is invariably made. Moreover, when the Court of Appeal referred to the Kemp and Kemp table as showing 'that the allowance for mortality must be very small', they were not making an appropriate comparison of like with like. The figure of 14.8 taken from the Kemp and Kemp table refers, as already indicated, to a woman of 35 with an average expectation of life. From the life table, also set out in Kemp and Kemp, we see that this expectation is 44.6 years. Thus the fact that only a small allowance for mortality is appropriate in relation to the average woman's expectation of survival from the age of 35 to the age of 60 cannot be a reliable guide to the allowance for mortality appropriate to a severely injured woman aged 29 with a total expectation of life estimated by doctors as no more than 25 years.

The Ogden Working Party Report

This was prepared by a working party comprising representatives of the actuarial and legal professions, chaired by Sir Michael Ogden QC, and published under the auspices of the Government Actuaries Department by HMSO in its second edition in November 1994. It is headed 'Actuarial Tables with explanatory notes for use in personal injury and fatal accidents cases'.

The tables themselves set out multipliers which enable the user to assess the present capital value of the plaintiff's future annual loss or future annual expense calculated to take account of the chances that he will die young, or live to be very old, based on population mortality. The expectation of life of course differs for men and women. Calculations are also given for the adjustment of the multiplier for other risks or contingencies, eg unemployment or illness, reflecting individual circumstances in relation to occupation and to region.

The explanatory notes instruct the reader in detail how to use the tables and the adjustments. They also very strongly advocate the adoption of the ILGS discount rate as the appropriate multiplier in place of the conventional 4 - 5%, with arguments which were taken up by the Law Commission.

The Law Commission Report No 224

This is entitled 'Structured settlements and interim and provisional damages'.

The research on which its recommendations were based is described in the report as follows:

"1.7 At the same time as our consultation exercise was taking place, the Commission was carrying out empirical research on damages. Social and Community Planning Research, an independent non-profit making institute specialising in social surveys, carried out a linked programme of quantitive and qualitive research for us, while Professor Hazel Genn, of Queen Mary and Westfield College, London, coordinated the project on our behalf. She is now preparing a report which we hope to publish later this year. We commissioned an in-depth survey of a nation-wide representative sample of 761 people who had received awards of damages for personal injury. The study had three specific aims, which were to explore what levels and what sorts of damages people receive from personal injuries, how people use their compensation payments and why they used the funds in the way reported, and to explore recipients' feelings about the adequacy of the settlement in meeting their needs, both at the time the award was made and at the time of interview. Interviews were conducted with people who had received damages at any time from two years ago up to ten years ago (the accidents occurred between 1967 and 1991), and we stratified the claims into four size bands according to the amount of damages received: Band 1 being settlements between £5,000 and £19,999, Band 2 being settlements between £20,000 and £49,999, Band 3 being settlements between £50,000 and £99,999, and Band 4 being settlements of £100,000 or more. Most of the interviews were held in the spring of 1993.

Having recommended that the Ogden Tables should be admissible in evidence in actions for personal injuries where it is desired to establish the capital value of any future pecuniary loss, the report discusses the discount rate as follows:

"Use of ILGS rates to discount lump sums

2.24 We also described in the consultation paper how, despite elaborate calculations concerning mortality, the assessment of future pecuniary loss could be falsified by application of an inappropriate discount rate to the multiplier. The present interest rates and projections of future movements are both subject to continuous adjustment. At present, however, the general presumption is that the court will always abide by its figure of a 4-5% return on investment as appropriate in determining the discount. Insurance companies do not take decisions based on such simplistic assumptions. Annuities involve such companies in making a promise to make payments over a long period of time on the basis of much more sophisticated methods of predicting future interest rates and of hedging the risk of interest rate movements. We therefore suggested in the consultation paper that the need for actuarial methods to be given greater prominence goes hand in hand with the need for more thought to be given to the choice of the appropriate discount rate when selecting multipliers in individual cases.

2.25 The multiplier approach is very flexible in that it can incorporate virtually any assumption about 'contingencies and chances', and about interest rates. Its use, however, seemed to us to be inappropriate unless use is also made of the most up-to-date information. We suggested in the consultation paper that to make enlightened assumptions about mortality rates would not lead to much greater accuracy in the assessment of damages so long as very crude assumptions about interest rates were being made. Our provisional view was that courts should make more use of information from the financial markets in discounting lump sums to take account of the fact that they are paid today. One way of doing this would be to enable courts to refer to the rate of return on ILGS as a means of establishing an appropriate rate of discount. The purpose of this would be to obtain the best reflection of market opinion as to what real interest rates will be in future. The question upon which we sought the views of consultees was whether it would be reasonable to use the return on ILGS as a guide to the appropriate discount.

2.26 Almost two-thirds of those who responded to this question supported the use of the ILGS rates to determine more accurate discounts. These consultees agreed that the assumption of a 4-5% rate of return over time is crude and inflexible and can lead to over - or under - compensation and hence to injustice. The General Council of the Bar told us that National Savings index-linked savings certificates produced 3.25% compound between 1980 and 1990, and that the Family Division generally used a 5% discount rate, but because this was before the deduction of tax, such a discount amounted to 3 - 3.75% net of tax. A number of consultees argued that it was inconsistent to apply a 2% rate to respondents for loss of interest on capital used for housing. One QC noted that the real rate of return for top tax payers on building society savings has been consistently less than 2% since 1978 and for much of that period there has been a negative return.

2.27 Comments were made to the effect that the current discount rate is 'excessively favourable to appellants', that respondents are 'consistently short-changed', and that 4-5% is 'wholly unrealistic', 'unfair' and 'no more than a judicial exercise in appellant weighted approximation'. While a third of those who responded opposed our suggestion about ILGS rates, a quarter of these in fact favoured the use of other methods (such as a new and regularly reviewed fixed rate), thereby also recognising the arbitrary nature of the 4-5% rate assumption. Another concern of those who opposed the suggestion was that any new system would be more complex than the existing one, which had the attraction of simplicity and consistency. These responses suggested that if a new system is practical and does not significantly add to costs, it would be acceptable.

2.28 We share the views of the majority of those who responded to us, that a practice of discounting by reference to returns on ILGS would be preferable to the present arbitrary presumption. The 4-5% discount which emerged from the case law was established at a time when ILGS did not exist. ILGS now constitute the best evidence of the real return on any investment where the risk element is minimal, because they take account of inflation, rather than attempt to predict it as conventional investments do. Capital is redeemed under ILGS at par and index-linked to the change in the Retail Price Index (RPI) since issue. Income remains constant in real terms, rising with increases in the RPI. There is no premium available for risk because there is no risk.

2.29 While it cannot, of course, be said with certainty that respondents would always invest lump sum damages in ILGS, it is reasonable to assume they are naturally risk-averse, and the evidence from the Edinburgh study confirms the reasonableness of this assumption. Our own study was particularly revealing on this point. Spending of the award was related not only to the amount of damages received but also to the period between settlement and interview by SCPR. The proportion of recipients with about half or more of their damages still to spend by the time of interview increased from 24% in Band 1 to 35% in Band 2, 53% in Band 3, with a very slight drop to 51% in Band 4. Only one in ten in Band 4 had spent all their damages. For settlements within 3 years prior to interview, 71% of those with the smallest awards had spent over half of their damages, and only a third of those with the largest awards had done so. The longer the time since settlement, the smaller the difference between Bands; for settlement over 4 years ago, 56% of Band 2 recipients had spent over half their award, but the figure for those in Band 4 was still less at 45%. We believe that these figures show that those with serious injuries, who receive larger awards, are most concerned to preserve their funds for the future, and this would naturally make them risk-averse.

2.30 Our study revealed more direct evidence of this tendency. The most common method of saving a compensation award was to use a building society account, followed by a bank account. In all Bands, recipients were more likely to save their money in bank or building society accounts or in savings certificates than to invest in stocks or securities. As the amount of the award increased, however, so did the likelihood of investing in stocks or securities. Only one in ten recipients in Band 1 invested some of their compensation money in stocks or securities compared with six in ten of those in Band 4. The likelihood of getting advice about investment also increased significantly by size of award, from 26% in Band 1 to 84% in Band 4. We consider this to be clear evidence that those who receive large awards, where the choice of multiplier, and hence the level at which it is discounted, is crucial, are most concerned to preserve the value of their damages and to make good investments. This lends considerable weight to our assumptions about ILGS.

2.31 We are also convinced that ILGS rates can be used in a practical way to achieve a discount rate which is more realistic. We believe that ILGS should always be looked at, but that the parties should have the opportunity to adduce evidence as to alternatives they consider more appropriate if they so wish. For example, it may in the future be arguable that returns on ILGS are unduly depressed compared to those on other investments, and it is therefore important to keep flexibility in the system. We therefore recommend that there should be legislative provision:

(2) Requiring courts, when determining the return to be expected from investment of the sum awarded in any proceedings for damages for personal injury (including proceedings under the Fatal Accidents Act 1976 and the Law Reform (Miscellaneous Provisions) Act 1934), to take account of the net return to the respondent on an index-linked government security (Draft Bill, Clause 6(3))."

The Law Commission then recommend that the legislation should only permit departure from the ILGS rate where it can be shown that an alternative rate would be more suitable in the individual case.

A draft Bill containing clauses implementing these recommendations was appended to the report.

The Expert Evidence

Expert evidence was called by both sides in all three cases and was strongly relied upon by both the appellants and the respondents from their respective viewpoints.

In Wells v Wells, the respondent called Mr J.H. Prevett OBE, who is a partner in Bacon and Woodrow, Actuaries and Consultants, and a Fellow of the Institute of Actuaries. He was a member of the Ogden Working Party, and in his short report he simply endorsed their recommendations (and of course inferentially those of the Law Commission), and put forward ILGS as the appropriate guideline by reference to their real return as published daily in the Financial Times. The respondent did not call an accountant.

The appellant called Mr Michael Topping, a partner in Frenkel Topping and Co., Chartered Accountants, who stated that he considered the appropriate discount rate applicable to the case was the conventional 4 - 5% range.

Citing the policy of the Court of Protection (see below) he stated that, as the award would almost certainly be invested in a mixed basket of securities split approximately 70% equities and 30% gilts, the yields on equities should be taken into account when adopting the appropriate discount rate upon which to base the multiplier. These have over the medium to long term exceeded 4 - 5%, as demonstrated by the BZW Equity and Gilt Study, showing the average annual real rates of return on equities after deduction of basic rate taxes, as summarised by Mr. Topping for each of the periods to 31st December 1992 on an investment made on 1st January in each of the years from 1973 to 1992 as follows:

% %

1973 3.7 1983 11.2

1974 6.6 1984 10.2

1975 12.4 1985 8.7

1976 8.8 1986 8.0

1977 10.6 1987 6.1

1978 9.0 1988 6.7

1979 9.5 1989 7.2

1980 11.1 1990 2.6

1981 10.8 1991 13.1

1982 12.0 1992 15.7

Mr Topping also provided a table setting out in greater detail the performance of equities by reference to their average annual real rate of return from 1961 onwards which showed that, although in most years there was a positive yield, in some years, particularly in 1968 and 1972, there was a negative yield for a subsequent period of up to ten years, before a positive yield emerged.

In Page v Sheerness Steel Mr Prevett again gave evidence for the respondent, who did not call an accountant. His report was on the same lines as in Wells v Wells, but he also gave much more extensive oral evidence, stating that while he had no experience of advising plaintiffs in setting up investment funds, he had for all his life advised trustees of pension funds, where it was important that the assets should match the liabilities; once the fund was closed, with benefits in payment and liabilities fixed, he would recommend the investment of the entire fund in ILGS, so as to minimise the risk of the fund not being able to meet its liabilities due to inflation. He thought that the position of a plaintiff was comparable, and that ILGS was the natural investment for his award, whereas investment in a mixed basket of equities and other stocks would carry a high degree of risk.

The appellant called Mr Hugh Gregory, a partner in Robson Rhodes, Chartered Accountants. Having cited the policy of the Court of Protection, the terms of the Trustee Investment Act 1961 and the BZW table, he said he considered that it was reasonable to follow the Court of Protection investment strategy of about 70% in equities and 30% in gilts, on which the return was significantly higher than that on ILGS, as demonstrated by the following BZW table:

Returns in period 1983 - 1994

Geometric Arithmetic

mean mean

% %

Nominal returns

Equities 17.14 17.85

Conventional gilts 10.97 11.38

Index-linked gilts 7.08 7.36

Cash 10.45 10.49

Real returns

Equities 11.70 12.45

Conventional gilts 5.82 6.29

Index-linked gilts 2.11 2.41

Cash 5.32 5.33

In addition, the appellant called on subpoena Mr Bruce Denman, who is in charge of the investment branch at the Public Trust Office dealing with Court of Protection cases where there is an outside receiver. He stated that where a person comes under their jurisdiction, they will normally formulate an investment policy for that individual in the light of his or her circumstances at the time, which would probably dictate a different approach from an entire investment in ILGS. Where a long term scheme is involved, a segregated portfolio would normally be set up, including as the main part (70% or thereabouts) UK equities together with unit and investment trusts, as well as keeping money in cash and investments in gilts. In cross examination he stated that even if the court adopted a new approach and assessed the award of damages on the basis of what would be a reasonable return on ILGS as recommended by the Law Commission, the hands of the Court of Protection would not be tied, and they would probably stick to their normal investment strategy of setting up a segregated portfolio as described above.

In Thomas v Brighton Health Authority the respondent called Mr Philip Haberman, a partner in Messrs KPMG, Chartered Accountants. He compared the multiplier/multiplicand approach as akin to an annuity calculation, and recommended ILGS as suitable securities for providing an annuity on the footing that they provide a regular unfluctuating income with no need to resort to frequent or premature sales of capital. Other advantages were that a portfolio of ILGS could be set up to allow for anticipated withdrawals of capital to be made at or close to the maturities of individual stocks (thus almost eliminating the risk of unplanned capital depletion), and that ILGS are liquid and readily realisable in an emergency. This policy was comparable to that adopted by life insurers and by the managers of closed pension schemes.

Mr. Haberman defined 'prudent management of the portfolio' as avoiding unnecessary risks, matching the riskiness of the investments selected to the needs of the plaintiff, and avoiding excessive dealing and hence the need to recover high levels of dealing costs. These criteria were met by investment in ILGS, in contrast to investment in equities which is inherently risky since both capital and income can vary widely, and can even disappear altogether if the company goes into liquidation; although these risks can be reduced by selecting a portfolio of equities, this can only eliminate the risks of individual investments relative to the market as a whole, and cannot reduce the risks inherent in the market itself. Volatility in real capital value led to the risk that planned sales of capital would have to be made at unfavourable points in the investment cycle, and volatility in income led to the risk of having to make unplanned excessive sales of capital in the early years, in both instances depleting the fund. This was well illustrated by the performance of equities in unfavourable years as shown in the Topping table.

Mr Haberman recognised that the long term average rate of return on equities currently lies in the range of 4 - 5%, but said it is important to note that the higher return which this represents, in excess of the (almost) risk free returns generated from ILGS, is compensation for the risks involved in equities.

In cross-examination Mr Haberman acknowledged that when giving evidence in Casey v East Anglian Regional Health Authority (infra) he had recommended a portfolio comprising 80% ILGS and 20% equities, but said that he had subsequently changed his mind, and throughout his cross-examination he adhered to the views described above that 100% ILGS is appropriate.

The appellant called Mr Peter Dickerson, a partner in Baker Tilly, Chartered Accountants. He stated that in his opinion Mr. Haberman drew a closer comparison between personal injuries' awards and a conventional purchased annuity than is justified by the facts. The touchstone for investment of a plaintiff's award was to avoid rigidity in future cash flow, and to maximise the opportunities for flexibility to meet possible changing needs, always bearing in mind the wide range of uncertainties for which the court is required to allow.

ILGS were not the appropriate form of investment for a number of reasons. The assumption that they are virtually risk-free applies only if, once an investment is made, it is held to maturity, and also only if a pattern of holdings can be purchased at the date of the award to meet the predicted requirements; neither of these criteria was made easy by the pattern of ILGS currently available, as set out in a table furnished to us during the hearing:

ILGS AVAILABILITY

Short Medium Long

to 5 years 5 to 15 years 15+ years

1996 2001 2003 2016

1998 2004 2005 2020

2006 2009 2024

2011 2013 2030

In recent years, further tranches of existing ILGS have been issued, but no gaps have been filled, and no issue has been made with a redemption date beyond the year 2030.

Secondly, changes in market rates of return on ILGS are affected by changes in the capital values at which they are bought and sold in the market. These are illustrated by the following table which was furnished to us during the hearing covering the years 1990 to 1994:

The actual interest paid remains fixed in real terms, in the case of most ILGS at 2½% of the nominal value adjusted for inflation. If the market rate is above 2½%, that market rate of return is obtained by purchasing ILGS at a discount, so that part of the return is obtained in the form of a premium in excess of the purchase price (in real terms) payable only on maturity. This produces the further disadvantage that the cash flow on interest payments is normally less than the real rate of return, thus increasing the need to realise capital regularly.

Thirdly, if investments need to be sold to meet unanticipated changes in the timing of the plaintiff's needs, the wide fluctuations in market rates of interest, and hence in the value of ILGS, can expose him to a considerable level of risk.

Fourthly, since the prices and returns on all ILGS are influenced by the same factors, they will tend to move in unison, so that there can be no policy of investing in a spread of such securities to ensure that the risk is spread.

Mr Dickerson questioned the validity of Mr Haberman's comparison with life insurers and closed pension funds, since in both these instances the insurance company or pension provider has entered into a fixed commitment where future expenditure was pre-determined, whereas those responsible for investing a plaintiff's fund have no fixed liabilities, but are required in his best interests to cater for a range of estimated future needs which might well change over time. Consequently the latter should invest in a fund which produces the highest reasonable real return after tax without incurring undue risk.

The BZW analysis indicated that a portfolio with a substantial equity content, but with a component of non-equity investment available to meet short term needs, stands a reasonable chance of balancing risk against return in a way which should be acceptable to plaintiffs and their advisers. While it was true that equity values do suffer some volatility, such volatility has historically only been in the short term; in the long term, real equity values have shown a continual upward progression so that whatever past investment date is chosen, an attractive long term return has invariably been achieved.

In conclusion, in common with the other two appellants' experts, Mr Dickerson recommended that a prudently managed balanced investment portfolio would comprise not less than 70% equities.

The Three Judgments

In Wells v Wells, Judge Wilcox cited the Law Commission's recommendations and their draft Bill, which he said had changed the climate of opinion, and which he appeared to assume would be fully implemented. As a result he rejected Mr Topping's approach, accepted Mr Prevett's, and adopted a multiplier based on ILGS.

In Thomas v Brighton Health Authority Collins J stated as follows at page Q52:

"I am conscious of the value of guidelines and the desirability of endeavouring to achieve some degree of certainty and consistency, if only because cases can the more easily be settled if the relevant principles are known. It has understandably taken a very long time for the courts to consider change, but the evidence before me persuades me that, consistently with the requirement that damages should compensate and provide, so far as possible, that the respondent is put into the position he would have been in but for the appellant's negligence, it is right to take account of the ILGS. It seems to me that, unless authority precludes me from so doing, I ought to recognise the existence of a means, which, to follow Lord Diplock's words, is capable of dealing with so conjectural a factor with greater precision.

I am not impressed with the argument espoused by Mr Dickerson that the prudent respondent will invest in equities and obtain 4 - 5%. So long as the courts assume such an investment in fixing the multiplier, respondents will be forced to invest in that way to prevent the money running out. The argument is thus circular. The court will not consider what an individual respondent may choose to do with his money. He may decide to seek a larger return, but at least the sum available should be sufficient to cover the risk involved in so doing.

There have been some attempts to persuade judges to have regard to ILGS. All but one have hitherto failed. The first was Robertson v Lestrange [1985] 1 AE 950, a decision of Webster J. He was pressed with Wright v British Railways Board [1983] 2 AC 773, which was said to justify the new approach. I respectfully agree with Webster J that that case did not directly assist. The evidence at that time did not support the contention that damages would be invested in ILGS as opposed to the conventional type of investments. It seems to me that I have the evidence which Webster J lacked. I think, too, that Webster J may have over-emphasised the need for there to be evidence that all competent advice would recommend investing the award in ILGS, since, so long as the award was based on 4 - 5%, such advice would hardly be likely to be given. Further, he was clearly unimpressed with the evidence of the expert called by the respondent.

The next attempt was in Casey v East Anglian Regional Health Authority before Gage J in November 1993. Gage J summarises the contentions of the parties at pages 18 - 19 of the transcript. The evidence before him focused on the recommendation as to how the award should be invested. For the reasons I have given, I think of greater importance is how an annuity can sensibly be provided, although it must be demonstrated that such a method of investment would be appropriate for a respondent to use. After referring to the relevant authorities, Gage J said this at page 25:

'In my judgment, what Mr Justice Webster said in Robertson v Lestrange holds good today, although, for myself, I would not go quite as far as Mr Justice Webster did. My view is that the court should not depart from the convention unless satisfied on the evidence in a particular case that there is a reason peculiar to that case to do so or that investment in equities giving a return of 4 - 5% no longer satisfied the requirement of prudent investment management given the object and life of the fund.'

It will be apparent that I respectfully disagree with his approach. The test is not whether it would be prudent to invest in equities but whether to invest in ILGS would achieve the necessary object with greater precision."

In Page v Sheerness Steel Dyson J stated as follows at page Q35:

"In my view Mr Purchas is right in submitting that the court is not concerned with how a particular respondent will choose to invest his damages. A wealthy respondent might choose to use the money to buy a yacht. That is irrelevant. The court is concerned to calculate a sum which is sufficient, if invested, to yield a return which will as closely as possible match the income lost by the respondent and/or the expenditure that he will incur from time to time as a result of the injuries sustained. Until the advent of ILGS, a respondent who wished to invest his damages so as to obtain a return which would as closely as possible compensate him for his lost income, no more and no less, had no choice but to invest in a balanced portfolio of blue chip equities, gilts and so on. There was no other way of seeking to get as close as possible to the position in which he would have been if he had not suffered a loss of earnings. Now there is a far more precise investment tool for achieving this purpose. I agree with what Collins J said in Thomas v Brighton Health Authority, unreported, 7th November 1995. The question is not whether it would be prudent for a respondent to invest in equities but whether to invest in ILGS would achieve the necessary object of compensation with greater precision. I have no doubt that it does"

In both Thomas and Page the judges also accepted the respondent's expert evidence in preference to the appellant's.

The Other Recent Decisions

These are:

Casey v East Anglian Health Authority (November 1993 Gage J)

Lodge v Simpson (December 1995 Garland J)

Walsh v Glessio (February 1996 Gage J)

Smith v Waltham Forest Health Authority (February 1996 French J)

As already noted, in each of these four cases the self-same arguments were addressed, the ILGS multipliers were rejected, and the conventional guidelines adopted, for reasons similar to those advanced by the appellants in the present appeals.

The Appellants' Submissions

Mr John Leighton Williams QC on behalf of Mr Wells and of Sheerness Steel plc, and Mr Kieran Coonan QC on behalf of the Brighton Health Authority, submitted that there is no reason for change from the conventional approach, which is still sound in law.

They unequivocally accepted the basic rule that damages are to be assessed on the basis that the fundamental purpose of an award is to achieve as nearly as possible full compensation for the injuries sustained. But they submitted that the judges fell into error by concluding that from this it followed:

(i) That the award of damages must be fixed on the assumption that the plaintiff is entitled to invest it taking the minimum risk, and

(ii) that the test is not whether it would be prudent to invest in equities but whether to invest in ILGS would achieve the necessary object with greater precision.

On the contrary, as the authorities showed, the plaintiff is in no different position from the ordinary investor, and the court can and should assume that he and his advisers will invest prudently. Prudent investment required the choice of a basket of securities including a preponderance of equities. Furthermore ILGS, because of the gaps, their non-availability beyond the year 2030, and the substantial fluctuations in their market value, are by no means risk-free.

They submitted that the Law Commission's reasoning was unsound, and based on inadequate research. The correct approach was that adopted by the appellants' experts.

The Respondents' Submissions

Mr Christopher Purchas QC on behalf of Mrs Wells and Mr Page, and Mr Robert Owen QC on behalf of James Thomas, submitted that the only way of satisfying the fundamental purpose of an award of damages, namely to achieve as nearly as possible full compensation to the plaintiff for the injuries sustained, was to fix it on the assumption that he was entitled to invest it taking the minimum risk, ie to invest in ILGS; and that the correct test was that adopted in the courts below, namely that the court should not ask whether it was prudent to invest in equities, but whether to invest in ILGS would achieve the necessary object with greater precision. The ultimate object was to produce a present value for the future recurring loss with the greatest conceivable degree of accuracy. As a result the plaintiff was not to be treated as equivalent to an ordinary investor, since he had suffered loss, and received in compensation damages on a once-for-all basis as his sole protection for the foreseeable future.

Prior to the inception of ILGS in 1982, there was no practical way of dealing with the problem, and in particular guarding against future inflation, other than by the conventional approach, but that has all changed, as the Ogden Working Party and the Law Commission report showed, with the result that the court can now see what return is available once inflation is taken out by reference to ILGS. It followed that, had ILGS been available in the 1970's, Lord Diplock and his colleagues would surely have adopted ILGS as a better alternative and a more appropriate benchmark; this they suggested was strikingly illustrated by the frequent references in the speeches of Lord Diplock and others to an annuity or an assumed annuity.

The great advantage of ILGS is that the return is certain, both interest and capital are protected against inflation, the yields are visible on a daily basis, and consequently the future is protected as securely as possible. By contrast, equities are risky, as illustrated by the evidence showing that in some years, particularly 1968 and 1972, an investment in equities would have shown a negative return over several subsequent years.

They further submitted that, when fixing the multiplicand at the first stage, all relevant factors were taken into account, and appropriate discounts applied in accordance with the relevant degrees of probability, with the result that at the end of the first part of the exercise the court had converted those probabilities into a notional certainty; by contrast, at the second stage, when selecting the multiplier, probabilities did not enter into the picture, and the sole function of the court was to select that figure which would most precisely ensure that the plaintiff was fully compensated. As Mr Purchas put it vividly at the conclusion of his argument, ILGS is the only way you can guarantee the plaintiff gets his money back.

They accepted that there was a degree of risk in ILGS, but one that paled into insignificance compared with equities. Consequently, if the multiplier was based on the conventional approach, the element of risk would not be reduced to the greatest possible degree, so that in the result the plaintiff would be under-compensated.

Furthermore, even if contrary to their argument prudence was a relevant consideration, their expert evidence demonstrated that ILGS was the most prudent investment.

Analysis and Conclusions

There is, as already stressed, no dispute as to the basic rule, namely that the damages are to be assessed on the basis that the fundamental purpose of an award is to achieve, as nearly as possible, full compensation for the injuries sustained by the respondent.

The two critical and closely linked questions which lie at the heart of the present problem are whether the respondents are right in their two propositions that, in order to achieve this object:

(1) The award must be fixed on the assumption that the plaintiff is entitled to invest it taking the minimum risk; and

(ii) the test is not whether it would be prudent to invest in equities but whether to invest in ILGS would achieve the necessary object with the greatest precision.

In support of the first proposition the respondents sought to draw a contrast between an ordinary investor on the one hand and a plaintiff on the other, portraying the latter in some special category, since he has suffered damage, and receives a once-for-all award which is his sole protection for the future. But in our judgment this contrast is fallacious, and the plaintiff is in no different case from the ordinary investor, as Lord Scarman stressed in the final passage quoted above from Lim's case; to treat him in some different category from the ordinary investor would place him unwarrantably in a privileged position. This statement of principle, made unanimously by the House of Lords (including Lord Diplock), is in our judgment of paramount importance in the present context, and confronts the respondents with grave difficulty.

In addition the respondents laid great stress on the references in several of the judgments to an annuity or an assumed annuity. We very much doubt whether the use of these words signified anything more than that the calculation is to be made on the footing that both capital and income will be exhausted at the end of the prescribed span. Moreover, there is nothing elsewhere in these judgments suggesting any intention to sanction the 'risk-free' test (contrast Lim's case).

The respondents also sought to portray the multiplicand, once firmly established during the first stage of the exercise, as converting an assessment of probabilities into a notional certainty; and they submitted that at the second stage, the fixing of the multiplier is in effect a mere mathematical function, regardless of probabilities, to return the plaintiff to his pre-accident position with maximum precision.

We cannot accept either of these submissions. The multiplicand is the product of an assessment of a combination of a wide range of future probabilities, and cannot be regarded as anything more that the best and most conscientious estimate of the plaintiff's future losses and needs, which will always remain uncertain; thus the concept of a notional certainty is unsound. To adopt Lord Scarman's comments in Lim's case, unfortunately the only certainty is that, particularly in long-term cases, the projection will prove wrong to some extent one way or the other.

So far as the second stage is concerned, in our judgment the suggestion that, in fixing the multiplier, the court is making a judgment which is little more that a mathematical exercise is erroneous, as Lord Bridge stressed in Hunt v Severs in the passage quoted above. Furthermore, at this second stage, no less than at the first, the probabilities come into play in order to arrive at the appropriate discount when fixing what Lord Scarman described in Lim's case as a 'fair multiplier'. In the process of assessing this discount the court must take into account not only financial considerations such as the accelerated payment and the availability of capital as well as income to meet future expenses, but also, bearing in mind life's manifold contingencies, the degree of likelihood that the particular plaintiff may not live out his full expectation of life; and, in the case of future loss of earnings, that he might not have continued to work throughout his full working span, or (in the case of a child) that he might never have become an earner (see per Lord Diplock in Cookson v Knowles at 568, per Lord Scarman in Lim at 196, per Lord Bridge in Hunt v Severs (supra) and per Griffiths LJ in Croke v Wiseman [1982] 1 WLR 71 at 83). These factors are of course helpfully addressed with a considerable degree of sophistication in the second edition of the Ogden Tables which will no doubt be of considerable assistance in the future; but they cannot of course cater for every relevant circumstance, affecting the individual plaintiff, which will enter into the final assessment, as for example in Hunt v Severs in the case of a severely injured plaintiff aged 29 as quoted above.

Thus we reject the respondents' first basic proposition.

We now turn to the respondents' second basic proposition as to the appropriate test. The appellants, we think rightly, strongly rely on the repeated emphasis in the authorities upon prudent investment. The respondents suggest that this only related to the guidelines then in force, and has been outmoded by the advent of ILGS. We disagree. It is for the court to hold the balance evenly between both sides, and just as the plaintiff is entitled to an award which achieves as nearly as possible full compensation for the injuries sustained, so also we think the defendant is entitled to take advantage of the presumption that the former will adopt a prudent investment strategy once he receives his award. Furthermore the court, which, as already noted, is dealing with probabilities when fixing the multiplier, can and should pay regard to the high probability that the plaintiff will invest prudently; any other approach would be artificial.

We therefore also reject the respondents' second basic proposition.

What then is prudent investment strategy?

We concentrate for the present on the long-term awards of which the present three are typical instances at the top end.

Of the expert accountant witnesses called, only Mr Haberman (supported by Mr Pickett's actuarial evidence) dissented from the view that a basket of investments including a substantial proportion of equities is appropriate. We do not find his reasoning convincing, since it seems to be based on the assumption that the respondents' two basic propositions, which we have rejected, were sound. We much prefer the evidence of the appellants' experts, and are satisfied that their recommendations as to prudent investments are sound.

Undoubtedly, equities are more risky than ILGS. Undoubtedly in some individual years investing in equities would have yielded a negative return in the ensuing period (the same applies albeit less severely to ILGS). However, the figures produced by the appellants' experts, and in particular the BZW tables, seem to us to demonstrate that, over longer periods of years, equity investment has been sound.

We are also strongly influenced by two other aspects:

(1) With the sole exception of short-term cases, the policy of the Court of Protection, as described in Mr Denman's evidence, and as illustrated by their published Investment Policy (latest edition February 1996), which was made available in the course of the hearing before us, is to include 70 - 80% equities in a wide spread of high yielding investments chosen from Common Investment Funds, unit trusts, investment trusts, individual UK ordinary shares, and convertibles. Common Investment Funds are a collection of three unit trusts professionally managed and only available for funds held in court, which provide a convenient method of obtaining a good spread of investment, both in equities and fixed interest securities. This is on the footing, specifically stated in the policy document, that 'some risk is acceptable'. Only in the short-term cases of 5 years or less is a portfolio based on short dated gilts adopted, on the footing that in this limited class of case 'very little risk is acceptable'. As French J observed in Smith v Waltham Forest Health Authority (supra) the Court of Protection is an organisation which is 'hardly noted for its gambling instinct'.

(ii) Under the terms of the Trustee Investment Act 1961 trustees are obliged to split their investment equally between narrow and wider range investments unless otherwise directed by the terms of the trust itself; and recently, under the Charities (Trustee Investment Act 1961) Order 1995, the permissible ratio between wider and narrow range investment has been extended to 75:25 in the case of charities.

The respondents contend that trusts are not comparable, because the trustees must balance the interest of present and future beneficiaries, whereas those in charge of the investment of a personal injuries award are solely concerned with the individual plaintiff. However, we do not think this undermines the validity of the comparison in the present context, since it is implicit in the policy of the legislature that investment of a substantial proportion of the capital of a trust in wider range funds is inherently sound; and in any event a prudent plaintiff in a long-term case will also seek to balance present and future needs to safeguard his capital position during the later stages of his life.

We are not impressed by Mr Haberman's comparison with life insurance and closed pension schemes, which we do not regard as comparable to personal injuries awards, not least because of the inevitable uncertainty of the estimates underlying the multiplicand, to which we have already referred; this uncertainty we think, tells strongly in favour of the flexibility afforded by equities, which may be a particular advantage to a plaintiff if in due course the multiplicand proves to have been fixed on an unduly optimistic assessment. ILGS, by contrast, are inherently rigid.

While of course we fully accept that ILGS are less risk-prone than equities, they do nonetheless carry some element of risk, which includes the drawbacks identified by Mr Dickerson. We note particularly the gaps and the present cut-off in 2030, which would (for example in the Thomas case), make an ILGS-based investment strategy difficult, since his expectation of life extends well beyond that year. No doubt, as the experts accepted, further ILGS stocks will be issued, but in the light of the recent policy of issuing further tranches of existing stocks rather than new ones, it does not seem to us necessarily to follow that the present gaps will be filled, or future gaps avoided.

It follows that we do not accept that, had ILGS been available in the 1970's, Lord Diplock and his colleagues would have been likely to select them in preference to the conventional guideline. In support of this submission the appellants also relied on Lord Diplock's conclusion in Wright v British Railways Board [1983] 2 AC 773 that, to assess the appropriate discount for past loss of interest, ILGS is the best yardstick; but, as is clearly demonstrated by the judgment of Oliver LJ in Auty v National Coal Board [1983] 1 WLR 784 the exercise there being undertaken was quite different from the assessment of future loss.

For all these reasons we consider that the present guidelines are still valid and we are not persuaded that the case has been made out for the courts of their own motion to adopt ILGS in their place. Consequently the present conventional discount rate of 4.5% should continue to apply.

Counsel for all parties urged us to recommend a single guideline to apply across the board. We were concerned that this might unfairly disadvantage plaintiffs in short-term cases, (say within the Law Commission Bands 1 - 3) where, as the Law Commission's evidence shows and the Court of Protection recommends, they would be likely to invest in gilts or building societies rather than in equities. However, as the following table from Kemp and Kemp (6th Edition) vol 1 p 8032/1 shows, in these cases the rate of the percentage discount makes practically no difference:

Clearly the Ogden Tables are very useful as a check, and we therefore favour the sanction of their admissibility as proposed in Section 10 of the 1995 Act, together with those parts of the explanatory notes which are truly explanatory. This recommendation does not however apply to those parts of the explanatory notes which espouse ILGS as the appropriate guideline.

Our departure from the Law Commission's and the Ogden Working Party's recommendations, which of course deserve considerable respect, causes us some concern.

Counsel for the appellants directed strong criticism against the Law Commission's reliance on a sample of no more than 761 people, but we do not feel we are qualified to form a view either way on that aspect.

However, it is noteworthy that this sample was broken down into only four bands, of which Band 4 started at the comparatively low level of £100,000. In that band no less than 84% took investment advice, and no less than 60% invested in stocks and securities, no doubt pursuant to the advice they received. With all respect, this does not seem to us to support the Law Commission's assumption in favour in ILGS for band 4, particularly at the top end of the range. In the lower bands, for reasons already given, the selection of the discount rate has minimal significance.

It is also noteworthy that, according to paragraph 10.3 of the Law Commission Consultation Paper No 225, no less than of 77-78% of the sample were satisfied with the way in which they had saved or invested their money.

We would add that many of the considerations which have influenced our conclusion are not debated in either report, in both of which there seems to be an implicit assumption, which we have rejected, that the two basic propositions advanced by the respondents are sound.

Finally in this part of our judgment, we wish to mention the Duxbury Tables and the publication issued by the Family Bar Association entitled 'At a glance', to which our attention was drawn, and which, based on computer technology, have developed a very sophisticated mechanism for assessing future financial dependencies after divorce. This technique may, with suitable adaptation, provide a useful step forward in personal injuries cases in the future while adhering to the present guidelines, particularly, for example, in the treatment of tax, where the present multiplier/multiplicand method seems somewhat crude. This would be worthy of investigation as a much more modest measure of reform. We would, however, wish to make it clear that in our opinion such a review should be undertaken by a body on which not only lawyers and actuaries but also accountants and investment advisers are represented. For all its good work, it seems to us that it would have been a great advantage to the Ogden Working Party, which was composed of eminent lawyers and actuaries, to have included within its membership both accountants and investment advisers; so far as we can judge the former were not involved at all, and the latter were only involved to the extent that assistance from a well-known firm of stockbrokers was acknowledged. We attach an appendix on this topic written by Thorpe LJ.

The appellants' appeal on the general point of principle is therefore allowed.

PART II

THE INDIVIDUAL CASES

WELLS v WELLS

On 26th August 1992 Mrs Margaret Thelma Wells, then aged nearly 58, a healthy and happy mother and grandmother and part-time nurse, was grievously injured in a road traffic accident when being driven by her husband, the appellant, in the family car. She suffered a major head injury, resulting in fractures of the vault of the skull and the upper jaw, a fracture of the upper back bone displacing the vertebral body into the spinal chord and severe internal and external damage. As a result of her head injuries she suffered severe brain damage.

Mrs Wells was knocked unconscious by the accident. She stopped breathing for a while immediately after it and had to be ventilated. She remained deeply unconscious, and ventilation was continued in hospital for about a week when a tracheostomy was performed. She continued to be deeply unconscious until about the end of December 1992. After that she began to develop some, but very limited, signs of awareness. In January 1993, in an attempt to assist her recovery, an operation was undertaken to drain the excessive accumulation of cerebro-spinal fluid within her skull. This produced only a slight improvement, and in January 1993 she was transferred, still mostly unconscious, to a long-term rehabilitation centre. There she remained for about 9 months until late September 1993, apart from short returns to hospital because of difficulties caused by intravenous feeding. Throughout that time she depended on the nursing staff for all her needs, being only variably conscious, immobile and incontinent.

In late September 1993 Mrs Wells was moved to a nursing home, still in much the same condition, unconscious for a good deal of the time, bed or wheel-chair bound and requiring twenty four hour nursing. In about May 1994 she returned to live at home with her husband and family. There, she began to improve, thanks to their encouragement and support, 24 hour care provided by professional carers and regular physiotherapy and occupational therapy at home and at a nearby 'Headway' centre twice a week. Her level of consciousness and physical mobility improved. She began to communicate more. However, the overall recovery was limited, and the doctors are agreed that her condition has now stabilised.

Injury, Pain and Suffering, and Loss of Expectation of Life

The Judge awarded £120,000 for injury, pain and suffering. The appellant contends that that figure is too high, and that the appropriate range is towards the upper end of the Judicial Studies Board's Guidelines, 2nd edition, 1994, for moderately severe brain damage, namely £77,500 - £95,000.

In addition to the medical and other evidence of Mrs Wells' condition, the Judge and this court have had the advantage of seeing a video-film of her life at home with her family in October 1994. It is agreed that it is generally representative of her condition today. The picture is one of permanent severe intellectual and physical impairment, requiring constant care. Mrs Wells operates at a very low intellectual level, and even that is extremely variable, often confused and not assisted by her very short term memory. She does not initiate conversation or physical action; her communication lies largely in responding to simple questions or prompts. Her eyesight is badly impaired, with almost no useful sight in the right eye, convergent vision in the left and nystagmus in both.

After an enormous investment of daily physiotherapy Mrs Wells can use her hands and arms more and has some limited movement in her legs enabling her to take a few steps in a walking frame, but even then only with much encouragement and someone at hand to help her; it is a laborious business. Her sense of balance is greatly affected so that she cannot, in any event, be trusted to move about on her own unaided. She has learned to feed herself, though her food had and has to be soft or cut for her, and she needs the security of a mug for drinking. She has achieved a qualified form of bowel and bladder control in the day time, by frequent visits to the lavatory, but she has to be checked and changed as necessary for bladder incontinence about three times a night.

As we have said, her position has now stabilized, and little, if any, further improvement is to be expected. It amounts to a very limited mental and physical function, some awareness and unease about her condition, though with an apparent contentment in her supportive and stimulating family setting, and a need for constant care and regular nursing oversight.

As to the risk of future illness and expectation of life, it should be noted that Mrs Wells did not suffer from any condition before her injury which would have made her particularly vulnerable to disease or have shortened her life. However, there was some conflict in the medical evidence about the likely future effect of her immobility and urinary incontinence caused by her injuries.

Dr Peter Harvey, a consultant neurologist called on behalf of Mrs Wells, said that, because of the close support of her family and future intensive care, any infection, in particular of the chest or of the urinary tract, would be treated speedily and contained. He referred to her relative mobility, her normal medical condition apart from the consequences of her injury and the longevity of her sisters (all in their mid 70's). Those circumstances led him to make what he called a 'guestimate' of her life expectancy of about 20 years from the date of the accident.

Mr Alan Richardson, a consultant neurosurgeon, called on behalf of the appellant, said that there is a significant risk of future deterioration in her medical condition. That is because of her age and limited mobility, both of which, he said, would weaken her immune system and render her vulnerable to infection. As to life expectancy, he too attempted no more than a 'guestimate'. Having initially put it at about 8 years from the date of the accident, he said that, though his preferred view was in the region of 10 years from that date, it could be as long as 13 years, that is, to about 10 years, 3 months, from the date of trial.

The Judge preferred what he called "the considered and more closely reasoned approach" of Mr Richardson, but fixed upon a life expectancy of 17 years, 9 months, from the date of the accident, that is, 15 years from the date of trial and nearly 5 years longer than Mr Richardson's longest estimate. This is how he described his conclusion, at [1996] PIQR Q65:

" Sadly I am convinced that the opinion of Mr Richardson is well warranted, namely that there is a likelihood of no further improvement in mobility and a significant future risk of deterioration in her physical condition. While she has shown significant improvement in her spirits, cooperation and capacity to perform up to the upper end of her limited neurological capacity, age and the lack of independent mobility will weaken the immune system and render her vulnerable to infection. I accept that which Mr Richardson expresses in his opinion. She will become more at risk of stasis and her ability to combat infection will become compromised.

Dr Harvey's view is that Mrs Wells' life expectancy is not affected by her condition in view of the intensive care that she now receives and in the future will receive. Mr Richardson originally concluded that five years [from the date of trial] is the period of life expectancy but has accepted that there is a wide margin. His later reports and evidence advanced the opinion that it could, for non-medical reasons, be as long as thirteen years from the date of the accident. Both medical men emphasize that their estimates are 'guestimates'.

I prefer the considered and more closely reasoned approach of Mr Alan Richardson and doing the best I can upon the medical evidence and all the other evidence I am persuaded that the life expectancy in this case more likely than not is fifteen years."

Mr John Leighton Williams, on behalf of the appellant, submitted that, having regard to the undisputed medical evidence as to Mrs Wells' present condition and its permanency and to the Judge's preference for the evidence of Mr Richardson, his figure for life expectancy is too long and that his assessment of £120,000 for injury, pain, suffering and loss of amenity is too high. As the life expectancy bears on the amount of the general award, we shall deal with life expectancy first.

Mr Leighton Williams submitted that the Judge, having said that he preferred Mr Richardson's evidence, referring expressly to his assessment of a possible expectancy of up to 13 years from the date of accident, 10 years, 3 months, from the date of trial, could not properly fix on a figure for 15 years from the date of trial.

Mr Christopher Purchas, on behalf of the Mrs Wells, submitted that the Judge, having preferred the evidence of Mr Richardson to that of Dr Harvey, was entitled to conclude from it, the evidence of longevity in her family, the excellent care regime and her relative mobility, that the probable life expectation lay between their respective estimates.

In our view, it is plain from Mr Richardson's reports and his evidence as a whole that his final acceptance of the possibility of 13 years from the date of the accident was the longest that he was able to contemplate. The Judge, having expressly stated that he preferred the reasoning of Mr Richardson to that of Dr Harvey, could not properly give effect to it by taking a figure somewhere between his maximum and Dr Harvey's much higher figure. It may be that the Judge fixed on the figure of 15 by splitting the difference between Mr Richardson's preferred figure of 10 years and Dr Harvey's 20 year figure from the date of the accident and mistakenly applying it to the date of trial. However he went about it, we do not consider that the figure of 15 from the date of trial is justified on the Judge's own view of the evidence. We substitute an expectancy of 10 years, three months, from the date of trial (13 years from the date of the accident).

We return now to the question of general damages for injury, pain, suffering and loss of amenity.

Mr Leighton Williams submitted that the Judge, in awarding £120,000 under this head, wrongly put the case in and towards the top of the 'Very Severe Brain Damage' category in the Judicial Studies Board Guidelines, the range of which at the time was £105,000 to £125,000. He maintained that the Judge should have regarded it as in the next category, albeit towards the upper end of it, namely 'Moderately Severe Brain Damage', the range of which was £77,500 to £95,000.

In our view, there is no doubt that Mrs Wells' injuries and disability, though severe, do not come within the former category of very severe brain damage, which the Guidelines describe as follows:

"In the most severe cases the plaintiff will be in a vegetative state; there may be recovery of eye opening and some return of sleep and waking rhythm and postural reflex movements; no evidence of meaningful response to environment. Unable to obey commands; no language functions and need for 24 nursing care."

Her condition fits more readily the latter description in the Guidelines of moderately severe brain damage, namely:

"Severe disability. Conscious, but total dependency and requiring constant care. Disabilities may be physical, e.g. limb paralysis, or cognitive, with marked impairment of intellect and personality."

The scheme of the Guidelines is to identify considerations affecting the level of the award within each category, considerations which are the same in these two categories, namely insight, life expectancy and extent of physical limitations. As Mr Leighton Williams' and Mr Purchas' submissions suggested, the main relevant considerations here were her age, nearly 58 at the time of the accident, limited but some mobility, her ability to take and enjoy trips with her family outside the home, some, but limited, insight into her condition, a need for constant care which will be provided, no great pain and a significantly limited expectation of life.

There are no closely comparable reported cases. Such comparables as there are indicate, not surprisingly, higher levels of awards to children and young people than to those in middle or late middle age, and to those whose expectation of life is normal and not curtailed by their condition. Some of the comparables to which were referred were of awards to children with similar or greater levels of disability than that of Mrs Wells, producing awards the value of which at the time of trial was over £120,000. See Cassel v Hammersmith & Fulham Health Authority, [1992] PIQR Q1, QBD, Q168, CA; Almond v Leeds Western Health Authority, [1990] 1 Med LR 370; O'Donnell v South Bedfordshire Health Authority, Kemp, Vol 2, para. A4-001/4. We were also referred to two cases of severely brain damaged claimants in their forties producing similar levels of awards: Degan, a CICB case, Kemp, Vol 2, para. A4-002 and Cunningham v Camberwell Health Authority [1990] 2 Med LR 49. Cunningham is the closest on the facts to this case, but it concerned a much younger woman, 41 years old at the date of injury, who was far more seriously permanently disabled than Mrs Wells and, like her, had some awareness of her condition.

In our view, both by reference to the Judicial Studies Board's Guidelines and such reported comparables as there are, the Judge's award of £120,000 in this case is too high, and well above the bracket for this type of case. We consider that there should be substituted an award of £100,000.

Future Loss Of Earnings

The parties agreed before the Judge that Mrs Wells had a working life of 2.5 years from the date of trial, and both suggested to him some discount from that figure when calculating the multiplier. Mrs Wells' proposed multiplier was 2.35 and the appellant's proposal was 2 to 2.25. However, the Judge, in awarding £18,812, took the full 2.5 as the appropriate multiplier. The difference is almost de minimis in the context of this claim. However, the Judge should have allowed some discount, and Mr Purchas has conceded that there could be a reduction so as to produce his originally proposed figure of 2.35. In our view, that is as much as the appellant could expect, and we substitute a multiplier of 2.35 under this head, producing a figure of damages of £17,683.28.

Future Cost Of Therapies Etc.

The Judge applied what appears to be a full life multiplier of 12.5 to the continuing costs, in current figures which he found established, of physiotherapy, occupational therapy, regular attendance at Headway and holidays. The Judge also awarded a lump sum of £1.300 for counselling. He appears to have settled on the multiplier of 12.5 by reference to Mr Prevett's evidence and the Ogden Tables, applying a discount rate of 2.5, possibly a rounding down from 2.8, the real return net of 25% tax on 3.78% obtainable on ILGS at the time. See pp. Q66-67 of his judgment.

Mr Leighton Williams suggested that the Judge should have applied a lower multiplier, first by applying a conventional discount of 4.5% to a lower life expectancy than 15 and then by making a further reduction to reflect Mrs Wells' diminishing need for therapies as she gets older. Alternatively, he suggested that the Judge should have discounted the individual awards. He submitted that the Judge's application of the full life multiplier was inconsistent with his findings that there was a significant risk of future deterioration in her physical condition and a likelihood of increased vulnerability to stasis and infection. He also attacked the multiplicands in general terms, complaining that they were based on a 52 week year, making no allowance for illness and tiredness - both of which in the past, the evidence showed, had reduced physiotherapy - or for holidays. As to holidays, he suggested that they would become less likely in later years as her condition deteriorated.

Mr Purchas argued in support of the multiplier of 12.5, based on the Judge's assessment of 15 for life expectancy and an apparent discount of 2.5% and the undiscounted multiplicands. He referred to the Judge's firm acceptance of the costs for the services claimed and the continuing need for them at the same or a greater level.

As to physiotherapy, the evidence before the Judge was that continuance of it was vital to the maintenance of Mrs Wells' mobility and general well-being, though there was some indication that she found it very tiring. He accepted the evidence called on her behalf that there should be provision of £9,360 for 6 hours of it a week in 1995/1996, reducing to £4,680 for 3 hours per week in 1996/97 and continuing thereafter at £1,560 p.a. for 1 hour per week. The long-term relatively modest provision of 1 hour per week seems to us to be of a piece with the Judge's view, when dealing with life expectancy, that there was a significant future risk of deterioration in her physical condition (see Q65). His concern, at Q70, appears to have been that she might have benefited from more than one hour a week over the years, but he did not reflect that concern in his award.

" ... It is the intensive therapy, as I have already observed, that really enables Mrs Wells to have some mobility, although not independently initiated. It is something that is of crucial importance in this regime of care. I accept that it will not be reduced and the costs that are in fact contended for by the respondent ... are made out. ... I have doubts as to whether that will be enough as she gets older, but that is what is claimed for and I am not going to substitute my view for a higher figure [sic]."

As to occupational therapy, the Judge expressed himself satisfied on the evidence that it was and would be of continuing value to Mrs Wells and that the figures constituting the reducing multiplicands had been established. Those were: £2,840 for 1995/96, £1,040 for 1996/97 and thereafter at the rate of £480 p.a.. He also awarded £1,440 p.a. for Mrs Wells' twice weekly attendances at Headway.

As to Mrs Wells' visits to Headway, the Judge's finding on the evidence was that there would be a continuing and lasting need for them. He said, at Q70:

"I considered carefully the submission that perhaps as she gets older Mrs Wells will not want to go to Headfirst [sic], but I have taken the view that it is that sort of stimulation by getting out and being with those who have a sympathetic view to her own condition that will continue to be helpful throughout the rest of her life and therefore the proper multiplier will be 12.5 there."

As to the provision for annual holidays, the Judge was clearly satisfied on the evidence that these had been and would continue to be an important part of the annual cycle for Mrs Wells and her family. In awarding £1,420 p.a. under this head, he said, at Q71:

"I turn to the question of holidays. It is clear there is some justifiable emotional tie to Wales. It is something that goes back in her psyche and in her recollection. It is something that is talked of in the family and I see no reason why there should not be two weeks in Wales per annum, or an equivalent location, and the figures there in my judgment are wholly appropriate and the multiplier there is 12.5."

In the light of our substitution of a figure of 10 years, 3 months, for life expectancy from the date of trial for that of 15 taken by the Judge and our view that the conventional discount rate of 4.5% should apply, the multiplier should, in any event, be reduced from 12. 5 to 8.25. See Appendix 1A in Kemp, Vol. 1, p 8032/1. However, we see no need for any further reduction to take it below a full-life multiplier. The Judge was entitled to find, on the evidence before him, that Mrs Wells should continue indefinitely with the various therapies and that she would benefit from doing so. As the figures we have mentioned indicate, he provided for an early reduction in physiotherapy and occupational therapy and, overall, made a modest life-time provision for those and the other amenities under this head. Accordingly, the appropriate total sum under this head, applying a multiplier of 8.25 is £54,265.

Mr Leighton Williams also complained about the Judge's award of a lump sum for counselling, observing that it had only been suggested rather diffidently by Mrs Joanna Clarke-Wilson, an occupational therapist who had given evidence on behalf of Mrs Wells. The effect of her evidence (see transcript day 1, pp 287C-288A) is that, although Mrs Wells had a limited intellectual function, she had some awareness of her condition and that could benefit from counselling. In our view, the Judge should not have acted on that suggestion. The other evidence, including the video-film, demonstrates its invalidity. Mrs Wells has far too low a level of brain function to benefit from counselling as distinct from, and in addition to, the constant stimulus which her attentive family, the permanent company of her carers and her weekly physiotherapy and occupational therapy will give her. Accordingly, we disallow the award for counselling in its entirety.

Future Cost Of Care

The evidence before the Judge of the present 24 hour care regime established for Mrs Wells was as follows. At the centre of it is Mrs Wells' daughter, Mrs Susan Smith, whom the Judge described as 'the key person' providing the continuity in the whole regime. There is a case manager, Mrs Trina Hardiman, of the case management firm called Head First, who liaises closely with Mrs Smith in the maintenance of the established system of care and therapy, including the staff to provide those services. There is a residential carer on duty for 14 hours a day and on call at night, a day carer who works from 9 a.m. to 3 p.m., and a night carer whose hours are from 9 pm to 8 am. The carers are variously employed direct or through the British Nursing Association Agency. The evidence was that there would be a move as soon as possible to all direct employed staff. In addition, Mrs Smith received some part-time domestic help.

The Judge was of the view that the existing level of care was necessary and would continue to be necessary for the rest of Mrs Wells' life. To the extent that there was a difference between the expert evidence as to care and its cost called on each side, he said that he preferred that given on behalf of Mrs Wells. On that basis he settled on a multiplicand of £71,250 p.a., to which he applied his multiplier of 12.5, producing a total of £890,625.

Mr Leighton Williams submitted that that award of nearly £900,000 for the future care of a 60 year old woman is far too high and out of proportion to her needs. He challenged its make-up in the following respects.

First, he criticised the figure of £28,963 pa for a residential carer because it was costed on the basis of a direct employed carer on a 14 hour day, whereas BNA carers were, at any rate until 1995, paid on the basis of a 10 hour day. However, the appellant's expert had acknowledged in evidence that it would not be unreasonable to continue the existing level of care of 14 hours a day, which she considered generous but could not say was excessive. However, she suggested that future carers might be asked to perform more duties. The Judge's conclusion, at Q67, was that, in the light of that evidence in addition to that of Mrs Wells' nursing care experts, he could see no reason for not continuing with that level of care.

In our view, there is no basis upon which this Court could properly interfere with that conclusion of the Judge. It was of a piece with the nursing care evidence on both sides and with his view of the medical evidence that Mrs Wells was likely to need more, not less, care as the years went by. At Q67 he said:

"... I have indicated already that the present care regime should continue. ... I look at ... [the nursing care evidence] against the background of the medical evidence that there is unlikely to be any significant improvement. I remind myself of the observation I made earlier. I cannot rule out the prospect of some deterioration and the need for more intensive care. ..."

Mr Leighton Williams' second criticism under this head was about the Judge's allowance of £3,368 pa (£70 per week plus national insurance) for an on call at night fee. He pointed out that the existing contracts of direct employed carers provided for no such fee 'unless called three times [a night] or more by waking staff', and that in the case of the agency carers the uncontradicted evidence was that conventionally there was no extra charge for up to two calls a night.

The evidence was that Mrs Wells needed turning in bed at night because of her immobility and the consequent need to avoid bed sores and because of her variable urinary incontinence which was unlikely to improve. The nursing care experts called on behalf Mrs Wells said that she needed checking for incontinence and turning every two or three hours and that it was not reasonable to expect a residential carer to undertake such regular work at night as part of her normal duty. The nursing care expert called on behalf of the appellant suggested that the frequency should be less. However, the Judge preferred the evidence of Mrs Wells' nursing care experts, stating, at Q68, that he was satisfied that she would "need to be seen three times per night". We can see no basis upon which we can properly differ from that view of the evidence.

Mr Leighton William's third criticism under this head was that the Judge wrongly provided in his award for a night carer, that is a night nurse, as distinct from a night sleeper. The cost of a night carer was £19,639 pa, whereas a night sleeper would cost £9,100, a potential saving of £10,539 pa. He argued that a night sleeper could cope perfectly well alone or, if necessary, with the help of a resident carer, attending to the three or so checks a night.

Mr Purchas relied, as he did in relation to the other items under this head, on the Judge's preference for the evidence of Mrs Wells' nursing care experts that the existing care regime should continue.

In our view, this is another instance where, on the evidence, the Judge has over-provided for Mrs Wells. He has awarded her the cost of two persons to care for her at night, a residential carer who is to be paid, in addition to her wage of £28,963 pa, a substantial supplement of £3,368 pa for being called out at night, and a night carer at a cost of £19,639 pa whose duty is to remain awake throughout night to deal in the main with the three or so occasions when it is necessary to help check her for incontinence and turn her. We are firmly of the view that a residential carer on night call, and paid for it, and a night sleeper, similarly on call, would be adequate, and we, therefore, reduce the award under this head by £10,539 pa.

Mr Leighton Williams has also attacked the Judge's provision in the overall care figure for bank holiday costs of £1,368 pa, for which the existing care contracts made no provision, and for travelling costs for carers of £1,092 pa for which the contracts did provide but which, according to the appellant's nursing care expert, were unusual for direct employed carers.

The Judge, in his award, clearly accepted the reality, as did the appellant's nursing care expert, that it is not unreasonable or unusual to have to pay extra for work on bank holidays, and he was, in our view, entitled to accept the cost as estimated by the experts called on behalf of Mrs Wells. As to travelling expenses, the evidence on her behalf was that she would need to spend over £3,000 pa. The evidence on behalf of the appellant was that the claim was 'excessive' since, although it was often part of agency staff expenses, it was unusual in the case of direct employed staff and that a lower figure of £1.092 pa should be substituted. That figure was presumably intended to allow for the likelihood of employment of some agency staff from time to time. As we have indicated, the Judge accepted the appellant's figure, and we can see no reason to disturb his finding in the matter.

Finally, under the head of future care, Mr Leighton Williams made two submissions about Mr Wells' future role in contributing to Mrs Wells' care and as to the benefit he receives from the professional carers.

As to Mr Wells' role as a future carer, he contended that the Judge should have made some allowance for the care which he could be expected to give Mrs Wells when he retires. He was aged 62 at the time of trial and employed as an assistant manager at a Co-operative supermarket. The evidence was that he was a loving and attentive husband who helped in her care when he came home from work and at the weekends. He was due to retire at the age of 65, and it was expected that he would be able to give more time to her then. However, there was evidence that he had a bad arm and shoulder which already disabled him from helping in lifting or moving her and which prevented him from doing much useful gardening. And, of course, he too would become less able to help as he grew older. On that evidence, we do not consider that the Judge could with confidence have made any identifiable reduction on that basis in the figure that he awarded for the cost of future professional care.

As to the benefits received by Mr Wells, Mr Leighton Williams referred to the terms of the existing residential carer's contract requiring her, when not attending to Mrs Wells, to support him in the organisation and maintenance of the family home and to help him in the running of the house. It may be that Mr Wells will receive some benefit in this way, but it is unlikely to be significant given the provision that is also made in the award for domestic help. In any event, the particular residential carer's contract, which may not be replicated in this respect in future arrangements for residential care, does not in this incidental provision increase the overall cost of Mrs Wells' care.

Accordingly, we reduce the Judge's overall multiplicand of £71,250 under this head by £10,539 (the additional cost of a night carer which we have disallowed) to one of £60,711, to which we apply the 4.5%, discounted multiplier of 8.25 to produce £500,865.75.

Future Domestic Help

The Judge awarded a total of £23,400 (£1,872 p.a. x 12.5) for the cost of future domestic help of 9 hours a week. Mr Leighton Williams did not challenge the need for domestic help at the level and cost contended for on behalf of Mrs Wells. However, he submitted that the Judge disregarded the carers' contracts which required them to do much of that work and thus double-counted in making this separate award. The Judge in fact referred to that aspect. He said, at Q68:

"I turn to the claim for domestic help. That, in my judgment, is well made out, both as to the necessity of it, the time and the rate of pay. ... in my judgment the contracts, although widely drawn as for the carers in this case, are unrealistically wide when they trespass upon the degree of domestic service and garden help."

Mr Leighton Williams submitted that the Judge should not have dismissed those contractual obligations, since they had apparently been framed by Mrs Wells' case manager with her and Mr Wells' needs in mind. He referred us to three contracts, the terms of each of which undoubtedly imposed wide-ranging household duties, including cooking, cleaning, washing, ironing and dusting, One of them, in addition, included light maintenance work, gardening and shopping. As one of the nursing care experts called on behalf of Mrs Wells put it, the carer's job was to be "very much involved in the running of the whole household". That also seems to have been the view of the nursing care expert called on behalf of the appellant, though her view was that carers should normally only be expected to do light household chores. She also said that where, as here, there were two full-time carers more domestic work could be expected from one or both of them than in the case of only one full-time carer.

It may not be possible to achieve the same favourable terms as to domestic duties when negotiating future care contracts on behalf of Mrs Wells. However, it does seem to be accepted that carers generally have, and are likely to continue to have, a domestic role to a greater or less degree as part of their overall responsibilities. In the circumstances, and bearing in mind that there is provision for two full-time day carers for Mrs Wells for the rest of her life, we consider that there has been some double-counting in this separate award and that some reduction of it should be made on that account. Precision in fixing on such a reduction is impossible, but allowing for the uncertainty of future contractual arrangements, we consider that it would be right to reduce the award by one third, namely to £1,248 pa so as to allow for 6 hours of separate domestic help weekly. The substituted award under this head will, therefore be £10,296 (£1,248 x 8.25).

Gardening

The Judge awarded £6,675 based on what he referred to as an agreed figure of £534 pa, to which he applied the multiplier of 12.5. In fact that cost had not been agreed; it came from a quotation sought, but not accepted, by Mrs Wells' family. The evidence was that, before her injuries, Mrs Wells had done most of the gardening and that since then various members of the family, including Mr Wells, had tried to keep it in order, but were finding it too much. Despite the terms of one of the carer's contracts, the evidence was that little gardening help was given by the carers.

Mr Leighton Williams submitted that the present and future need for help in the garden did not stem from Mrs Wells' disability. Mr Wells' increasing inability to cope with it was an entirely separate development which would have necessitated paid help in any event. There was, in addition, the present and possible future contractual requirement of some help in this respect from the carers.

We have felt some hesitation about this award. However, since Mrs Wells had undertaken the main gardening burden before the accident, and could have been expected to continue to do so but for it, we feel that there should be some recovery under this head. The quoted cost of £534 pa does not seem unreasonable to us. However, we do not consider that the Judge should have applied a full multiplier. Mrs Wells' ability to cope with the garden would have been likely to diminish as she got older even if she had remained in reasonably good health for her age. Given the full multiplier of 8.25 that we have substituted, we consider that a multiplier of 6 would be appropriate, producing a figure for damages under this head of £3,204.

The Respondent's Notice - Court of Protection Fees

Included in the award were figures for the past and future costs of the Court of Protection, of the case manager and of Mrs Smith, Wells' daughter, as receiver, in the general management of her affairs. Also included was a sum for past fees payable, subject to taxation by the Court of Protection, to Mrs Wells' solicitor in advising and assisting Mrs Smith in her appointment as receiver and in her dealings as such with the Court of Protection.

Claimed, but not included in the Judge's award, were estimated annual sums for future advice and assistance that Mrs Wells' solicitor would give to Mrs Smith in her role as receiver in managing her mother's affairs and in her dealings with the Court of Protection to that end. Mrs Wells' solicitor gave evidence that it was usual for legal costs to be incurred in the general management of a patient's affairs in dealing with the Court of Protection, such as in advising the receiver on budgeting, investments, tax returns and the form of carers' contracts, and to appear as necessary before the Master in connection with such matters. She said that the practice was for the Court of Protection to allow taxed costs of solicitors for such management where the receiver is not a professional receiver. The solicitor estimated the first year's costs in this case at £3,900 and thereafter at £1,400 p.a. for life.

The Judge declined to make such an award because, in his view, the costs arose from the award not from Mrs Wells' inability to administer her own affairs. He said, at pages 12G to 13E of the transcript of this (unreported) part of his judgment:

" It seems to me that those are potential expenses that arise out of the award and is rather akin to the claim for the fees of stockbrokers, financial advisers, accountants and the like, involved in the management of the plaintiff's investment portfolio. Here in this case provision has already been made for the administration of her fund. It is complementary provision. Firstly, there is the Court of Protection itself dealing with the investment of the funds and to whom an account is rendered by the receiver already appointed, a receiver who, in the terms of the award, is already remunerated for her time and skills, who is professionally assisted by a case manager, again for whom provision is made to pay for this cost throughout the period of the plaintiff's life.

It seems to me therefore that any additional costs relating to investment or any further accounts beyond receiver's accounts arise out of the award rather than out of the Plaintiff's inability to administer her own affairs. That inability is wholly taken care of, in my judgment, in this case by the Court of Protection, and her daughter the receiver, together with professional advice that is envisaged as coming from the case manager that has been appointed.

In my judgment therefore provision is not appropriate for future legal costs."

Mr Purchas submitted that the Judge should have awarded these additional costs because:

1. Mrs Wells needs assistance in looking after her affairs as a result of the appellant's negligence;

2. the required assistance is provided in part by the Court of Protection, in part by her receiver and in part by her solicitor;

3. the expenses are a foreseeable consequence of her injury; and

4. the expenses claimed are reasonable.

Mr Leighton Williams submitted that the Judge was correct not to allow these additional costs, for the reasons that he gave.

The starting point is the proposition to be found in Kemp Vol 1, p. 5024/5:

" Where the plaintiff is unable to look after his affairs, the Court will in a proper case include in the damages awarded, a sum to cover estimated Court of Protection fees.

The award will normally be administered by the Court of Protection, but in suitable cases the trial court may approve administration by a private trustee."

The Court of Protection prescribes by Rules tables of fixed fees and costs for general administration and the handling of transactions based respectively on the amount of the clear annual income and the value of the transaction. The scale of fees is higher where the receiver is the Public Trustee. Where, as here, the receiver is not the Public Trustee, fixed or taxed solicitor's costs may be allowed for certain items. If the receiver is a solicitor, the Court now usually allows taxed profit costs in respect of his work as a receiver. See, for example, Cassell v Hammersmith & Fulham Health Authority, an award by Rose J, as he then was, of just over £1M., on 90% liability, to an 8 year old boy suffering from cerebral palsy caused by medical negligence at his birth. The award included the costs of the Court of Protection and of a professional receiver, though without the 10% reduction applied to the other damages. Certain parts of his award were successfully challenged in the Court of Appeal, including his decision not to reduce those costs by 10% like the rest of the damages. However, there was no challenge to the principle of their recovery. See Cassell v Riverside Health Authority [1992] PIQR Q168, CA. See also Futej v Lewandowski [1980] 124 Sol J 777, per Edwin Jowitt QC sitting as a Deputy High Court Judge, where the court awarded as part of the damages the management fees of both the Court of Protection and of the Official Solicitor as receiver. In Cassell Rose J explained the award in the following way:

" There is before me an agreed statement from Mr. Hooper, the respondent's solicitor, indicating that his fee, if he were to be appointed as receiver, would be £2,650 a year, which is somewhat, though not greatly, higher than would be incurred if the public trustee were the receiver. The statement indicates the services which he would provide. These include regular meetings with the parents and child, distribution of income from the fund through a bank account, dealing with tax returns, commenting on investment advice obtained by the Court of Protection, and preparing an annual account and report for the Court of Protection. Mr. Whitfield accepts that, if the public trustee were the receiver, the Court of Protection costs based on this would properly be recoverable from the appellants. That being so, it seems to me that the only question on this aspect is whether, in the circumstances of the present case, the appointment of a professional receiver other than the public trustee would be reasonable. In my judgment, the answer is plainly yes. The exceptional size of the fund merits a professional receiver and the high level of parental involvement and responsibility which here exist would, it seems to me, be most satisfactorily catered for by personal liaison of the kind which Mr. Hooper's statement contemplates."

In our view, Rose J's reasoning, which we respectfully approve and adopt, is equally applicable, where the facts warrant it, to the case of a non-professional receiver who may need to turn to a solicitor for assistance in the administration of fund. But for the injury and award and the consequential need to involve the Court of Protection in the administration of her affairs, Mrs Wells would not need such sophisticated assistance. There is no justification for treating it as an impost on the sum considered necessary by the Court to compensate her for what she has lost or as akin to the cost of investment advice in cases where the Court of Protection is not involved. See Francis v Bostock 9th November 1985, The Times, a non-Court of Protection case in which Russell J, as he then was, in referring to Duller v South East Lincolnshire Engineers [1981] CLY 585, per Edwin Jowitt QC, then sitting as a Deputy High Court Judge, expressly acknowledged the distinction. Moreover, if the Public Trustee or a professional receiver had been appointed, involving greater expense, she would have been entitled to recover the taxed costs of such assistance. In our view, the real question is whether, given the provision in the award for a case manager for Mrs Wells and for some administrative and accounting work by Mrs Smith as receiver, it is reasonable and necessary for Mrs Smith to have the assistance of a solicitor in her management of her mother's affairs and in her dealings with the Court of Protection.

Whether it is necessary to distinguish between cases where the Court of Protection has and has not become involved has been the subject of a first instance judgment contrary to that of Russell J. In Anderson v Davis [1993] 5 PIQR Q87, Rodger Bell QC, sitting as a Deputy High Court Judge, held that the necessary and reasonable costs of managing a large award are recoverable whether or not the Court of Protection has become involved. He said, at page Q101:

" The judgment of Russell J, as he then was, has been followed in other cases and it is with some trepidation that I decided not to follow it here, for the following reasons. First, in a case like this, which is one where any wise plaintiff without financial or investment expertise would be bound to require skilled advice on the management of his fund, I can see no difference, in principle, between an expense which is necessary under the Rules of Supreme Court or pursuant to the direction of the judge on the one hand, and an expense which is enforced by circumstance, or which will probably be enforced by circumstance, save that the Court of Protection fees are bound to be judged as reasonable expenses, whereas other management fees may or may not be judged to be reasonable, in all the circumstances.

Secondly, if the plaintiff has, in commonsense and good judgment, to spend management fees to use his fund to provide true compensation, that seems to me to be part of the economic loss which the Court is enabling him to recover. Put another way, if he does not take such management advice, at a cost to him, the reality is that the award will not compensate him as the Court intends it to do by making its award of damages."

As the Court of Protection is involved here, it is not necessary to resolve that conflict of opinion on this appeal. All we say is that Mr Bell's reasoning is of a piece with ours in holding that the necessary and reasonable costs of employing a solicitor to assist Mrs Wells' receiver - her daughter - and the case manager in dealing with the Court of Protection should, in principle, be recoverable as part of her damages flowing from the appellant's negligence. Much may depend, whether or not the Court of Protection is involved, on the competence of a lay receiver or plaintiff and on the nature and complications of the continuing management of a large fund; see eg Hodgson v Trapp Kemp, Vol 2, p 51635, per Taylor J, as he then was, at pp 51641-2. Here Mrs Wells' solicitor gave evidence to the Judge as to the legal assistance and its cost likely to be required over the coming years, and as to the reasonableness and correspondence of the estimated costs with taxed costs granted by the Court of Protection in other similar cases. We recognize that such costs are in addition to those payable in respect of case management and of some administrative assistance to be given by Mrs Wells' daughter as receiver. However, it does not seem to us that the additional costs for this legal input into the general management of such a large sum is unreasonable, given the solicitor's uncontradicted evidence;

of the nature and need for the proposed services in this case; and

of the practice of the Court of Protection to allow comparable sums by way of taxation where there is no professional receiver.

Accordingly, we allow the claim under this head, being £3,900 for the first year and £1,400 p.a. for subsequent years. On a multiplier of 7.25 years from May 1996, that amounts to a total of £14,050.

Substituted Awards

Injury, pain and suffering 100,000

Future loss of earnings 17,683.28

Future cost of therapies 54.265

Future cost of care 500,865.75

Future domestic help 10,296

Gardening 3,204

Court of Protection fees 14,050

__________

700,364.03

THOMAS v BRIGHTON HEALTH AUTHORITY

Mr and Mrs Thomas lived in Brighton. Mr Thomas had a small business of his own and Mrs Thomas was an air hostess. It was their plan to have three children, Mrs Thomas continuing her career despite the interruptions of childbirth. Their first child James was born on 30th June 1989 in the Royal Sussex County Hospital. As a result of the maladministration of a drug intended to induce labour James suffers from cerebral palsy. These proceedings for the recovery of damages in negligence were commenced in 1993. Liability was admitted and the case came for trial before Collins J on 7th November 1995 on the issue of quantum of damages only. By that date James was six years. His cognitive ability was unaffected by his condition and the evidence showed that he was a bright child of at least average intelligence. However he suffered from severe physical disabilities which resulted in many handicaps limiting his capacity to realise his intellectual potential. Speech and walking were equally difficult for him. He could not cut up food, hold a cup, or dress himself. Nor could he use a computer without the aid of a special device. Although the medical experts differed in their prognosis as to the quality of life ahead they were in agreement that James's expectation of life should be treated as 60 years.

Housing Costs

In October 1990, about 15 months after James's birth and 5 years before the trial, the family bought a larger house. They needed extra space because of his disability. The additional cost was about £60,000. They raised that sum by way of an endowment mortgage. By the date of the trial that had cost them an extra £27,250 in mortgage interest. The Judge dealt with the claim for past and future additional housing cost by applying the Roberts v Johnstone ([1989] 1 QB 878, CA) formula to both, but adopting a discount rate of 3% instead of the 2% indicated in that case.

The respondent maintains that the Judge should not have applied the Roberts v Johnstone formula to the past 5 years of mortgage interest and should have awarded the entire sum of £27,250 instead of the £9,000 (£60,000 x 3% x 5) that he did award. The appellant maintains that he was correct to apply the formula to past and future housing cost, but should have applied the traditional 2% discount rate.

The respondent contends that the Judge was correct to increase the discount rate from 2% to 3% because a risk-free investment rate of 3% can now be obtained by the purchase of ILGS. The appellant argues that there is no evidence of that and that such evidence as there may be of economic change is not sufficient to warrant moving to a higher rate.

The Judge accepted the respondent's argument for an increase because he was satisfied on the evidence that the rate of return in risk-free investment, which he equated to an ILGS rate, had by then moved up to and had settled at 3%. He said, at page Q56 of his judgment:

" Mr Haberman and Mr Dickerson both agreed that in the long run property prices would rise to keep pace with inflation, and so I see no reason to vary the return on that ground. The second ground is more substantial. It is clear from Stocker LJ's judgment [in Roberts v. Johnstone] at 892B-893B that the Court of Appeal adopted the figure of two per cent because 'a tax-free yield of two per cent in risk free investment would not be a wholly unacceptable one' and relied on Lord Diplock's speech, which I have already cited, to reach that conclusion. It is to be noted that Lord Diplock relied heavily on the fact that in 1983, when Wright v. British Railways Board was decided, ILGS were producing two per cent, and made it clear that the figure of two per cent was applicable 'for the time being': see p. 784C.

The evidence before me satisfies me that the rate has settled at three per cent. Accordingly and consistently with the reasoning of the Court of Appeal in Roberts v. Johnstone, I think that the rate should be three per cent rather than two per cent. ..."

On this appeal the following matters are agreed:

1. That the Roberts v Johnstone test is different from that identifying the discount rate for future loss;

2. that the 2% rate derived, not from any examination by the trial judge or the Court of Appeal in that case of then current rates, but from the speech and reasoning of Lord Diplock in Wright v British Railways Board, at 781, who had in turn relied upon the 2% figure adopted by the Court of Appeal in Birkett v Hayes [1982] 1 WLR 816 for interest on general damages from the service of the writ to trial;

3. that the value of property is likely to continue in the long-term to at least keep pace with inflation;

4. that there was no evidence as to ILGS rates or any other mode of investment before the trial judge or the Court of Appeal in Roberts v Johnstone, and that if there had been it would have shown at the time of the appeal, as Mr Dickerson's uncontradicted evidence shows, gross rates of nearly 4% producing a net return after tax of over 3%.

Mr Coonan submitted that the Judge erroneously took the ILGS rate as his starting point to measure the appropriate rate today. He added that, in any event, the evidence before the Judge did not support the view that the ILGS rate had 'settled' at 3% or that it is a 'risk-free' rate as contemplated by the Court of Appeal in Roberts v Johnstone.

Mr Owen submitted that the Roberts v Johnstone formula is the same or closely similar to that with which the House of Lords was concerned in Wright, namely that for the selection of an appropriate rate of interest on general damages - the net return on risk-free investment. He submitted that the evidence before Collins J. demonstrates "by reference to the net return on ILGS" that the 2% rate is now too low and that the appropriate rate is that selected by the Judge, namely 3%. He added that this variation is just the sort of adjustment that Lord Diplock foresaw in Wright.

As Stocker LJ held in Roberts v Johnstone, the measure of damages in respect of additional housing costs necessitated by a plaintiff's injuries is the additional cost over his lifetime of providing that accommodation. Clearly, that may be in the form of compensation for loss of use of capital or, as here, the continuing true cost of the additional mortgage commitment. The underlying assumption, borne out by the evidence in this case, is that protection against inflation and thus the risk element is afforded in the long term by the rising value of property. Stocker LJ selected the rate of 2% as representing an annual tax-free yield on risk-free investments, that is, the real reward for foregoing the use of capital, but did not do so by tying it to a return then current on any particular form of investment.

The genesis of the 2% figure is undoubtedly to be found in the judgments of Lord Denning MR and Eveleigh and Watkins LJJ in the Court of Appeal in 1983 in Birkett v Hayes which, as we have mentioned, concerned the appropriate rate of interest to be awarded on general damages from service of writ to trial. In the circumstances, it is not surprising that the Court did not examine closely what might have been earned by the respondent in risk-free investment during that period. Their treatment of the matter was, in any event, much broader than one of considering individual rates of return according to type of investment. Their purpose was fix on a guide-line figure below the market rate of return which would generally be fair to both paries, recognizing that:

1. because of the decision of the House of Lords in Pickett v British Rail Engineering Ltd. the award was to be assessed at the date of judgment, not at the date of the writ; the award thus had built into it an element reflecting inflation for the period in question; see per Eveleigh LJ at 823D-F; and

2. the award was discretionary and would often be made in cases where the plaintiff could have proceeded more quickly with his claim, but yet where it would be wrong to deprive him of interest; see per Eveleigh LJ at 824B-C.

Lord Denning MR concluded his judgment on the point at 821D-E in these words:

" ... if interest is to be awarded from the date of the service of the writ (as Pickett's case [1980] AC 136 compels), then that interest should be very low indeed. There is nothing to guide us but the feeling of what is fair. ... Having discussed it with my brethren, I would put the interest at 2 per cent. and recommend it as a guideline for future cases.

Eveleigh LJ said much the same, at 824B:

"... I ... think that we should approach this matter upon the basis that the court should arrive at a final figure which will be fair, generally speaking, to both parties."

However, he settled on the same 2% figure by assuming a true earnings rate of interest of 4%, appropriate to a period of stable currency (823G), noting that such return would attract tax on a claim for past loss of earnings. He then continued, at (824H-825A):

" As the plaintiff does not pay tax on the interest on general damages and as I regard 4 per cent. gross as too high, we must look for a net figure below 2.8 per cent. There was evidence in this case that to very select bodies, such as pension funds, two recent government stock issues which are index-linked had all been taken up. The actual interest rate which these produced of course fluctuates according to the figure at which the stock stands after issue but the evidence was that around 2 per cent. was enough to attract investors. National savings index-linked certificates also produce only a very low rate of interest.

These considerations lead me to regard the figure of 2 per cent. as appropriate for interest on the award of general damages. ..."

In 1983, in Wright v British Railways Board, the plaintiff asked the House of Lords to revise upwards the Birkett v Hayes guideline on the ground, inter alia, that the then commercial rate of interest was more than 2% above the rate of inflation and that, therefore, the latter rate resulted in under-compensation of plaintiffs in personal injury cases. Lord Diplock, with whom the other members of the Appellate Committee agreed, approved the Court of Appeal's reasoning in Birkett v Hayes and declined to revise its guide-line rate of 2%. He stressed that such a guideline was of a broadly applicable conventional rate, that it was one of practice, not law, and that it was one primarily for the Court of Appeal to assess according to evidence before it of the economic circumstances of the day. He added, however, that in the interest of predictability the Court should not consider revising it unless and until it is satisfied on expert evidence of a long-lasting change from the economic circumstances obtaining at the time of Birkett v Hayes governing the market rate for foregoing the use of money. His concluding words, at 785F-786B, make plain the extent and sureness of the economic change that he had in mind:

" As regards the fixing of the conventional rate of interest to be applied to the conventional figure at which damages for non-economic loss have been assessed, the rate of 2 per cent. adopted and recommended as a guideline by the Court of Appeal in Birkett v. Hayes ... covered a period during which inflation was proceeding at a very rapid rate. As I have already said, I see no ground that would justify this House in holding that guideline to have been wrong, or to overrule the trial judge's application of it to the instant case. Although the rate of inflation has slowed, at least temporarily since the period in respect of which the 2 per cent. guideline in Birkett v. Hayes was laid down, no one yet knows what the long term future of the phenomenon of inflation will be; and the guideline, if it is to serve its purpose in promoting predictability and so facilitating settlements and eliminating the expense of regularly calling expert economic evidence at trials of personal injury actions, should continue to be followed for the time being, at any rate, until the long term trend of future inflation has become predictable with much more confidence. When that state of affairs is reached - and it would be unrealistic to suppose that it will be in the immediate future - it may be that the 2 per cent. guideline will call for examination afresh in the light of fresh expert economic evidence, which may show that assumptions that could validly be made at the time of Birkett v. Hayes as to what was the current rate of interest obtainable in the market that was attributable to foregoing the use of money will have ceased to hold good. But there is no material before your Lordships to suggest that the time is yet ripe for this. ..."

Lord Diplock, in Wright, identified two possible routes by which the Court of Appeal could examine a claimed need for change, though, as he acknowledged there was no expert evidence in the case supporting his analysis. The first route (see 782D-783A) was to examine index-linked - inflation proof - stock which the Government had recently begun to issue, and to take

"the rate of interest accepted by investors in index-linked government securities ... as a broad indication of what is the appropriate rate of interest to be awarded ...".

The second route (see 782B-C) was to take the difference between actual and nominal rates of interest over the relevant period on Government or other securities in which "the risk element apart from inflation is minimal".

As to either route, Lord Diplock had earlier, at 781F-G, drawn attention to the distinction between the element of interest consisting of a reward for taking a risk and that for foregoing the use of his capital for the time being, observing that in times of stable currency the latter element predominates. This is how he put it, at 781G-H:

"... In times of stable currency the rate of interest obtainable on money invested in government stock includes very little risk element. In such times it is, accordingly, a fair indication of the 'going rate' of the reward for temporarily foregoing the use of money. Inflation, however, when it occurs, exposes all capital sums of money that are invested temporarily in securities of any kind instead of being spent at once on tangibles to one form of risk, amounting to a certainty, that upon realising the security there will be some reduction in the 'real' value of the money received for it, whatever other kind of risk the security selected for investment may attract."

The Court of Appeal in Roberts v Johnstone applied the Birkett v Hayes formula, approved in Wright, for assessing a broad conventional figure for foregoing the use of money to the purpose of assessing the future cost of additional accommodation made necessary by a plaintiff's injuries. In doing so, it was no more tied to the rates, or the trend in rates, for ILGS than the Court of Appeal or the House of Lords respectively had been in those cases. As we have already mentioned, there was no evidence as to the rate of return on ILGS or any other mode of investment before the House of Lords in Wright or the trial judge or the Court of Appeal in Roberts v Johnstone, and even if there had been it would not have supported a figure of 2%. This is how Stocker LJ, giving the judgment of the Court in Roberts v Johnstone, applied Lord Diplock's reasoning and hence the Birkett v. James guideline to this exercise, at 892F-893B:

" Lord Diplock was ... concerned with the appropriate interest rates for non-economic loss, and the reasoning may therefore be said to be inappropriate to economic loss such as the notional cost of mortgage interest on acquired property. It seems to us, however, that where the capital asset in respect of which the cost is incurred consists of house property, inflation and risk element are secured by the rising value of such property particularly in desirable residential areas, and thus the rate of 2 per cent. would appear to be more appropriate than that of 7 per cent or 9.1 per cent., which represents the actual cost of a mortgage loan for such a property.

We are reinforced in that view by the fact that in reality in this case the purchase was financed by a capital sum paid on account on behalf of the appellants by way of interim payments, and thus it may be appropriate to consider the annual cost in terms of lost income and investment, since the sum expended on the house would not be available to produce income. A tax-free yield of 2 per cent. in risk-free investment would not be a wholly unacceptable one. Mr McGregor, for the plaintiff, objects that if a rate of 2 per cent. is adopted then the multiplier of 16 would be far too low and a substantially higher multiplier should be adopted, resulting in much the same anomaly. For our part we would reject this argument, since the object of the calculation is to avoid leaving in the hands of the plaintiff's estate a capital asset not eroded by the passage of time; damages in such cases are notionally intended to be such as will exhaust the fund contemporaneously with termination of the plaintiff's life expectancy."

In applying the 2% interest rate for general damages to this use the Court of Appeal was adopting a general notional rate of interest on a non-economic loss, where the risk element of interest was accounted for by the effect of inflation, to future economic loss where the same element, and sometimes more, is provided for by a rise in property values. As we have said, on the evidence before Collins J, he was satisfied that in the long-term property prices would rise to keep pace with inflation. In the circumstances, it is hard to see where the change justifying a revision of the conventional rate to 3% is to be found.

Mr Owen's only suggestion was an ILGS rate because it represents the net return on risk-free investment. But, as our earlier analysis of the evidence when considering the multiplier demonstrates, ILGS are not risk-free. Nor on the material before Collins J, to which we have referred, is there sufficient evidence of the rates generally available to show that they have settled at 3%, or that they are likely to remain constant in the foreseeable future. In short, the evidence does not show the firm change of circumstances envisaged by Lord Diplock as justifying a revision of the rate.

The judge's reason for using the Roberts v Johnstone formula to calculate the past loss was that the rationale of the formula was to avoid over-compensation and that that should apply to calculation of both past and future loss. See page Q55 of his judgment.

Mr Owen submitted that Roberts v Johnstone is authority only for use of the formula to future additional cost. He said that there can be no proper basis for applying the formula to past additional cost, arguing that the cost of additional accommodation made necessary because of a plaintiff's disability should be treated in the same way as other similarly necessary additional cost, for example, the purchase of a specially adapted motor car or other special equipment. In addition, he sought to distinguish between Roberts v Johnstone, where the plaintiff financed the additional expense by capital outlay made with the assistance of interim payments from the defendant, and this case, where the plaintiff's parents committed themselves to an endowment mortgage. He submitted that the plaintiff has not foregone the use of capital but has had to borrow to meet the cost of the accommodation and that, therefore, the true loss is the interest incurred to finance the whole of the additional borrowing, namely £27,250.

Mr Coonan submitted that Mr Owen's analogy of this part of the claim with that for the purchase of a specially adapted car is false, since the life of a car is short and its value diminishing, whereas with a house a plaintiff has a long-lasting and appreciating asset which will in part repay him his outlay. He maintained, as the Judge held, that there is no reason to treat past and future loss differently.

In our judgment, Mr Coonan's submission is correct. There is no logical reason why past and future loss should be calculated differently and with such a different result. In this case to award the respondent the whole of the past interest incurred would be to ignore the capital appreciation of the property over the five years before trial, the main factor underlying the Roberts v Johnstone approach. In our judgment also, the difference in the mechanics of the purchase between that case and this is immaterial to the principle of entitlement, namely of fixing a rate by reference to that appropriate for additional loss of use of capital. If it were otherwise, the formula would not apply to interest payable on future purchases of property on mortgage, thus producing a dramatic and wholly illogical difference in amounts recoverable under this head according to the means of financing adopted by a plaintiff. Accordingly, in our view, the Judge was right to award a sum based on the Roberts v Johnstone formula under this head, but he should have adopted a discount rate of 2%, not 3%, so as to award a sum of £6,000, not £9,000.

The Whole Life Multiplier

The judge dealt with this issue in the following paragraph:

"The respondent contends for 24.25. I think this fails to make an adequate allowance for the vulnerability of the respondent. I note that a multiplier of 29 would be appropriate for a normal expectation of life. Although the respondent's is reduced to 60, the courts have tended to reduce multipliers by about 20% to cater for the hazards of life in such cases. That would mean about 23 and that is the figure I propose to adopt."

This conclusion is attacked by the appellant in the third ground of appeal and by the respondent in the second ground of the cross appeal. Before us it was common ground that the judge adopted the wrong approach. His starting point should have been James's life expectancy as agreed by the doctors rather that the life expectancy of the average six year old derived from actuarial tables. So the issue argued out before us is whether the judge was right to reduce a properly calculated multiplier by about 20% to cater for the hazards of life. Mr Coonan QC for the appellants upholds the judge's approach. He supports the judge's impression that that reduction is in accordance with authority. Mr Coonan particularly relies upon the decisions in Croke v Wiseman [1982] 1 WLR 71, Lim Poh Choo v Camden and Islington Health Authority [1980] AC 174 and Janardan v East Berkshire Health Authority [1992] Med LR 1. In the first two cases the reduction for contingencies was 18% and 32% respectively. In the last the judge selected a multiplier that involved a 14% reduction but considered a multiplier that would have involved a 17% reduction. It is in fact on that last authority that Mr Coonan particularly relies since the case is closely analogous on its facts and the detailed reasoning of McCullough J demonstrates how the adoption of a substantial discount was consistent with authority.

Mr Owen emphasises that in agreeing James's expectation of life the experts had had particular regard to risks specific to James and had in particular reflected the increased risk of accident, chest infection, urinary infection, and inhalation likely to affect people with cerebral palsy. In such circumstances Mr Owen forcefully submits that there can be no rational basis for any further discount for contingencies, all relevant contingencies having already been reflected in the specifically agreed expectation. Mr Owen asserts that that approach is not inconsistent with authority and if it is at variance with Janardan v East Berkshire Health Authority then that case is wrongly decided. Alternatively he submits that if it is right in principle to make any further discount it should not exceed the modest level of 5% recognised in Hunt v Severs [1994] 2 AC 35, since external risks are much reduced in the case of an individual respondent who is dependant on continuous care.

Weighing these two submissions we conclude that Mr Coonan's is the more orthodox. His contention for a discount in the order of 20% is in line with previously decided cases which were carefully reviewed and applied by McCullough J in the case of Janardan v East Berkshire Health Authority , strikingly similar on its facts.

Since the appellants have succeeded on the principal point the arithmetical multiplier on the basis of a 4.5% discount is just over 20. If that multiplier were further discounted by 20% the outcome would be just over 16. The appellants' contention for a whole life multiplier of 17 would be the product of a discount factor of just over 15%. We adopt that multiplier as most nearly reflecting the conclusions which we have reached on the points of principle argued before us.

Working Life Multiplier

Collins J dealt with this question in the following paragraph:

"James would have started work when he was 23. Thus there must be a reduction in the multiplier to recognise the acceleration of payment. He will begin to work in 17 years time, the multiplier for which is 13. This, arguably, should not be discounted because he is likely to reach that age. This would suggest a multiplier of 10. Another way of doing the exercise is to take the multiplier for the 37 years of working life, discounted by 20%, namely 17.7 and multiply this by 0.6 to give 10.6. Both methods suggest to me that an appropriate multiplier, applying all discounts, is 10."

The appellants challenge this conclusion by the third ground of appeal and the respondent by the fourth ground of the cross appeal. Mr Coonan for the appellants makes the following submission , assuming success on the principal issue as to the appropriate yield to be earned by the accelerated capital payment. On that yield the multiplier for the 17 years to James's assumed career commencement at age 23 is 11.71. The multiplier for 54 years to age 60 is 20.16. Therefore the arithmetic multiplier for the years between ages 23 and 60 is 8.45, the result of subtracting 11.71 from 20.16. The arithmetical multiplier of 8.45 should in Mr Coonan's submission then be discounted by 25%. Mr Coonan contends that a higher discount is reasonable in the calculation of a working life multiplier since it is necessary to reflect not just risks affecting life but risks affecting employment such as redundancy, recession, injury, and illness. A 25% discount to the arithmetic multiplier produces a figure of 6.3 which Mr Coonan rounds up to 6.5 in recognition of the fact that McCullough J in Janardan v East Berkshire Health Authority had favoured a 20% discount if left to himself. Finally Mr Coonan emphasises that the multiplicand of £20,000 per annum net adopted by the judge made no allowance for contingencies.

Mr Owen eventually accepted that the comparable arithmetical multiplier assuming a 3% yield from capital would be 13.41 for the years of employment between 23 and 60 years. However he consistently submits that the discount to reflect employment risks should be modest and in the order of 10%.

Again on this issue, consistent with our conclusions on the whole life multiplier, we conclude that Mr Coonan's submission has the support of precedent. A 25% discount to the arithmetic multiplier produces a figure of 6.3 whilst a 20% discount to the arithmetic multiplier produces a figure of 6.76. The figure of 6.5 for which Mr Coonan contends will be applied to the judge's multiplicand of £20,000.

Case Manager

As part of the claim for the cost of future care, the respondent claimed the cost of a case manager. The Judge, at Q58, rejected the claim, observing simply "I am not persuaded that a case manager is reasonably necessary".

The respondent's case was that he would require such a manager for 4 hours a month from the age of 23 or 24 when it was expected he would have a home of his own. The estimated cost was £50 an hour plus expenses of about £3,000 p.a.. He relied on the only expert evidence on this issue at the trial, namely the report and evidence of Rosemary Statham, a care expert. She said that, mainly because of his difficulty in communication and likely tendency to fatigue, he would need help when he started to live independently in recruiting and managing his care staff and in making the most of local resources. However, she acknowledged that he might well be up to most of those tasks; her concern was that it would take him a lot of effort and time.

The relevant findings of the Judge (Q46-7), based on the evidence of the respondent's mother, evidence from two doctors, and watching a video-film of the respondent at school and at home, were as follows. Despite his great physical impairment and difficulty in communicating, he should be able to reach "A" level standard and operate a computer. In his early 20's he should be able to move to his own home; but that he would need full-time care. Although he was determined to do as much for himself as he could, he was too disabled to be able to earn his own living. As to his difficulty in communicating, which seems to be the main foundation of Mrs Statham's evidence of the need for a case manager, the Judge said, at Q46:

"... His speech is likely to improve; he will never be able to communicate naturally, but he should be able to make himself understood."

Mr Owen complained of the Judge's unreasoned rejection of the claim and submitted that it was contrary to the uncontradicted evidence of Mrs Statham. He added that claims for a case manager are now a familiar part of many care regimes for grievously injured respondents.

Mr Coonan submitted that the Judge's view, though unreasoned, was entirely reasonable on the evidence and in the light of his findings. He referred, in particular, to the Judge's reasonably optimistic assessment, on all the evidence before him, of the respondent's likely future ability to communicate.

Our view is that we should not disturb the Judge's finding on this matter. It is plainly supportable on the evidence before him. He had also had the advantage of observing on the video-film the determination and level of functioning of the respondent even at this early age. He was not dealing with someone who is intellectually brain damaged or who is completely immobile or unable to communicate his thoughts and wishes. He will always have around him carers who know him well and who can help, if necessary, in this way. Also, in the early years of his independent living, he will no doubt be able to look to his parents for some help of the sort that Mrs Statham had in mind.

Future Holiday Costs

The Judge awarded, without explanation, £20,000 for future holiday costs. The respondent maintains that he should have awarded over double that amount, £40,624.

Given the appellant's concession at the trial that £900 p.a. was reasonable, it may be that the Judge calculated the figure of £20,000 by taking the multiplier of 23, which he calculated by applying a discount rate of 3%, so as to produce a total of £20,700 and rounding it down to £20,000. However he went about it, he clearly did not accept the reasonableness of some of the claims made in evidence by the respondent's mother and Mrs Statham in support of a multiplicand of about £1,800. Those included figures for upgrading a car, upgrading flights for the respondent and the person accompanying him, extra cost of taxis and extra cost of accommodation, and were derived from past holidays in Florida and Spain.

Mr Owen contended that, in the light of the uncontradicted evidence of the respondent's mother and Mrs Statham, the Judge should have awarded £40,624.

Mr Coonan contended that £900 p.a. was a reasonable figure to cover the additional holiday costs caused by the need for the respondent to have someone to accompany him whenever he goes on holiday. His only quarrel with the Judge's final figure of £20,000 was that it was based on a multiplier derived from the 3% discount rate, whereas he submitted it should have been £15,300 based on a multiplier of 17 derived from a rate of 4.5%.

We have examined the evidence of Mrs Thomas and Mrs Statham, such as it is, on this head of claim. It suffered from two disadvantages. First, as we have said, much of the costings were derived from the holidays in Florida and Spain for which the respondent had claimed a total of £5,246.50. The Judge clearly found that claim unreasonable and untypical as a marker for future costs, because he only allowed £1,500 for past holiday costs. The respondent does not appeal that award. Second, on our reading of the evidence of Mrs Thomas and Mrs Statham on the matter, it was generally vague and not as convincing as might have been expected for such substantial claims. Doing the best we can on very limited material, we do not consider that the respondent has made out a case for increasing this head of award. The Judge clearly regarded much of the claimed additional expenses as unreasonable. From what he had to go on we are not surprised.

In our view, the Judge was entitled to settle on a multiplicand of £900, but should have taken a discount rate of 4.5%, not 3%, to produce a multiplier of 17 and an award of £15,300.

Future Miscellaneous Costs

The judge dealt with this issue summarily and without any reasoning. He simply said at Q60:

"Understandably, the respondent has gone into great detail in working out various extra costs. In my view, many of them are not justified. I propose to allow the following:

(a) Extra laundry £9,000

(b) Extra heating £4,750

(c) Additional mileage £6,000

(d) Extra holiday costs £20,000

(e) Extra vehicle costs £6,000

I do not allow anything for telephone or food."

Mr Owen by his cross appeal attacks two items. He contends that the allowance of £6,000 for extra vehicle costs defies the uncontroverted evidence of Mrs Thomas and her expert which justifies an award six times greater, namely £36,000. He also says that the claim to future telephone costs at the rate of £100 per annum was supported by the uncontroverted evidence of the same expert. Thus the whole life multiplier should be applied to the multiplicand of £100 to capitalise the claim to future telephone costs.

Mr Coonan seeks to demonstrate over six pages of his skeleton argument how the judge's finding of £6,000 for future vehicle costs and the judge's rejection of the claim for future telephone costs can be justified. Thus he seeks to uphold the judge's conclusion on both issues. In further written submissions delivered by Mr Owen after the conclusion of oral argument he takes issue with Mr Coonan's exposition.

The absence of reasoning places us in a difficult position. Evaluating the written submissions on these issues it does appear that the judge's allowance for future vehicle costs was at the very bottom of the bracket which can be supported on the evidence. However we do not consider that Mr Owen has demonstrated conclusively that the judge's figure of £6,000 is the result of fallacy or disregard of evidence or misunderstanding of evidence. Thus we do not propose to interfere. The claim for future telephone costs was a minimal item within the scale of the case and we are satisfied that the judge was entitled to reject it in his overall survey of what was reasonably established.

Conclusion

Mr Coonan submitted a helpful table designed to demonstrate the application of multipliers based on an assumed yield of 4.5% to all of the individual items of future loss. We regard it as a helpful document and it will no doubt be a useful aid to counsel and to the court in requantifying the respondent's award in the light of our findings on this appeal.

PAGE v SHEERNESS STEEL

Kelvin Page was born on 8th April 1967 on the Isle of Sheppey. His father worked for the Sheerness Steel plc and all his childhood and schooling were on the Isle of Sheppey. Between the ages of 16 and 21 he served in the Army both at home and abroad. On his discharge he immediately commenced work with the appellant company. In the following year he married a girl whom he had known at school. Her father and her brothers also worked for the appellants. Into the marriage she brought a son by a previous relationship. The respondent always treated his stepson as his own. The respondent was an ambitious man who worked hard. He regularly worked a 12 hour day including night shifts. During his first 30 months with the company he was promoted to work at the rolling end of the bar mill. The company operated a system to grade the level of performance of their employees. The points awarded to the respondent classified him as a standard performer within one point of the score necessary to elevate him into a high performer. It was his intention to work for the appellants until he reached the age of retirement. That intention was traditional for many of the workforce.

On 16th October 1991 the respondent suffered as horrific an industrial accident as it is possible to imagine. He was standing alongside the line conveying white hot steel bars along a cooling bed. A rod at a temperature of over 500 degrees centigrade buckled and shot from the line striking the respondent's head on the right temple. It penetrated the skull, traversed the brain and emerged beyond the left temple. A workmate cut the bar short and the respondent with his left hand pulled the bar from his head. He did not lose consciousness. The skull was fractured both at the site of entry and at the point of exit. There were burn injuries to the skull and to the brain across the right frontal lobe extending into the left fronto-parietal region of the brain. He suffered extensive burn injuries to the left hand that had extracted the burning bar. The surgeons at the hospital did what they could for him but he was left with appalling and permanent injuries. He suffered permanent brain damage, permanent loss of taste and smell, scarring and weakening of the left hand, scarring to both temple areas and reduced intellectual function. Whereas prior to the accident his intellectual level was within the average range he had been reduced to the borderline defective range. The accident radically altered his personality. Before the accident he was extrovert and sanguine both at home and at work. Since the accident he suffered from epilepsy, depression, irritability and social withdrawal. From his wife's perspective she had lost a husband who she described as one of the best. Instead she had a husband who was querulous, attention seeking, and dependent. From being the major contributor in the family he had become as dependent as her nine year old son. In order to care for him she had had to sacrifice her intention to return to work and develop a career of her own.

The appellants did not dispute liability. But there was a substantial challenge to the quantification of the various heads of loss advanced on the respondent's behalf and it was the issues arising from that challenge that Dyson J determined at the trial on 4th December 1995. Dyson J awarded £80,000 general damages, £71,095 for past loss, and £801,995 for future loss. In addition there was some allowance for interest on past losses and Court of Protection fees.

Multipliers

Mr Leighton-Williams principally attacks the judge's decision to accept the submission of Mr Purchas that in calculating future losses the multiplier should be based upon the Ogden Tables and the 3% net rate of return said to result from ILGS investment. For the reasons given in Part I of this judgment Mr Leighton-Williams succeeds on this principal point. Both the whole life multiplier of 24 and the working life multiplier of 20.8, the judge's starting points, must be reworked. Mr Leighton-Williams further attacks the judge's discount of these multipliers to reflect contingencies other than mortality. Dyson J did not accept Mr Purchas's contention of a 2% reduction to 20.28. Having emphasised the risks inherent in work so hard and dangerous, he cut Mr Purchas's submission to 19. He made no reduction of the whole life multiplier of 24 taken from page 21 of the Ogden Tables. Expressed as a percentage the judge's reduction for contingencies other than mortality amounts to 8.65%. Mr Leighton-Williams submits that the percentage deduction should have been at least 12.5%. We conclude that there is some merit in this submission and substitute for the judge's multiplier of 19 a multiplier of 14 for the purposes of calculation of future loss of earnings. In relation to the whole life multiplier we substitute a figure of 17.

Mr Leighton-Williams also quarrels with the multiplier of 14 which the judge applied to the respondent's annual salary as a Territorial Army Reservist. We conclude that the issue is too negligible to merit interference by this court.

Multiplicand

It was agreed that the respondent's continuing net loss of earnings as a standard performer was at the rate of £16,700 per annum but at the annual rate of £18,564 if he was be treated as a high performer. The judge assessed his prospects of promotion from standard to high performer as even and accordingly logically adopted a multiplicand of £17,632 by averaging the two annual rates. Mr Leighton-Williams attacks that conclusion. He submits that the respondent's prospects of achieving the higher grade were entirely speculative and that the evidence demonstrated that the appellants were raising the threshold between standard and high performer. We conclude that there is no merit in this submission. The judge was perfectly justified in the conclusion which he reached on the evidence before him. Mr Leighton-Williams had called the appellant's personnel director, Mr Billot. In chief there was this exchange:

Q - "How do you see the situation for the future so far as the respondent is concerned?"

A - "There is no evidence that I can see that would indicate that Mr Page would be anything other than a standard performer."

However in cross examination Mr Purchas extracted a very significant answer as follows:

Q - "At the end of the day, it is for my lord to assess the chance. What I am suggesting to you is that he had at least a 50% chance of becoming a high performer. It would be unfair really to adopt any other approach. Do you agree with that?"

A - "It is an opinion that you have expressed and I am not quite sure that I agree with it or disagree with it."

Q - "We will leave it there then."

Nothing in re-examination recovered what had been close to a concession.

Pension Loss

Again the judge took as a starting point an annual loss of £23,316 by averaging the gross salary of a standard and high performer. The pension rate applicable to that salary was £12,483.80 per annum gross or £9,362.85 net after tax. Applying the 3% discount rate Mr Purchas advanced a multiplier of 3.5. To that the judge applied a 2% deduction for contingencies other than mortality and fixed a figure of £32,114. Having considered Mr Leighton-William's submissions based on the decision in Auty v National Coal Board [1985] 1 WLR 784 the judge adopted a further discount of 10% to reflect imponderables, thus producing a figure of £28,903 (£32,114 minus £3,211).

Consistent with the conclusions which we have reached in Part I of this judgment for the multiplier of 3.5 adopted by the judge we substitute a multiplier of 2. Although we cannot accept the submission of the appellants in reply that the practical application of the decision in Auty v National Coal Board can be expressed in any precise formula, a discount factor of 15% for contingencies is in our judgment appropriate on the facts of this case. The final figure for loss of pension is therefore £15,197.

The Cost of Future Care

This was the most substantial of the heads of the respondent's claim. For this item the judge allowed the total sum of £490,000. Mr Leighton-Williams mounts a number of sustained attacks on the multiplicands. He says that the judge took professional salary rates and made no discount for the fact that future care was to be provided essentially by Mrs Page with the consequence that there would be no income tax or national insurance contributions levied. For that consideration Mr Leighton-Williams submitted that there should be a discount of between 25% and 33.33%. Secondly he emphasised that this was not a case in which the respondent required any physical care but only an intermittent companion to encourage him from apathy and isolation. Thirdly Mr Leighton-Williams challenges the judge's conclusion that 17 hours per week for extra household chores formerly performed by the respondent should be quantified at a home carer rate and paid by the appellants. Fourthly Mr Leighton-Williams submits that the judge was wrong to allow hourly rates at levels that were at least 13.5% higher than was appropriate for the provision of domestic services.

In relation to all these submissions it is important to note that the respondent relied upon the evidence of an expert, Mrs Gipson, and the appellants upon the evidence of an expert, Mrs Gough. The judge rejected the evidence of Mrs Gough. He said:

"I regret to say that I did not find Miss Gough at all convincing as a witness."

On that basis we conclude that the judge was perfectly entitled to reach the conclusions that he did and we reject the criticisms advanced by Mr Leighton-Williams.

In this same area of the case Mr Leighton-Williams criticises the judge's conclusion that there was an evens probability that Mrs Page, despite her resolution, might not sustain a marriage so burdensome in its changed circumstances. He applied that conclusion to the cost of future care by pricing the first 12 years on the basis that Mrs Page would be the family carer and pricing the next 12 years on the basis that a professional carer would have to be employed. That issue was essentially one for the judge's discretion having seen and heard the witnesses, particularly Mrs Page. We see no basis for interfering with the judge's conclusion.

It follows that the only reduction that we make to the judge's award for the cost of future care is the reduction consequential upon our conclusions in Part I of this judgment and the reduction of the whole life multiplier from 24 to 17.

Case Manager

Here again there must be a consequential reduction. In considering future care the judge was satisfied that the respondent required a case manager. Mr Leighton-Williams does not attack that conclusion but he contends, successfully, that the multiplier to be applied to that annual charge must be reduced to give effect to our conclusion on the principal point in these appeals.

The Enabler

The judge concluded that it was reasonable for the future arrangements to include an enabler who would encourage the respondent to lead a more constructive life. He cut the claim for 16 hours per week to 12 hours per week but allowed for 52 weeks per annum and applied the whole life multiplier of 24. Mr Leighton-Williams points out that there is no reflection of the facts that an enabler would not be required whilst the respondent was on holiday, that there would inevitably be breaks in the continuity of employment, and the fact that the respondent's apathetic response to an enabler made it very unlikely that one would be employed in the respondent's later years. Our conclusion is that in addition to the multiplier reduction flowing from Part I of this judgment the weeks per year should be reduced from 52 to 40 to reflect the considerations advanced by Mr Leighton-Williams.

DIY Services

Under this head the respondent claimed £1000 per annum at a reduced multiplier of 20. The judge accepted that claim. We reduce the multiplier not only because we have adopted a whole life multiplier of 17 but also because we conclude that it is more appropriate to apply the working life multiplier to a claim for DIY services. Obviously in the last phase of life an individual is likely to be less competent and less vigorous in this field. Accordingly we reduce the award under this head from £20,000 to £14,000.

The Conservatory

The judge allowed a claim for £7,000 to add a conservatory to the home to which Mr and Mrs Page had moved after the accident in order to distance themselves from the proximity of the steel works. Mr Leighton-Williams points out that the move was to a house of their choice and any addition was not the result of the respondent's disability but of their decision to buy a home of that design. We conclude that this was very much a matter for the judge and we would not interfere with his award.

The Respondent's Cross Notice

The first issue considered by the judge was whether permanent health insurance benefits received by the respondent were deductible from his claim for loss of earnings. The contract of employment included the following provisions for the respondent's benefit:

"6.1 You are able to participate in the company contributory pension and life assurance plan or you will have the opportunity of joining the plan on reaching the age of 21.

6.3 Your contributions to the company scheme will be at the rate of 4.5% of earnings excluding profit-share pay. Membership of our pension plan entitles you to life assurance and permanent health insurance benefits in accordance with the rules and regulations laid down by these schemes. Details are available in the personnel department.

9.4 During such unavoidable absence due to sickness or other approved reason the company will continue to pay you at your normal salary less statutory sickness benefit for up to 26 weeks.

9.5 Sickness which continues beyond 26 weeks may qualify for a different scale of benefits under the separate permanent health insurance scheme. The rules of this scheme may be viewed in the personnel department."

The respondent was a member of the company's group sickness pay insurance scheme. The benefits payable to members were insured by the Commercial Union and all premiums were paid by the appellants. The respondent was 'an insured' under the terms of that policy. Under the policy the 'sum insured' meant 50% of the members annual rate of salary less productivity bonuses and any element of profit sharing at the date of disablement. Under the terms of the policy the Commercial Union was liable to pay the appellants the 'sum insured' in respect of the 'insured' in the event of total disability. For the respondent Mr Purchas submitted that in consequence the respondent's receipts under the scheme were insurance monies and therefore authority established that they were not deductible from damages. Mr Leighton-Williams submitted that these receipts were to be treated as sick pay rather than insurance monies and were therefore deductible in the calculation of the respondent's loss. It was common ground that the field of contention was governed by the decision in Hussain v New Taplow Paper Mills Ltd [1988] 1 AC 514. Mr Purchas endeavoured to distinguish that authority from the facts of the present case. He drew a number of distinctions none of which impressed the judge. Having considered in some detail the facts in Hussain and the terms of both the respondent's contract of employment and of the appellant's policy with the Commercial Union, the judge concluded thus:

"When I stand back from the detail of the argument and ask whether the insurance payments received by the respondent correspond to wages and had the character of sick pay I am satisfied that the answer is that they do."

In support of his cross notice Mr Purchas's primary submission is that the respondent in Hussain did not purchase the relevant benefits. Here his client purchased the benefits by electing to contribute 4.5% of his earnings to a voluntary pension and life assurance plan. He might just as well have chosen not to join the scheme and to pay an equivalent percent of his earnings as premium for a bespoke insurance policy.

It does not seem to us that Mr Purchas's submission is borne out by the evidence. Again the key is to be found in the evidence of the personnel director, Mr Billot. His final and authoritative statement in chief was as follows:

"The company funds the insurance in totality and, as a trustee of the pension fund, I can say that no member of the pension fund pays any contribution towards it whatsoever. The full 4.5% of contribution of salary goes into pension fund investment."

On that evidence we conclude that the judge was right to classify these receipts as sick pay rather than insurance benefits. He rightly rejected Mr Purchas's endeavour to distinguish the decision in the case of Hussain. In our judgment the respondent fails on the cross notice.

At the conclusion of his judgment at page 36 Mr Justice Dyson gave a helpful summary of the heads of his award. We make no alteration to either paragraphs (a) or (b). Our variations all fall within paragraph (c). We leave it to the bar in the first instance to agree the figures.

FINAL CONCLUSION

In the result all three appeals succeed to the extent we have stated in this judgment. Mrs Wells' cross appeal succeeds only in relation to the Court of Protection fees. James Thomas' and Kelvin Page's cross appeals fail.

APPENDIX

Lord Justice Thorpe:

From 1st January 1971 the court on dissolving a marriage acquired jurisdiction to make provision for the former wife's financial dependency by way of equitable redistribution of assets. Subsequent decisions emphasised the desirability of a single capital award to achieve a clean break between the spouses. The broad basis upon which such a capital sum was to be calculated was first established by the decision of this court in Preston v Preston [1982] Fam 17. The case decided that the recipient of the capital award had to have resort both to the principal sum as well as to the interest that it earned in meeting her needs. Hollings J specifically referred to civil claims when he said:

"If it seemed that [the judge] was assessing the amount of the lump sum by reference to the income to be derived from it, without regard to the freedom of the wife to expend capital, then there could indeed have been an error of principle in the judge's approach, for it is, in my judgment, wrong to assess a lump sum by reference to the amount of gross or net income it could produce, since, in cases such as this, where the lump sum is provided for no one specific purpose, the recipient must be expected to expend in one way or another both capital and income: cf awards of damages (and eg, Malone v Harrison [1979] 1 WLR 1353, under the Inheritance (Family Provision) Act 1975)."

At that point there was no established method by which judges should calculate the sum needed by the recipient during her whole life dependency on the assumption that the award would be exhausted at the end of her actuarial span. The judges might have looked to the multiplier/multiplicand method used in the Queen's Bench Division and, incidently, used by Hollings J in the Inheritance Act case of Malone v Harrison. But since the field was untrammelled by precedent, Mr Lawrence, a partner in Messrs Coopers and Lybrand who was particularly experienced in Family Division litigation, considered what would be the most precise means of calculation. His solution, as ultimately developed, was to harness the computer by devising a programme into which could be fed in each case the individual characteristics that would determine outcome. First it was necessary to calculate what sum the recipient required to meet her needs in the first year of the dependency. Second it was necessary to calculate the duration of the dependency, either by instructing an actuary in the individual case or by reference to the English Life Tables. Finally it was necessary to feed the computer with required assumptions as to the rate of yield, the rate of capital appreciation, the rate of inflation and the current tax structure. Obviously the programme was flexible to meet variations in anticipated future need and receipts. For instance if an expensive car needed to be replaced every four years that could be built into the programme. Equally if a vested reversionary interest was expected to come into possession at an estimated future date that circumstance could be reflected in the calculations that the computer was programmed to carry out. So programmed, the computer calculated for each year of the dependency the receipts, the disbursements including tax precisely calculated, and the consequent value of the fund at the year end. At the end of the final year of dependency the value of the fund was close to zero. At the beginning of the first year the fund stood at that figure which enabled it to perform its obligation to meet the calculated outgoings on a year by year basis. If the value of the fund were expressed as a graph it would show the initial value climbing in the early years as the combination of yield and capital appreciation exceeded outgoings to a point approximately three quarters of the way through the dependency in the average case, after which the recipients needs are met largely by capital realisation and the graph line plunges steeply to zero. Mr Lawrence introduced this method for the first time in the case of Duxbury v Duxbury determined by Reeve J in 1984. The judge accepted Mr Lawrence's methodology. The husband appealed to this court on another issue. In the leading judgment of Ackner LJ he said:

".... the resultant figure is £540,000 and, according to expert evidence which has not been challenged before us, this sum is required to produce over the assumed future expectation of life of Mrs Duxbury of 35 years, she being at the date of the hearing 45 years old, an income which is spendable (that means after tax) of £28,000 per annum approximately. When I say that this sum is required, resort is to be made both to the income which it can produce and to the capital so that over the 35 years she can thus maintain herself, the assumption being - and it is all theoretical - that at the end of the 35 years the whole of that fund will have been spent."

Thereafter Mr Lawrence's methodology acquired the name of the case in which he had introduced it. It has become the universal method of calculating the extent of the applicant's award in substantial clean break cases. The efficacy of the method has never, to my knowledge, been successfully challenged and that is no doubt a tribute to its worth. Whilst in the aftermath of Duxbury it was customary for accountants to be instructed in each case to prove the computations, since 1991 the FLBA has published annually essential court tables for ancillary relief (entitled 'At A Glance'). These tables include Duxbury calculations which enable a judge to see in any case what is the life expectancy of any applicant between the ages of 42 and 76 and what capital sum would be required to provide for round figure expenditure from £10,000 per annum to £100,000 per annum throughout that dependency. So since the arrival of 'At A Glance' it has only been necessary to involve the forensic accountants in unusual or difficult cases.

The use of the multiplier/multiplicand method in Inheritance Act claims was shortlived. Once the utility of the computer programme method became apparent it was adopted for the resolution of large scale claims in the Chancery Division once the dependency was admitted or proved. A recent example is the case of Nott v Ward (13 December 1994 unreported).

There can be no doubt that the introduction of computer technology to the calculation of a future dependency produces results that, although inevitably speculative, are more specifically calculated and more likely to match reality than those achieved by the cruder method of multiplier and multiplicand. This was recognised by the Bar Council in its submission to the Law Commission Consultation Paper 125. The submission included an appendix, 'A simple damages problem, a typical common law multiplier/multiplicand calculation and a Duxbury calculation' (paragraph 2.3). Later in paragraph 2.10 the authors concluded:

"We would not exclude the multiplier/multiplicand approach as appropriate in the vast majority of simple cases .... On the other hand, Duxbury calculations will provide a fairer answer and should therefore have a place in more complex cases, as we have demonstrated."

The authors of the report included the Family Division junior, Mr Nicholas Mostyn, the principal author of 'At A Glance'. It seems to me surprising that the Law Commission report number 224 referred to the submission of the Bar Council without even recording their conclusion that Duxbury calculations should have a place in more complex cases. This may be because professional debate had centred upon not whether the multiplier/multiplicand method should be replaced but upon whether in using the multiplier/multiplicand method the court should make the conventional assumption of net yield at the rate of 4.5% or at the rate of 3% generally available from ILGS. Professional debate was probably so centred since it was upon that issue that the Ogden Committee concentrated in its reports.

The multiplier/multiplicand method by contrast is less sophisticated, having its origins in an age prior to the introduction of computer technology. What is it in essence? It is described in Kemp at paragraph 6-005 as "a crude way of taking into account the relevant contingencies such as mortality and the receipt of a lump sum as compensation for a stream of future losses". More specifically at paragraph 6-005/2 it is said "the courts take account both of contingencies and the discount for a lump sum by applying an arbitrary multiplier to the multiplicand. One can say 'arbitrary' because the multiplier is not calculated in a precise or logical manner. On the other hand, in another sense the selection of the appropriate multiplier is by no means arbitrary as the courts tend to select a multiplier which accords with that selected in comparable cases by other courts over the years. Thus a pattern has emerged. Practitioners likewise tend to study the pattern and assume that, in the particular case with which they are concerned, the court will chose a multiplier that accords with the pattern".

An endeavour to substitute a more mathematical approach was made in the case of Mitchell v Mulholland and another (No 2) [1972] 1 QB 65. The court evaluated an income loss to the respondent over the period of 29 years from trial to assumed retirement at age 65. The judge adopted a multiplier of 14. The discount from 29 to 14 was, of course, intended to reflect both the benefit of accelerated receipt of future earnings by way of single immediate capital payment and the avoidance of future risks such as redundancy and early death. The respondent unsuccessfully contended for what was described by the court as an actuarial approach. What the respondent proposed was that the court should take his assumed net salary for each of the 29 future years and discount 3.625% for each year of accelerated receipt. Thus in the 29th year the discount factor was applied 29 times. The summation of the calculations for each of the future years was then further discounted to reflect the possibility of periods of unemployment resulting from contingencies. The approach was rejected by this court. The emphasis in the judgments on the limitations of actuarial assumptions does not seem to me to meet the point that the respondent proffered a more precise calculation of his loss by arithmetical method. In my judgment the deficiency of the method advanced in Mitchell v Mulholland was that it attempted greater precision, and therefore a more scientific mode, only in relation to the flow of future income and not in relation to other factors capable of more precise formulation.

The Ogden tables represent the modern challenge to the hallowed multiplier/multiplicand method. It seems to me that they have much in common with the method advocated in Mitchell v Mulholland . Both might be described as discounted income-flow calculations. The Ogden method calculates the duration of loss, simply in the case of a working life by counting the number of years from the respondent's age at trial to the age of retirement, and in the case of a whole life by taking the figure from English Life Table 14. So for a 50 year old respondent the whole life figure is 24. At a 4% investment (or discount) rate an initial investment of £14.80 would produce £1 per annum spendable for 24 years. So the tables show a multiplier of 14.8 for such a case.

Again in my judgment the deficiency of the Ogden method is that it makes no attempt at similar precision in calculating other relevant considerations, and particularly the incidence of tax. The problem of tax is described in paragraph 10 of Section A of the Tables as follows:

"Thus, if it is decided that the rate of interest to be used to value, without allowing for tax, is say 3.5% and the respondent will pay no tax, the figure of present value, is to be found by using the multiplier in the column headed 3.5%. If, however, he will pay 25% tax on the income from his compensation, so that the net income he receives will be at the rate of only 75% of 3.5%, that is at 2.625%, then the best figure is to be found in the column headed 2.5%. However it should be borne in mind that as the capital is gradually exhausted the total income obtainable from the interest on it will fall, and the rate of tax payable may therefore also fall. This may mean that the deduction to be made for tax should be a smaller percentage than the rate of tax apparently applicable at the outset."

However although the problem is identified there is only the barest suggestion of a solution. The assumption of a 25% flat rate of tax currently made in the Queen's Bench Division (despite the reduction of basic rate to 24%) is in my judgment crude, unrealistic, and favourable to plaintiffs. The reality is that the individual tax payer is entitled to allowances and the income above is then taxed by the application of varying and increasing rates to specific bands of income. In an average case a taxpayer currently only pays tax amounting to 25% of taxable income if his taxable income approaches £40,000 per annum. Even in the case of a very substantial award the overall incidence of tax expressed as a percentage of overall receipts will not approach 25%. By way of instance I again take the case annexed to the Bar Council's submission to the Law Commission. The plaintiff's needs would by a Duxbury calculation be met by an award of £823,245 assuming the current Family Division yield of 4.25%

and 1996/97 tax rates. Over the 38 years of dependency total receipts by way of capital and income amount to nearly £3.4M upon which tax of £380K is levied. So tax expressed as a percent of receipts plus tax emerges as almost precisely 10%. This seemingly low percentage is explained by the fact that much of the receipt, particularly in later years, comes from capital realisations. Since the introduction of indexation relief within capital gains tax and since the Duxbury computation is currently programmed on the basis that capital growth equates to the rate of inflation, no allowance need be made for capital gains tax on realisations. Obviously if too great an incidence of tax is assumed the resultant award will over compensate a plaintiff

since provision is made for more tax than will be levied.

From this review of the three modes I reach the following conclusions:

(1) Duxbury is to be preferred to both the multiplier/multiplicand and Ogden modes in substantial cases because, although it shares with Ogden a more precise attempt to calculate the future discounted income flow, it has these important additional advantages:

(a) The programme attempts a realistic arithmetical calculation of the incidence of tax year by year throughout the period for which compensation is provided. Of course it can be said that the resulting figure is speculative and imprecise in that it necessarily makes assumptions as to future rates of tax which future budgets will inevitably confound. However it is surely preferable to attempt greater accuracy, and with it greater fairness to litigants, than to apply in all cases a crude assumption that is demonstrably unsound. Certainly the Duxbury method offers a specific solution to the problem posed in paragraph 10 of Section A, namely that in the early years when expenditure is largely met from income the incidence of tax will be comparatively great, whereas in the later years when expenditure is largely funded from capital realisations the incidence of tax will be comparatively low.

(b) The Duxbury method enables specific assumptions as to changes in needs and receipts in future years to be programmed. This flexibility is particularly convenient in cases in which there may be a finding of variable levels of expenditure resulting from changing needs and circumstances, alternatively in cases in which future capital receipts can be anticipated. Particular examples drawn from Family Division experience might be an applicant who at the conclusion of the children's education will move to a jurisdiction where higher rates of tax are levied; alternatively an applicant who will be free to realise a substantial part of the capital provided for a home selected to meet the needs of the family during the children's education. It is important to emphasise that Duxbury is only a programme. Whilst it makes general assumptions, such as future rates of inflation and capital appreciation, it makes none specific to the individual plaintiff. It is for the judge to determine what assumptions should fairly be made in relation to the individual plaintiff and to instruct the computer to make its calculations accordingly.

(2) The 6% gross yield conventionally assumed in the multiplier/multiplicand method is probably currently too high. The rate of yield from ILGS is perhaps too low, although if expressed as 3% net it is only marginally below the current Duxbury assumption of 4.25% gross or 3.18% net were 25% to be deducted for tax. The Damages Act 1996 allows for periodic review of the assumed rate of yield. That flexibility must have advantages over the comparative rigidity of the multiplier/multiplicand assumption.

(3) No single assumption adopted in the calculation of awards of damages should be reviewed in isolation. The current multiplier/multiplicand assumption of 6% gross yield, disadvantageous to a respondent, is offset by the advantageous assumption of an overall 25% tax on total receipts. Were the appellants to succeed in establishing the ILGS rate of yield and then to discount it by 25% they would have turned a minus and a plus into two pluses. (That may perhaps explain why the expert evidence on which the respondents relied stated that the ILGS 3.76% gross rate of return was equivalent to 3% net. Mathematically a 25% tax deduction would produce a net rate of 2.82%.)

(4) Any review of these highly technical considerations bearing on methodology should be attempted in the first instance not by way of landmark appeals but by an interdisciplinary committee of experts. The Ogden Committee obviously provides the model but surely it should be expanded to include judges, forensic accountants, and investment fund managers. Whatever value there is in this appendix is in considerable measure the result of interdisciplinary work. I have discussed it in draft with both Mr Lawrence and Mr Mostyn and I acknowledge the great contributions that each has made to its development.

(5) The principal objective of such a reviewing committee should be to advise on the method that most effectively achieves three objectives:

(a) It must be fair to the victim of the tort feasor.

(b) It must be not unfair to the insurance industry which from its premium income indemnifies the tort feasor.

(c) It must be relatively simply expressed and relatively straightforward in application, thereby aiding the determination of individual cases by compromise and avoiding any unnecessary introduction of expert reports and evidence in those cases that have to be determined by trial.

(6) It seems difficult to conceive that one method would be universally applicable. It is obvious that a computer programme would only be considered for the computation of large awards. To take the Law Commission's classification, the computer programme would seem to have nothing to offer in cases within Bands 1, 2 and 3. But that should present no practical obstacle. In ancillary relief litigation there has never been any difficulty in perceiving the boundary between the case that requires a Duxbury computation and the case that does not.

(7) There does not seem to be a distinction of fundamental principle between providing for the future needs of respondents in personal injury litigation and applicants in proceedings under the Matrimonial Causes Act 1973 or the Inheritance (Provision for Family and Dependants) Act 1975. As Part I of our judgment emphasises the victim of tort is not entitled to privileged status as an investor. In so far as Holman J drew distinctions in FN v FN [1996] 1 FLR 833 he did so in reliance on passages in the judgment of Collins J, which we have disapproved.

Order: Appeals allowed as per judgment

as to main point of principle.

Case of Wells :

That the appeal on the general point of principle be allowed and the order of His Honour Judge Wilcox dated 27th June 1995 be varied by reducing the damages award by £532,173.00 so that the plaintiff is now to be awarded the sum of £1,086,959.00; that the plaintiff do pay back £532,173.00 plus interest to be calculated at 4.5% payable since date of payment into court on 12th July 1995 until the date it was paid out to the plaintiff; that there be no order as to the costs of this appeal; that the respondent's notice filed by the plaintiff by way of cross appeal be granted only in relation to the Court of Protection fees; that the plaintiff to have the costs of the cross appeal as contained in the respondent's notice to be offset against the defendant's costs; that the plaintiff's application for leave to present a Petition of Appeal to the House of Lords be adjourned to be considered at a future date.

Case of Thomas

That the appeal be allowed and the order of the Honorable Mr. Justice Collins dated 7th November 1995 be set aside; that the cross appeal filed on behalf of the plaintiff be dismissed; that the question of costs be adjourned to be considered at a future date; that the plaintiff's application for leave to present a Petition of Appeal to the House of Lords be adjourned to be considered at a future date.

Case of Page

That the appeal be allowed and the order of the Honourable Mr. Justice Dyson dated 11th December 1995 be set aside; that the cross appeal filed on behalf of the plaintiff be dismissed; that the question of costs be adjourned to be considered at a future date; that the plaintiff's application for leave to present a Petition of Appeal to the House of Lords be adjourned to be considered at a future date.

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