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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Smee v Adye [2000] EWCA Civ 146 (19 April 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/146.html
Cite as: [2000] EWCA Civ 146
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Case No: QBENF 1999/0781/A2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QBD (HH Judge Steel,
sitting as a Deputy High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
Wednesday 19 April 2000
LORD JUSTICE STUART-SMITH
LORD JUSTICE ROBERT WALKER
and
LORD JUSTICE LAWS
RICHARD ANTHONY SMEE |
Respondent | |
- and - |
||
BYRON BRIAN ADYE |
Appellant |
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
__________________________________
Alan Jeffreys QC (instructed by Messrs Barlow Lyde & Gilbert for the Appellant)
John Foy QC & Andrew Ritchie (instructed by Messrs John Healy for the Respondent)
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE STUART-SMITH:
Introduction
1. On 20 January 1995 the claimant, Richard Anthony Smee, sustained multiple injuries in a road traffic accident. Liability was admitted. On 29 March 1999, after a hearing lasting three and a half days, HH Judge Steel, sitting as a Deputy High Court Judge, gave judgment for the total sum of £1,043,896.89 by way of damages and interest. Of that sum £45,000 was for general damages for pain, suffering and loss of amenity. There is no appeal in relation to that. The bulk of the award, £925,512.70 was in respect of future loss of earnings and pension. It represented the judge's assessment of the financial consequences of the risk that he would have to retire from his employment sooner than he otherwise would have. The Defendant appeals that award by leave of Sedley LJ.
2. Mr Smee was 39 at the date of the accident, being born on 21 December 1955. He was married and at the time of trial had two children, a son aged six and daughter aged 2. He was a highly successful chartered accountant, having become a partner of Ernst and Young at the early age of 31. He sustained very severe injuries. Although the amount awarded for general damages is not in dispute, it will be necessary to set out these injuries in some detail. He was in hospital for seven weeks and spent a further six weeks at a rehabilitation unit. His recovery was remarkable such that he returned to full-time work after 8 months and by the Spring of 1996 he was working flat out. He had lost no earnings because he was entitled under the partnership to payment of a share of profit while off work. Since his return to work his income had substantially increased year by year such that by 1999 it was of the order of £425,250 p.a. gross.
The Claimant's case
3. His case was that his work was highly demanding, responsible and stressful, involving long hours, daily travel by train from his home in Hampshire to the office and much international travel, such that there was a serious risk that he would have to retire several years earlier than he would otherwise have done.
The Judge's findings
4. The judge accepted this case. She made a number of important findings, all of which are criticised by Mr Jeffreys QC, who appeared for the Defendant. Those findings are as follows:
(i) But for the accident the Claimant would have worked until the age of 60 and not taken early retirement at 58;
(ii) There was `a real, although small, risk that he could be compelled to take early retirement as soon as the age of 50 rising to a certainty at 58'. Based on this conclusion she assessed the loss on the basis that he would now retire at 55;
(iii) That upon retirement he would have no residual earning capacity;
(iv) That his earnings would increase at the rate of 6% above inflation until the age of 50, when they would level out;
(v) That upon retirement he would draw his pension immediately rather than deferring it until he was 60.
On these conclusions she calculated the loss at £1,322,161; however, she discounted by 30% in order `to allow for the chances element'. Hence she arrived at the figure of £925,512.70.
The Claimant's injuries
5. Although it is only three aspects of the residual complications of his injuries, namely his head injury, hip replacement and risk of deep vein thrombosis, that have attracted most consideration in relation to early retirement, I agree with Mr Foy QC who appeared on Mr Smee's behalf, that it is necessary to look at the overall picture of his injuries to realise what enormous strength of character and determination it has taken for the Claimant to overcome them. The judge summarised them as follows:
"In the accident, he sustained a head injury with retrograde amnesia for ten minutes and anterograde [post-traumatic] amnesia for 24 hours, resulting in some short-term memory loss. That does not interfere with his capacity to work as he has adapted to allow for this.
Facial fractures: multiple facio-maxillary fractures requiring open reduction and internal fixation with two plates and screws. One plate has subsequently been removed, the other remains. This has resulted in some scarring and altered sensation and some mild difficulty with breathing, particularly when he has a cough or cold.
The right arm: fractures of the mid shaft radius and ulna; cuts and bruises; scarring; tender when knocked or jarred and aching.
The right hip and pubic rami: fracture dislocation, with multiple fractures requiring fixing with plate and pin; contusion of the right sciatic nerve with sciatic nerve palsy; impaired circulation to the head of the head right femur; fractures of the left public rami; sciatic nerve damage is significant, pain and disability which will increase with time. He will develop osteo-arthritis and he will need a hip replacement operation, or possibly two, dependant upon the date of the first.
His legs and knees: cuts, some scarring, tender stiff knee.
His right foot: a serious injury described by Mr Taor. Multiple injuries involving the metatarso phalangeal joints of all toes. There were fractures, resulting in pain, limitation of movement and stiffness of the joints. A foot drop. He will need individually made insoles permanently, and wear trainers rather than shoes for comfort. There is a possibility of a future operation, mentioned by Mr Taor in his report. One of the effects on the soles of the foot, as we heard in evidence, affect the efficiency of the blood supply from the leg to the heart.
There is a tracheotomy caused because of the maxio-facial surgery resulting in a scar. There is venous damage to the right leg. The damage was caused by the trauma but became apparent in 1997, and he was referred to Dr Tristram who found damage to the deep veins - in particular a defective valve, resulting in leakage of the deep veins of the right leg. This was relieved by surgery, but the damage to the smaller veins remains and vulnerability to further trauma. There is discolouration, vulnerability to ulceration and deep vein thrombosis. He will have to wear a supportive stocking for the rest of his life.
The operative history shows five operations immediately resultant on the accident injuries: three post accident, on the 21st, 24th and 30th January; subsequently an operation for removal of the pin from the arm; an operation for removal of the plates on 30th January 1998: a total of six operations involving a general anaesthetic.
He was an in-patient in hospital, including two weeks in intensive care, and subsequently in private hospital care until 21st April 1995, that is a period of three months. Thereafter he was in outpatient care, including physiotherapy, and was off work for eight months. Even before that time, he had been doing some work and keeping in touch with the projects from home by computer. I note that, even in hospital, he asked his wife to bring the lap-top into hospital for him; that is mentioned in the nursing notes referred to in Dr. Clarke's report at page 370.
Although he has adapted his way of working to accommodate deficiencies in his short-term memory by making notes, he does not do that at home where his wife does it for him. He has resumed full responsibilities at work and continues to play a key role in the partnership. He can do the job, can drive, travel by air and public transport, though with some restriction and pain because of his disabilities. He is courageous, well-motivated and makes little of the remaining symptoms from these dreadful injuries. His attitude, and the courage and understanding of his wife are impressive.
In mid to late 1997, there was late development of deep vein thrombosis, varicose veins and ankle swelling. An operation to improve this has eased the pain but has left scarring, and residual problems remain. There is a continuing risk of ulceration from the smaller veins and a potential risk of thrombosis and possibly a pulmonary embolism from further operative treatment. There will be further operative treatment, that is the hip replacement, which both orthopaedic surgeons consider inevitable. They differ as to how soon an operation will be needed. To some extent this is patient-driven. There will be (and is already) osteo-arthritis which will become painful, and the timing of the operation will largely depend on the time when the patient finds that the pain and restriction on his lifestyle demands operative treatment, subject only to the reservations of the surgeons that the earlier this operation takes place, the more likely it is that a second operation will be needed at some time in the plaintiff's life. The prosthesis, of course, has a limited life-span, albeit considerably longer than those inserted when this operation was first undertaken.
There is a slightly increased risk compared with the average patient because of the previous injury and because of the venous damage, which could result in deep vein thrombosis - on a worst case scenario pulmonary embolism - which could be apparent shortly after the operation, or silent damage to secondary veins, which would not show itself so quickly but would increase his current vulnerability to ulceration.
His current disabilities: he is tired after a day's work, has pain from the hip which is not necessarily directly attributable to exertion or sitting; pain from the leg and ankle, which he finds more easily attributable to specific over-exertion, or restrictions or extensive standing or sitting. He has pain on knocking or catching the leg or ankle against something and risk of ulceration. There is discomfort from the constant wearing of a leg support stocking. Additional tension from having to adapt to compensate for memory loss at work."
The Appellant's overall criticism
6. Before I come to the Defendant's detailed criticisms of the conclusions set out in paragraph 4, I must deal with one overall submission made by Mr Jeffreys. He submitted that when the Court is attempting to assess what will happen in the future it is wrong to state things as being certainties. There is no such thing as certainty, there are more or less degrees of probability that something will occur, or would have occurred if there had been no accident, there is then a risk that because of the effect of the injuries the Claimant will not be able to work as long as he would have done, but for the accident. It is this risk which has to be evaluated. Thus there is no certainty that the Claimant would have worked until 60 without the accident and no certainty that he will now have to retire by 58, still less 55. I have some sympathy with this criticism, because the judge does not explain in her judgment how she arrived at what she took as certainty. If she concluded that it was more likely than not that such a thing would happen, and thereupon converted into a certainty, this would be an error. Such an approach, while appropriate in the finding of historical facts, is not appropriate when the Court is trying to assess what will happen in the future, or what would have happened, but for the accident (see Allied Maples Group Ltd v Simmons and Simmons [1995] 1 WLR 1602 at p1610 B-C and Doyle v Wallace [1998] PIQR.Q146). These cases were not cited to the judge.
7. There would have been more force in this criticism were it not for the fact that the judge seems to have adopted the approach advocated by Mr Jeffreys (see Day 4 p26A-B and p29C-F). In the light of this it seems to me that Mr Jeffreys' real criticism is that a discount of 30% is not sufficient. In effect what the judge has done is to conclude that there is a 70% risk that Mr Smee will have to retire five years earlier than he would otherwise have done. That provides the appropriate multiplier. The multiplicand, which is affected by the annual increase of 6% in share of profits until 50 and the draw down of pension on retirement, is diminished by 30%.
8. What ought to be the Court's approach to the judge's assessments as to future events? They are not findings of primary fact where there is a conflict of evidence and questions of credibility are involved. On the other hand, the judge's assessment of the Claimant's character and personality may be an important part of her determination of these events. Moreover, in deciding whether this Court should interfere and alter the judge's discount to take account of the fact that what she was dealing with was risk and not certainty, we should only do so if we are satisfied that she is clearly wrong. There must be quite a wide margin of appreciation, just as there is when this Court decides whether to alter an award of general damages. Though in such a case it may be easier to show that the award is outside an acceptable bracket, because generally speaking a tariff can be determined from decided cases. I think the Court's approach should be similar to that when we decide whether or not to interfere with a trial judge's apportionment of liability between tortfeasors or an assessment of contributory negligence. The Court will only do so if it feels that the judge was plainly wrong.
The Defendant's detailed criticisms
9. Would the Claimant have continued to work until he was 60½ if there had been no accident? Mr Jeffreys says no. Partners of Ernst and Young have to retire at the end of the financial year after their 60th birthday. But they can take early retirement at 58. In his witness statement (p75) Mr Smee said he would like to retire early, but as a result of starting a family fairly late in life, it is probably unrealistic to assume that he would be in a financial position to retire before the normal retirement date. Mr Jeffreys pressed him in cross-examination on the basis that by the time he was 58 he would have built up a very substantial capital sum out of his earnings so as to afford to educate his children through university. Since this appeared to be the main reason for not taking early retirement, there is obviously some force in this point that Mr Jeffrey's made, especially as it does not seem that Mr and Mrs Smee have an extravagant life- style. Mr Jeffreys also points out that in recent years the majority of partners in Ernst and Young have retired before 60.
10. The judge dealt with the point in this way:
"But for the accident would he have taken early retirement? The defendants argue that he would. His comments about "spending time with the family if able to do so financially" I note. Having heard him give evidence and seen his motivation after the accident, I do not consider that he works only for money, but enjoys the challenge, the adrenaline and feels a considerable commitment to his partners and his firm. He is rightly described as "a high flyer"; a partner at 31 and now one of the key players in the partnership. His answer about early retirement in cross-examination, "It would depend if I was still enjoying myself and the challenge were in line with my aspirations", is very telling. At 40, or even 43, 60 seems a lifetime away, and though he spoke of possibly finding the idea of early retirement attractive, if it were financially appropriate for his young family - and I can assure him that their needs continue when they are at university - I am satisfied that when the time came, provided he was still enjoying himself (and there is no evidence he would not be) he would have continued working, but for the accident, until the normal retirement age, that is at the end of the firm's financial year after his 60th birthday. I am reinforced in this view by the fact that, of those partners who have retired early in recent years none fits into the description of "key players", which clearly is a proper description of this plaintiff."
11. This is an aspect of the case where impression of the Claimant's personality is of some importance. If this finding was expressed in terms of a probability, or even a strong probability, it would be difficult to quarrel with it, so long as it is borne in mind that it is not a certainty. But as I have already pointed out, the judge approached the matter in the way she was invited to. So the question is does the 30% discount adequately reflect this and other uncertainties?
12. What is the risk that the Claimant's injuries will compel him to retire earlier than he otherwise would have done? Mr Jeffrey's accepts that there is some risk that this is so; but he says that the judge has seriously overstated it. There were three areas of principal concern - the loss of short term memory, the hip replacement with its attendant risks, and the likelihood of deep vein thrombosis. Mr Jeffreys points out that none of the doctors dealing with their own speciality suggested that any of these matters alone would prevent him from working. Moreover, the risks of serious complications arising from a hip replacement operation and deep vein thrombosis seems to be small.
13. The judge dealt with the matter as follows:
"Will his injuries compel him to retire early and, if so, when? There are two aspects of the accident injuries which do not quite run in parallel but are to some extent interrelated, which may cause him to be unable to continue in what is a demanding and high-pressured job.
Firstly, the pain and discomfort from injuries other than the hip increases to such an extent that he is unable to maintain the level of work - in particular, the lifestyle of travel, both in the UK and long haul - effectively. This could be because of the leg ulceration, the foot and/or pain in the hip. This would be irrespective of a hip replacement operation.
Under this head, the first consideration, I also take into account the short-term memory loss, in respect of which he has adapted his method of work by taking and relying on notes. The extent of this need was apparent from Mrs Smee's evidence. She said: "It is nothing of major significant danger; frustrating. I tell him and he forgets he was asked to do it. For the first couple of years it drove me potty. Now I make allowances and write everything down." Both consultants considered this could be an element leading to early retirement, his previous level of activity being more of an effort for him. Dr. Plant in evidence said: "Considering he is in a very high intellectual level of performance, he is less likely to be able to sustain this to full retiring age than if he had not had a head injury. It is a component in considering early retirement. Some do because they cannot cope with stress energy levels in the job. He is now more vulnerable than he would be."
A second, separate, or, as I say, parallel consideration, is the hip replacement operation, which both surgeons consider inevitable. It carries a small risk in any case, but here there is an increased risk because of his injuries. That is partly because of the previous damage to the hip; not a severe risk because of the skill of Mr Brown in achieving a very good result by the earlier surgery. There is also the risk of deep venous problems, pulmonary embolism at the most serious, going down to minor vein damage, described as "silent", which would increase the risk of ulceration.
The figures quoted by the experts differ, that is the percentage of numbers at risk. In part, this is because the orthopaedic surgeons will have records only of those venous problems which occur shortly after surgery, and do not include the "silent" type. It may be that if the programme Dr. Tristram is now engaged on, scanning on the 8th day after joint replacement, continues more accurate figures will be available in the future. Although a successful operation, which would have to be repeated if carried out an early stage, would relieve pain in the hip and increase mobility, it would not affect the other injuries.
As far as the date for the hip replacement is concerned, both consultants agree that the timing is to a large extent patient driven, and the relevant factor is the degree of pain, rather than the pathology, being the determinative matter. Both agree that the operation is inevitable, and in evidence Mr Taor said it would have occurred by the age of 60. Professor Paton puts the date earlier. Mr Taor said there was a small possibility it could be as early as 50, rising on a straight line from then to the end point. Bearing in mind both aspects, and the commitment of the plaintiff to pull his weight within the firm, I am satisfied that there is a real, although small, risk that he plaintiff could be compelled to take early retirement as soon as aged 50, rising to a certainty by the age of 58. I do not consider that when I take into account both aspects, the graph from the earliest date to the later date is a straight line, but will be more gradual in the early years, rising more sharply in the later period."
14. In my judgment the judge was entitled to consider the wearing and ageing effect of pain, coupled with anxiety that must be caused by short term memory loss in a highly responsible job gave rise to a substantial risk of early retirement. The same criticism can be made as before, especially perhaps in relation to the supposed certainty of retirement at 58. But again the real question is whether the discount is sufficient.
15. The judge made no allowance for residual earnings when the Claimant has to retire early. Mr Jeffreys submits that she should have done. It is one thing to have to retire from the highly stressful job as a partner of Ernst and Young, but there is no reason he submits why his skills as an accountant who has great experience in auditing property companies, should not command a market locally which would not involve arduous travel and such a stressful level of responsibility. Mr Smee himself contemplated that he would be able to find work, but only of a charitable nature. The judge dealt with the matter quite shortly. She said:
"There has been no firm evidence of availability of work. I note the age of likely retirement and the difficulty of obtaining paid employment for anyone in their 50's, particularly the later 50's, coupled with the fact that a specialist in a profession is not a particularly attractive proposition as an employee for a firm requiring more "run of the mill" work."
16. It is hardly to be expected that there would be evidence of availability of work in 12-15 years time. But I think the judge was justified in thinking there would be a substantial risk that he would not be able to obtain paid employment. But I do not think the possibility should be entirely disregarded.
17. The judge found that the Claimant's earnings would increase by 6% per annum in real terms until he reached 50 and would then level off. Partners' share of profits in Ernst and Young are determined on the basis of an allocation of points, each point being worth an aliquot part of the firm's profit for the year in question. The allocation is done annually by the executive partners based on performance and status in the partnership. Analysis of the allocation of points to the Claimant between 1992 and 1998 shows a 6% increase annually. Mr Jeffreys criticised the conversion of this increase into increased earnings on two bases. First that it postulates a future 6% annual increase in the profits of the firm, which he submitted was unjustified. I agree with this, if it were so. But in the calculation no assumption of increase in the firm's profit has been made. The assumption is that the profit will remain constant. Secondly it is submitted that it is not justifiable to conclude that the historical increase will continue for the next seven years. There would be more force in this submission were it not for the fact that the 1999 increase in the Claimant's points was 12%. This was not taken into account in calculating the 6% figure. This 12% increase, coupled with an increase in the point value for 1999 has resulted in a very substantial salary increase this year. I am not therefore persuaded that the judge was wrong to take this increase in real terms into account.
Loss of pension
18. The Claimant had two retirement annuity policies, one with Scottish Equitable and the other with Standard Life. His case was that if he had to retire early he would convert the retirement annuities into a personal pension plan and draw the pension from the date when he retired, rather than the date of maturity of the annuities which was either 63 or 60. On retirement earlier than 60 this would have two effects: (a) he will no longer be making contributions so the fund will be less than it otherwise would, and (b) the fund would be diminished by earlier draw down and therefore the annual payments will be less than they would have been. The point in (a) is not material because the earnings loss has been calculated net of pension contributions. But the point in (b) is relevant. This loss has been calculated and forms part of the claim; it is dependant on the assumption that the Claimant will draw his pension at 55 and not 60.
19. Mr Jeffreys makes two submissions in relation to this. The first is that there is no evidence that Mr Smee will draw his pension on retirement rather than at 60. Indeed he goes further than this and submits that in his statement Mr Smee indicated that he would not draw his pension until he was 60. Mr Smee was in fact mistaken in thinking that he could after retirement top up his pension out of damages for lost earnings, which is the point he is making at p.81 of the Core Bundle.
20. The second submission is that as a matter of probability the Claimant will not draw his pension until he is 60. This is so for two reasons. First because by the time he comes to retire he will have saved a very substantial sum from his extremely high earnings. Secondly under the terms of the partnership deed if he has to retire at 55 through ill health, he will receive £875,000 in five annual tax free instalments. Funds from these sources will, it is said, make it unnecessary and unwise, to draw down the pension at that stage, thereby reducing the lump sum and annual payments.
21. The judge dealt with the point succinctly; she said there was no evidence to support the contention that the Claimant would not draw the pension on retirement.
22. This issue only became a live one during the cross-examination of Mr Faull, the Claimant's forensic accountant, who was the last witness in the case. Mr Jeffreys says that he deliberately did not raise the matter with the Claimant; he was relying on his witness statement and the absence of any evidence that he would draw down on retirement. But I do not think it is as simple as that. The claim and the basis for it was clearly advanced in the claim and Mr Faull's report. The Defendant's counter-schedule held no hint of this argument. I suppose it would have been possible for Mr Smee to have been recalled. But no application was made to do so. The case for the Claimant seems to have been advanced on the basis that it was the obvious thing to do to draw pension on retirement. If any other conclusion was to have been drawn, it should I think have been put to Mr Smee. It was not. That seems to have been the view of the judge and I do not see any reason to differ from it.
23. The critical question is whether the discount of 30% was too little. In my view the award was certainly generous to the Claimant. I have little doubt that if I had been sitting at first instance, I should have given more weight than the judge appears to have done to Mr Jeffreys' submissions in relation to retirement age if there had been no accident, probable retirement age now and residual earnings. I have had considerable doubt as to whether or not the award was so high that we should reduce it. In the end, and not without considerable hesitation, I have concluded that we should not. The judge has considerable experience in this type of case; although I would not have approached the case in quite the same way as she did, that appears to be the way Mr Jeffrey invited her to approach it. On the all important question of retirement age, her assessment of the Claimant's personality and character must have played a part and is entitled to respect.
24. For these reasons I would dismiss the appeal.
LORD JUSTICE ROBERT WALKER: I agree
LORD JUSTICE LAWS: I also agree
(Order does not form part of the approved judgment)