United Kingdom House of Lords Decisions

Parliamentary Archives,
HL/PO/JU/18/248

Hodgson (Respondent) v. Trapp and others (Appellants) and

Hodgson (a patient suing by her husband and next friend Keith

Elliot Hodgson) (Respondent) v. Trapp and others (Appellants)

(Petitions consolidated by order dated 21st November 1986) (On

Appeal from the Queen's Bench Division of the High Court of

Justice)

JUDGMENT

Die Jovis 10° Novembris 1988

Upon Report from the Appellate Committee to whom was
referred the Cause Hodgson against Trapp and others and
Hodgson (a patient suing by her husband and next friend Keith
Elliot Hodgson) against Trapp and others (petitions
consolidated by order dated 21st November 1986) (On Appeal
from the Queen's Bench Division of the High Court of Justice),
That the Committee had heard Counsel on Monday the 11th,
Tuesday the 12th and Monday the 18th days of July last, upon
the Petition and Appeal of Maurice Alan Trapp and Stratford on
Avon District Council, praying that the matter of the Order
set forth in the Schedule thereto, namely an Order of Mr.
Justice Taylor of the 8th day of May 1987, might be reviewed
before Her Majesty the Queen in Her Court of Parliament and
that the said Order might be reversed, varied or altered or
that the Petitioners might have such other relief in the
premises as to Her Majesty the Queen in Her Court of
Parliament might seem meet; as upon the Case of Keith Elliot
Hodgson and Christine Elizabeth Hodgson lodged in answer to
the said appeal; and due consideration had this day of what
was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and
Temporal in the Court of Parliament of Her Majesty the Queen
assembled, That the said Order of Mr. Justice Taylor of the
8th day of May 1987 complained of in the said Appeal be, and
the same is hereby, Varied by reducing the quantum of damages
and the interest payable thereon to the extent indicated in
the penultimate paragraph of the speech of the Lord Bridge of
Harwich and the concluding sentence of the speech of the Lord
Oliver of Aylmerton: And it is further Ordered, That the
Cause be, and the same is hereby, remitted back to the Queen's
Bench Division of the High Court of Justice to do therein as
shall be just and consistent with this Judgment.

Cler: Parliamentor:

Judgment: 10.11.88

HOUSE OF LORDS

HODGSON
(RESPONDENT)

v.

TRAPP AND OTHERS
(APPELLANTS)

AND HODGSON

(A PATIENT SUING BY HER HUSBAND AND NEXT FRIEND

KEITH ELLIOT HODGSON)
(RESPONDENT)

v.

TRAPP AND OTHERS

(APPELLANTS)
(PETITIONS CONSOLIDATED BY ORDER DATED 21 NOVEMBER

1986)

(ON APPEAL FROM THE QUEEN'S BENCH DIVISION OF THE

HIGH COURT OF JUSTICE)

Lord Chancellor
Lord Bridge of Harwich
Lord Brandon of Oakbrook
Lord Oliver of Aylmerton
Lord Goff of Chieveley




LORD MACKAY OF CLASHFERN

My Lords,

I have had the advantage of reading in draft the speeches
to be delivered by my noble and learned friends, Lord Bridge of
Harwich and Lord Oliver of Aylmerton. I agree with both
speeches and for the reasons given in them I too would allow the
appeal on both grounds.

LORD BRIDGE OF HARWICH

My Lords,

On 4 March 1982 the respondent plaintiff sustained
catastrophic injuries in a road accident for which the appellant
defendants admit liability. At the time of the accident the
plaintiff was aged 33, a wife and mother and a woman of many
talents and wide-ranging interests. It is unnecessary for the
purpose of any issue arising in this appeal to describe in detail her
pathetic condition as a result of the accident. It was graphically
summarised by Taylor J.:

"[She] has been reduced to a vegetative existence. Her
physical activity is minimal. Mentally she functions at the



- 1 -




level of a young child. She is wholly dependant on others
and will permanently remain so."

The judge awarded damages, inclusive of interest, in the sum of
£431,840. The defendants now appeal from that award directly to
your Lordships' House pursuant to the judge's certificate under
section 12 of the Administration of Justice Act 1969 and by leave
of the House. The appeal raises issues with respect to the judge's
assessment of the elements included in the aggregate award as
follows:




Cost of care to date of trial	£ 53,871
Future cost of care	£154,000
Future loss of earnings	£ 75,123

Two distinct points of law arise for determination. First, in
assessing damages to meet the expenses, past and future, of
providing for the appropriate care of the plaintiff, the judge made
no deduction in respect of the attendance and mobility allowances
payable to the plaintiff pursuant to sections 35 and 37A of the
Social Security Act 1975. He rightly held himself bound to
disregard those allowances pursuant to the decisions of the Court
of Appeal in Bowker v. Rose, The Times, 3 February 1978, Court
of Appeal (Civil Division) Transcript No. 164 of 1978, C.A., and
Gohery v. Durham County Council, (Unreported) on 26 April 1978,
Court of Appeal (Civil Division) Transcript No. 236 of 1978, C.A.
On the first point the present appeal is an invitation to the House
to reverse those decisions. Secondly, having assessed the
multiplicands for future cost of care and future loss of earnings
and indicated that he considered multipliers of 13 and 11
respectively to be appropriate, the judge increased the multipliers
to 14 and 12 to take account of the incidence of higher rates of
taxation likely to be attracted by interest on the capital sum of
his award. This was the course approved by the Court of Appeal
in Thomas v. Wignall [1987] Q.B. 1098 and the correctness of that
decision is also now called in question.

The basis of the statutory entitlement to attendance
allowance under section 35 of the Act of 1975 is that the
claimant is so severely disabled physically or mentally that he
requires, by day, frequent, by night, prolonged or repeated,
attention in connection with his bodily functions, or continual
supervision to avoid substantial danger to himself or others. Thus
the allowance is clearly intended to meet, in whole or in part, the
necessary cost of care of a person as severely disabled as the
plaintiff in the instant case, irrespective of the cause of the
disability. The basis of entitlement to mobility allowance under
section 37A is that the claimant is unable or virtually unable to
walk but is in such a condition as to permit him to benefit from
enhanced facilities for locomotion. Here again, the allowance is
intended, subject to a point of detail which I must consider later,
to contribute to the cost of care of a person who, like the
plaintiff, cannot walk, in so far as that cost is incurred in
providing means to alleviate the hardship of immobility.

It is necessary first to consider Daish v. Wauton [1972] 2
Q.B. 262. That was a case where the plaintiff, a boy of five,
suffered severe injuries in an accident for which the defendants
admitted partial liability. The boy was likely to spend the rest of



- 2 -

his life in a National Health Service institution. In awarding a
single global sum for general damages the trial judge substantially
discounted the element representing future loss of earnings on the
ground that the plaintiff's earnings would have been mainly spent
in maintaining himself, whereas in the event he would be
maintained by the State. The Court of Appeal increased the
award to take full account of future loss of earnings on the
ground that the benefit of free maintenance in a State institution
was to be disregarded.

In Bowker v. Rose the trial judge, in awarding damages in
respect of the cost of care of a severely incapacitated plaintiff,
had declined to make any deduction in respect of attendance and
mobility allowances payable under the Act of 1975. The leading
judgment in the Court of Appeal affirming the judge's award was
delivered by Roskill L.J. Having referred to passages from the
speech of Lord Reid in Parry v. Cleaver [1970] AC 1 and from
the judgment of Windeyer J. in National Insurance Co. of New
Zealand Ltd, v. Espagne (1961) 105 C.L.R. 569, to both of which I
shall have to refer later, he concluded that the key to the
question whether the allowances were to be deducted lay in
discerning the purpose of the legislation under which the
allowances were payable:

"In my view," he said, "we should look at the relevant
section and ask what is the purpose of this legislation. Is it
a benefit conferred by the State upon the individual, so that
the individual shall receive it when the event occurs which
entitles him to it, irrespective of the cause of that event
and irrespective of what other compensation he may receive
to compensate him for his loss?"

On further consideration of the authorities, and in particular Daish
v. Wauton [1972] 2 Q.B. 262, Roskill L.J. answered his own
question in the affirmative. Having recited the argument in
favour of deduction of the allowances in mitigation of damage, he
concluded:

"I would reject the argument both in principle and on
authority. I reject it in principle because I think that to
give effect to it would be to ignore the purpose of this part
of the relevant social security legislation. I would reject it
on authority because I think that to accept it would fail to
follow - as it is our duty in this court to follow - the
decision in Daish v. Wauton."

Gohery v. Durham County Council (Unreported), another case
involving attendance allowance, had been decided at first instance
before the decision of the Court of Appeal in Bowker v. Rose, but
came before the Court of Appeal some two months later. The
court inevitably held themselves bound by Bowker v. Rose, though
Ormrod L.J. expressed a doubt, with which I am inclined to agree,
as to whether that decision followed necessarily from the earlier
decision in Daish v. Wauton [1972] 2 Q.B. 262.

An ironic twist is added to the story by the enactment of
section 5 of the Administration of Justice Act 1982, which
reverses the effect of Daish v. Wauton, but does not touch the
point at issue in the present appeal.

- 3 -

My Lords, it cannot be emphasised too often when
considering the assessment of damages for negligence that they are
intended to be purely compensatory. Where the damages claimed
are essentially financial in character, being the measure on the
one hand of the injured plaintiff's consequential loss of earnings,
profits or other gains which he would have made if not injured, or
on the other hand, of consequential expenses to which he has been
and will be put which, if not injured, he would not have needed to
incur, the basic rule is that it is the net consequential loss and
expense which the court must measure. If, in consequence of the
injuries sustained, the plaintiff has enjoyed receipts to which he
would not otherwise have been entitled, prima facie, those receipts
are to be set against the aggregate of the plaintiff's losses and
expenses in arriving at the measure of his damages. All this is
elementary and has been said over and over again. To this basic
rule there are, of course, certain well established, though not
always precisely defined and delineated exceptions. But the courts
are, I think, sometimes in danger, in seeking to explore the
rationale of the exceptions, of forgetting that they are exceptions.
It is the rule which is fundamental and axiomatic and the
exceptions to it which are only to be admitted on grounds which
clearly justify their treatment as such.

The classic heads of exception to the basic rule are: (1)
moneys accruing to the injured plaintiff under policies of insurance
for which he has paid the premiums: Bradburn v. Great Western
Railway Co. (1864) L.R. 10 Ex. 1; and (2) moneys received by the
plaintiff from the bounty or benevolence of third parties motivated
by sympathy for his misfortune: Redpath v. Belfast and County
Down Railway [1947] N.I. 147. The reasoning relied on by courts
in support of other exceptions has, I think, invariably been based
on the application to a greater or lesser degree by analogy of the
same reasons as are thought to justify the primary exceptions.
These reasons were fully examined by Lord Reid in Parry v.
Cleaver [1970] AC 1, 14. I ventured myself to suggest in
Hussain v. New Taplow Paper Mills Ltd. [1988] A.C. 514, 528A,
that the common sense of the two primary exceptions was obvious
and I do not resile from that view. The difficulty, which has been
widely recognised, is to articulate a single precise jurisprudential
principle by which to distinguish the deductible from the non-
deductible receipt. As Lord Reid said in Parry v. Cleaver [1970]
A.C. 1, 13: "The common law has treated this matter as one
depending on justice, reasonableness and public policy."

I hope I may be forgiven for repeating an observation I made in
Hussain v. New Taplow Paper Mills Ltd. [1988] A.C. 514, 528:

"Given the inevitable divergencies of judicial opinion as to
what justice, reasonableness and public policy require, it is
not surprising that courts in different common law
jurisdictions should sometimes have solved similar problems
in this field in different ways."

In Hussain it was necessary to examine the extent to which
the analogy of the insurance exception to the general rule against
double recovery could be pressed. Your Lordships now have to
examine the question how far it is appropriate to treat statutory
benefits as analogous to the proceeds of voluntary benevolence
intended to alleviate the plight of the victims of misfortune.

- 4 -

The main support for the view that statutory benefits in aid
of those in need should be disregarded in assessing damages as
being a form of "public benevolence" comes from a passage in the
speech of Lord Reid in Parry v. Cleaver [1970] AC 1 and from
some observations of Windeyer J. In National Insurance Co. of
New Zealand Ltd, v. Espagne 105 C.L.R. 569.

In Parry v. Cleaver Lord Reid said, at p. 14:

"So I must inquire what are the real reasons, disregarding
technicalities, why these two classes of receipts are not
brought into account. I take first the case of benevolence.
I do not use the work 'charity' because, rightly or wrongly,
many people object to it. I know of no better statement of
the reason than that of Andrews C.J. in Redpath v. Belfast
and County Down Railway [1947] N.I. 167, 170. There the
company sought to bring into account sums received by the
plaintiff from a distress fund. Andrews C.J. said that the
plaintiff's counsel had submitted

'that it would be startling to the subscribers to that
fund if they were to be told that their contributions
were really made in ease and for the benefit of the
negligent railway company. To this last submission I
would only add that if the proposition contended for
by the defendants is sound the inevitable consequence
in the case of future disasters of a similar character
would be that the springs of private charity would be
found to be largely if not entirely dried up.'

It would be revolting to the ordinary man's sense of justice,
and therefore contrary to public policy, that the sufferer
should have his damages reduced so that he would gain
nothing from the benevolence of his friends or relations or
of the public at large, and that the only gainer would be
the wrongdoer. We do not have to decide in this case
whether these considerations also apply to public
benevolence in the shape of various uncovenanted benefits
from the welfare state but it may be thought that
Parliament did not intend them to be for the benefit of the
wrongdoer."

The case of Espagne 105 C.L.R. 569 concerned a question whether
an invalid pension paid to a blind person under complex statutory
provisions which involved a substantial discretionary element was
to be taken into account in assessing the general damages and
damages for loss of earnings awarded to the plaintiff for injuries
including the loss of his sight. The decision, as I read the
judgments, turned largely on the unusual provisions of the statute
in question which both Menzies and Windeyer JJ. subjected to
exhaustive examination and analysis. The passage from the
judgment of Windeyer J. on which particular reliance was placed
by Roskill L.J. in Bowker v. Rose The Times, 3 February 1978,
Court of Appeal (Civil Division) Transcript No. 164 of 1978, C.A.,
is at pp. 599, 600 as follows:

"In assessing damages for personal injuries, benefits that a
plaintiff has received or is to receive from any source other
than the defendant are not to be regarded as mitigating his



- 5 -

loss, if: (a) they were received or are to be received by him
as a result of a contract he had made before the loss
occurred and by the express or implied terms of that
contract they were to be provided notwithstanding any rights
of action he might have; or (b) they were given or promised
to him by way of bounty, to the intent that he should enjoy
them in addition to and not in diminution of any claim for
damages. The first description covers accident insurances
and also many forms of pensions and similar benefits
provided by employers: in those cases it is immaterial that,
by subrogation or otherwise, the contract may require a
refund of moneys paid, or an adjustment of future benefits,
to be made after the recovery of damages. The second
description covers a variety of public charitable aid and
some forms of relief given by the State as well as the
produce of private benevolence. In both cases the decisive
consideration is, not whether the benefit was received in
consequence of, or as a result of the injury, but what was
its character: and that is determined, in the one case by
what under his contract the plaintiff had paid for, and in
the other by the intent of the person conferring the benefit-
The test is by purpose rather than by cause."

It is important, however, to note the cautionary words, not cited
in the judgment of Roskill L.J. in Bowker v. Rose, which Windeyer
J. added immediately following the passage cited above. He said,
at p. 600:

"Nevertheless it is not, I think possible, to enunciate
an exhaustive rule for all parts of this vexed topic. And
the questions that arise can never be determined in the
abstract. Each must depend on the terms of the particular
contract, pension scheme, charitable benefaction or statute
governing the benefit conferred."

Whatever may be the position with regard to discretionary
statutory pensions of the kind with which the High Court of
Australia was concerned in Espagne's case 105 C.L.R. 569, when I
turn to consider statutory benefits for the relief of various forms
of need which are payable as of right to those who fulfil the
qualifying conditions, I find the concept of "the intent of the
person conferring the benefit" a somewhat elusive one. Statutory
benefits of the kind in question come either directly from the
pocket of the taxpayer or from some fund to which various classes
of citizens make compulsory contributions. The legislation
providing for the benefits is prompted by humanitarian
considerations directed to meeting certain minimum needs of the
disadvantaged, irrespective of their cause. It is, of course, always
open to Parliament to provide expressly that particular statutory
benefits shall be disregarded, in whole or in part, and section 2 of
the Law Reform (Personal Injuries) Act 1948 is the most familiar
instance where it has done so. But in the absence of any such
express provision, where statutory benefits are payable to one
whose circumstances of qualifying need arise in consequence of a
tort of which he was the victim, I can certainly discern no general
principle to support Lord Reid's tentative opinion "that Parliament
did not intend them to be for the benefit of the wrongdoer."

- 6 -

As regards statutory benefits intended to relieve purely
financial hardship, it is now settled that unemployment benefit is
to be taken into account as mitigating loss of earnings occasioned
by wrongful dismissal: Parsons v. B. N. M. Laboratories Ltd. [1964]
1 Q.B. 95; affirmed by this House in Westood v. Secretary of
State for Employment [1985] A.C. 20. In delivering a speech in
the latter case with which the rest of their Lordships adjudicating
agreed, I observed, at p. 43:

"I do not see any analogy at all between the generosity of
private subscribers to a fund for the victims of some
disaster, who also have claims for damages against a
tortfeasor, and the state providing subventions for the needy
out of funds which, in one way or another, have been
subscribed compulsorily by various classes of citizens. The
concept of public benevolence provided by the State is one I
find difficult to comprehend."

Parsons v. B. N. M. Laboratories Ltd. [1964] 1 Q.B. 95 was
followed by the Court of Appeal in Lincoln v. Hayman [1982] 1
W.L.R. 488, in holding that supplementary benefit paid to the
plaintiff in a personal injury action was to be set off against his
loss of earnings in assessing special damages. Counsel for the
respondent in this appeal did not challenge the decision in Lincoln
v. Hayman. He sought instead to distinguish it on the ground that
payments from public funds to provide the indigent with a
minimum acceptable level of subsistence are essentially different
in kind from payments to meet the needs of those suffering from
particular disabilities. I am unable to see any rational basis for
this distinction.

In the end the issue in these cases is not so much one of
statutory construction as of public policy. If we have regard to
the realities, awards of damages for personal injuries are met from
the insurance premiums payable by motorists, employers, occupiers
of property, professional men and others. Statutory benefits
payable to those in need by reason of impecuniosity or disability
are met by the taxpayer. In this context to ask whether the
taxpayer, as the "benevolent donor," intends to benefit "the
wrongdoer" as represented by the insurer who meets the claim at
the expense of the appropriate class of policy holders, seems to
me entirely artificial. There could hardly be a clearer case than
that of the attendance allowance payable under section 35 of the
Act of 1975 where the statutory benefit and the special damages
claimed for cost of care are designed to meet the identical
expenses. To allow double recovery in such a case at the expense
of both taxpayers and insurers seems to me incapable of
justification on any rational ground. It could only add to the
enormous disparity, to which the advocates of a "no-fault" system
of compensation constantly draw attention, between the position of
those who are able to establish a third party's fault as the cause
of their injury and the position of those who are not.

A separate and subordinate point was raised on behalf of
the plaintiff in relation to mobility allowance. It was submitted
that the allowance was intended exclusively to meet the cost of
providing transportation for the claimant whether by invalid
carriage, car or otherwise. The only specific item of damages
included in the judge's award to the plaintiff referrable to the



- 7 -

provision of transportation for the plaintiff in that sense was a
sum of £2000 for additional expenditure on a family car. It is
submitted that this limits to £2000 the amount that may be
deducted from the plaintiff's damages in respect of mobility
allowance. I am unable to read the phrase "enhanced facilities for
locomotion" in section 37A(2)(b) of the Act of 1975 in the narrow
and restricted sense necessary to support this submission. There is
no doubt that the plaintiff qualifies for the full mobility allowance
on the footing that her condition permits her to benefit from such
enhanced facilities. The facilities may take a variety of forms
and would certainly include whatever outings are provided for her
by those who care for her. I see no reason why the whole of the
mobility allowance should not be regarded, just as the attendance
allowance, as available to meet the cost of her care generally and
thus as mitigating the damages recoverable in respect of the cost
of that care.

It follows in my opinion, that Bowker v. Rose The Times, 3
February 1978, Court of Appeal (Civil Division) Transcript No. 164
of 1978, C.A. and Gohery v. Durham County Council (Unreported)
26 April 1978, Court of Appeal (Civil Division), Transcript No. 236
of 1978, C.A. were wrongly decided and should be overruled.

On the second point raised by the appeal relating to the
multipliers used by the judge in assessing future loss of earnings
and future cost of care, I have had the advantage of reading the
speech of my noble and learned friend, Lord Oliver of Aylmerton,
and I entirely agree with it.

These conclusions have the following effect on the quantum
of damages awarded under the relevant heads in dispute. The
aggregate of attendance and mobility allowances received by the
plaintiff to date of trial, £9,671, is to be deducted and reduces
the award for cost of care to date of trial to £44,180. The
judge's estimate of the annual future cost of care, £11,000, falls
to be reduced by the annual aggregate of the allowances at the
agreed figure of £2,792. The resulting multiplicand, £9,208,
multiplied by 13 instead of 14, gives the figure for future cost of
care of £119,704. The reduction of the multiplier applied to
future loss of earnings from 12 to 11 reduces the award under this
head to £68,856. The interest element in the award of damages
will also require consequential adjustment.

I would allow the appeal by reducing the judge's award of
damages to the extent indicated.

LORD BRANDON OF OAKBROOK

My Lords,

I have had the advantage of reading in draft the speeches
prepared by my noble and learned friends Lord Bridge of Harwich
and Lord Oliver of Aylmerton. I agree with both speeches and for
the reasons given in them I would allow the appeal by reducing
the damages awarded by the judge to the extent indicated by Lord
Bridge of Harwich.

- 8 -

LORD OLIVER OF AYLMERTON

My Lords,

The tragic factual history which has given rise to this
appeal has been fully rehearsed in the speech of my noble and
learned friend, Lord Bridge of Harwich. As regards the first
grounds of appeal relating to the question of mobility and
invalidity allowances, I entirely agree with everything that has
fallen from my noble and learned friend.

The second ground of appeal raises a quite distinct issue
which arises in this way. It was agreed at the trial before
Taylor J. that the respondent had suffered a continuing loss of
salary of £3,267.77 per annum and there was, in addition, an
assessed loss of £3,000 per annum in respect of free-lance work in
which the respondent had engaged prior to the accident. To these
multiplicands Taylor J. applied a multiplier of 11, which is not
challenged. That figure, however, he increased to 12 in order to
take account of the fact that the income likely to be produced
from conventional investment of the sums awarded would attract
income tax at the higher rate, a course which had been approved
by the Court of Appeal in Thomas v. Wignall [1987] Q.B. 1098.
Similarly in relation to the prospective costs of nursing care and
attendance, the learned judge adopted a multiplicand of £11,000 to
which he applied a multiplier of 13, which again is not challenged.
To that, however, he again added a further one year in order to
take account of the incidence of taxation at the higher rates.
The appellants do not challenge the general proposition that the
prospective incidence of higher-rate income tax may, in
exceptional circumstances, be a factor which can legitimately tip
the scales in favour of selecting a multiplier at the higher end of
the conventional scale. They do, however, challenge the
correctness of an approach which involves, after the calculation of
the appropriate multiplier in accordance with the conventional
scale, the making of a specific addition to the multiplier in order
to take account as a separate and individual feature, of the higher
taxation rates which may be attracted by the income likely to be
produced by the investment of a very substantial award. The
same point arises in relation to the future costs of the Court of
Protection, agreed at £850 per annum, to which, for the same
reason, the judge again applied an increased multiplier of 14.

The point arose directly for decision in Thomas v. Wignall
[1987] Q.B. 1098, a case in which the total sum awarded was just
short of £680,000, which included sums of £435,000 for future care
and £39,000 for loss of future earnings. The trial judge, Hutchison
J., had taken a life expectancy of 28 years and a multiplier of 14,
to which he had added a further year to take account of the
effect which higher taxation would have on the income from such
a large award. This was challenged on appeal on the grounds that
such an addition was both wrong in law and unsupported by
evidence. In the Court of Appeal, the leading judgment was
delivered by Nicholls L.J. and the ratio of his approach, with
which Sir John Donaldson M.R. concurred, is encapsulated in the
following passage (pp. 1104-1105):

- 9 -

"Higher rates of income tax are a fact of life. In general,
the larger an individual's income, the greater is the
percentage of it which goes in tax. Further, all the signs
are that a taxation system having this broad effect will
continue to exist in this country for the foreseeable future,
although the figures and the percentages will vary from
time to time. Thus, other things being equal, taxation bears
and will continue to bear more heavily on the income of a
large award of damages than on the income of a small one.
In percentage terms, the net yield after tax of a substantial
fund is likely to be lower than the net yield after tax of a
small fund the income whereof is subject to little or no tax.

"Hence, and still speaking in general terms, there is, in this
respect, a material distinction from the outset between a
very large award and a comparatively modest one. In
principle one would expect that distinction to be taken into
account by the court when determining the amount of the
award. Take two examples, at opposite ends of the
spectrum. In one the court is concerned with assessing the
amount of an award to make good an income loss of £3,500
per annum, or to provide for annual expenditure at that
rate. In the other, the facts are the same save that the
income loss or expenditure is £35,000 per annum. If 14
were the appropriate multiplier in the first case, in my view
it would be wrong, and import an inflexible rigidity neither
justifiable nor necessary, if the court were not able to make
some adjustment to the multiplier in the second case to
reflect the increased incidence of tax."

Lloyd L.J. dissented. In his view, in the absence at least of
expert evidence that the discount rate allowed for in the
conventional multiplier was insufficient to allow for the incidence
of taxation, the general principle laid down by this House in Lim
Poh Choo v. Camden and Islington Area Health Authority [1980]
A.C. 174 as regards allowance for future inflation applied equally
to future taxation which, like inflation, is covered by the ordinary
discount rate of 4-5% on the basis of which the multiplier is
selected. That, the appellants submit, is the correct approach and
one which is inherent in the decision of this House in Lim's case.

My Lords, the question can, I think, only be answered by a
consideration of the principles behind the exercise upon which the
court is called upon to embark in assessing damages in a case such
as the present. The underlying principle is, of course, that
damages are compensatory. They are not designed to put the
plaintiff, 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 plaintiff 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



- 10 -

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.
The process cannot, I think, be better described than it was in the
speech of Lord Diplock in Cookson v. Knowles [1979] AC 556.
He was there concerned with a claim under the Fatal Accidents
Act and, in particular, with the extent to which future inflation
ought to be taken into account in assessing damages under the
Act, but his description of the approach to and method of
assessment of damages is equally applicable to claims for future
loss of earnings and future expenses by the injured party himself.
Lord Diplock said, at pp. 567-568:

"When the first Fatal Accident Acts 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 the 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



-11-

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 3/4 per
cent.; whereas it would need only seven years as multiplier
if the assumed interest rate were 12 per cent."

Then, after providing some calculations related to the award in
that particular case in the light of interest rates then currently
obtainable, Lord Diplock continued, at pp. 571-572:

"My Lords, calculations such as these are artificial, but so
is the measure of damages called for by the Fatal Accidents
Act 1976. The kinds of security with which the calculations
are concerned are not typical of the way in which a
dependent widow (who will have other sources of income as
well) is likely to invest the damages she receives; but they
represent the kinds of security most appropriate for
providing the annuity upon the capital cost of which the
assessment of damages in fatal accident cases has to be
based. They demonstrate that even in periods of inflation
much higher than those contemplated at the time of Mallett
v. McMonagle [1970] A.C. 166 and Taylor v. O'Connor [1971]
A.C. 115, the greater part of its effect upon the real value
of damages recovered in respect of future annual loss would
be counteracted by a compensatory increase in interest
rates.

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 of 4 per cent.
to 5 per cent. 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 W.L.R. 17, 27-29, that the likelihood of
continuing inflation after the date of trial should not affect
either the figure of the dependency or the multiplier used.
Inflation is taken care of in a rough and ready way by the
higher rates of 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 a factor with greater precision."

It is, I think, important to bear in mind that this passage
was not intended to be prescriptive for the future but merely to
describe and analyse the result of an approach to the problem of
compensation which has come conventionally to be adopted by the
courts and which has been found over the years to produce a
substantially just result. In an area in which, as Lord Diplock
observed, the conjectural nature of the exercise necessarily renders
the computation at best rough and ready, it is not to be expected



- 12 -

that the process will or can be precise or entirely logical. So far
as taxation is concerned, for instance, there is already a degree of
illogicality in the process even as regards the incidence of
standard-rate tax. The decision of this House in British Transport
Commission v. Gourley [1956] AC 185 compels the court, in
determining the amount of the plaintiff's actual loss of earnings to
which the multiplier is to be applied, to take account specifically
of the income tax which, if the plaintiff had continued to work,
he would actually have had to pay upon his annual salary. Yet
your Lordships have not been referred to any case - and I have
certainly found none - in which the court has taken any specific
account of the fact that if the amount of the award is invested,
standard rate tax will, in many cases, be payable upon the income
produced by the investment. So that it may fairly be said that
the tax-paying plaintiff suffers tax twice, first by having the
notional tax deducted from his earnings for the purpose of
computing the award and then again by suffering the actual tax
which is deducted from the income earned by the award. Indeed,
on this analysis logic would demand that, in the case of a plaintiff
with a substantial private income or a wealthy spouse, the award
would require to be increased in order to compensate for the
increased rate of tax payable on its income by reason of the
existence of these other resources which may or not be
permanently available. This is yet a further illustration of the
complications and difficulties which arise if one seeks to take
account, as if the computation were an exact science, of individual
factors which are themselves imponderable.

Now, of course, in the assessment of what an injured party
has lost and of what is required to compensate him, the incidence
of the higher rates of taxation may appear in the equation in
three different ways. In the first place, the injured person's
current and likely future earnings lost as a result of the accident
may be of an amount which by itself attracts higher rates of tax
in the fiscal regime current at the date of assessment. This
presents no difficulty. What the court is required to do is to
assess the net amount of the loss in accordance with the principles
enunciated in Gourley's case [1956] AC 185. Secondly, the
injured person may already be possessed of other resources quite
unaffected by the accident which, either alone or when added to
the earnings lost as a result of the accident, would result in the
lost earnings being subjected to higher rate tax. In calculating the
actual loss of earnings, it is, as I understand it, the normal
practice to look at the plaintiff's actual tax position and to treat
the earnings lost as forming the top slice of his income (see
Lyndale Fashion Manufacturers v. Rich [1973] 1 W.L.R. 73). But
even here the authorities speak with a somewhat uncertain voice
on the extent to which other sources of income are to be taken
into account. That they fall to be taken into account to some
extent seems clear from the speeches of Lord Goddard (p. 208)
and Lord Reid (p. 214), in Gourley's case [1956] AC 185, but
Lord Goddard was at pains to point out the unscientific nature of
the exercise and suggested (p. 209) that possibly less (even,
perhaps, very little) regard should be paid to income from
disposable investments, which could be sold or transferred at any
time, than to permanent and less readily realisable sources of
income. For my part, I entertain some doubt whether it can be
right in calculating the injured person's net loss of earnings for
the future, to take into account higher rate tax currently payable



- 13 -

on income to which he or his wife is entitled from independent
resources on the assumption that he or she will continue to be
possessed of them indefinitely. Since, however, the point has not
been argued, I express no concluded view upon it. Thirdly - and it
is with this situation that the instant case is concerned - the
application to the net loss and to future expenses of the
conventional formula may produce a capital sum of such
proportions that, if it is assumed now to be invested in ordinary
income-bearing securities, its net income will, at current tax rates,
be subjected to higher rates of tax on the assumption either that
the present fiscal regime continues unaltered or that it is altered
to the disadvantage of the taxpayer. What is said by the
respondents is an echo of the majority judgments in Thomas v.
Wignall [1987] Q.B. 1098. The purpose of an award of damages is
to compensate the injured party for his net loss as a result of the
accident. If the calculated sum required for that purpose is of
such an amount that the income likely to be produced by it will
attract a high rate of tax it follows that a smaller proportion of
the annual loss or expense will be capable of being met from
income, that a higher proportion will therefore have to be met
from capital and that, accordingly, the Hanger of the fund being
exhausted before the end of the period for which it is calculated
to endure will be correspondingly increased. That risk ought,
therefore, to be met by an increase in the sum which would
otherwise be awarded and that can most conveniently be done by a
modest increase in the multiplier. The appellants' answer to this
is that it rests upon the unproven and unprovable assumptions first,
that the current tax regime will either remain unchanged or will
be altered to the disadvantage of the respondent as a taxpayer and
secondly, that the effect of higher rate tax is not in any event
capable of being counteracted by a careful investment policy.
Future taxation, the appellants argue, is as much an imponderable
as future inflation. Indeed the two go hand in hand for, in the
ordinary way, inflation results in a corresponding increase in actual
interest rates, so that, apart from the incidence of tax the
disadvantage of an increased cost of living can be expected to be
substantially met by an increased actual income. If, therefore, it
is wrong, as the authorities establish that it is, to increase an
award to allow for inflation, it follows that it is equally wrong to
increase it to allow for the possibility of future taxation. Both
are, the appellants argue, already embraced in and covered by the
conventional multiplier.

My Lords, the question has been touched upon in a number
of cases prior to Thomas v. Wignall [1987] Q.B. 1098. In Taylor v.
O'Connor [1971] A.C. 115, a Fatal Accidents Act case, the question
in issue was whether the trial judge, who had adopted a multiplier
of 12, had manifestly awarded too much. The impact of taxation
on the calculation, whilst not directly in issue, was adverted to by
all the members of the committee. It is not, however, possible to
derive a consistent theme from the speeches either as to the
extent to which tax should be taken into account or, if taken into
account, how it should be allowed for. Lord Reid expressed the
view, at pp. 128-129, that damages ought to be increased to allow
for taxation, although he would have done it by an increase in the
multiplicand. His view at that time, however, was that future
inflation should also be taken into account - a view which
conflicts with subsequent authority in this House. Lord Morris of
Borth-y-Gest (at p. 133) appears also to have thought that tax









- 14 -

should be taken into account but again by way of increasing the
multiplicand. Lord Guest (p. 136) was of the view that the
prospect of inflation did not justify an increase in the award but
that a higher multiplier could be justified by uncertainty as to the
incidence of tax. Viscount Dilhorne (p. 139) thought it
inappropriate to increase the award to cover inflation, but would
have increased the multiplicand to provide for tax.

Finally, Lord Pearson (p. 144) thought that inflation ought to
be left to be met by investment policy, but catered for by
assuming a low net yield from the fund. On the other hand, he
thought also (p. 143) that it would be right to cater for the
incidence of graduated income tax by an increase in the multiplier.

All of these views were obiter and none can be taken as
authoritative and it has to born in mind that they were expressed
in a case in which the only question was whether the trial judge's
award was manifestly too high and at a time when there had been
no authoritative pronouncement on the extent to which future
inflation was to be taken into account.

.

In Young v. Percival [1975] 1 W.L.R. 17, it seems to have
been assumed that increased interest rates would be a sufficient
counterbalance to the disadvantages of inflation regardless of the
incidence of standard rate tax, but there does not appear to have
been any consideration in that case of the effect of higher rate
tax. In Cookson v. Knowles [1979] AC 556, this House held that
it would be wrong for the court to make a further specific
allowance for inflation in an award of damages. The reason is
that inflation, because of the high rate of interest to which it
gives rise, is automatically taken into account by the use of
multipliers based on rates of interest related to a stable currency
(per Lord Fraser of Tullybelton at p. 577). Lord Fraser went on,
however, to express the view that inflation might possibly be taken
into account as justifying an increase in the award in very
exceptional cases where the evidence established that the impact
of higher rate taxation would render the assumed annuity
inadequate, in which event the problem might be dealt with by an
increase in the multiplier.

Cookson v. Knowles [1979] AC 556 preceded by only a few
months the decision of the Court of Appeal in Lim's case [1979]
Q.B. 196. In that case the trial judge had increased the multiplier
in order to provide for future inflation, a course which the Court
of Appeal endorsed, on the ground that, having regard to the fact
that he had had expert evidence as to the incidence of taxation,
he was justified in treating the case as exceptional by reference
to Lord Fraser of Tullybelton's speech in Cookson v. Knowles.
The Court of Appeal's decision was reversed by this House [1980]
A.C. 174 where it was again affirmed that no allowance ought to
be made for future inflation, although there was no specific
mention in the speech of Lord Scarman of higher taxation rates as
a specific ingredient of inflation. Lord Scarman said, at pp. 193-
194:

"The trial judge said he made allowance for future inflation
in the multiplier for cost of future care and in the
multiplier for loss of future earnings. The Court of Appeal,
in holding that he had made no mistake in principle, relied



- 15 -

upon a recent decision of this House, Cookson v. Knowles
[1979] AC 556 In that case, Lord Diplock, at p. 571,
made the comment that future inflation 'is taken care of in
a rough and ready way' because the conventional multipliers
applied by judges assume a rate of interest of 4 to 5 per
cent., whereas actual rates of interest are much higher.
Lord Fraser of Tullybelton, at pp. 577-578, added the
comment that 'in exceptional cases, where the [assumed]
annuity is large enough to attract income tax at a high rate
... it might be appropriate to increase the multiplier, or
to allow for future inflation in some other way . . .' My
Lords, I do not read these passages in the speeches in that
case of my noble and learned friends as modifying the law
in any way. "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] A.C. 115 and Young v.
Percival [1975] 1 W.L.R. 17. It is perhaps incorrect to call
this 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 a perfection which is beyond
the inherent limitations of the system. While there is
wisdom in Lord Reid's comment (Taylor v. O'Connor at p.
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 as likely to be falsified as to be borne out by the
event. Secondly, as Lord Pearson said in Taylor v.
O'Connor, at p. 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 demonstated that, upon the particular
fact of a case, such an assessment would not result in a
fair compensation (bearing in mind the investment
opportunity that the 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
tortfeaser, and so to impose upon him an excessive burden,
which might go far beyond compensation for loss."

- 16 -

In the light of the reversal by this House in Lim's case
[1980] AC 174, of the Court of Appeal's decision that provision
should be made for future inflation in the light specifically of the
tax position, it is arguable that the question raised by this appeal
and that raised in Thomas v. Wignall [1987] Q.B. 1098 is already
concluded against the respondents by that decision. That, indeed,
was, as I read his judgment, the view of Lloyd L.J. in Thomas v.
Wignall.

It is, however, the case that there is no authority which
deals specifically with the question of the extent to which higher
rate tax simpliciter ought to be taken into account as an element
in itself divorced from inflation and that matter has been argued
before your Lordships on the basis that the question remains open.
For my part I am certainly content to deal with it on that
footing, because I see some intellectual difficulty in the bare
assertion that a careful investment policy may be assumed to be
capable of dealing both with future inflation and with higher rate
taxation. The two considerations do in fact pull in opposite
directions. What is said about inflation is that it is generally
accompanied by increased interest rates. Since the capital sum
arrived at on the notional annuity-purchase basis is reached by
assuming interest rates very much below actual rates the argument
is that any decrease in the value of the fund and any increase in
living costs due to inflation can be compensated by the increased
yield which correspondingly reduces the need to resort to capital.
But if one assumes the continuation of graduated higher tax rates,
increased yield means simply that a greater proportion of the
income is absorbed in tax and the investment policy has therefore
to perform the double duty of maintaining the capital value of the
fund and of providing sufficient realisable capital gains to
compensate both for increased taxation and for higher living costs.
This may, of course, be possible, but it is by no means self-
evidently practicable. I approach the problem, therefore, on the
footing that, as regards the question of an allowance specifically
for higher rate taxation, such authority as there is provides at
best no more than guidance. That guidance seems to me however
to point strongly against the making of any such specific
allowance.

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 into
account what the plaintiff may choose to do with other resources



- 17 -

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 plaintiff 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 plaintiff 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 plaintiff 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.

I am, as I have said, content to deal with the question
raised on the footing that the answer is not already subsumed in
the answer given by this House in Lim's case [1980] AC 174 to
the allied question of whether specific allowance should be made
for inflation. The principle, however, appears to me to be much
the same. That tax will be levied is, no doubt, as Benjamin
Franklin observed, one of the two certainties of life, but the
extent and manner of its exaction in the future can only be
guessed at. It is as much an imponderable as any of the other
uncertainties which are embraced in the exercise of making a just
assessment of damages for future loss. The system of multipliers
and multiplicands conventionally employed in the assessment takes
account of a variety of factors, none of which is or, indeed, is
capable of being worked out scientifically, but which are catered
for by allowing a reasonably generous margin in the assumed rate
of interest on which the multiplier is based. There is, in my
judgment, no self-evident justification for singling out this
particular factor and making for it an allowance which is not to
be made for the equally imponderable factor of inflation.
Essentially the question is whether the discount provided by the
assumption of interest rates of from 4 to 5 per cent. applicable to
a stable currency, upon which the conventional multipliers are
based, is likely, because of the rates of tax payable on income
above a certain figure under the current fiscal regime, to prove to
be so ungenerous in comparison to the actual net return from the
fund as to produce a shortfall. Mr. Ashworth has put before your
Lordships figures which demonstrate that, in practice, this simply
has not happened and, of course, recent fiscal changes have shown
the falsity of any necessary assumption that higher rates of tax
will remain unreduced. Mr. Ashworth's figures were in fact based
upon the supposition that the relevant income to be considered was
that arising from the total global sum of damages. But, as I have



- 18 -

already mentioned, what your Lordships are concerned with is the
adequacy of the specific sums awarded for future loss of earnings
and for future support and it cannot be right that the adequacy or
inadequacy of that provision should be linked to what a plaintiff
chooses to do with damages awarded under other heads. On this
footing, your Lordships are concerned in the instant case with an
aggregate fund of, in round figure, £240,000, without taking into
account the reductions in the multiplicand proposed in the speech
of my noble and learned friend, Lord Bridge of Harwich. Invested
at 8 per cent. (the assumption made in counsel's tables) this
produces an income of £19,200 per annum gross. Personal
allowances would reduce the taxable element of this to something
less than £17,000, a figure which is below the starting point for
the higher rate of tax in the year 1987 in which judgment was
delivered. On this analysis, therefore, the problem of higher rate
tax did not in fact arise. If one takes into account the reduction
in the multiplicand for future care referred to in the speech of
my noble and learned friend, Lord Bridge of Harwich, the case is
a fortiori. The additions made to the multipliers by the judge was
therefore, in any event, unjustified. I should add, in addition, that
I am not persuaded that it was by any means self-evident in
Thomas v. Wignall [1987] Q.B. 1098 that the incidence of higher
rate tax would have resulted in a deficiency in the fund. There is
certainly no indication in the report that the court had before it
any evidence to that effect.

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 a 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. It would, I think, be extremely undesirable that trials
of personal injury cases should be encumbered with evidence from
actuaries and accountants directed to demonstrating the unprovable
as scientific fact for the purposes of an exercise which is, in its
very nature, incapable of being scientific. Moreover, I cannot
think that such evidence would in the end be of any real
assistance to the trial judge in making his assessment. Tax is
merely one of the many imponderables that are taken care of in
the conventional method of assessing damages. There may, I
suppose, be cases - although, again, I cannot for my part readily
imagine one arising in an exercise in its nature imprecise - where
the considerations pointing to the selection of one of two possible
multipliers are so finely balanced that the future incidence of
taxation may be taken into account as one, but only one, of the
factors which might properly tip the balance in favour of selecting
the higher rate rather than the lower, but the course sanctioned in
Thomas v. Wignall [1987] Q.B. 1098 of making a specific addition
on account of this factor alone is, in my judgment, as incorrect as
would be a specific addition to cover the risk of future inflation.
The dissenting view on this point of Lloyd L.J. in that case was,



- 19 -

in my opinion, correct. I would accordingly allow the appeal on
this ground as well as upon the ground canvassed in the speech of
my noble and learned friend, Lord Bridge of Harwich, with the
consequential reductions to which he has referred. In addition, the
reduction to 13 of the multiplier of 14 applied to the agreed
Court of Protection costs will result in the award under this head
being reduced from £11,900 to £11,050.

LORD GOFF OF CHIEVELEY

My Lords,

I have had the advantage of reading the speech of my noble
and learned friends, Lord Bridge of Harwich and Lord Oliver of
Aylmerton, and I would allow the appeal on both grounds.

- 20 -