Future loss of earnings or Smith v Manchester?

March 31, 2022

Andrew Ward

The decision of Anthony Metzer QC (sitting as a Deputy High Court Judge) in Natasha Palmer v Seferif Mantas and Liverpool Victoria Insurance Co. Ltd [2022] EWHC 90 (QB) provides a helpful analysis of the interplay between a Smith v Manchester award of general damages for disadvantage on the open labour market and a future loss of earnings claim calculated on a multiplier / multiplicand basis.

The Claimant, who was born on 29.11.1986, was injured in a road traffic accident when the First Defendant drove into the rear of her stationary car on the M25 motorway on 15.06.2014. Liability was admitted.

Save that it was admitted that the Claimant sustained some injury, the full nature and extent of her injuries was not admitted. A central issue concerned whether the Claimant sustained a TBI (traumatic brain injury). There were no adverse neuro-radiological findings. In cases of subtle brain injury, however, many experts now accept that radiographs do not always detect subtle lesions or axonal shearing. Whilst radiographs that show injury (e.g., a haemorrhage) can rule an injury in, a ‘normal’ CT or MRI scan does not necessarily rule injury out.

Having considered the TBI diagnostic concerns of GCS (Glasgow Coma Score), radiographs, retrograde amnesia and PTA (post-traumatic amnesia), the judge concluded that the Claimant had suffered a Mild TBI according to the Mayo criteria. Her recovery was protracted by Somatic Symptom Disorder (SSD). The judge said:

“I therefore find in summary that the Claimant suffered a mild TBI which, due to the development of SSD, the symptoms did not resolve when otherwise they would have been expected to within a relatively short period after the accident, migrainous headaches which have been continuing and worsening, and which amount to the most severe symptom that the Claimant is presently suffering from; PTSD, which initially resolved after a period of around 2.5 – 3 years but unfortunately has reoccurred. I also find that the Claimant became unable to continue with her work in 2017 and was forced to give it up as a result of her continuing symptoms.”

At the time of the accident, the Claimant was working as a marketing executive in hospitality at a nightclub in London earning £35,000 gross pa. She had worked in the nightclub industry for five years.

In terms of the claim for future loss of earnings, the Defendants submitted that the Claimant should be restricted to a Smith v Manchester award for disadvantage on the open labour market. She had only worked for her pre-accident employer for 17 months prior to the accident. There had been some disciplinary concerns.

However, the judge made an award of future loss of earnings on a multiplier / multiplicand basis totalling £1,206,053.

The following points arise:

  • A Smith v Manchester award is an award of general damages representing between about 3 months’ and 5 years’ net earnings to reflect the contingent future risk that a Claimant will find herself on the open labour market for longer between jobs if the range of available jobs is reduced by her injury. As such, it is a claim for a contingent future loss of earnings;
  • The decision in Palmer is a useful reminder to Defendants of the difficulties that can arise in trying to shoe-horn a case into a Smith Given that the Claimant was earning £35,000 at the time of the accident; that she had not worked since the accident; and that her residual earnings capacity was severely restricted by her injury, the judge had little difficulty in concluding that her future loss extended beyond the type of contingent loss envisaged by a Smith award;
  • There are cases in which Defendants have succeeded in limiting a future loss of earnings claim to a Smith award. One example is Billett v Ministry of Defence [2015] EWCA Civ 773. However, Mr. Billett left the Army and chose a career as a lorry driver with virtually no hindrance from his Non-Freezing Cold Injury (NFCI). He obtained a driving job within one week of leaving the Army. In that situation, the Court was receptive to the Defendant’s argument that the calculation of future loss of earnings on a multiplier / multiplicand basis would yield an unmerited windfall loss particularly if an Ogden ‘disabled’ reduction factor for contingencies other than mortality was applied to his residual earnings capacity. The Claimant in Palmer fell into a different category. She had been unable to return to work due to her injury. She had an ongoing loss, unlike Mr. Billett. Anthony Metzer QC concluded that:
    “In the present case…not only is the Claimant disabled within the definition of the Ogden Tables, but her disability has a particular impact on her ability to carry out her day-to-day work. I therefore determine that this is not a case in which it would be appropriate to make a Smith v Manchester award as I do not consider the Claimant would recover a disproportionate award for future loss of earnings. I therefore do so on the conventional multiplier / multiplicand basis with appropriate adjustment for the RF [Reduction Factor].”
  • As an aside, it is worth noting that the Explanatory Notes to the Ogden 8 Tables suggest that, whilst Mr. Billett was “disabled” pursuant to the definition in the Equality Act 2010, he would not be “disabled” pursuant to the definition in the Disability Discrimination Act 1995 which is used by Ogden 8;
  • The decision in Palmer confirms that where a Claimant has an established career, the Court should map out her future uninjured earnings on a “career model” basis looking at future progression in that career. If it is likely on the balance of probability that the Claimant would have completed X years in a career earning £Y, then the future loss is proved. A 51% chance generates a recovery of 100% of the loss. There may, however, be uncertainties as to whether a Claimant would have stayed in a particular job. As to this, the Court’s default position is likely to be that a Claimant would only leave a job to earn comparably in another job, thereby setting a baseline for the uninjured “career model”. Contingencies as to uncertain chances that are not proved on the balance of probability, such as promotion, can be factored in to the “career model” by adjusting the multiplier or multiplicand at different points;
  • Having looked at the uninjured “career model”, the Court must then map out the Claimant’s injured residual future earnings capacity. An interesting point in Palmer is that the judge did not strictly apply an Ogden 8 “disabled” Table D reduction factor for contingencies other than mortality when calculating the multiplier for future residual earnings. Rather, the judge adopted a hybrid reduction factor of 0.76 which was somewhere between the non-disabled and disabled options to reflect his view of the justice of the case pursuant to the approach previously taken in Connor v Bradman. The Ogden Working Party which wrote the Explanatory Notes to Ogden 8 say that the Courts should strictly apply the Ogden 8 Tables and should not engage in a Connor v Bradman-type subjective ad hoc determination of the appropriate residual earnings multiplier. The decision in Palmer shows that judges are not prepared to follow the Ogden 8 Explanatory Notes where it conflicts with their assessment of the justice of an individual case; and
  • Palmer serves as a cautionary reminder for Defendants that the circumstances in which a future loss of earnings claim can be restricted to a Smith v Manchester award are limited.

Andrew Ward is a member of the Personal Injury Defence Team at Exchange Chambers.

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