Lump sum awards for loss of earnings

October 2, 2018

By David Knifton QC

I have long argued that, save in exceptional cases, judges should use the Ogden Tables, applying the reduction factors in Tables A-D, when calculating awards for future loss of earnings in personal injury cases. The traditional “broad brush” approach favoured in the past can now be seen in many cases to have resulted in under-compensation, when compared with the more scientific application of the Ogden data. There is abundant authority to support the view that making Smith v Manchester or Blamire lump sum awards, rather than using the multiplier-multiplicand approach set out in the Ogden Tables, should only be undertaken where the judge really has no alternative, or where it would produce an obviously unreal result.

In recent years, cases in which lump sum awards have been made rather than a multiplier-multiplicand approach have generally been those in which the claimant has a poor working history (eg Hiom v Morrison Supermarkets [2010 EWHC 1183; AB v Royal Devon NHS Trust [2016] EWHC 1024), or where there is little evidence that the injury will in fact impair the claimant’s earnings prospects (eg Ward v Allies & Morrison [2012] EWCA Civ 128; Billett v MOD [2015] EWCA Civ 773).

It should not be assumed, however, that the making of a lump sum award means that damages will always be modest. In Irani v Duchon [2018] EWHC 2314, the Claimant was a 31 year-old research engineer who came to the UK in 2010 to complete an MSc, and subsequently obtained work in the technology centre of a polymer factory in Yorkshire. He suffered severe fractures to his left leg which, despite a good functional recovery from an orthopaedic viewpoint, left him with chronic pain, such that he was only able to return to work on light duties for 4 days per week, before being made redundant in 2015. The judge, David Pittaway QC, accepted that he had probably been made redundant as a result of his injuries. Although the Claimant had since found alternative work, the break in continuity of his employment scuppered an application for indefinite leave to remain in the UK. As a result, he would not be able to renew his visa after 2020, and would probably have to return to India or another Commonwealth country, resulting in a reduction in his earnings.

Whilst the judge accepted that the Claimant was disabled, and that a Blamire approach should only be used where other methodology is not practicable, he considered that there was a real risk that it would create an obviously unreal result in this case. Although a calculation of uninjured earnings based on mean average UK earnings for engineering professionals was acceptable, there was insufficient evidence to support the suggestion that the Claimant’s residual earnings potential in India or elsewhere was only £10,000 per annum, given that he was “a highly educated young man with specialist qualifications”. Had a multiplier/multiplicand approach been adopted, the judge indicated that he would have substantially discounted the final figure by 50% to reflect the chance that the Claimant might be able to obtain better paid employment in India or elsewhere. In the event, the judge made a Smith v Manchester award of £30,000 to reflect the continuing disability, which would place him at a slight disadvantage for jobs involving heavy lifting. In addition, however, he made a Blamire award of £150,000 for the “significant dislocation of his employment” when he returned to India and the probability that he would earn at a lower level at least until he was able to re-establish himself there or in another country. This represented “an acceptable broad-brush compensation in the absence of appropriate evidence to substantiate his claim”.

Of course, one can argue that more thorough preparation of the Claimant’s case would have resulted in evidence being before the court to substantiate the likely level of reduction in the Claimant’s earnings. After all, the court was willing to accept a figure for uninjured career earnings based upon average earnings for engineering professionals as set out in ASHE, which would probably have led to a calculation of uninjured lifetime earnings of around £1.2m. Moreover, the court accepted that the Claimant was “disabled” and would suffer a reduction in his earnings. However, the only evidence adduced to support the alleged residual earnings figure of £10,000 per year in India was a letter from a similarly-qualified employee and some job advertisements obtained from the internet. One would have thought that it ought to have been possible to obtain witness statements indicating likely earnings for engineering professionals in India, or possibly similar statistical data to that in ASHE, verified by a statement from an official at a suitable professional body in India. Alternatively, this might exceptionally have been one of those cases in which the court would have granted permission for expert evidence from an employment consultant. Nevertheless, the fact that the court was persuaded to make a lump sum award totalling £180,000 demonstrates that, even in a case where there the court has to resort to a lump sum approach due to the numerous uncertainties, a substantial figure may still be awarded.