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Cite as: [1988] UKHL 9, [1989] AC 807

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JISCBAILII_CASE_TORT

    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 -


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