The indemnity principle · The object of an award of damages is to give the claimant full compensation for the damage, injury or loss that D’s tort has caused him. · Damages awarded only to compensate the claimant, not punish the defendant. · Putting C back into the position they were in prior to the tort occurring (Lim Poh Choo). Law Reform Issues · Excessively complex and unrealistic - Artificial formulae used in calculations · Too much compensation? - Wasteful and overlapping with other systems - Trivial injuries compensated · Too little compensation? - Lasting for too short a time? · Artificiality of award - Lump sum instead of a pension Statutory Reforms · Damages Act 1996 · Courts Act 2003 - Power to replace lump sum with periodical payments Distinctions used in itemising damages Special Damages General Damages · Past loss of earnings · Past cost of care · Past expenses · Other past financial loss (Must be specially pleaded) (Naturally arising but not precisely quantifiable) · Future loss of earnings · Future cost of care · Future expenses · Non-pecuniary loss (PSLA) (No need to be specially pleaded)
Factors affecting assessment · Intensity of pain - The ‘thin skull rule’ (Mullins) · Level of insight - Vegetative state: full compensation for loss of amenity but none for pain and suffering: West · Age - Law Commission argued that age should be irrelevant - Children/older people suffer less? · Reduced life expectancy - Either more compensation because C knows of earlier death - Or less compensation because loss of amenity for shorter time? · Pre-injury hobbies and enjoyment of life · Offset damages for pre-existing condition · Failure to mitigate loss - Failure to take reasonable steps to reduce the effects of the injury, e.g. refusal to undergo medical treatment · Loss of marriage prospects · Gender - Women get more than men for facial disfigurement · Circumstances of injury Irrelevant Factors · Wealth - Consider, however, loss of lifestyle, amenity, relevant hobbies etc. · Inability to use damages How is it determined in practice? · Previous settlements (own experience) · Court judgments · Use of reference books - Kemp & Kemp: The Quantum of Damages - Judicial College Guidelines for the Assessment of General Damages Atiyah’s View · PSLA is a secondary form of compensation. · A ‘correction’ cannot be made. · Few other systems have PSLA. · Greater justification is required for compensating non-pecuniary loss as opposed to pecuniary loss because: - It is not an exact or even approximate replacement - It is open to fraud and abuse - It is viewed as less important than financial losses · PSLA justified only: - In the most serious cases - Involving long-term pain and loss of faculty Proposed Reforms · Pearson Commission (1978) - No recovery unless effects of injury continue for at least 3 months after the accident - Effect overall = reduce damages by 20% · Law Commission Report (1999) - Rejected any threshold because: → Might encourage exaggeration of symptoms → Exclusion for when pain is at its most intense → Minor injuries with no pecuniary loss would result in no damages - Proposed to increase all awards over £3,000 by between 50 and 100% because damages had failed to keep in pace in inflation over the last 30 years. - Proposals not enacted because they would: → Add £1 billion a year to the total tort bill → Increase liability premiums → Create an exceptional cost for the NHS. Lewis, ‘Increasing the Price of Pain’ (2001) 64 Modern Law Review 100 Heil v Rankin is by no means radical. This case only affects a small minority of personal injury claims which involve serious injury. · Reasons for an increase in damages - ‘Fair, reasonable and just’ - Accords to society’s views as a whole (voice of the people surveys) - Results in ‘proportionate’ awards - Accident victims now live longer so PSLA thus lasts longer · Problems - Emphasises the disproportionate importance of PSLA in the award of damages → The Law Commission notes that PSLA is a major cause of excessive cost, inefficiency and injustice of tort system. - Contrasts with corrective justice. · Calculating the limited increase in damages - The Law Commission proposed a large increase in damages for PSLA → Awards over £3,000 should be doubled. - By contrast, Heil v Rankin makes no change in damages for non-pecuniary loss assessed at, or below, £10,000. - Still, there is no statutory cap on damages, as in parts of the USA and in Australia. - There is no formal table yet of compensation based upon a percentage assessment as being developed within the European Union. · Justifying the increase - Appropriate for the courts to reconsider the level of damages, rather than Parliament. - Studies include: → Office of National Statistics (ONS) concerning public opinion about the level of damages. → Hazel Genn’s 1994 general report for the Commission’s damages project entitled ‘How much is enough?’ - These studies were criticised by the defendants in Heil v Rankin. · The discount rate - Highlighted in Wells v Wells. Law Commission, Damages for Personal Injury: Non-Pecuniary Loss (1995, Consultation Paper No 140), pages 78 – 86 · Some uniformity and consistency in awards is achieved. · There is a scope for assessments being highly particularised and flexible. · Awards should be standardised to some degree. · PSLA has no market value so is difficult to quantify. · Comparing awards seems to be the most straightforward method for converting the claimant’s loss into money. Objectives of Law Commission · Fair compensation · Consistency and uniformity · Predictability · Comprehensibility · Workability and simplicity Abolishing PSLA For Against · Moral offensiveness · No sum can adequately compensate · The cost · Damages are a barrier to rehabilitation. · Only awarding damages for pecuniary loss would discriminate unfairly against those who do not suffer any, or substantial, loss of earnings e.g. children, the unemployed. · PSLA does not compensate for the trauma of living in constant pain, but it ‘sugars the pill’.
Pecuniary Loss: Medical and Care Costs Costs that can be claimed as ‘reasonable’ · Therapy and non-therapy benefits - Cassel C wanted to have a swimming pool built in their house to increase their enjoyment of life. Held: Not justified therapeutically, claim refused. - McMahon Aromatherapy used for pain relief. Despite an expert testifying that it was of no medical value, claim succeeded. · Duty of local authority to provide care – can affect what is ‘reasonable’ - Smith v Lodge Damages are reduced to take account of free provision. · Private medical care costs are not ‘unreasonable’ only because NHS care is also available - Law Reform: Personal Injury Act 1948, s.2(4): private care costs can be obtained even if facilities just as good on the NHS (Rialas) - This was criticised by the Pearson Commission. - Law Commission rejected proposal because too uncertain. - Future costs cannot be claimed if unlikely that private treatment will in fact be sought (Woodrup) Assessing care costs: Relatives who provide care for free Donnelly v Joyce Claimant can recover cost of: · Services voluntarily given by loved one in caring for C from motives of affection or duty. - Even though no charge is made for the care. · How much? - Wages lost from job (maximum – market cost of supplying nursing care) - Possible 25% reduction if carer is untrained/does not pay tax or NI (Evans) - Reduction may be avoided: → Care is continuous (day and night) → Carer has nursing skill → Care is especially demanding What if carer is the tortfeasor? · Hunt v Stevens - No recovery for cost of care because otherwise tortfeasor would end up paying twice. · Advice to claimants - Purchase outside nursing care - Offer D a deal – pay for care from the tortfeasor OR professional carers will be employed. · Civil Law Reform Bill 2010 - Still refuse recovery for D’s past care to trial/settlement - But allow recovery for future care provided by D. Expenses other than care · Home help · Travel - E.g. taxis, adaptation of car, purchase of special vehicle. · Housing costs - Modifications to the home · Other costs of disablement · Cost of administering fund - By Court of Protection - For claimants mentally unable to manage affairs (Lister) · Divorce costs - No recovery – public policy not to encourage a marriage breakdown. Pecuniary Loss: Loss of earnings Importance · Past loss earnings comprise a major part of past financial losses – 24% of all damages. · Predominance of small claims in tort. · Distinctive features of tort compensation compared to other systems. Atiyah’s Criticisms of Two Tort Principles · 100% replacement of lost earnings - Contrast to the social security and private insurance rules → ‘Waiting days’ for benefit → Capped flat rate recovery with no earnings – related payments. · The earnings-related principle - The reliance upon maintaining existing income → Should tort recovery be capped to encourage high earners to take out private insurance? → Or should tort continue to maintain some claimants at a higher standard of living? - The expectation of obtaining higher income → Should claimants expect to be maintained by tort as an income which they have yet to attain? For the rest of their lives? → Even when the majority are unable to claim?
Problems · Need to forecast the future - Prediction of what would have happened to C if the accident had not happened: → Future job → Level of earnings → Tax - What is now likely to happen to C? → Earnings → Risk of losing job → Retirement → Recovery → Complications → Level of care (costs) → Life expectancy · Need to reduce the cost of future losses to a present day value - Investment return Three conceptual tools Multiplicand = net annual loss Deductions · Tax · NI contributions · Expenses, e.g. travel to and from work · Residual earnings Additions · Estimate for prospects of advancement/promotion · But no increase for rise in standard of living cost · Where children are injured: - Estimate of future prospects (Cassel) Multiplier = number of years of loss Deductions · The ‘contingencies of life’ - Uncertainty of what might have happened - No deductions for possibility of premature death - ‘Conventional’ reductions by judge without reason · Present day value of damages - C is obtaining damages earlier than would have received wages - Presumption of investment Discount Rate · Currently at 2.5% · C is expected to invest the lump sum payment Reform · The Law Commission recommended that the discount rates should not be based on returns from risky investments. Instead, returns of safe, index-linked government securities should be taken into consideration. · Wells v Wells - Moved away from 4.5% discount rate to one based on index-linked government securities. · Damages Act 1996 - Discount rate lowered to 2.5%
Introduction
Non-Pecuniary loss
pecuniary loss
Future Pecuniary Loss
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