As is widely known, the processes for setting an appropriate discount rate (or rates) for valuing future pecuniary loss are moving forward under separate legislation in both England & Wales and in Scotland.
The matter of updating the Ogden Tables to reflect any new rate (or rates) and to deal with changes in population life expectancy has consequently taken something of a back seat in recent years and, as far as we can tell, remains on the back burner very probably until new discount rates are determined under both pieces of legislation.
That said, the two-stage calculation set out in the Ogden Tables for valuing future loss of earnings claims was endorsed late last month by the Judicial Committee of the Privy Council (JCPC) in a Bahamian claim. Although that has no direct relevance to either England & Wales or Scotland, the JCPC of course comprises the Justices of the UK Supreme Court and therefore its endorsement of the two-stage calculation in the tables should be noted.
In Cadet’s Car Rentals v Pinder, the accident in 2013 rendered the respondent disabled but he was nevertheless able to work. He had no qualifications and was 34 years old at trial. A discount rate of 2.5% appears to have been accepted as applicable to the claim. It is necessary to set out these details and to examine the technical calculations made during the case in order to understand where the lower courts went wrong in calculating the future earnings award.
At first instance, the judge adopted only stage 1 of the two-stage calculation and simply used the basic multiplier from the relevant loss of earnings table, which was 21.07 (at 2.5%), adjusted by the relevant contingency factor in Table A, Males- not disabled, employed which was 0.91. The product of these was 19.1, which he applied to the difference between pre-accident earnings of $770 and post-accident earnings of $400 (both sums were weekly amounts) in order to arrive at an award of around $380,000.
On appeal, the defendant argued for a Smith v Manchester award and in the alternative that the figure of 19.1 was incorrect. The Smith award was refused and the Court of Appeal re-calculated the amount which in its view was to be awarded using the tables. It started with the basic multiplier of 21.07 but adjusted it by the contingency factor in Table B, Males – disabled, not employed, which was 0.23. The product was 4.84, which the Court applied to the $370 (weekly) difference between pre-accident and post-accident earnings in order to arrive at its award of just over $93,000.
The JCPC found that if the Tables are to be properly relied upon then both calculations were wrong. The correct approach was to be found in the explanatory notes to the Tables and Lord Lloyd Jones (giving the only opinion) found that there should be “a separate assessment for (a) the value of earnings the claimant would have received if the injury had not been suffered and (b) the value of the claimant’s earnings (if any) taking account of the injuries sustained. The loss is arrived at by deducting (b) from (a).” This passage is all but a word-for-word cut and paste from paragraph 37 of the explanatory notes. Following the correct approach yielded an award of over $650,000.
Standing back from the detail of the calculation, the earlier judicial attempts to assess the correct award are, respectively, less than 15% and 60% of its true value. This illustrates the risks of not following the recommended approach correctly. Although significant, those risks are probably not as prevalent in the UK was the case here given that the two-stage calculation has (a) appeared in the notes to the Tables since the sixth edition in 2007 and (b) has been incorporated into various software programmes used by insurers and solicitors to value claims for future losses.
In a side comment, Lord Lloyd Jones noted that “the Tables are intended to reflect the particular conditions prevailing in the United Kingdom which are likely to differ considerably from those in The Bahamas. The courts of The Bahamas may, therefore, wish to consider on some future occasion whether it is appropriate to refer to the Ogden Tables for guidance or whether it may be preferable to seek the assistance of actuarial tables designed to reflect the conditions prevailing in The Bahamas.”
As between England & Wales and Scotland, there are already well-known divergences in population life expectancy and it seems likely that later this year different discount rates will apply in each jurisdiction. We can only ponder whether these diverging factors taken together are likely to mean that parties and courts in either or both jurisdictions may be inclined follow Lord Lloyd Jones’s proposal and find it “preferable to seek the assistance of actuarial tables designed to reflect the conditions prevailing” in their particular part of the United Kingdom.
Alistair Kinley, director of policy and government affairs