In Part One of this series, I set out relevant factors as to whether a Smith v Manchester award was appropriate. In this article, I shall set out some of the factors in valuing the award.
The Difficulty of Valuing Smith v Manchester awards:
This is not a straightforward matter and an area where awards at court could be quite varied depending on the judge.
In Smith v Manchester, Edmund Davies LJ noted that:
‘It is a most difficult task, in circumstances such as here exist, to look into the future and to try to see “through a glass, darkly”, what are the risks of unemployment.’
Over time, the courts have continued to acknowledge the difficulty. In Eaton v Concrete (Northern) Limited, 1979 C.A. No. 30, LJ Megaw described it as:
‘nothing more than a guess’.
Lloyd LJ in Foster v Tyne and Wear County Council [1986] 1 All E.R. 567, set out:
“… when it comes to estimating loss of earning capacity, there is no such thing as a conventional approach; there is a rule of thumb which can be applied. … In each case the trial judge has to do his best to assess the plaintiff’s handicap, as an existing disability, by reference to what may happen in the future.… that is necessarily a matter of speculation; it is necessarily a matter of weighing up risks and chances in all the circumstances of a particular case. The very fact that the approach must necessarily be speculative means, of course, that the occasions on which this court will feel justified in interfering with the judge’s assessment will be few and far between, for there is no established range or standard against which to measure the judge’s award.”
The Guidance in Moeliker v Reyrolle:
However, not long after the decision in Smith v Manchester guidance was provided in Moeliker v A Reyrolle & Co Limited [1977] 1 W.L.R. 132. Preliminary principles were that:
- This head of damage generally only arises where a claimant is in employment at the time of the trial. However, there is a risk that he may lose this employment at some time in the future. He may be at a disadvantage in getting another or an equally well paid job. It is a different head of damages from an actual loss of future earnings which can already be proved at the time of the trial.
- Any guidance can only be on very broad lines, because the facts of particular cases may vary almost infinitely.
- Where a claimant is in work at the date of the trial, the first question on this head of damage is: what is the risk that he will at some time before the end of his working life lose that job and be thrown on the labour market?
- The risk must be “substantial” or “real” and not “speculative” or “fanciful”. If the court comes to the conclusion that there is no “substantial” or “real” risk of the claimant losing his present job during the rest of his working life, no damages will be recoverable under this head.
Factors as to the assessment itself:
In deciding this question the court noted that all sorts of factors will have to be taken into account. The factors would vary almost infinitely with the facts of the particular case.
The starting point was said to be the amount which a claimant is earning at the time of the trial and an estimate of the length of the rest of his working life.
It is then necessary to go on and consider
(a) how great this risk is; and
(b) when it may materialise.
It should be remembered that he may lose a job and be thrown on the labour market more than once. For example, if he takes a job and then finds he cannot manage it because of his injuries.
The next stage is to consider how far he would be handicapped by his disability if he was thrown on the labour market — that is, what would be his chances of getting a job, and an equally well-paid job.
Factors to consider might include:
- the nature and prospects of the employers’ business;
- the claimant’s age and qualifications;
- his/ her length of service;
- his/ her remaining length of working life;
- the nature of his/ her injuries;
- whether he/ she is only capable of one type of work, or whether he/ she is, or could become, capable of others;
- whether he/ she is tied to working in one particular geographical area;
- the general employment situation in his/ her trade or geographical area, or both.
- and any undertaking or statement of intention by his/ her employers as to his/ her future employment.
The court will have to make the usual discounts for the immediate receipt of a lump sum and for the general chances of life.
Overall Principle:
So the court said that consideration of a Smith v Manchester award should be made in two stages.
1. Is there a “substantial” or “real” risk that a claimant will lose his present job at some time before the estimated end of his working life?
2. If there is (but not otherwise), the court must assess and quantify the present value of the risk of the financial damage which the claimant will suffer if that risk materialises, having regard to the degree of the risk, the time when it may materialise, and the factors, both favourable and unfavourable, which in a particular case will, or may, affect the claimant’s chances of getting a job at all, or an equally well paid job.
The court noted that it was impossible to suggest any formula for solving the extremely difficult problems involved in stage 2 of the assessment. A judge must look at all the factors which are relevant in a particular case and do the best he can.
Likely range of awards:
There is no rule that the award should be calculated by reference to net annual income, or that the same should be multiplied by a period of time. However, in practice that is how courts often arrive at a general figure, which is often then rounded to the nearest convenient figure.
It was said in Billett v MoD [2015] EWCA Civ 773 that:
“In practice such awards usually range between six months’ and two years’ earnings: see Court Awards of Damages for Loss of Future Earnings: an Empirical Study and an Alternative Method of Calculation by R Lewis and others, [2002] Journal of Law and Society, Vol.29, pages 406-435 at 414.”
However, awards have been higher. In Foster (mentioned above), an award equivalent to 5 years for a 35-year old lorry driver. The Court of Appeal has approved other awards in excess of 2 years.
Guidance for Practitioners:
- Firstly, establish whether there is a ‘real’ risk of the claimant losing his/ her job and being at a disadvantage on the open labour market.
- Assess the (net) earnings at the time of the injury.
- Then assess the length of working life.
- Assess the factors which might affect the degree of handicap on account of his/ her injury, what are the chances of getting an equally well-paid job:
- Is the Claimant likely to be repeatedly out of work?
- His/ her age;
- His/ her skills;
- Nature of the injuries and their effects;
- Whether the claimant has more than one type of work available to him/ her, or whether he/ she could do;
- Whether he/ she is tied to a geographical area;
- The general employment situation in his/ her trade and/ or geographical area;
- The nature and prospects of the employers’ business;
- His/ her length of service;
- His/ her remaining length of working life;
- Any undertaking or statement of intention by his/ her employers as to his/ her future employment.
Conclusion
Remember, any of the above must be in evidence. A judge cannot, and should not, make assumptions about, say, the employment situation in a particular trade. If the claimant wishes the judge to take into account any particular factor, then the claimant must prove the same. Evidence from employers might clearly be relevant for a number of the factors above.
Whilst there is no formula, it will quickly become apparent as to where approximately on the range a claimant may sit. If there are a number of factors which point to significant future difficulty, then a higher award is likely. Conversely, if the factors are less significant, then the award is likely to be at the lower end of the range. However, it is ultimately a matter of judgement for practitioners and judges alike.
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