Monday, 27 July 2015

Billett - Loss of Earning Capacity

The Court of Appeal has given an important judgment on the assessment of damages for loss of earning capacity. It may herald a shift upwards in awards for loss of earning capacity.

The case is Billett v Ministry of Defence [2015] EWCA Civ 773, an appeal against a quantum judgment of Andrew Edis QC sitting, as he then was, as a Deputy High Court Judge. I represented the Respondent on the appeal.

Mr Billett had suffered a non freezing cold injury to his feet following a training exercise whilst he was in the Army. Liability had been compromised at 75% of damages to be assessed. Mr Billett was awarded just over £127,000 on 100% basis, but two of the awards were the subject of appeal: the award of £12,500 for pain, suffering and loss of amenity, and £99,064.04 for loss of earning capacity.

The first instance judgment can be found here. Mr Billett was aged 29 at trial. His injury was found to be to his feet only and to be very mild. The Trial Judge found that he was disabled within the meaning of the Equality Act 2010, "but only just". The Trial Judge found that he had left the army for reasons unrelated to his injuries and was in employment earning as much as he would have been without his injury. His NFCI prevented him from working or doing "anything else outside in cold conditions for any appreciable period of time". He worked as Large Goods Vehicle driver and his condition was not interfering very much with his ability to carry out that work at the time of the trial.

The Court of Appeal upheld the award of general damages for PSLA.

Loss of Earning Capacity

The principal issue identified by Lord Justice Jackson giving the lead judgment in the Court of Appeal was "how the court should assess damages for loss of future earning capacity in circumstances where the claimant suffers from a minor disability, is in steady employment and is earning at his full pre-accident rate. Should the court follow the traditional Smith v Manchester approach or should the court use the Ogden Tables suitably adjusted?" Note that in the first instance decision in Conner v Bradman [2007] EWHC 2789 (QB) the Judge was making an award for a "quantifiable loss of earnings" not for loss of earning capacity.

The Ogden Tables and Explanatory Notes include (since the 6th Edition) Tables A to D which set out "reduction factors" ("RF") to be applied to multipliers from tables 3 to 14. The RFs which are based on evidence of the effect on earning capacity of employment status, educational qualifications and disability status for men and women of certain age groups.  By comparing table A with Table B, keeping all other factors equal, the impact of disability on a man of the Claimant's age could be isolated. Of course the tables are only directly relevant if the claimant is "disabled" within the meaning set out in the Explanatory Notes. That test of disability involves (but is not limited to) consideration of whether the individual is disabled as defined within the Equality Act 2010. Furthermore, the tables give a mean figure for the relevant group: e.g. for 25 to 29 year old men, in employment with mid-range educational qualifications who are "disabled". Some within that group will have severe conditions, some, as Mr Billett was found to be, would only just scrape into the group. Should the Court apply the same reduction factor to all within the group? Articles on that issue by William Latimer-Sayer and Dr Wass in JPIL are referred to in the judgment.

Ultimately the Court of Appeal held that in the particular circumstances of this case a "traditional Smith v Manchester approach should have been adopted" rather than use of the Ogden Tables. It substituted its own assessment of £45,000 for loss of earning capacity, which equated to just over twice Mr Billett's annual net earnings. It should be noted that although this was less than half the Trial Judge's award, it was an award for a person who "only just scrapes" into the definition of disabled used within the Ogden Tables Explanatory Notes. Accepting that at the time of assessment the Claimant was only 29 years old, the award nevertheless suggests higher multiples of net earnings for claimants with more severe restrictions, even if the traditional Smith v Manchester approach is adopted. That would be most claimants, given the findings as to the test of "disability" (see below) and that Mr Billett's injury placed him at the outer fringe (at the bottom) of the range of disability.

The judgment addresses the use of the Ogden Tables and Explanatory Notes and the definition of disabled" for the purpose the Ogden Tables.

Definition of "Disabled"

1. The Court adopted the approach of the EAT in Aderemi to the test of "disability" under the Equality Act 2010, which test is adopted as one of the conditions for classifying a person as "disabled" for the purpose of the Ogden Tables A to D. Note that the test is not whether a disability is substantial, but whether the impairment has a substantial adverse effect on the individual's ability to carry out normal day to day activities. "Substantial" means "more than minor or trivial". Thus very many individuals with long term injuries will fall within the definition. It is a broad definition. The MOD submitted that the test of disability was whether the claimant broadly matched the examples set out in the Explanatory Notes. In doing so it had adopted the same wording as appears in Professor Wass's most recent JPIL article. In fact the MOD had instructed Dr Wass to advise it prior to the appeal hearing. The Court of Appeal did not adopt that test.  It did not agree with Dr Wass's opinion that Mr Billett was not disabled for the purpose of the tables. Unless and until there is a change in the conditions for the classification of a claimant as disabled within the Explanatory Notes, the Court of Appeal's approach is authoritative. 

Ogden Tables "A Valuable Aid"

2. Lord Justice Jackson stated, "I accept that in may instances the use of Tables A-D will be a valuable aid to valuing the claimant's loss of earning capacity." They were found not to be a valuable aid in the present case because the claimant was "at the outer fringe" of the broad spectrum of disability, and his disability "affected his ability to pursue his chosen career much less than it affects his activities outside work". As such there was "no rational basis for determining how the reduction factor should be adjusted." Labour market economists such as Dr Wass may not agree with that conclusion. Nevertheless for many claimants who are "disabled" and who fall to be compensated for loss of earning capacity, the Ogden Tables A to D will be a valuable aid to the courts.

The 2002 paper by Richard Lewis and others in the Journal of Law and Society, published in an abbreviated form in JPIL [2002] vol 2 pp151-165, concluded that Smith v Manchester awards had tended to under-compensate claimants, particularly younger men (such as Mr Billett). The Court of Appeal judgment does not refer to those papers but the Court considered that an award of slightly more than twice Mr Billett's annual net earnings was appropriate even though he was "only just" disabled.

The question of the appropriate adjustment to make, if any, to the RF in such cases where the court does use the Ogden Tables A to D as a valuable aid, remains unanswered by this judgment. The JPIL articles referred to in the judgment will be, I suggest, of considerable assistance. The RFs within the tables are mean figures for each relevant group. The Court of Appeal noted evidence that if those within any "disabled" group were categorised from 1 to 10 in terms of the severity of their disability, over 42% would be in the 1-3 categories. Only 13% would be in the 8-10 categories. Hence, I suggest, any adjustment would have to reflect that distribution. I also suggest that courts have to beware that some adjustments to the "after disability" RF would logically have to be made to the "before disability" RF with which comparison is being made for the purpose of assessing the loss of earning capacity. For example, if a Claimant is said to be a particularly gifted communicator, or has vocational qualifications not taken into account in the Tables, those factors would affect his potential earning capacity with or without a disability. It would be wrong to adjust only the "after disability" RF.

I was instructed by Ahmed Al-Nahhas of Bolt Burdon Kemp and my Juniors were Laura Collignon and Nicholas Maggs of Thomas More Chambers, to all of whom I pay tribute for their hard work, depth of knowledge and insight.

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