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House of Lords
Session 1997-98
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Judgments - Longden v. British Coal Corporation


  Lord Goff of Chieveley   Lord Slynn of Hadley   Lord Steyn
  Lord Hope of Craighead   Lord Clyde







My Lords,

          I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Hope of Craighead. For the reasons he gives I would allow this appeal.


My Lords,

          I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Hope of Craighead. I agree that the appeal should be allowed to the extent indicated by him but should otherwise be dismissed.


My Lords,

          I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Hope of Craighead. For the reasons he gives I would also make the order which he proposes.


My Lords,

          The question in this appeal relates to the assessment of damages in a claim of damages for personal injury. It concerns the treatment of a collateral benefit. The particular form of benefit with which we are concerned is an incapacity pension to which the plaintiff became entitled under his employers' staff superannuation scheme. This was a contributory pension scheme, which provided a pension to its contributors on their retirement from their employment at or after the normal retirement age. But it also provided an incapacity pension to its contributors in the event of their retirement before the normal retirement age on the ground of their ill-health. These were alternative forms of benefit, as contributors were entitled under the scheme to receive one or other of the two pensions but not both of them.

          The plaintiff sustained injury in an accident during the course of his employment at one of the defendants' collieries. The payments by way of pension which he received upon taking incapacity retirement after the accident consisted of an annual pension and a lump sum. It was accepted that these payments had to be ignored in the assessment of the plaintiff's claim for loss of earnings, both for the past and the future, until he reached the normal retirement age. But the plaintiff had also included in his claim for damages a claim for loss of pension after the normal retirement age. That loss was said to consist of the lump sum to which he would have been entitled on retirement had he continued in his employment until the normal retirement age, together with the difference between the annual retirement pension which he would have received after that date and the annual incapacity pension which he was in fact receiving and would continue to receive under the scheme. This approach to the assessment of his claim of damages was the same as that which was approved in Parry v. Cleaver [1970] A.C. 1 and Smoker v. London Fire and Civil Defence Authority [1991] 2 A.C. 502. The method which was adopted in calculating the total amount of the pension loss was that which was approved in Auty v. National Coal Board [1985] 1 W.L.R. 784.

          The defendants maintained at the trial that the award for the plaintiff's pension loss ought to take account of the lump sum which the plaintiff had received as part of his incapacity pension, together with the total amount of all the annual payments which he had received and would continue to receive or to be entitled to receive under his incapacity pension until he reached the normal retirement age. On their approach the pension loss had to be calculated by setting off against the net loss in the amount of pension which the plaintiff would receive after the normal retirement age all the benefits which he was entitled to receive in the form of an incapacity pension prior to that date. The defendants' superannuation scheme was benevolent to those who had to retire early on the ground of physical or mental incapacity--so much so, that the effect of the defendants' approach to the calculation of the claim for pension loss was to reduce that claim to nil. Their argument was that, if the calculation took full account of all the payments to which the plaintiff was entitled under the scheme from the date when he was awarded his incapacity pension, he had sustained no loss of pension at all.

          The trial judge, Douglas Brown J., awarded the plaintiff a sum of damages which included £33,036 under the heading of pension loss. It was subsequently agreed that the amount of this loss was erroneously calculated at the trial and that it should be corrected to £26,570. The Court of Appeal (McCowan, Roch and Ward LJJ.) [1995] I.C.R. 957 dismissed the defendants' appeal, subject only to varying the sum for which judgment was to be entered for the plaintiff to correct the error which had been made in calculating the amount of the pension loss. The defendants have now appealed against that decision to this House. The plaintiff, while seeking to support the decisions of Douglas Brown J. and the Court of Appeal, has introduced an alternative argument which was not presented to the courts below. This is that the lump sum which he received on his retirement under his incapacity pension should be apportioned between the periods before and after his normal retirement age and that the portion attributable to the period after his normal retirement age should then be set off against the amount claimed for pension loss.

          It is not necessary to say much about the facts of the case. The plaintiff was employed by the defendants as a deputy in their West Thorpe Colliery, North Derbyshire. He was injured in an accident there on 17 April 1985 when a load of heavy steel sections on a tram which he was accompanying up a gradient was dislodged and slid back on to his right foot. His foot was trapped and crushed between the steel sections and the rail of the tram track and he fell backwards, twisting his back. He was unable to continue in his employment as a result of his injuries. He resigned from his employment and applied for a pension to the staff superannuation scheme trustees. On 22 August 1986 he was awarded an incapacity pension under the scheme. He was 36 years old at the date of the accident, and he was 37 years of age when he retired. His normal retirement age for the purposes of the scheme, as a contributor whose service would have terminated on or after 17 May 1990 had he continued in the defendants' employment, would have been the date when he attained the age of 60. The trial judge found that if the plaintiff had not been injured he would probably have continued working for the defendants until he attained the age of 60, and that as a result of the accident his expectation of life had been reduced by three years to 71 years.

          On accepting an incapacity pension after his accident the plaintiff became entitled to and did receive under rule 22 of the scheme a lump sum of £10,185.91, together with an annual pension amounting at the date of the trial to £5,199. It is agreed that if he had continued in his employment to the age of 60 he would have received on his retirement at that age by way of retirement pension under rule 21 a lump sum of £33,242 and an annual pension of £11,080. On these figures the net annual pension loss after the age of 60 amounted to £4,411. An agreed multiplier of 10 was applied to that figure, resulting in a loss of pension of £44,110. To this was added the lump sum loss of £33,242, resulting in a total arithmetical loss of £77,352. There were then applied to this total a discount factor of 0.458 per cent. to allow for the accelerated receipt of money, and the resulting figure of £35,427 was then discounted again by a factor of 25 per cent. to allow for contingencies. This produced a final discounted pension loss of £26,570. After taking account of sums for special damages including loss of earnings for the past, for future earnings loss, and for pain and suffering and loss of amenities the total award was £427,753.

          The only other point which requires to be noted at this stage is that it had been the practice before the hearing at first instance in this case, as between the defendants and those claiming damages from them for personal injury, to deduct from the calculation of pension loss the whole of the lump sum received by the claimant when he took incapacity retirement under the scheme. The calculation of the plaintiff's claim of damages which was first put forward on his behalf was consistent with this practice, because it allowed for the deduction from his claim of the whole of the lump sum of £10,185.91 which the plaintiff received in August 1986. Counsel for the plaintiff was permitted to withdraw this deduction at the hearing at first instance. The primary argument which Mr. McLaren Q.C. advanced on his behalf was that no such deduction should be made. His alternative argument was that it should be apportioned between the pre- and post-retirement periods. He proposed the following method for carrying out this apportionment. Using the Ogden Tables and applying a discount rate of 4.5 per cent, the multiplier to the pension age of 60 for a man aged 37, which was the age which the plaintiff had attained when he retired, is 14. Taking his retirement age plus three years to add back the number of years which were deducted from his expectation of life due to the accident, i.e. 40, the whole life multiplier at the same discount rate is 16.7. The post-retirement element in the lump sum is thus 2.7/16.7 x 100 = 16 per cent. 16 per cent of the lump sum of £10,186 is £1,630. On this approach £1,630 should be deducted from the pension loss, resulting in a net figure of £24,940.

          Mr. Hawkesworth Q.C. for the defendants made no criticism of these calculations, although he pointed out that the use of the Ogden Tables did not yet have statutory authority. Section 10 of the Civil Evidence Act 1995, which provides for the admissibility and proof of the Ogden Tables, is not yet in force: see the Civil Evidence Act 1995 (Commencement No 1) Order 1996 (S.I 1996 No. 3217), which brought into force all the provisions of that Act except sections 10 and 16(5). But we were informed that in practice the tables are now regularly used in the calculation of damages. It has been held in Scotland that the court can take judicial notice of the Ogden Tables: O'Brien's Curator Bonis v. British Steel Plc., 1991 S.C. 315. So there seems to be no good reason for not adopting Mr. McLaren's approach to the calculation, assuming that in principle such a calculation is necessary to arrive at the net loss.

          Accordingly two issues are before us in this appeal. The first relates to the total of all the payments which the plaintiff will have received by way of incapacity pension by the date when he attains the normal retirement age. Is it necessary for the total of all these payments to be brought into account in calculating the amount of the loss of pension after the normal retirement age? The second, which arises only if the first question is answered in the negative, relates to the proper treatment of the lump sum which the plaintiff received when he took his incapacity pension. Is it appropriate for this sum to be apportioned, and for that part of it which is attributable to the period after the normal retirement--but only that part--to be deducted from the claim in order to arrive at the net loss?

          The argument to which we listened was presented with commendable skill, clarity and economy on both sides. There was no dispute about the basic principles. The question is how they should be applied to the facts of this case, and in particular to the defendants' argument that the plaintiff can only be held to be entitled to damages for loss of pension if, looking at the matter overall, he has been able to demonstrate that he will be worse off in regard to the whole of his pension rights throughout his lifetime. As Mr. McLaren put it, the only question which divides the parties is one of deductibility. The defendants had conceded in the courts below that the incapacity pension payments which the plaintiff has received and will continue to receive up to his normal retirement age are not deductible from his claim for loss of earnings. There was no dispute that his claim for loss of pension after the normal retirement age could be no greater than his net loss of pension, after setting off the amounts of incapacity pension which he will receive after that date against the amounts of retirement pension which he would have received but for the accident. The question which remained was whether it was sufficient, in order to arrive at the net loss, to set off only the amounts of incapacity pension which the plaintiff will receive when he would otherwise have been in receipt of his retirement pension, or whether there must also be set off against the retirement pension the total amount of all the pension benefits which he has received and will continue to receive up to the date when he would have retired.

          The defendants' argument was in essence a very simple one. The plaintiff was entitled to receive as damages no more than his net loss of pension. The proper way to calculate that net loss was to establish the difference, if any, between the annual pension and the lump sum actually received and receivable and the annual pension and the lump sum which the plaintiff would have received had he worked to his normal retiring age.

          There is no doubt that the plaintiff cannot recover under his claim of damages for pension loss any more than the amount of his net loss. The purpose of the award of damages is to compensate him for his loss, not to enrich him. It should leave him no worse off than he was before, nor should he be any better off. As Lord Bridge of Harwich said in Hussain v. New Taplow Paper Mills Ltd [1988] A.C. 514, 527, the rule is that prima facie the only recoverable loss is the net loss. Financial gains which accrue to the plaintiff which he would not have received but for his accident are prima facie to be taken into account in mitigation of the losses which he has sustained. The principle is that the compensation which he receives by way of the payment of a sum of money as damages should as nearly as possible put him in the same position as he would have been in if he had not sustained the wrong for which he is to be compensated: Lord Blackburn in Livingstone v. Rawyards Coal Co. (1880) 5 App.Cas. 25, 39. In Hodgson v. Trapp [1989] A.C. 807, 819 Lord Bridge summarised the law in this way:

    "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."

The main point: deduction of all the pre-retirement payments

          I shall deal first with the main point, which was Mr. Hawkesworth's argument that the total of all the pre-retirement payments had to be deducted in order to arrive at the net loss of pension after the normal retirement age.