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Morgan v UPS Ltd, Court of Appeal, 17 April 2008

28 April 2008
The issues

Damages – Smith v Manchester award – disadvantage on labour market – how to assess.

The facts

The Claimant brought a claim for personal injuries against the Defendant. Judgment was entered for the Claimant in the sum of £44,329.12. Liability had been admitted. The Defendant appealed on the basis that the award was too large.

The Claimant was 26 at the time of the accident and 32 at the date of Trial. He suffered a fracture to his left wrist. He was left handed. He had had three operations on the wrist by 2003 and a fourth operation in September 2005. In 2003 he gave up working for the Defendant for reasons which were unconnected with the injury and was dismissed in October 2003. The Claimant had intended to set himself up as a car mechanic. The Defendant had had him surveyed and had found him working as a mechanic in Spring 2005 and showing that he was not as disabled as he had claimed to be. The agreed medical report stated that there was no reason why the Claimant should have any significant loss of function for all normal every day activities; that he was at long term risk of developing a post-traumatic arthritis, the risk being between 5% to 10% and not likely to eventuate for 10 to 15 years. It took the view that he was fit to work full time as a mechanic, although he was likely to require assistance in heavy tasks. He was not fit to undertake heavy manual work or to work in any environment requiring repetitive use of the hands and wrists. He was able to carry out lighter manual work and clerical work on a full time basis.

Although the Claimant’s credibility was challenged at Trial and the Judge’s findings were mainly unfavourable, the Judge accepted the Claimant’s mother’s evidence that he had been trying to build up a customer base for a business as a mechanic and accepted that the Claimant had had a genuine aspiration to establish himself as a self-employed mechanic. He awarded £22,800.00 for loss of earning capacity, composed of two elements, £12,800.00 for “future earning capacity” and £10,000.00 for a Smith v Manchester award. The Defendant had conceded at Trial that some Smith v Manchester award was appropriate. The Defendant appealed on the basis that the Recorder had awarded future loss of earnings on a basis that had not been pleaded or argued and that the claim for future loss was covered by the Smith v Manchester award.

The decision

The approach to the assessment of damages for future loss of earnings will vary with the situation of the particular Claimant. What was called a Smith v Manchester award was a response to a situation in which the Claimant had a partial disability but was in regular employment. The approach had been analysed in the case of Moeliker v A Reyrolle & Co Ltd (1976). The head of damage arose only, in most cases, where a Claimant was, at the time of his Trial, in employment but there was a risk that he might lose his employment at some time in the future and might then, as a result of his injury, be at a disadvantage in getting another job or an equally well paid job. The consideration should be in two stages. Firstly, was there a “substantial” or “real” risk that a Claimant would lose his present job at some time before the end of his working life and secondly, if there was, the Court should assess and quantify the present value of the risk of the financial damage which the Claimant would suffer if that risk materialises, having regard to the degree of the risk, the time when it would materialise and the factors, favourable and unfavourable, which in a particular case would affect the Claimant’s chances of getting a job at all or an equally well paid job.

In Cornell v Green the Court of Appeal later confirmed that a Smith v Manchester would not generally be awarded to cover a continuing partial loss of earnings, emphasising the distinction between damages for loss of earning capacity and damages for future loss of earnings.

In this case the Judge had described a conventional approach to a loss of earnings capacity, including disadvantage on the labour market. He made an award for what he described as “impairment of future earning capacity”. That award covered the risk of arthritis in the future and a range of earning related problems for the future. He then made a further substantial award for what he called “Smith v Manchester”. To consider disadvantage on the labour market under two quite separate headings “loss of earning capacity” and “Smith v Manchester” inevitably risked double counting on these facts.

The Recorder’s job was to assess a capital sum to represent the current value of what he was likely to earn as compared with what he would have earned but for his injury. There could be no comparison of his pre-accident work record because the Claimant had decided to embark on a new trade and was not in employment. He had given up his employment with the Defendants voluntarily. There was no question therefore of applying a multiplier to a multiplicand. It was necessary to assess whether the business venture would be a success, how successful it would be, and how much more successful it would have been but for the modest disability. It would also have been necessary to assess what would have happened if the venture did not succeed and to express, as a capital sum, the consequences of the disadvantage the Claimant would suffer on the labour market by reason of his disability if he sought other work. The Claimant was 32. He had a small but significant disability affecting the range of work he could do. There was a small risk of post-traumatic arthritis in the long term. The total award of £22,800.00 was, in the circumstances, generous but no so generous that the Court should interfere with it.

For the future, awards for Smith v Manchester should be confined to situations such as those in Smith or Moeliker. Disadvantage in the labour market was a factor in assessing damages for loss of earning capacity / future loss of earnings which would very frequently arise when there was a continuing or prospective disability. It took many forms, including those considered in Smith and in Moeliker where a Claimant was in employment.

Appeal dismissed.

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