Tinee Harvey v Dennika Warren

• Jurisdiction: Bermuda
• Judge: Bell, JA,Baker, P,Riihiluoma, JA
• Judgment Date: 01 April 2016
• Neutral Citation: [2016] CA Bda 6 Civ
• Date: 01 April 2016
• Court: Court of Appeal (Bermuda)
• Docket Number: CIVIL APPEAL No. 13 of 2015

[2016] CA (Bda) 6 Civ

The Court of Appeal for Bermuda

Before:

Baker, President

Bell, JA

Riihiluoma, JA (Acting)

CIVIL APPEAL No. 13 of 2015

CIVIL APPEAL No. 14 of 2015

Between:

Tinee Harvey

Appellant

and

Dennika Warren

Respondent

Between:

Colonial Insurance Company Limited

Appellant

and

Kate and James Thomson

Respondent

Appearances:

Andrew Hogarth, QC and Craig Rothwell, Cox Hallett Wilkinson Limited, for the Appellants

Martin Porter, QC and Jai Pachai, Wakefield Quin Limited, for the First Respondent

David Westcott, QC and Paul Harshaw, Canterbury Law Limited, for the Second Respondent

Applicable discount in assessment of damages covering future losses — appropriate investment vehicles for United Kingdom and Bermuda resident claimants

Bell, JA

1 In the case of Helmot v Simon in the Guernsey Court of Appeal (Guernsey Law Reports [2009–10] GLR 465), Sumption JA (as he then was) began his judgment with the following sentence:

‘This appeal raises important questions about the assessment of long-term future damages in personal injury actions, a subject which has been much litigated in England but on which there is no authority in Guernsey.’

The position in Bermuda was the same as that in Guernsey, in terms of the lack of Bermudian case authority, until Kawaley CJ dealt with the issue of the assessment of the appropriate discount rate for future losses in the context of three cases which he had directed should be heard together, with provision for expert evidence. In two of those cases, the Chief Justice had made a provisional order that there should be a discount rate of 3 percent, but in one of them it had been urged upon him that the court should adopt a zero rate of discount, without hearing expert evidence. This led the Chief Justice to call for expert evidence from an economist, actuary or chartered accountant, addressing the following issues:-

(i) what is the most appropriate measure in Bermuda for the rate of return on a lump sum conservatively invested (e.g. ILGS/US TIP securities/local bank term deposit rates)?

(ii) what provision if any should be made for a gap between price and earnings inflation? and

(iii) within the constraints of a modest retainer and providing a very basic guide, what range of discount percentage appears appropriate for the 2 ^nd Defendant's case?

2 By way of background, the Chief Justice had, at the outset of his judgment in this case, expressed the broad issue in the following terms:-

‘When claimants in personal injuries cases are awarded a lump sum in respect of future loss, the need has historically arisen to adjust the award to take into account the commercial reality that a lump sum prudently invested over the term of the assessment period could well result in a benefit greater than the amount of compensation the claimant is properly entitled to receive.’

He then referred to the basic methodology of the necessary calculation, which requires identifying the amount of compensation due on an annual basis, whether it be loss of earnings or the annual cost of care (the multiplicand), and the number of years for which such compensation should be paid (the multiplier), typically calculated on the basis of normal life expectancy, and then combining the two, with a discount factor to deal with the point made in the quotation above. Particularly in times of more significant returns on capital than may be the case today, the discount, even at 4 or 5 percent, would have a significant effect on the total lump sum (reducing it in total), so as to ensure that the claimant would not be over-compensated. The object of the discount was to arrive at an amount which would generate the necessary annual amounts, allowing for future inflation, on the assumption that the plaintiff drew on the whole of the income and a sufficient portion of the capital to exhaust it at the expected time of the plaintiff's death. As the Chief Justice observed, for many years Bermudian courts and practitioners had relied on the English Ogden Tables, named after Sir Michael Ogden QC, which tables set out the appropriate multipliers for claimants of different ages and various potential award periods, together with a range of adjustment rates which could be selected to suit the justice of the particular case. Before the English case of Wells v Wells [1999] 1 AC 345, the adjustment rate had typically been between 4 and 5 percent.

3 As the Chief Justice noted, calculation of the appropriate discount rate has for some time been far less problematic in England and Wales, as a result of two legislative initiatives not applicable to claimants under Bermudian law. First, the Lord Chancellor in England and Wales is now empowered by statute to fix the appropriate discount rate, and in 2001 this had been fixed at 2.5 percent. Secondly, English courts are now empowered by statute to make periodical payment orders in respect of future loss awards in personal injury cases. Bermuda courts continued to follow the older English common law authorities suggesting a discount rate of between 4 and 5 percent, until the suggestion that the court should adopt the zero percentage rate previously mentioned, without hearing expert evidence. The Chief Justice recognised that while he was making particular findings for the purposes of the three cases before him, his ruling sought to lay down principles of general application, which he hoped would be applied in other similar cases, without the need to adduce similar expert evidence as had been given before him.

4 Before the Chief Justice there was evidence given by three experts, in the form of one economist, Dr. John Llewellyn, called by the Plaintiff Thomson, and one actuary, Mr. Christopher Daykin called by all three Plaintiffs, with one actuary, Mr. Peter Gorham, called for the Defendants.

5 Having set out the issues in broad terms the Chief Justice asked himself the question whether there should be a new Bermudian law position on discount rates. He referred to the submissions of the claimants in the cases before him that the Court should follow the Privy Council's decision in Simon v Helmot, on appeal from the Guernsey Court of Appeal [2012] UKPC 5, and adopt the approach to discount rates which had been established by the House of Lords in Wells. The defendant insurers had contended in broad terms that, having regard to the economic realities applicable in Bermuda, the more nuanced approach adopted by the Hong Kong Court of First Instance in Chan Pak Ting v Chan Chi Kuen [2013] HKCFI 179 should be preferred.

6 The Chief Justice then reviewed the English cases on the one hand and the Hong Kong case on the other. He concluded that Chan Pak Ting had to be understood in the context of its facts, and particularly the fact that investment in ILGS (Index Linked Government Securities, or Index Linked Gilts), the form of investment held to be appropriate in the English cases, was not even a potentially available investment income for the hypothetical reasonable Hong Kong plaintiff. The Chief Justice concluded that the principal authorities to which he had been referred in argument and which he had at that part of his judgment summarised, did not support a finding that, as a matter of pure law, the assessment of damages rules should be changed. He referred to the oft-cited passage in the judgment of Lady Hale in Helmot in the Privy Council, where she had indicated (para. 60):

‘The only principle of law is that the claimant should receive full compensation for the loss which he had suffered as a result of the defendant's tort, not a penny more but not a penny less. Allied to this is the principle, which no one in this case has sought to attack, that damages must be expressed as a lump sum payable now…’

The problem with that eminently fair and sensible principle is that it is easier said than done. As Sumption JA recognised in his judgment in Helmot (paragraph 7), when commenting on the problems associated with the calculation of lump sum awards, and particularly the factors to be taken into account, because there is no procedure available for revising a lump sum award in the light of future events as they occur, it is necessarily the case that while an assessment can be made which is correct on the balance of probabilities when the award is made, it is almost certain to be wrong in the event, possibly by a considerable amount.

7 The Chief Justice then turned to the expert evidence before him. It is convenient at this point to refer to the fact that one of the cases on which the Chief Justice had ruled (Talbot) was not the subject of appeal. In relation to the other two Plaintiffs, Thomson and Warren, the former had returned to the United Kingdom where an investment in ILGS was in practical as well as hypothetical terms available to her, and the latter had remained a resident of Bermuda, where such an investment was not available to her, quite apart from the complication of currency conversion. Consequently, consideration needed to be given to an investment in TIPS (Treasury Inflation-Protected Securities), the US equivalent of ILGS. Further, in the case of TIPS, consideration needed to be given to the appropriateness of such an investment in the context of a comparison between the US and Bermuda economies, and whether such difference as might exist would require some further adjustment.

8 The various experts' reports comprised some 165 pages, and we in this court were spared the full appendices and provided only with selected extracts, which themselves made up a substantial binder, even though, in the way of such matters, the references made to us from the appendices were relatively minimal, which is not to say that the material to which we were taken was not important; it clearly was. But the point of referring to the volume of material is to explain that I see no need to duplicate or even to try to...