Warren v Harvey

• Jurisdiction: Bermuda
• Judgment Date: 22 June 2015
• Neutral Citation: [2015] SC Bda 37 Civ
• Date: 22 June 2015
• Docket Number: CIVIL JURISDICTION 2008: No. 311 2014: 139
• Court: Supreme Court (Bermuda)

Between:

Dennika Warren

Plaintiff

and

Tinee Harvey

Defendant

Kate Thomson

Plaintiff

and

James Thomson

1st Defendant

and

Colonial Insurance Company Limited

2nd Defendant

Argus Insurance Company Ltd

Plaintiff

and

Somers Isles Insurance Company Ltd

First Defendant

and

Harold Talbot

Second Defendant

[2015] SC (Bda) 37 Civ

CIVIL JURISDICTION 2008: No. 311

2012: No. 6

2014: 139

In The Supreme Court of Bermuda

Mr. Jai Pachai, Wakefield Quin Limited, for the claimants in Civil Jurisdiction 2008: No.311 (‘Warren’) and Civil Jurisdiction 2014: No. 139 (‘Talbot’)

Mr. Paul Harshaw, Canterbury Law Limited, for the claimant in Civil Jurisdiction 2012: No. 6 (‘Thomson’)

Mr. Craig Rothwell, Cox Hallett & Wilkinson Limited, for the Defendants' Insurer, Colonial Insurance Company Limited, in Warren and Thomson (‘Colonial’)

Mrs. Lauren Sadler-Best, Trott & Duncan Limited, for the 1 ^st Defendant in Talbot

RULING (ASSESSING DISCOUNT RATE FOR FUTURE LOSS)

(in Court) 1

Introductory

1 The present Ruling follows upon a continuation of adjourned trials for the assessment of damages in the three captioned matters in which the following Orders were made:

• (a) On November 25, 2014 in relation to the Talbot claim, I ruled that, as far as loss of future earnings was concerned, unless the claimant filed an expert report in accordance within 35 days (or such longer time as may be directed), he would be awarded $26,533.97 x 12.70 = $336,981.42 (applying a discount rate of 3%);

• (b) on January 9, 2015 in the Warren matter, I awarded the claimant $138,123.09 in respect of a loss of future earnings, applying a discount rate of 3% and subject to her right to apply within 35 days for leave to adduce expert evidence in support of a lower rate; and

• (c) on January 19 2015, in light of the common issues identified in the earlier cases, it was directed that expert accounting and economics evidence in relation to the appropriate discount rate for future damages in all three matters could be adduced at a single hearing.

2 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. That compensation for future loss is generally assessed on the basis of annual earnings and, where applicable, annual medical or other expenses attributable to the relevant injury. The assessment task crucially entails identifying the amount of compensation due (the multiplicand) and the number of years to which the award relates (the multiplier). For many years the Bermudian courts have relied on the English Ogden Tables which set out the appropriate multipliers for claimants of different ages and various potential award periods, together with a range of adjustment rates (expressed as a percentage) from which courts or litigants can choose to suit the justice of their particular case. Following English 1970's vintage case law, the adjustment rate has been between 4 and 5%.

3 Because until recent years market conditions have always justified assuming a positive adjustment rate based on projected investment returns the application of which serves to reduce or lower the applicable multiplier and the size of the future loss award, that adjustment rate is popularly referred to as the “discount rate”. Although the 2008 global financial crisis created a shift in economic conditions giving rise to the possibility of a negative adjustment rate, it still seems most straightforward to refer to the percentage used for identifying the appropriate multiplier in the Ogden Tables as the “discount rate”.

4 Calculation of the discount rate has for more than a decade now been far less problematic in England in Wales as a result of two legislative initiatives not applicable under Bermudian law. Firstly, the Lord Chancellor is empowered by statute to fix the discount rate and in 2001 fixed it at 2.5% 2. Secondly, English courts are now empowered by statute to make periodical payment orders in respect of future loss awards in personal injury cases 3. Bermudian courts continued to follow older English common law authorities suggesting a discount rate of between 4% and 5%. This was until Mr. Pachai in the Talbot and Warren matters sought to rely on the (Guernsey) Judicial Committee of the Privy Council decision in Simon v Helmot [2012] UKPC 5. In that case a 0.5% discount rate was approved for prices related heads of future loss based on expert evidence given by an actuary and an economist. A discount rate of -1.5% was approved for earnings related heads of future loss.

5 Mr. Harshaw, as I recall, foreshadowed relying on Simon v Helmot at an earlier stage of the Thomson case, despite the fact that it was only formally raised in early 2015. Be that as it may, in my judgment in Argus Insurance Company Ltd v Harold Talbot et al [2014] SC (Bda) 93 Civ (25 November 2014); [2014] Bda LR 114, which was delivered on the second day of the three-day trial of the Warren matter where Mr. Pachai urged the Court to adopt a 0% rate without hearing expert evidence, I reached the following findings on the discount rate issue:

‘ 18…Having considered the above legal principles, I determine that it would not be appropriate for this Court to depart, as dramatically as counsel for the claimant suggests, from the longstanding discount rates upon which local litigants have relied and which have been applied by this Court after Simon v Helmot, without expert evidence from either an economist, actuary or chartered accountant addressing the following issues:

• (1) 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?);

• (2) what provision if any should be made for a gap between price and earnings inflation;

• (3) 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.’

6 Mr. Pachai's subsequent application in the Warren matter for leave to adduce such expert evidence was not opposed by Mr Rothwell: Warren v Harvey [2015] SC (Bda) 1 Civ (January 2015); [2015] Bda LR 1, at paragraphs 17, 22.

7 The three Plaintiffs adduced evidence from the same actuary the Plaintiff in Thomson also adduced evidence from an economist while the Defendants (or their insurers) adduced evidence from the same actuary without adducing opposing evidence from an economist. Each side essentially advanced conflicting expert assessments of what the most appropriate discount rate calculation methodology was. It was common ground that the factual assessment was governed by the umbrella legal principle pithily expressed by Lady Hale in Simon v Helmot:

‘ 60. The only principle of law is that the claimant should receive full compensation for the loss which he has suffered as a result of the defendant's tort, not a penny more but not a penny less…’

8 The present Ruling primarily sets out this Court's findings for the purposes of the three cases before the Court. However, it also attempts to lay down principles of general application which can hopefully be applied in other cases without the need to adduce similar expert evidence in the near future.

The current Bermudian law position

9 The assessment of damages in tort is primarily governed by common law rather than statutory rules. Subject of course to more recent changes initiated by statute in the United Kingdom in this area of law, English case law will, where relevant remain highly persuasive. As Harvey da Costa (Acting President) pointed out in Crockwell v Haley [1993] Bda LR 7 (at pages 5–6):

‘ In matters of commerce uniformity is of course highly desirable and this court in J.E.L. Lightbourne & Co. Ltd. v Test Freres (1980) LRC (Comm) 463 readily followed the decision of the House of Lords in the Advocaat case (1980) RPC 31… The President of the Court took the view that there was no reason why the Common Law…as applied in these islands should be any different…’

10 The Court of Appeal for Bermuda in Haley v Crockwell approved the approach of the trial judge (Ward J, as he then was) in assessing future damages for personal injuries articulated by Lord Diplock in the House of Lords case of Cookson v Knowles [1979] A.C. 556. As da Costa (P, Acting) further opined (at page 15):

‘ The ‘Diplock approach’ has been consistently followed in assessing damages in Bermuda. As I have observed it has its critics. It is not a perfect system but then it operates in a realm in which perfection must remain beyond the wit of man. On the whole however it produces results that are substantially just. There does not appear to be any valid reason why Bermuda should seek to depart from it a system of assessment that has become well established here.

11 Telford Georges JA (at pages 26–27) observed that different local circumstances would justify Bermudian common law taking its own distinctive course. However, he cited (at 30–31 of Haley) with approval the following dictum of Lord Diplock in Cookson v Knowles (at page 571):

‘ Quite apart from the prospects of future inflation, the assessment of damages in fatal accidents can at best be only rough and ready because of the conjectural nature of so many of the other assumptions upon which it has to be based. The conventional method of calculating it has been to apply what is found upon the evidence to be a sum representing ‘the dependency’, a multiplier representing what the judge declared to be the appropriate number of years purchase. In times of stable currency the multipliers that were used by judges were appropriate to interest rates of 4...