Judgment in this case was handed down on the 21 July - a copy of the judgment can be found here. It was a complex case between a prison officer and his employers, the Ministry of Justice. The claimant suffered psychiatric injury as a result of breaches of contract and duty of care by his employers, which had suspended him in order to investigate allegations of sexual misconduct.
This note examines three issues arising from the judgment and a separate costs decision handed down shortly afterwards. Suffice to say, that the claimant was successful in being awarded £286,572 in damages.
1. The loss of earnings claim - "Ogden" table reduction factors
Throughout the judgment, multipliers are quoted to four decimal places, which perhaps marks an unusual level of precision. However, the judgment indicates one approach to the Table A - D reduction factors for contingencies other than mortality when, as in this case, the claimant’s age falls outside the Ogden table age ranges (paragraph 209 onwards of the judgment deals with this issue).
In the Ogden table explanatory notes, a note at the head of Tables A to D says:
"For older ages the reduction factors increase towards 1 at retirement for those who are employed and fall towards 0 for those who are not employed. However where the claimant is older than 54, it is anticipated that the likely future course of employment status will be particularly dependent on individual circumstances, so that the use of factors based on averages would not be appropriate. Hence reduction factors are not provided for these older ages."
The claimant was 56. Due to the stress and depression he suffered, and for which the defendant was liable, he was not able to return to his work as a prison officer. The judge accepted he would have worked until 65.
"But for" earnings
The unadjusted Table 9 multiplier was 8.2466. The parties agreed to use the reduction factor (“RF”) applicable to the 54 year old level being 0.79 as a guide.. The defendant submitted that 0.79 should be applied as there was not much difference between 54 and 56, a submission that the judge rejected holding that an upward revision was needed particularly as the claimant was in fact close to 57. The claimant sought an RF of 0.9, on the basis that at 56/57 his employment as a prison officer would have been secure, with little risk of dismissal. The judge felt 0.9 went too far towards the point where the effect of a reduction factor would disappear yet there was still eight years left to retirement.
Taking into account the extent to which his age was higher than 54, and the likely security of the work, the judge adopted an RF of 0.83. That still amounts to an assessment of a 20% chance of being out of work prior to retirement regardless of the injury.
Residual earning capacity
Both the parties and the judge considered this on the basis of Table A “Age 65 Males not disabled”. The defendant argument that the RF should be 0.79 was said to be wholly unrealistic being an “employed” factor whilst the claimant had been unemployed for many years (five and a half years due to the impact of the defendant’s wrongdoing) and had not yet been able to look for work.
The claimant sought 0.59 (the Table A figure for an unemployed, not disabled male of age 54) as a starting point, and the judge accepted. The claimant argued it should be reduced to 0.2 for four reasons: the long period off work; the long period of sickness; how he became to be unemployed and that he had sued his employer.
The judge did not accept 0.2 but said a reduction from 0.59 to 0.49 was warranted to reflect the age at which the claimant would start to look for work and the background which could be off-putting to a new employer.
If nothing else, this case is a useful reminder of the age limitation on the RFs in the Ogden tables and that either the factors need to be modified or the use of factors replaced with some other assessment based on the evidence for a particular claimant.
The extreme modifications contended for by the claimant were rejected on both counts (but so were the non or slight modifications of the defendant). The judge’s approach to a “but for” reduction factor for an older age claimant, with few years left, and in secure employment is perhaps helpful as it still amounts to a 20% reduction in the multiplier to reflect a 20% risk of not having been employed but for the accident.
Conversely only a 0.1 reduction (as opposed to nearly 0.4 contended for by the claimant) was made to the reduction factor for age 54 in respects of risks to his residual earning capacity.
2. The discount rate change
Attempt to argue for a different (i.e. previous) rate
Before dealing with the Part 36 point, it is worth mentioning that in the main trial the defendants raised an argument relating to the discount rate change which did not succeed – in fact said by the judge to be doomed to fail.
The trial was heard in the months leading up to the end of 2016 with closing submissions in December 2016. Judgment was handed down on 21 July 2017. Those dates straddle the change to the discount rate on the 20 March 2017.
The defendant argued this was a case where a different discount rate (to that from the 20 March) should apply. The arguments were (1) the claimant had wanted the case resolved at the trial which completed in December 2016; (2) the claimant had never asked for the new rate to apply; (3) the claimant’s losses had not altered in the months since trial, only the legislation had (Damages (Personal Injury) Order 2017) and therefore it was pure “serendipity” that the claimant had the benefit of the new rate. The defendant argued that the rate in force at the time the evidence was heard should be applied.
The judge said points (1) and (2) were hopeless or irrelevant and that (3) hit the point: the law had changed. His actual comment, perhaps unwittingly straying into the discount rate debate, was “the application of the new rate is simply the operation of law. It is no more serendipitous than the old rate pertained for many years to the benefit of defendant generally.”
The interaction between the Part 36 offer and the discount rate change
Notwithstanding that comment about “benefit”, when moving to consider the consequences of the Part 36 offers in the costs hearing, the judge was prepared to accept that the rate change should be taken into account.
The claimant had made two Part 36 offers. The first was in 2014 of £223,500 and the second in October 2016, at a reduced sum of £180,000. It will be recalled that the claimant was awarded £286,000.
Counsel for the claimant argued that the award beat both Part 36 offers - £286,000 was higher than the sums in both offers. It followed that the usual Part 36 sanctions should apply from 2014.
In respect of the 2014 offer the judge rejected that argument preferring that from the defendant which drew parallels with the case of Novus Aviation Ltd v Alubaf Arab International Bank in which Part 36 sanctions were not applied where a claimant offer was beaten solely due to changes in exchange rates in the immediate aftermath of Brexit decision.
The damages awarded in Marsh of £286,000 would have amounted to £217,500 if recalculated on the 2.5% rate applying at the time of the first Part 36 offer, and therefore, less than the amount in the claimant’s offer. The judge said the same approach adopted in “Novus Aviation” should apply to discount rate change situations. As a result, it would not be just for the usual consequences to flow in respect of the 2014 offer. No order was made in respect of additional damages and enhanced interest on costs or damages.
The same could not be said of the 2016 offer which was less than even the recalculated figure. The claimant was awarded the additional damages and enhanced interest on damages and costs from the date of expiry of that offer.
Important points to consider
This was a complex case and until the costs judgment is available some caution is needed. That said, the judge seems to have been clear in his approach to the discount rate change. In effect his approach was to look at the discount rate prevailing at the time the offer was made and what the damages would have been calculated using that rate.
It might be unsafe at this stage to believe this would be the last word on the issue (and it is not clear what the position would have been if a defendant’s offer was in play) but the decision is helpful to refer to if a similar situation arises.
3. Refusal to mediate - indemnity costs awarded
Reports on this case have highlighted the contrast between the claimant and defendant approaches: the claimant making offers and seeking to mediate several times and the defendant making no offers, ignoring all claimant offers and refusing to respond to invitations to mediate.
The punishment of a party (even a winning one) unreasonably refusing to mediate by adverse costs orders is not new, and in this case the defendant had to pay costs on an indemnity basis from July 2016.
The reasons put forward by the defendant for not engaging in mediation were: (1) it had a strong defence; and (2) the litigation was out of the ordinary as the defendant was a public body, the litigation related to a police investigation in a prison and there was widespread public concern arising from inquiries into abuse involving public institutions.
The judge’s view was that it was well known that personal injury claims against an employer were often amenable to ADR because “an independent person can approach the case dispassionately and without the history [and sometimes/or] the emotion that can colour one’s judgement in relation to claims by an employee against an employer”. The judge rejected the relevance of any of the reasons given and said that if a defendant did not want to engage in mediation for public policy reasons it had to be prepared to take the costs consequences.
What this means for you
Indemnity costs followed due to the unreasonable failure not just to mediate but to respond to invitations to mediate. That said, the reasons the defendant would have relied on had it chosen to raise them would not have been insufficient in the judge’s view.
In the recent case of Gore v Naheed and another, the Court of Appeal caused a ripple in the line of cases relating to unreasonable refusal to mediate where Pill LJ said that he had some difficulty in accepting that the desire of a party to have his rights determined by a court of law in preference to mediation could be said to be unreasonable conduct. The first instance decision was upheld not to penalise a defendant who refused mediation in the belief that it had no reasonable prospect of success. A refusal to mediate was a factor to take into account and in Gore the belief that the defendant had a strong case (borne out by winning at trial) and that mediation would be a waste of time was seen not to be an unreasonable basis for the refusal.
The two cases together – although very different in the way an invitation was responded to – probably show different ends of the spectrum, but highlight the need to think carefully about how to respond to invitations to mediate (always assuming not wishing to propose it) and to respond with a clear explanation of the reasons why an invitation is rejected at the time it is made.