Executive Summary
England’s Supreme Court has ruled that the multiplier for future losses in dependency claims under the Fatal Accidents Act 1976 should be determined using the date of trial, rather than date of death.
It is anticipated that the Hong Kong Courts will follow this Supreme Court ruling.
The effect will be increased damages for future losses in such dependency claims, meaning that insurers will need to review and make appropriate upward adjustments to their reserves for such claims.
Supreme Court decision in Knauer v Ministry of Justice
On 24 February 2016, England’s Supreme Court ruled that that the multiplier for future losses in dependency claims under the Fatal Accidents Act 1976, should be determined using the date of trial, rather than the date of death (Knauer v Ministry of Justice, [2016] UKSC 9). This is a departure from the longstanding House of Lords authorities in Cookson v Knowles [1979] AC 556 and Graham v Dodds [1983] 1 WLR 808 (followed in Hong Kong) which had held that such multipliers should be determined from the date of death and not trial. It remains to be seen whether the Hong Kong courts will follow the Supreme Court’s ruling, but it is anticipated that they will, given that they currently follow the Cookson v Knowles approach. The practical effect of this will be an increase in damages for future losses in dependency claims under the Fatal Accidents Ordinance (Cap. 22), meaning that insurers will need to review and adjust upwards their current reserves for such claims.
The Facts
Mrs Knauer died from asbestos-induced mesothelioma, contracted in the course of her employment with the Ministry of Justice. Her husband claimed damages for future loss of dependency under the Fatal Accident’s Act 1976. At the hearing for the assessment of damages, the annual figure for the value of income and services lost as a result of Mrs Knauer’s death (i.e. the multiplicand) was assessed, but in issue, was whether the number of years by which that figure was to be multiplied (i.e. the multiplier) should be calculated from the date of death or the date of trial. The difference between the two approaches would make a significant difference to the value of the claim, namely over £50,000.
Trial Judge’s Ruling
The trial judge referred to the current way of calculating multipliers in fatal accident claims. He said that the multiplier (set out in the Ogden Tables) is reached by taking a starting point of the number of years to the predicted date of death of the claimant or retirement or death of the deceased (as the case may be), which is then discounted both for the uncertainties of life and for accelerated receipt. This conventional method of calculation fixes one overall multiplier, then classifies the period to trial as special damages and the remainder as future loss. This method of calculation, the trial judge said, was illogical because the discount for accelerated receipt should not apply to the period from death to trial because the damages have not even been received by that stage.
Mr Knauer urged the trial judge to depart from this conventional method and instead treat the period to trial as special damages (with a small discount for the uncertainties of life but none for accelerated receipt) and then calculate the multiplier for future loss starting at the date of trial or judgment. The trial judge held that he was bound by the House of Lords decisions in Cookson v Knowles and Graham v Dodds to calculate the multiplier from the date of death, but made it clear that, freed from those authorities, he would have preferred to calculate the multiplier from the date of trial. Accordingly, he granted a certificate, enabling Mr Knauer to leap frog the Court of Appeal and appeal the point directly before the Supreme Court.
Supreme Court’s Ruling
The Supreme Court unanimously held that it should not follow Cookson v Knowles and Graham v Dodds. It said that that the correct date at which to assess multipliers for damages for future loss in claims under the Fatal Accidents Act 1976 is the date of trial and not the date of death.
The Supreme Court said that the following factors gave rise to an overwhelming case for changing the law:-
Calculating damages for loss of dependency from the date of death, rather than date of trial, means that the claimant suffers a discount for early receipt of the money, when in fact the money is not received until after trial, which leads to under-compensation in most cases.
There has been a material change in the relevant legal landscape since Cookson v Knowlesand Graham v Dodds, which were decided in a different era, when the calculation of damages for personal injury and death was nothing like as sophisticated as now and the use of actuarial evidence or tables was discouraged; the Ogden tables did not even exist. Since then the Ogden tables have become the staple of personal injury and fatal accidents practice and the House of Lords made it clear in 1998 in Wells and Wells that the tables should be regarded as a starting point for the calculation of multipliers.
In the current legal climate, application of Cookson v Knowles and Graham v Dodds is illogical and their application results in unfair outcomes, which has encouraged courts to try to distinguish them on inadequate grounds, leading to uncertainty and inconsistencies.
Impact on Hong Kong Fatal Accident Claims
It is anticipated that the Hong Kong courts will follow the Supreme Court’s approach and rather than determining multipliers for future losses in dependency claims from the date of death (as they currently do), will calculate them from the date of trial. This will result in increased damages for future losses in dependency claims under the Fatal Accidents Ordinance (Cap.22). Insurers should therefore prepare for such change, which will mean increasing reserves and adjusting any sanctioned payments upwards. We will monitor the situation and issue a further newsletter as soon as the Hong Kong courts make any ruling in this regard.
Karen Dicks, Deacons
