Cookson v Knowles [1978] UKHL 3
LORD DIPLOCK VISCOUNT DILHORN
My Lords,In the instant case the Court of Appeal, speaking through Lord Denning M.R., has laid down guide lines for the assistance of judges upon whom there falls the task of assessing damages in cases brought under the Fatal Accidents Act 1976. These complement some earlier guide lines for the assessment of damages in personal injury cases which had been laid down by the Court of Appeal in Jefford v. Gee [1970] 2 QB 130 . The trial in Jefford v. Gee had taken place at a time when the relevant statutory provision empowering courts to award interest on damages was section 3 of the Law Reform (Miscellaneous Provisions) Act 1934. By the time the appeal was heard that section had been amended by section 22 of the Administration of Justice Act 1969.As was correctly stated by Lord Denning M.R. in Jefford v. Gee, the effect of the amendment was not to alter the principles which the court should apply when awarding interest on damages in cases where it decided to do so. What the amendment did was to oblige the court to award interest in all actions for personal injuries or fatal accidents unless it was satisfied that there were special reasons why no interest should be given.The section as amended gives to the judge several options as to the way in which he may assess the interest element to be included in the sum awarded by the judgment. He may include interest on the whole of the damages or on a part of them only as he thinks appropriate. He may award it for the whole or any part of the period between the date when the cause of action arose and the date of judgment and he may award it at different rates for different parts of the period chosen.The section gives no guidance as to the way in which the judge should exercise his choice between the various options open to him. This is all left to his discretion; but like all discretions vested in judges by statute or at common law, it must be exercised judicially or, in the Scots phrase used by Lord Emslie in Smith v. Middleton 1972 S.C. 30, in a selective and discriminating manner, not arbitrarily or idiosyncratically—for otherwise the rights of parties to litigation would become dependent upon judicial whim.It is therefore appropriate for an appellate court to lay down guide lines as to what matters it is proper for the judge to take into account in deciding how to exercise the discretion confided to him by the statute. In exercising this appellate function, the court is not expounding a rule of law from which a judge is precluded from departing where special circumstances exist in a particular case; nor indeed, even in cases where there are no special circumstances, is an appellate court justified in giving effect to the preference of its members for exercising the discretion in a different way from that adopted by the judge if the choice between the alternative ways of exercising it is one upon which judicial opinion might reasonably differ.If a discretion to differentiate in an award of interest on damages between one component of the full amount of the award and another is to be exercised judicially, this calls for an analysis of the nature and manner of assessment of the different kinds of loss and injury sustained in personal injury and fatal accident cases. Such an analysis was undertaken by the2Court of Appeal in Jefford v. Gee. Although it was an action for personal injuries by a living plaintiff, the judgment of the court dealt also with fatal accident cases, though this could only be obiter.The instant case is a typical fatal accident case. There are no special features about it that distinguish it from the general run of fatal accident cases so far as concerns awarding interest on damages. The deceased, the husband of the plaintiff, was killed in a motor accident in December 1973. He was then aged 49 and was in steady work as a wood-work machinist. Had he lived it would have been sixteen years before he reached the age of 65 when he would have qualified for a retirement pension and, in the ordinary course, might have been expected to cease working. The plaintiff was aged 45 and it was held by the Court of Appeal and is now common ground that her dependency at the date of death can be taken as £1,614 a year and that by the date of the trial in June 1976 the dependency as it would have been by then can be taken as £1,980 a year, owing to increases in wages during the two and a half years that had elapsed since December 1973.The judge assessed damages by applying to the dependency at the date of trial which he had reckoned at £2,250 per annum a multiplier of eleven years purchase. This comes to £24,750. He awarded interest on the whole of that amount from the date of death until the date of judgment at 9%, the short term investment rate. This came to an additional sum of £5,412. In so doing, he was following the guide lines for fatal accident cases laid down obiter in Jefford v. Gee.On appeal, the Court of Appeal varied those guide lines. They held that for the purpose of awarding interest on damages the damages should be divided into two parts, one assessed by reference to the assumed dependency during the period between the date of death and the date of trial, and the other by reference to the assumed future dependency from the date of trial onwards. On the former part, interest should be awarded at half the short term investment rate, but on the latter part in respect of future dependency no interest should be allowed. The court also took occasion, though this could only be obiter, to vary the guide lines for personal injury cases laid down in Jefford v. Gee by holding that damages for non-economic loss. i.e. pain and suffering and loss of amenities should be assessed on the scale at which such damages were currently being assessed at the date of trial, but that no interest should be allowed on this part of the damages. Both these changes were said to be required by reason of the increase in the annual rate of inflation since the decision in Jefford v. Gee.My Lords,in general I agree with the judgment of the Court of Appeal in the instant case and, except in one respect, with the reasoning of that judgment and of the earlier judgment in Jefford v. Gee. Two separate though related questions are involved in the appeal to your Lordships' House. The first is whether and, if so, how should the prospect of continued inflation after the date of trial be dealt with in assessing the capital sum to be awarded by way of damages in fatal accident and personal injury cases. The second is whether in such actions, where there are no unusual circumstances, interest should be awarded on the whole or part of that capital sum and, if the latter, on what part.When the first Fatal Accidents Act was passed in 1846, its purpose was to put the dependants of the deceased, who had been the bread-winner of the family, in the same position financially as if he had lived his natural span of life. In times of steady money values, wage levels and interest rates this could be achieved in the case of the ordinary working man by awarding to his dependants the capital sum required to purchase an annuity of an amount equal to the annual value of the benefits with which he had provided them while he lived, and for such period as it could reasonably be estimated they would have continued to enjoy them but for his premature death. Although tins does not represent the way in which it is calculated such a capital sum may be expressed as the product of multiplying an annual sum which represents the "dependency" by a number of years'3purchase. This latter figure is less than the number of years which represents the period for which it is estimated that the dependants would have continued to enjoy the benefit of the dependency, since the capital sum will not be exhausted until the end of that period and in the meantime so much of it as is not yet exhausted in each year will earn interest from which the dependency for that year could in part be met.The number of years' purchase to be used in order to calculate the capital value of an annuity for a given period of years thus depends upon the rate of interest which it is assumed that money would earn, during the period. The higher the rate of interest, the lower the number of years' purchase. Thus to give an illustration that is relevant to the instant case, the capital value of an annuity for the full sixteen years which would have elapsed if the deceased had lived to work until he was sixty-five would require the eleven years' purchase adopted as multiplier by the judge at an assumed interest rate (whether he worked it out or not) of 43/4%; whereas it would need only seven years as multiplier if the assumed interest rate were 12%.Today the assessment of damages in fatal accident cases has become an artificial and conjectural exercise. Its purpose is no longer to put dependants, particularly widows, into the same economic position as they would have been in had their late husband lived. Section 4 of the Fatal Accidents Act 1976 requires the court in assessing damages to leave out of account any insurance money or benefit under national insurance or social security legislation or other pension or gratuity which becomes payable to the widow on her husband's death, while section 3(2) forbids the court to take into account the re-marriage of the widow or her prospects of re-marriage. Nevertheless, the measure of the damages recoverable under the statute remains the same as if the widow were really worse off by an annual sum representing the money value of the benefits which she would have received each year of the period during which her husband would have provided her with them if he had not been killed. This kind of assessment, artificial though it may be, nevertheless calls for consideration of a number of highly speculative factors, since it requires the assessor to make assump- tions not only as to the degree of likelihood that something may actually happen in the future, such as the widow's death, but also as to the hypothetical degree of likelihood that all sorts of things might happen in an imaginary future in which the deceased lived on and did not die when in actual fact he did. What in that event would have been the likelihood of his continuing in work until the usual retiring age? Would his earnings have been terminated by death or disability before the usual retiring age or interrupted by unemployment or ill-health? Would they have increased, and if so, when and by how much? To what extent if any would he have passed on the benefit of any increases to his wife and dependent children? Would she have gone out to work when the children had grown older and made her own contribution to the family expenses in relief of his?Looked at from a juristic standpoint, it may be accurate to say, as did the majority of the High Court of Australia in Ruby v. Marsh (1975) 6 ALR 385, that the entirety of the damage is sustained by the widow at the moment that her husband dies; but what she loses then is only the expectancy of the benefits which he would have provided for her in future years if he had lived. Looked at realistically her loss of the benefit for each year is not suffered until the year in which it would have been received; and at the date of death the present value of that future loss is such a sum as would grow to the money value of the benefit if it were invested at compound interest at current rates until the year in which it would have been received.So if it be assumed that apart from any other factors, owing to future rises in the general level of wages consequent on monetary inflation, the value in inflated currency of the benefits provided to his wife by the deceased would have progressively increased if he had lived it would be possible by this means to calculate the total capital value at the date of death of the deceased of yearly sums of amounts which did not remain constant but varied from time to time or increased progressively for each successive year during the term of the annuity.4As regards any such assumption for the period after the trial, it can only be conjectural, since it involves in addition to the prospects of continuing monetary inflation, the various speculative factors particular to the deceased which I have previously mentioned. For the period between the death and trial, however, there will be some hard facts available which reduce, though they cannot eliminate, reliance on conjecture. Thus if it can be proved, as it was in the instant case, that if the deceased had continued in good health in his existing employment for the two-and-a-half years that had elapsed between his death and the date of trial his wages would have risen by some 27% (which represents a rate of 10% per annum compound over the two-and-a-half years) and the judge feels justified on the evidence in assuming a likelihood, which however necessarily falls short of certainty, that the dependency during that period would have increased proportionately, there is a relatively firm foundation on which to base an assessment of the value of the benefits lost by the widow up to the date of trial.I agree therefore with that part of the decision of the Court of Appeal that holds that, as a general rule in fatal accident cases the damages should be assessed in two parts, the first and less speculative component being an estimate of the loss sustained up to the date of trial, and the second component an estimate of the loss to be sustained thereafter.In so deciding the Court of Appeal assigned as the reason for assessing the damages in two parts not the greater reliability of the assessment of the loss suffered by the widow during the period up to the date of trial, but the fact that only by this method does one obtain as a starting point for estimating the loss to be suffered by the widow in future years after the trial, a figure for " the dependency " greater than that existing at the date of death by an amount that reflects the influence of inflation on the general level of wages since the deceased's death. It is at this point in the reasoning that with respect 1 part company with them.What they in fact did was to assess the annual dependency during the two-and-a-half years up to the trial at the mean figure of £1,797 accepted by the court as applicable during that period. For the remaining period of dependency after the dale of trial they applied a multiplier of 8 1/2 years purchase (viz. the judge's 11 years minus 2 1/2 to the figure of £1,980 to which they accepted the dependency would have risen by the date of the trial. By calculating the future dependency in this way and using a figure 27% higher than the dependency at the date of death, they considered that eil'ect would be given to the increase in the general rate of wages owing to inflation which had actually occurred between the date of death and the date of trial; but apparently they did not think that their calculations made any allowance for the possibility of continuing inflation thereafter. In this, they were in my view mistaken.In Mullen v. McMonagle [1970] A.C. 166 when the rate of inflation was running at an average rate of 3 to 3 1/2% per annum, I suggested that its effects could be offset, to some extent at any rate, by prudent investment in buying a home, in growth stocks or in short term high interest yielding securities; and I went on to give some examples of the effects of interest rates upon the capital value of annuities. High rates are obtainable in times of inflation because the interest sought by a lender represents not only what he would require in times of stable currency for foregoing the use of his money for a year, but also an additional sum that is sufficient to restore to him in depreciated currency the buying power which his money represented when he lent it.I had supposed that what 1 myself had said in 1970 and Lord Pearson
had repeated in 1971 in Taylor v. O'Connor [1971] A.C. 115 at p 143 that
the rate of inflation could be largely offset by prudent investment policy,would no longer hold good once inflation was proceeding at rates as high
as those that have been current in the last three or four years. This has
proved to be the case with investment in equities and growth stocks; but,as has been demonstrated by arithmetical tables produced by the respondent,it has not been so in the case of investment in fixed interest bearing
securities at any rate if the rate of tax on the dependant's gross income is
5low. The rate of return on these securities between the dates of death and trial has been of the order of 14% gross; thus giving to an investor in the tax bracket which would have been applicable to the plaintiff in the instant case a net return of 12%. This is the relevant type of investment which is to be assumed for the purpose of calculating the present value of an annuity. At this net rate of interest the multiplier of 11 years' purchase adopted by the judge and split into 2 1/2 and 8 1/2 years by the Court of Appeal is sufficient to provide an annuity for the whole period of 16 years of a constant amount between 55% and 60% greater than the annual sum found by the Court of Appeal to be the dependency at the date of death and some 24% greater than the assumed dependency at the date of trial.So far as inflation and increasing wages would affect dependency in future years, however, the effects are progressive. If allowance is to be made for future inflation a more relevant calculation would be of the capital cost of an annuity which increased from one year to another throughout the period. In the instant case the product of 11 years' purchase of a sum of £1,614 which was found by the Court of Appeal to be the dependency at the date of the deceased's death would produce at an assumed net rate of interest of 12% a capital sum sufficient to purchase an annuity starting at £1,614 and increasing by £180 in each successive year throughout the whole period of 16 years. For the first two-and-a-half years between death and trial this gives figures which are not very far off what the evidence showed to be the actual rate of increase of wages during that period in the kind of work in which the deceased had been employed. They take three years instead of two and a half to reach £1,980. For the remaining 13 1/2 years which would have elapsed before the deceased would have reached normal retiring age the capital sum would provide for continuing annual increases of the same amount rising in the last year to a dependency of £4,314. Since the annual rise is constant and inflation operates at a com- pound rate this calculation provides for diminishing rate of future inflation. On the other hand it makes no allowance for the various hazards of working life that may have ended, interrupted or reduced the earning power of the deceased before he reached normal retiring age of 65.My Lords,calculations such as these are artificial, but so is the measure of damages called for by the Fatal Accidents Act 1976. The kinds of security with which the calculations are concerned are not typical of the way in which a dependent widow (who will have other sources of income as well) is likely to invest the damages she receives; but they represent the kinds of security most appropriate for providing the annuity upon the capital cost of which the assessment of damages in fatal accident cases has to be based. They demonstrate that even in periods of inflation much higher than those contemplated at the time of Mallett v. McMonagle and Taylor v. O'Connor, the greater part of its effect upon the real value of damages recovered in respect of future annual loss would be counteracted by a compensating increase in interest rates.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 to what is found upon the evidence to be a sum representing " the dependency", a multiplier representing what the judge considers in the circumstances particular to the deceased 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% to 5% whether the judges using them were conscious of this or not. For the reasons I have given I adhere to the opinion Lord Pearson and 1 had previously expressed which was applied by the Court of Appeal in Young v. Percival [1975] 1 WLR 17 at 27-29, that the likelihood of continuing inflation after the date of trial should not affect either the figure for the dependency or the multiplier used. Inflation is taken care of in a rough and ready way by the higher rates of interest obtainable as one of the consequences of6it and no other practical basis of calculation has been suggested that is capable of dealing with so conjectural a factor with greater precision.I turn then to the question of interest on the two components in the award of damages; the loss of the dependency sustained by the widow up to the date of trial, and the future loss of the dependency after that date. I can deal with the matter shortly, for I agree with the result reached by the Court of Appeal. Once it has been decided to split the damages into two components which are calculated separately, the starting point for the second component, the future loss (which I will deal with first), is the present value not as at the date of death but at the date of the trial of an annuity equal to the dependency starting then and continuing for the remainder of the period for which it is assumed the dependency would have enured to the benefit of the widow if the deceased had not been killed. To calculate what would have been the present value of that annuity at the date of death, its value at the date of trial would have to be discounted at current interest rates for the two-and-a-half years which had elapsed between the death and trial. From the juristic standpoint it is that dis- counted amount and no more to which the widow became entitled at the date of her husband's death. Interest on that discounted figure to the date of trial would bring it back up to the higher figure actually awarded. To give in addition interest on that higher figure would be not only to give interest twice but also to give interest on interest.On the other hand the first component of the total damages, the loss of dependency up to the date of trial, is in respect of losses that have already been sustained over a period of two-and-a-half years before the award is made. Had her husband lived the widow would have received the benefit of the dependency in successive instalments throughout that period. A rough and ready method of compensating her for the additional loss she has sustained by the delay in payment of each instalment (which ranges from two-and-a-half years to none) is that adopted by the Court of Appeal, viz. to give interest for the whole of the period but at half the short term investment rate upon the mean annual amount which represents the assumed dependency during that period. Looked at from the juristic standpoint the justification for giving interest at only half the current rate is that the amount that the widow became entitled to at the date of her husband's death in respect of the instalments of the dependency which would have enured to her benefit up to the date of trial, would be the present value of each successive instalment as at the date of death. To calculate that value the nominal amount of the first instalment after the death would not need to be discounted at all, that of the median instalment would need to be discounted at current interest rates, but for half the period only between date of death and trial while that of the last instalment would need to be discounted at current interest rates for the whole of the period. The discounted figure for the sum of the instalments which represents their present value as at the date of death would thus be less than the sum actually awarded by an amount which represents the discount at current rates of interest on the nominal amount of each instalment for a period which over all the instalments averages approximately half the period between the date of death and trial. So, in effect, interest for half the period has already been included in an award of the sum of the nominal amounts of the instalments due up to the date of trial. To give interest on the sum of the instalments for the whole of that period instead of only half would be to give interest twice. This may be avoided either by halving the period for which interest is given at current rates or by giving interest for the whole period at half the current rates, as suggested by the Court of Appeal.To summarise:For the reasons I have given, which follow largely upon the arithmetical basis for the assessment of damages which is called for by the provisions of the Fatal Accidents Act 1976 I consider that1. In the normal fatal accident case, the damages ought, as a general rule, to be split into two parts:7the pecuniary loss which it is estimated the dependants have already sustained from the date of death up to the date of trial (" the pre-trial loss "), andthe pecuniary loss which it is estimated they will sustain from the trial onwards (" the future loss ").Interest on the pre-trial loss should be awarded for a period between the date of death and the date of trial at half the short term interest rates current during that period.For the purpose of calculating the future loss, the " dependency " used as the multiplicand should be the figure to which it is estimated the annual dependency would have amounted by the date of trial.No interest should be awarded on the future loss.No other allowance should be made for the prospective continuing inflation after the date of trial.I would dismiss this appeal, and the respondent's cross appeal
[The instant case is concerned with damages in fatal accident cases only but the Court of Appeal took occasion to deal also though obiter with damages in personal injury cases and your Lordships have been invited to follow suit. It is evident that what I have earlier said about the effect of the prospect of continuing inflation on the assessment of damages for future loss of the dependency in fatal accident cases would apply pari passu to claims for loss of future earnings (or earning power) in personal injury actions; what I have said about awarding interest on the two components of the total claim to damages in fatal accident cases, would also apply to claims for loss of earnings in personal injury actions, where the corresponding first component is the loss of earnings up to the date of trial claimed under the head of special damage. The question of damages for non-economic loss which bulks large in personal injury actions, however, does not arise in the instant case. It has not been argued before your Lordships and I refrain from expressing any view about it.]Viscount Dilhorne
My Lords,I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Diplock and Lord Fraser of Tullybelton. I agree with them and would dismiss this appeal and the cross appealLord Salmon
My Lords,I agree that this appeal and the cross appeal should both be dismissed broadly on the grounds stated by my noble and learned friend Lord Diplock and for the detailed reasons given by my noble and learned friend Lord Fraser of Tullybelton with which I completely concur.There is one matter that 1 should like to emphasise, namely that in my view it is impossible to lay down any principles of law which will govern the assessment of damages for all time. We can only lay down broad guide lines for assessing damages in cases where the facts are similar to those of the instant case and where economic factors remain similar to those now prevailing. For example, it was at one time regarded as axiomatic that, in assessing damages in cases of death, for loss of earnings, or maintenance, it could safely be assumed that if a substantial part of the sum awarded was invested in equities, the plaintiff would be amply protected against inflation because this would be balanced by the rise in equities which would automatically follow inflation. This theory which8was regarded by most financial experts as being beyond doubt is now exploded. But it has not made much difference because sums awarded as damages, if invested in Gilts, now produce interest up to the rate of 14% a year. And so, although in assessing damages the courts still use about the same multiplicand and multiplier as formerly, the result, by chance, is much the same. Just as the price of equities ceased to keep pace with inflation so, one day, may the interest rates of Gilts. I entirely agree with Lord Reid when he said in Taylor v. O'Connor [1971] A.C. at p.130 A that in assessing damages it would "be quite unrealistic to refuse to take it " (inflation) into account at all." Inflation, however, is only relevant in so far as it increases wages. Wages may keep pace with inflation or they may lag behind or overtake it. If inflation ceases, as it might, to increase interest rates just as it has failed to increase the capital value of equities, yet it increases the rate of wages, the whole basis of assessing damages for loss of wages or maintenance will have to be reconsidered; and the instant case will become as outdated as Jefford v. Gee [1970] 2 OB 130.Lord Fraser of Tullybelton
My Lords,Three question are raised in this appeal. The first relates to the basis on which damages under the Fatal Accidents Act 1846 to 1959, and now under the Fatal Accidents Act 1976, ought to be assessed, and in particular whether it should be similar to the basis used for assessing damages for personal injuries. The second is whether the prospect of future inflation should be taken into account in assessing damages under the Acts and, if so, how that should be done. The third question relates to the principles on which the discretionary power of the court to award interest on the principal sum of damages under the Acts ought to be exercised. The questions are separate but to some extent are related to one another.On the first question the most important point is whether the damages ought to be assessed as at the date of death or as at the date of trial. In strict theory 1 think there is no doubt that they should be assessed as at the date of death, just as in theory they are assessed at the date of injury in a personal injury case. But the damages awarded to dependants under the Fatal Accidents Acts for loss of support during what would (but for the fatal accident) have been the remainder of the deceased person's working life have to be based on estimates of many uncertain factors, including the length of time during which the deceased would probably have continued to work and the amount that he would probably have earned during that time. The court has to make the best estimates that it can having regard to the deceased's age and state of health and to his actual earnings immediately before his death, as well as to the prospects of any increases in his earnings due to promotion or other reasons. But it has always been recognised, and is clearly sensible, that when events have occurred, between the date of death and the date of trial, which enable the court to rely on ascertained facts rather than on mere estimates, they should be taken into account in assessing damages. Thus if a dependant widow has died between the date of the injured man's death and the date of the trial or if (before the Fatal Accidents Act 1976 section 3(2) became law) she had remarried, the fact would be taken into account, just as medical evidence of facts relating to the injuries of an injured person up to the date of trial is taken into account in preference to prognosis made immediately after the accident. Similarly if the rate of wages paid to those in the same occupation as the deceased person has increased between the date of death and the date of trial the increase is rightly taken into account in assessing damages due to his dependants under the Fatal Accidents Acts. Assessment of damages in this way requires the pecuniary loss to be split into two parts, relating respectively to the period before the trial and the period after the trial, in the same way as it is split in a personal accident case. To that extent the same method of assessment is used in both classes of case.9The loss of support between the date of death and the date of trial is the total of the amounts assumed to have been lost for each week between those dates, although as a matter of practical convenience it is usual to take the median rate of wages as the multiplicand. In a case such as this, where the deceased's age was such that he would probably have continued to work until the date of trial, the multiplier of this part of the calculation is the number of weeks between the date of death and the date of trial. That is convenient, although it is strictly speaking too favourable to the plaintiff, because it treats the probability that, but for the fatal accident, the deceased would have continued to earn the rate for the job and to apply the same proportion of his (perhaps increased) earnings to support his dependants as if it were a certainty. I mention that in order to emphasize how uncertain is the basis on which the whole calculation proceeds. That was the method employed by the Court of Appeal, which calculated the dependency at date of death as £1,614, and at date of trial as £1,980, giving a median of £1,797 per annum as the multiplicand for the period of 2 1/2 years between the two dates.For the period after the date of trial, the proper multiplicand is, in my opinion, based upon the rate of wages for the job at the date of trial. The reason is that that is the latest available information, and, being a hard fact, it is a more reliable starting point for the calculation than the rate of wages at the time of death. The appropriate multiplier will be related primarily to the deceased person's age and hence to the probable length of his working life at the date of death. In the present case the deceased was aged 49 at the date of his death and the trial judge and the Court of Appeal used a multiplier of 11. That figure was not seriously criticised by Counsel as having been inappropriate as at the date of death, although I think it is probably generous to the appellant. From that figure of 11, the Court of Appeal deducted 24; in respect of the 2 1/2 years from the date of death to the date of trial, and they used the resulting figure of 8 1/2 as the multiplier for the damages after the date of trial. In so doing they departed from the method that would have been appropriate in a personal injury case and counsel for the appellant criticised the departure as being unfair to the appellant. The argument was that if the deceased man had had a twin brother who had been injured at the same time as the deceased man was killed, and whose claim for damages for personal injury had come to trial on the same day as the dependant's claim under the Fatal Accidents Acts, the appropriate multiplier for his loss after the date of trial would have been higher than 8 1/2. On the assumption, which is probably correct, that that would have been so, it does not in my opinion follow that the multiplier of 8 1/2 is too low in the present claim under the Fatal Accidents Acts where different considerations apply. In a personal injury case, if the injured person has survived until the date of trial, that is a known fact and the multiplier appropriate to the length of his future working life has to be ascertained as at the date of trial. But in a fatal accident case the multiplier must be selected once and for all as at the date of death, because everything that might have happened to the deceased after that date remains uncertain. Accordingly having taken a multiplier of 11 as at the date of death, and having used 2 1/2 in respect of the period up to the trial, it is in my opinion correct to take 8 1/2 for the period after the date of trial. That is what the Court of Appeal did in this case.I pass to the second question, which is whether the award should be increased to make allowance for inflation after the date of trial. What is relevant here is not inflation in general, but simply increases in the rate of earnings for the job in which the deceased person would probably have been employed. The reason for the increase is irrelevant. There would be no justification for attempting to protect dependants against the effects of general inflation, except to the extent that they might reasonably expect to have been protected by increases in the deceased person's earnings. At first sight it might seem reasonable that the award for the period after the date of trial should be increased in some way " to allow for inflation in " the future ". But I am satisfied that an increase on that ground would not merely be impossible to calculate on any rational basis, but would10also be wrong in principle. The measure of the proper award to a widow (who is generally the main dependant and to whom alone I refer, brevitatis causa) is a sum which, prudently invested would provide her with an annuity equal in amount to the support that she has probably lost through the death of her husband, during the period that she would probably have been supported by him. The assumed annuity will be made up partly of income on the principal sum awarded, and partly of capital obtained by gradual encroachment on the principal. The income element will be at its largest at the beginning of the period and will tend to decline, while the capital element will tend to increase until the principal is exhausted. The multipliers which are generally adopted in practice are based on the assump- tion (rarely mentioned and perhaps rarely appreciated) that the principal sum of damages will earn interest at about 4 or 5%, which are rates that would be appropriate in time of stable currency, as my noble and learned friend Lord Diplock pointed out in Mallett v. McMonagle [1970] A.C. 166, 176 D. But in time of rapid inflation the rate of interest that can be earned by prudent investment in fixed interest securities tends to be high, as investors seek to protect their capital and also to obtain a positive rate of interest. At the date of the trial in this case (May 1976) it was possible to obtain interest at a rate of approximately 14% in gilt edged securities, and so long as inflation continues at its present rate of approximately 10%, experience suggests that the interest element in the widow's assumed annuity will be appreciably higher than the 4 or 5% on which the multiplier is based. What she loses by inflation will thus be roughly equivalent to what she gains by the high rate of interest, provided she is not liable for a high rate of income tax. In that sense it is possible to obtain a large measure of protection against inflation by prudent investment, although the theory that protection was to be had by investment in equities is now largely exploded. I have referred to the " assumed " annuity because of course the widow may not choose to apply her award in the way I have mentioned; it is for her to decide and she may invest it so as to make a profit or she may squander it. But the defendant's liability should be calculated on the basis of an assumed annuity. In the normal class of case, such as the present, where the widow's annuity would be of an amount which would attract income tax either at a low rate or not at all, I respectfully agree with the statement of my noble and learned friend in Mallett, supra at 176C that the courts in assessing damages under the Fatal Accidents Acts should leave out of account the " risk of further " inflation, on the one hand, and the high interest rates which reflect the " fear of it and capital appreciation of property and equities which are " the consequence of it, on the other hand." It follows that in my opinion the Court of Appeal came to the right conclusion in Young v. Percival [1975] 1 W.L.R. 17. I do not consider that anything I have said is inconsistent with the view expressed by Lord Reid in Taylor v. O'Connor [1971] A.C. 115, 130 A to the effect that it would be " quite unrealistic to refuse to take " it [inflation] into account at all." The fact is that, as was demonstrated from tables shown to us, inflation and the high rates of interest to which it gives rise is automatically taken into account by the use of multipliers based on rates of interest related to a stable currency. It would therefore be wrong for the court to increase the award of damages by attempting to make a further specific allowance for future inflation.In exceptional cases, where the annuity is large enough to attract income tax at a high rate, it may be necessary for the court to have expert evidence of the spendable income that would accrue from awards at different levels and to compare the total annuity with the amount of the lost dependency having regard to the net income (after tax) of the deceased person. Whether in such cases it might be appropriate to increase the multiplier, or to allow for future inflation in some other way would be a matter for evidence in each case.With regard to the third question, the purpose of awarding interest on damages is to compensate the plaintiff in so far as he has been kept out of money which was due to him before the award is made. Interest is not awarded as a punishment to the debtor for withholding the money, although11any unjustifiable delay on his part would be a reason for making the award just as unjustified delay by the plaintiff in claiming it might be a reason for refusing to make an award, see General Tire & Rubber Co. v. Firestone Tyre & Rubber Co. Ltd. [19751 1 W.L.R. 819, 836 H (Lord Wilberforce) 841 E (Lord Salmon).The powers and duties of the court in respect of awarding interest on damages are now regulated by subsection (1) of section 3 of the Law Reform (Miscellaneous Provisions) Act 1934 and the new subsection (1A) added by section 22 of the Administration of Justice Act 1969. The latter subsection provides that where damages are awarded in respect of inter alia a person's death (as in the present case) the court shall exercise its power to order payment of interest " on those damages or on such part of them as the " court considers appropriate, unless the court is satisfied that there are " special reasons why no interest should be given in respect of those " damages ". The section evidently leaves a wide measure of discretion to the court and it gives no indication of the special reasons that should weigh with the court in deciding whether to order payment of interest or not. It is a matter for the discretion of the court, and your Lordships' House can only provide guide-lines as to the principles on which the discretion should be exercised. But some guide-lines are required in order that the discretion may be exercised with reasonable consistency.The Court of Appeal, having split the damages into two parts, pre-trial and post-trial, gave interest on the former part at half the appropriate rate and gave no interest on the latter part. That was in line with the decision in Jefford v. Gee [1970] 2 QB 130 which was a case of personal injuries. In my opinion the Court of Appeal made its award of interest on correct principles. The only argument to the contrary that seems to merit considera- tion is to the effect that interest ought to have been given on the post-trial damages as well as on the pre-trial damages, on the ground that the whole sum of damages was due at the date of death and ought in theory to have been paid then. An argument to that effect prevailed with the majority of the High Court of Australia in Ruby v. Marsh (1975) 132 C.L.R. 642 on a construction of section 79A(3)(b) of the Supreme Court Act 1958 of Victoria. Section 79A is in terms broadly similar to those of section 1A of the English Act of 1934, as amended by the Act of 1969, and in so far as the decision in Ruby, supra, turned upon considerations that would apply to the English legislation, I would respectfully prefer the view of the minority. The realistic view seems to me to be that damages for the period after the date of trial are compensation for a loss of dependency which the plaintiff has not suffered at that date and that she is therefore being compensated for future loss. This part of the compensation ought, in theory, to be discounted because it is being paid in advance, but the information that was put (without objection) before the House showed that, in this case, it had not been effectually discounted. The realistic view has hitherto prevailed both in England—see Jefford v. Gee, supra —and in Scotland where similar, though not identical, statutory provisions apply. In Macrae v. Reed and Mallick Ltd. 1961 S.C. 68 (a case of personal injuries) Lord Patrick at page 77 said " What can never be justified, in " my opinion, is an award of interest on loss which the pursuer has not yet " sustained at the date of the trial from a date anterior to the Lord Ordinary's " interlocutor...." and in Smith v. Middleton 1972 S.C. 30 (a claim by a widow in respect of the death of her husband) Lord Emslie (the Lord Ordinary as he then was) expressed his general agreement with Lord Patrick's opinion in Macrae. I am of the opinion that the Court of Appeal rightly awarded interest on the damages in respect of the period before the date of trial, and rightly declined to award interest on the damages for the period after the date of trial.I would dismiss this appeal and the cross appeal.12Lord Scarman
My Lords,I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Diplock and Lord Fraser of Tullybelton. I agree with them and would dismiss the appeal and the cross appeal. I add only one comment. In so far as this appeal is concerned with the award of interest pursuant to section 3 of the Law Reform (Miscellaneous Provisions) Act 1934 as amended by section 22 of the Administration of Justice Act 1969 neither the Court of Appeal nor your Lordships' House can do more than indicate guidelines for the exercise of a judicial discretion conferred upon judges by statute. Judicially-indicated guidelines should not be treated as though they were a rule of law. They are to be followed unless the particular circumstances of a case, (which in the present context must include any change from currently prevailing financial conditions), indicate that they would be inappropriate. The fact that the Court of Appeal has considered it appro- priate in this case to revise the guidance it gave in Jefford v. Gee [1970] 2 Q.B. 130 illustrates, if I may respectfully say so, the legally correct approach to guidelines declared by an appellate court for the exercise by judges of a discretion conferred by statute.310657 Dd 353246 140 5/78