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DOYLE V WALLACE (1998)

•  The claimant was badly injured in a road accident and was unable to work.

She had been planning to train as a drama teacher if she could get thenecessary qualication. And if not she planned to get a clerical job.

• Her income would have been substantially higher as teacher than as a

clerk but at the time of the accident it was too early to know whether she

would have obtained the necessary qualication.

•  The trial judge found that she had a !"# chance of qualifying as a drama

teacher and calculated the damages for loss of future earnings on the

basis of an income.

• $nce the court has the net annual loss gure it adjust that sum to take

into account factors which might have altered the claimant%s original

earnings such as promotion prospects and the gure that they reach as a

result of doing so is called the multiplicand.

•  The court then takes the number of years that the disability is likely to

continue &which may be the entire claimant%s life' and reduces this

number by taking into account what are called the (contingencies of life)

the fact that even if the accident had not happened the claimant might

not have lived or worked until retirement age.

•

At this stage the court has before it the annual amount that willcompensate the claimant and the number of years for which this amount

should be payable. However simply to multiply the rst gure by the

second would actually over*compensate the claimant. +or e,ample annual

loss of -"""" to be payable over /" years simple multiplication to these

gures gives us -/""""".

•  0ut a claimant does not actually need a lump sum of -/""""" to produce

an annual income of -"""" over /" years because the assumption is

that the lump sum is invested and so makes more money during the /"

years with the result that the claimant would end up over*compensated.

•  To avoid this the court the court assumes that the investment will earn a

particular rate of return &discount rate' and reduces the lump sum to one

which on the basis of the assumed rate of return will provide the right

rate of compensation. The gure arrived at is called the multiplier and the

multiplicand multiplied by the multiplier gives the sum necessary to

compensate the claimant for loss of future earnings.

•  The rate of return on investments that the court assumes is very

important which the higher the assumed rate of return the smaller the

lump sum. And if for some reason the claimant in practice is unable toachieve this rate of return they will be under*compensated.

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• 1ntil now courts generally assumed a rate of interest of 2*!# per year.

 This practice was criticised by among others the 3aw 4ommission in its

55! report Structured Settlements and 6nterim and 7rovisional 8amages

&3aw 4om 9o //2'. 6t said that the assumed rate relatively sophisticated

understanding of investments which few claimants would possess and so

many claimants were likely to end up under compensated.

•  The commission recommended that the court should use as their guideline

the return given to investors on investment called an 6nde, 3inked

:overnment Security &63:S' which would give a more accurate picture of

the kind of returns claimants could hope to get on their lump sum.

•  The 8amages Act 55; responded to this recommendation by providing

that the 3ord 4hancellor can prescribe a rate of interest for the purposes

of calculating multipliers and in