British Transport Commission v Gourley

JurisdictionUK Non-devolved
JudgeEarl Jowitt,Lord Goddard,Lord Reid,Lord Radcliffe,Lord Tucker,Lord Keith of Avonholm,Lord Somervell of Harrow
Judgment Date08 December 1955
Judgment citation (vLex)[1955] UKHL J1208-2
Date08 December 1955
CourtHouse of Lords
British Transport Commission

[1955] UKHL J1208-2

Earl Jowitt

Lord Goddard

Lord Reid

Lord Radcliffe

Lord Tucker

Lord Keith of Avonholm

Lord Somervell of Harrow

House of Lords

Upon Report from the Appellate Committee, to whom was referred the Cause British Transport Commission against Gourley, that the Committee had heard Counsel, as well on Wednesday the 13th, as on Monday the 18th, days of July last, upon the Petition and Appeal of the British Transport Commission, whose principal office is situate at 222 Marylebone Road, London, N.W.1, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 8th of July 1954, might be reviewed before her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen in Her Court of Parliament, might seem meet; as also upon the printed Case of Harold John Frederick Gourley, lodged in answer to the said Appeal; and whereas by an Order of this House of the 28th day of July last, it was Ordered, That the Appeal be re-argued; and whereas the said Appeal was accordingly re-argued as well on Tuesday the 4th, Wednesday the 5th and Thursday the 6th, days of October last; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 8th day of July 1954, complained of in the said Appeal, be, and the same is hereby, Discharged except as to Costs, and that the Judgment of the Honourable Mr. Justice Pearce of the 1st day of April 1954, be, and the same is hereby. Discharged except as to Costs: And it is further Ordered that the Plaintiff do recover from the Defendants the sum of £16,695, credit being given for the sum of £7,000 already paid to him by the Defendants: And it is further Ordered (on consent), That the Appellants do pay, or cause to be paid, to the said Respondent the Costs incurred by him in respect of the said Appeal to this House, the amount of such Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Queen's Bench Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

Earl Jowitt

My Lords,


the Respondent, who is an eminent civil engineer, suffered severe injuries whilst travelling in a railway train owing to the negligence of the Appellants' servants, and brought his action to recover damages.


The trial Judge awarded him £9,000 for pain and suffering and loss of amenities, and £1,000 in respect of out of pocket expenses. No question arose in this appeal as to this part of the award.


The trial Judge further awarded the Respondent the sum of £37,720 in respect of loss of earnings actual and prospective, and in arriving at this sum paid no regard to the fact that had the Respondent been able by his activities in his profession as a civil engineer to achieve the earnings represented by the sum of £37,720, he would have had to pay a large amount in respect of income tax and surtax on the amount of such earnings.


The trial Judge, at the request of the Appellants, made an alternative assessment of £6,695, which represented the sum he would have awarded if he ought to have taken into account in assessing damages the tax which the Respondent would have had to pay if he had in fact earned by his professional activities the sums lost.


It was agreed by Counsel on both sides—and I think rightly agreed—that the Respondent would incur no tax liability in respect of the award of £37,720, or alternatively of £6,695.


The question for determination in this appeal is whether the Judge ought to have taken the tax position into account in assessing that part of the damages attributable to loss of earnings actual or prospective.


The broad general principle which should govern the assessment of damages in cases such as this is that the tribunal should award the injured party such a sum of money as will put him in the same position as he would have been in if he had not sustained the injuries (see per Lord Blackburn in Livingstone v. The Rawyards Coal Company, 5 A.C. 25 at page 39).


The principle is sometimes referred to as the principle of restitutio in integrum: but it is manifest that no award of money can possibly compensate a man for such grievous injuries as the Respondent in this case has suffered.


The principle, therefore, affords little guidance in the assessment of damages for the pain and suffering undergone and for the impairment which results from the injuries: and in fixing such damages the Judge can do no more than endeavour to arrive at a fair estimate, taking into account all the relevant considerations.


The principle can, however, afford some guidance to the tribunal in assessing compensation for the financial loss resulting from an accident, and in such cases it has been referred to as "the dominant rule of law" (see per Lord Wright in Liesbosch Dredger v. Edison, S.S., [1933] Appeal Cases, 449 at page 463).


There are, no doubt, instances to be found in the books of exceptional cases in which this dominant rule does not apply, as, for instance, in cases of insurance, or cases calling for exemplary or punitive damages, or in certain cases dealing with the loss of use of a chattel; but, as Lord Sumner said in ( Admiralty Commissioners v. S.S. Chekiang [1926] A.C. at page 643), "The measure of damages ought never to be governed by mere rules of practice, nor can such rules override the principles of the law on this subject".


It was argued for the Respondent that no consideration of the tax which would have resulted had he not been prevented from earning the sums for the loss of which he claims compensation was legitimate, as this consideration was too remote. It was pointed out that the tax under Schedule D (which was the relevant schedule in this case) is not payable until some time after the money has been earned, and in no sense constitutes a charge on the monies themselves. If the tax fell to be assessed under the system of P.A.Y.E. or under Schedule E, different considerations would arise: for in that case the tax would be deducted before the money was paid.


I do not think that we should draw a distinction between cases in which the money is deducted before the payment of tax is made, and those cases in which the tax falls to be paid after the money has been received.


It is a strange fact that until 1933 the question whether the tax position of the injured person should be taken into account in assessing damages had, so far as I can ascertain, never been raised. No doubt in the old days tax was so small that it may have been thought not worth while to take account of it. In the great majority of running-down cases the question would not have arisen and in those days the amount of damages was assessed by a jury under appropriate directions from the judge.


However, for many years before 1933 the amount of tax had been assessed at a figure by no means negligible, and there is no record of the point ever having been raised.


The first case in which this question arose for decision was the case of ( Fairholme v. Firth and Brown 149 L.T. page 332). That was a case in which a company had wrongfully dismissed their managing director. The damages were assessed at £18,000, and the issues for determination were

( a) Whether any sum awarded to the plaintiff by way of damages would be subject to British income tax and/or surtax.

( b) If not, whether this fact and the fact that the plaintiff would have been liable for income tax and surtax if the money had been paid under the agreement, should be taken into account in assessing damages.


Point ( a) was not in fact argued, it being agreed by Counsel on both sides that the damages would not be subject to tax: and accordingly du Parcq, J. assumed, without deciding the point, that no tax would be exigible on the amount of the damages and pointed out that this was the foundation for the argument on point ( b).


I express no opinion as to what the answer to point ( a) would have been if it had been the subject of a judicial decision. There may well be a difference between actions for personal injuries and actions for wrongful dismissal in regard to the obligation of the plaintiff to pay tax on the amount of damages received: and cases on the one topic may therefore be a dangerous guide to follow on the other.


du Parcq, J., in the course of his judgment, said:

"I should be reluctant to give a decision which would seek to alter an inveterate practice unless I were convinced that the practice is inconsistent with principle, and unjust, and I am not so convinced in this case. On the contrary, I am of opinion that it is right in principle to have no regard, in assessing damages as between master and servant, to the servant's liability to the Crown, which is truly res inter alios acta".


The only ground, apart from the reference to inveterate practice upon which du Parcq, J. based his judgment, rests upon the maxim res inter alios acta. I confess to some difficulty in defining the limits of this principle in cases concerning the assessment of damages in personal injury cases.


The contract which the injured person has made, which gives him the right to the salary for the loss of which he claims to recover damages, may surely also be said to be res inter alios acta from the point of view of the wrong-doer; and yet this contract obviously forms the basis upon which damages for loss of earnings are to be assessed.


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