Hussain v New Taplow Paper Mills Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Lord Bridge of Harwich,Lord Havers,Lord Ackner,Lord Oliver of Aylmerton,Lord Goff of Chieveley |
| Judgment Date | 04 February 1988 |
| Judgment citation (vLex) | [1988] UKHL J0204-1 |
| Date | 04 February 1988 |
| Court | House of Lords |
[1988] UKHL J0204-1
Lord Bridge of Harwich
Lord Havers
Lord Ackner
Lord Oliver of Aylmerton
Lord Goff of Chieveley
House of Lords
My Lords,
The appellant plaintiff sustained an injury in the course of his employment by the respondent defendants which necessitated the amputation of his left arm below the elbow. In an action for damages Judge Harris Q.C., sitting as a deputy judge of the High Court, held the defendants guilty of negligence, the plaintiff of contributory negligence. He apportioned two thirds of the blame to the defendants, one third to the plaintiff and awarded damages accordingly. The sole issue arising in the present appeal concerns the basis of calculation of those elements in the assessment of damages relating to the plaintiff's loss of earnings from the date of the accident to the date of trial and to his future loss of earning capacity.
The matter arises in this way. The loss of the plaintiff's left arm disabled him from resuming his previous work as a machine operator. He remained off work from the date of the accident, 17 March 1983, until the trial in June 1985, but his contract of employment by the defendants continued. Shortly before the trial he was offered by the defendants a job as a weighbridge attendant, which the trial judge held it would be unreasonable for him to refuse. There is no dispute that his earnings as a weighbridge attendant were properly to be taken as the measure of his earning capacity in assessing future loss from the date of trial, subject, however, to an additional award of damages under the principle in Smith v. Manchester Corporation (1974) 17 K.I.R. 1. The dispute relates exclusively to sums paid by the defendants to the plaintiffs before trial and other sums which will continue to be payable by them so long as the plaintiff appellant remains in their employment in pursuance of what is described in the contractual documents embodying the terms of the plaintiff's employment as the defendants' "permanent health insurance scheme" to which I will refer simply as "the scheme." The trial judge held that these payments should be disregarded in assessing damages for loss of earnings past and future. The Court of Appeal (Kerr, Lloyd and Ralph Gibson L.JJ) held that the payments should be taken into account in reduction of damages under that heading: [1987] 1 W.L.R. 336. The plaintiff appeals from that decision by leave of your Lordships' House.
The relevant terms of the plaintiff's contract of employment, including those incorporated by reference to two documents entitled "Rules and Conditions of Employment" and "Revised Rules of New Taplow Mills Limited Public Health Insurance Scheme," and of the defendants' insurance policy with N.E.L. Public Health Insurance Limited ("N.E.L.") providing insurance cover for amounts they are liable to pay to their employees under the scheme are fully set out in the judgment of Lloyd L.J. at pp. 339-342. I do not think it necessary for me to repeat them here. For the purpose of resolving the issue raised in the appeal it is sufficient to summarise their effect. In any case of incapacity through illness or injury an hourly paid employee of the defendants, as the plaintiff is and was, is entitled to sick pay at the rate of half his earnings from the end of the second week of absence from work for the ensuing 11 weeks. But if the incapacity results, as in this case, from accident or illness arising out of and in the course of the employee's employment, the employee receives his full pay for the full 13 weeks. In case of any incapacity through illness or injury continuing after 13 weeks payments are due under the scheme. In the case of total incapacity to work the amount of the payment due is one half of "salary" defined as meaning total gross annual earnings received from the defendants immediately prior to incapacity. In the case of reduced earning capacity, as in the plaintiff's case after taking up work as a weighbridge attendant, the amount due is one half of the difference between present earnings and earnings before incapacity. In either case the real value of the benefit is protected against inflation by a provision for "increase in the amount to be paid at the rate of 5 per cent per annum compound after each year's payment." An employee's entitlement to these benefits under the scheme continues until death or retiring age so long as he remains in the employment of the defendants. Payments under the scheme are subject to income tax and an employee in receipt of payments under the scheme is liable for National Health Insurance contributions. The liability to provide the benefits is that of the defendants alone. But the defendants' insurance policy with N.E.L. effectively indemnifies them against this liability. The defendants' contracts with their employees and their policy of insurance with N.E.L. are to this extent linked that N.E.L. may require evidence of the employee's good health before the defendants may accept the employee for membership of the scheme. But once accepted the employee, if he leaves the defendants and takes other employment, may in certain circumstances have the option of taking out a new and individual public health insurance policy for himself with N.E.L. on defined terms and without medical evidence. It is contended for the plaintiff, and I am content to assume, that the combined effect of the contract of employment and the defendants' insurance policy is that when an employee who is in receipt of benefit under the scheme ceases for any reason to be employed by the defendants he continues to be entitled to the equivalent benefit directly from N.E.L. In the course of the hearing before the Court of Appeal an agreement was reached whereby the plaintiff discontinued an appeal against the quantum of damages awarded by the judge under the principle of Smith v. Manchester Corporation (1974) 17 K.I.R. 1 on receiving an undertaking given on behalf of N.E.L. that, if the plaintiff ceases to be employed by the defendants when in receipt of benefit under the scheme, they will continue to pay him the equivalent benefit.
What happened in the plaintiff's case was that the defendants treated him more generously than their contractual obligations required. They paid him at the full rate of his pre-accident earnings for 15 months following the accident and thereafter until trial at half the rate of his pre-accident earnings. Since the trial they have paid and will continue to pay him, in addition to his earnings as a weighbridge attendant, half the difference between those earnings and his pre-accident earnings. No claim is made for any loss of earnings for the first 13 weeks after the accident when the plaintiff was receiving his fulll wage as sick pay, nor in respect of the amount representing half his pre-accident earnings which for the following year the defendants continued to pay him on an ex-gratia basis. But it is claimed that the plaintiff is entitled to recover as special damages from the end of 13 weeks after the accident half his loss of earnings for the following year representing the amount of lost earnings recouped to him under the scheme and his full loss of earnings therafter until trial, disregarding the scheme payments. Similarly, he claims that his future loss must be calculated on the difference between his earning capacity as a machine operator and a weighbridge attendant without regard to the payments due under the scheme. I need not go into the detail of the figures. They are not in dispute. On the basis of full liability, the damages assessed by the trial judge included sums referrable to the disputed loss of earnings and loss of earning capacity amounting to £35,321.82. Two thirds of this amount, £23,547.45, was, therefore, the sum included in the judge's award which the Court of Appeal deducted as excessive and which the plaintiff now claims to have restored.
In Parry v. Cleaver [1970] A.C. 1, Lord Reid, discussing the general principles applicable to the assessment of damages for financial loss said, at p. 13:
"Two questions can arise. First, what did the plaintiff lose as a result of the accident? What are the sums which he would have received but for the accident but which by reason of the accident he can no longer get? And secondly, what are the sums which he did in fact receive as a result of the accident? And then the question arises whether the latter sums must be deducted from the former in assessing the damages. British Transport Commission v. Gourley [1956] A.C. 185 did two things. With regard to the first question it made clear, if it had not been clear before, that it is a universal rule that the plaintiff cannot recover more than he has lost. And, more important, it established the principle that in this chapter of the law we must have regard to realities rather than technicalities. The plaintiff would have had to pay tax in respect of the income which he would have received but for the accident. So what he really lost was what would have remained to him after payment of tax …. But Gourley's case had nothing whatever to do with the second question."
This dichotomy, however, must not be allowed to obscure the rule that prima facie the only recoverable loss is the net loss. Financial gains accruing to the plaintiff which he would not have received but for the event which constitutes the plaintiff's cause of action are prima facie to be taken into account in mitigation of losses which that event occasions to him. In many, perhaps most, cases both losses and gains will come into the calculation. Just as in a claim for damages for wrongful dismissal the plaintiff must, if he can, mitigate his damage by securing other employment, so also a plaintiff disabled by personal injury from continuing his...
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