The appellant (S) appealed against the Court of Appeal of Guernsey's decision to increase an award of damages made to the respondent (H).
H, who was 28 years old, had suffered serious injuries when he was knocked off his bike by S. S had admitted liability and it was common ground that H was entitled to a lump sum to compensate him for future loss of earnings and the costs of his future care. However, an issue arose as to how the lump sum should be calculated to take account of future inflation. S argued that the Royal Court should apply the single discount rate which had been set by the Lord Chancellor under the Damages Act 1996. However, H argued that that rate was too low and that its adoption would result in him being undercompensated. He claimed that the court should set an appropriate rate following the approach of the House of Lords in Wells v Wells  1 A.C. 345 which had regard to the current rate of return on index-linked government securities, and that it should apply two multipliers: one for earnings-related losses and the other for costs that were not earnings related. H's case was developed by the leading of evidence from a chartered accountant, an economist and an actuary. Ultimately, the Royal Court awarded a lump sum of approximately £9.33 million by applying a single discount rate of 1 per cent to all future losses. However, the Court of Appeal subsequently increased the award by approximately £4.5 million, substituting a discount rate of -1.5 per cent for the earnings-related losses and a rate of 0.5 per cent for the other losses. It was S's case that the Court of Appeal had erred in its approach. The issues for the Privy Council were whether (i) it was acceptable for there to be different discount rates for different heads of loss; (ii) it was acceptable to apply a discount rate which was not a discount rate at all, but an adjustment of the lump sum in the reverse direction; (iii) the Royal Court had been entitled, on the evidence that had been before it, to hold that an adjustment to the discount rate was not open to it in the absence of a suitable index and that the evidence before it was of too general a character to be acceptable.
(1) If the evidence showed that inflation would affect different heads of loss in different ways and that the differential was capable of being evaluated, the court should not close its mind to using different rates. The possibility of modifying the effect of tying future payments to the retail prices index was recognised by s.2(9) of the 1996 Act, as amended by the Courts Act 2003 s.100(1). It was endorsed by the Court of Appeal in Flora v Wakom (Heathrow) Ltd (formerly Abela Airline Catering Ltd)  EWCA Civ 1103,  1 W.L.R. 482, on the ground that there was no indication in that section that Parliament intended to depart from the principle that a victim of a tort was entitled to be compensated as nearly as possible in full for all pecuniary losses, Flora considered. However, over-elaboration in the carrying out of the exercise was to be avoided. The decision in Wells should not be seen as an indication that a single discount rate always had to be adopted. It would be wrong to do that if the evidence showed that, if that were to be done, a given head of loss would not be fully compensated, Wells considered (see paras 52-53 of judgment). (2) The effect of the adjustment which H contended for was to increase, rather than reduce, the number of years used as the multiplier. At first sight that was counter-intuitive. It was an increase, not a reduction. However, the word "discount" was not an apt way of describing the exercise. It was, in essence, simply a process of adjustment. In principle there could be no objection to its operating in the reverse direction if the evidence showed that an adjustment which increased the multiplier was needed to ensure that the lump sum would continue to be large enough to meet future losses. Otherwise, the effects of accelerated receipt, which were inevitable where the award was by means of a lump sum, would not be properly recognised (para.54). (3) The Royal Court was not prepared to make the adjustment in the absence of a suitable index, and because it thought that it would be wrong to conclude that the extent of the gap between the growth of Guernsey average earnings and Guernsey inflation could be identified by the general economic theory and general data that H's experts had analysed. However, the law had never demanded precision in the assessment of future loss. The evidence of H's economist was the best evidence that was available and his conclusions, and those of the actuary, were largely unchallenged. Accordingly, the Court of Appeal had been right to intervene and to substitute for the Royal Court's single figure of 1 per cent overall a rate of 0.5 per cent for the future losses that were not earnings related and a rate of -1.5 per cent for the earnings-related elements of H's future losses, on the ground that those figures had been established by the evidence (paras 56-57).
The Privy Council held that the Court of Appeal of Guernsey had not erred in its approach when determining the amount of lump sum damages to be awarded to a claimant for future loss in a personal injury case.