Worth the wait for Ogden 8?
September 29, 2020
This article was first published in APIL’s PI Focus Newsletter, September 2020 edition (Volume 30/ Issue No.7)
By David Knifton QC
Introduction
As William Latimer-Sayer QC, Chairman of the Ogden Working Party, observes in his Introduction to the 8th Edition, “supposedly, good things come to those who wait”. When the 7th Edition was published in 2011, we were told that a substantial re-write of the Explanatory Notes was in the offing, and that it was hoped that the 8th Edition would be available in the autumn of 2012.
How much has happened since then. The discount rate, which had stood at 2.5% since 2001, was finally changed to -0.75% in March 2017, and then (in England and Wales) to -0.25% in August 2019. Political unrest has led to the Brexit Referendum and 2 changes of Prime Minister. Economic uncertainties have been compounded by the Covid-19 pandemic. Meanwhile, judges have continued to struggle with the definition of “disabled” (first introduced in the 6th Edition), and in some cases to make liberal changes to the adjustment factors in Tables A-D as a result.
And so, 8 years later than planned, the 8th Edition of the Ogden Tables is finally here. Which begs the question: was it worth the wait? The answer? Absolutely. The new edition is far more than just an update. It provides more detailed guidance on when it may be appropriate to depart from standard mortality assumptions, a new section explaining how to calculate pension loss, further guidance on using the Tables in fatal accident cases following Knauer v Ministry of Justice [2016] UKSC 9, and guidance on indexation where future loss of earnings are awarded as periodical payments.
However, the most significant change, in my view, is the guidance on adjustments for contingencies other than mortality (Section B of the Explanatory Notes). I sincerely hope that this new guidance will finally put an end to the “impressionistic tinkering” which has befuddled many of the cases concerning the use of the Ogden Tables to assess loss of earnings.
The ONS Data
One of the criticisms of the 7th Edition was that, since the Tables were based upon mortality projections from data published in 2008, it had failed to keep pace with improvements in mortality thereafter. Surprisingly, however, the latest 2018 data has shown a reduction in mortality projections, reflecting a slowing trend in life expectancy improvements since 2011. Thus, projected mortality for a male aged 20 at the time of publication of the 7th Edition was 67.22 years, for a male aged 50 was 35.45 years, and for a male aged 80 was 9.49 years, with the ONS anticipating increases in subsequent years. The equivalent figures for females were 70.96, 38.73 and 10.77. In the 8th Edition, however, the same life expectancy projections for a male are 66.36, 34.53 and 8.92 respectively, whilst for a female they are 69.17, 37.14 and 10.10. Whilst these differences may appear modest, they could prove significant in cases where the annual losses are substantial.
Additional Tables
The 8th Edition comprises 36 Tables, rather than 28, having added new tables for earnings and pension loss to/from age 68 (state pension age for those born after 6th April 1978) and to/from age 80 (perhaps reflecting the reality of future retirement age). Furthermore, a set of Additional Tables is available in Excel on the Government Actuary’s Department website, enabling calculation of the multiplier from any given age at trial to any given age in the future, and also assisting in the calculation of split multipliers.
Mortality Assumptions
The Ogden Tables are based upon a reasonable estimate (produced every 2 years by the ONS) of the future mortality likely to be experienced by average members of the population alive today. Whilst the Explanatory Notes to the 7th Edition indicated that no increase or reduction for mortality should be made unless there is clear evidence in an individual case that the claimant is “atypical”, no further guidance was given. Obviously, in cases where the injury itself has impacted upon life expectancy (for example, in a spinal cord injury case), expert medical evidence would seek to perform an assessment of remaining life expectancy, taking into account both injury-related factors and non-injury-related factors. There has, however, been an increasing tendency in recent years for defendants to seek to adduce expert evidence suggesting that the claimant’s life expectancy is shorter than average, perhaps due to a history of smoking, obesity or some underlying health problem.
The 8th Edition notes that, whilst there is no definition of “atypical”, the courts have generally been reluctant to admit expert evidence on life expectancy based on lifestyle factors alone, since the average in the Tables includes smokers and non-smokers, those who are overweight and those who have an ideal BMI etc, citing Edwards v Martin [2010] EWHC 570 and Dodds v Arif [2019] EWHC 1512. In this regard, it is worth mentioning that the Ogden Tables are based on data for the whole of the UK, even though life expectancy rates in England are rather higher than those in the other constituent countries. Clearly, however, such lifestyle factors may be taken into account in a case where, due to the nature of the injury, a bespoke calculation is required. It remains to be seen whether this guidance will reduce the number of applications to rely on expert life expectancy evidence.
A further welcome clarification concerns which Table should be used in a case involving impaired life expectancy. The 7th Edition suggested that using a fixed term multiplier (previously Table 28) for the determined life expectancy would give too high a figure, since it did not allow for the distribution of deaths around the expected length of life, such that Table 1 or 2 should be used, adopting the stated life expectancy equivalent to the relevant age in the 0% column. When the discount rate was 2.5%, that method resulted in a further reduction in the multiplier. The correctness of this approach, although applied in Crofts v Murton [2009] EWHC 3538 and Smith v LC Window Fashions [2009] EWHC 1532, had been queried in cases such as Burton v Kingsbury [2007] EWHC 2091 and Whiten v St George’s Healthcare NHS Trust [2011] EWHC 2066. For now at least, it seems that the debate is over: for so long as the discount rate remains close to 0%, either Table 1 or 2 should be used, assuming the claimant to be older than his actual age by the same number of years as his life expectancy is impaired, or Table 36 should be used for the determined life expectancy. Although the use of Table 36 will slightly understate the applicable multiplier, the difference is negligible whilst the discount rate remains close to 0%. Should there be a significant change in the discount rate away from 0% in the future, the use of a Table 36 multiplier may again become inaccurate.
Loss of Earnings Calculations
When adopting a multiplier to calculate future loss of earnings, it is necessary for a further adjustment to be made to take account of risks other than mortality, such as periods of unemployment due to sickness, redundancy, bringing up children etc. Tables of adjustment factors to reflect these employment risks were first introduced in the 2nd Edition of the Ogden Tables, and were significantly revised in the 6th Edition, based on employment status, educational attainment and whether the claimant was disabled or not. Although they were based on extensive data from the 1998-2003 ONS Labour Force Survey, and had been subject to independent statistical scrutiny and review, the Explanatory Notes suggested that the adjustment factors were intended as a “ready reckoner”, which in many cases it would be appropriate to increase or decrease to take account of the circumstances of the particular claimant. This led to a series of cases, beginning with Conner v Bradman [2007] EWHC 2789, in which sizeable adjustments were made to the multiplier for residual earnings, based upon a judicial instinct that a strict application of Tables A-D led to the wrong result. In many instances, this stemmed from disquiet regarding the statutory definition of “disabled”, which only requires the claimant to show that his injury has lasted for more than 1 year, has a more than minor or trivial impact on his ability to carry out normal day to day activities, and affects the kind or amount of paid work he can do (for example, by restricting heavy lifting or limiting him to part-time work).
The cases produced some surprising and often inconsistent results. In XYZ v Portsmouth Hospital NHS Trust [2011] EWHC 243, the judge regarded it as a “borderline decision” whether a claimant with irreversible kidney damage which impaired his mobility and restricted him to part-time work was “disabled”. In both Leesmith v Evans [2008] EWHC 134 and Swift v Carpenter [2018] EWHC 2060, the judges considered it appropriate to make a significant upwards adjustment to the residual (disabled) earnings multiplier, even though in each case the claimant had suffered a lower limb amputation!
In Conner v Bradman the judge adopted a mid-point between the disabled and non-disabled reduction factors when determining the multiplier for residual earnings, despite acknowledging that tables based on detailed actuarial evidence should not be subject to “impressionistic tinkering” by the judge. A similar approach was taken in XYZ v Portsmouth, Sharma v Noon Products [2011] 4 WLUK 175, Kennedy v London Ambulance Service [2016] EWHC 3145 and Inglis v MOD [2019] EWHC 1153, whilst in Clarke v Maltby [2010] EWHC 1201 and Johnson v Le Roux Fourie [2011] EWHC 1062 the judge declined to make any adjustment to the residual earnings multiplier, despite the claimant in each case being clearly disabled. Dr Victoria Wass has argued forcefully that this approach leads to under-compensation and a lack of certainty and predictability[1]. In contrast, the judges in Davison v Leitch [2013] EWHC 3092 and Seers v Creighton [2015] EWHC 959 considered there to be no justification for departing from the adjustment factors in Tables B and D.
Regrettably, the Court of Appeal in Billett v MOD [2015] EWCA Civ 773 missed an opportunity to provide further guidance on the extent of permissible judicial adjustments. Having agreed that the judge had correctly found the claimant to be disabled (but “only just”), they suggested that determining the appropriate adjustment factor was a matter of broad judgment, and that there was no rational or scientific basis on which it could be determined in this case. Instead, they regarded this as a classic case for a Smith v Manchester award, equivalent to approximately 2 years’ earnings. Whether that approach had any greater rational or scientific basis is open to debate, but it was followed in Murphy v MOD [2016] EWHC 3 and XX v Whittington Hospital NHS Trust [2017] EWHC 2318[2].
Nevertheless, in both Ward v Allies & Morrison [2012] EWCA Civ 128 and in Irani v Duchon [2019] EWCA Civ 1846, the Court of Appeal has confirmed that the Blamire lump sum approach should only be used where the court has no real alternative, as was the case in Irani, where there was no proper basis for determining the claimant’s residual earning potential in India or another Commonwealth country.
The Ogden 8 Guidance on Contingencies other than Mortality
The re-written Section B of the Ogden Explanatory Notes now provides more detailed and helpful guidance to take account of risks other than mortality when calculating loss of earnings claims. First, the reduction factors in Tables A-D have been re-calculated at a discount rate of 0%, bringing them closely into line with the current discount rate, and the educational categories have been re-labelled and clarified to avoid the rather confusing D, GE-A and O classifications. The new categories are Level 1 (below GCSE level qualification), Level 2 (GCSE grade A*-C or 9-4 to A level or equivalent) and Level 3 (degree or higher education equivalent), although further guidance is given as to the category into which particular qualifications fall. Although the reduction factors remain based on research data from 1998-2003, it is hoped that updated research may better inform future editions.
Second, the Notes clarify the Ogden definition of “disability”. This requires a person to fulfil all 3 of the following conditions:
i. The person has an illness or a disability which has or is expected to last for over a year, or is a progressive illness;
ii. The Disability Discrimination Act 1995 definition is satisfied in that the impact of the disability has a substantial (i.e. more than minor or trivial) adverse effect on the person’s ability to carry out normal day-to-day activities;
iii. The effects of impairment limit either the kind or the amount of paid work he/she can do.
The Notes explain that the definition of disability used in the Ogden Tables is based on the test set out in the Disability Discrimination Act (DDA) 1995 and its accompanying guidance notes, not (as stated in the 7th Edition) that used in the Equality Act 2010, which it is suggested adopts a lower threshold (resulting in the reported prevalence of disability in the working-age population rising from 12% in 1998 to 19% in 2019). This is because the research which underpinned the data in Tables A-D was based on the earlier definition and guidance. Whilst there is little difference between the actual statutory wording, Sched 1 para 4 of the DDA specifies that an impairment will only be taken to affect the ability of a person to carry out normal day-to-day activities if it affects one of the following: (a) mobility; (b) manual dexterity; (c) physical coordination; (d) continence; (e) ability to lift, carry or otherwise move everyday objects; (f) speech, hearing or eyesight; (g) memory or ability to concentrate, learn or understand; or (h) perception of the risk of physical danger. Examples of qualifying impairments were given in the guidance notes accompanying the DDA, but were largely dropped from the Equality Act 2010 as they were considered unduly restrictive. Thus, whilst the claimant in Billett v MOD was held to be disabled under the Equality Act definition, on the basis that his feet were permanently sensitive to the effects of cold, preventing him from working outdoors in cold conditions, he was arguably not disabled under the DDA criteria, as his mobility was unaffected.
Perhaps most importantly, the Explanatory Notes stress that, whilst it is not intended to be prescriptive, the Ogden methodology is applicable in most circumstances, and the reduction factors in Tables A-D “should generally be used unless there is a good reason to disapply or to adjust them”. This is because they are based on group averages which are statistically verifiable, the average representing the centre of the range. Of course, the reduction factors are averages for 3 broadly defined characteristics – employment status, educational attainment and disability status – which cannot capture all the factors which might affect the claimant’s future earnings in an individual case. For example, a claimant who left education before achieving their full potential in order to take up an offer of employment might be better represented by placing them in a higher education category, whilst a claimant with a single GCSE at grade C might be better treated as falling within Level 1. A claimant with a chequered employment history who happened to have found a temporary job at the time of the accident might better be regarded as non-employed. The residual earnings of a nurse whose injury now restricts her to a basic clerical role might be better represented by a lower educational group than her pre-accident status.
Adjustments for Disability
The most valuable guidance warns against significant adjustments based upon the perceived level of disability. Data from the Department for Work and Pensions shows that, of those classified as disabled, the median level of severity on a scale of 1-10 is 4, with 43% falling in the range 1-3 (mild), 44% in the range 4-7 (moderate) and only 13% in the range 8-10 (severe). Thus, the fact that a claimant’s disability may be considered relatively mild would not be a justification for departure from the adjustment factors in Tables B and D: on the contrary, such a level of disability is probably close to the median. Moreover, it is the effect of the injury on the claimant’s work that is important: a lower limb amputee is impaired regardless of their occupation, but the disability would be greater for a claimant in a manual job than one in a sedentary role.
Crucially, the Explanatory Notes emphasise that where a departure is appropriate, it could be in either direction and it would normally be expected to be modest. This is because disability is likely to have a far greater effect on employability than any other employment characteristic. In a clear criticism of the Conner v Bradman approach, it is stated that “interpolation using a mid-point between the disabled and non-disabled reduction factors is not advised.” It is better to retain the disabled reduction factor, but to use the reduction factors for different employment, age or educational categories as a guide to the size of the departure. For example, take the case of a male claimant aged 40, with no educational qualifications, who is no longer capable as a result of his injury of resuming his previous heavy manual job, but has found apparently secure clerical employment which he can perform without difficulty. Rather than taking the mid-point between the disabled (Table B) and not disabled (Table A) reduction factors, which would be 0.61, it might be appropriate to adjust the Table B reduction factor from 0.35 (Level 1 education) to 0.43 (Level 2), reflecting the more limited impact that his disability has on his new role.
It must, however, be borne in mind that, quite apart from any reduction in earnings caused by injury, disabled people face increased job search periods, spend longer periods out of work, and may have to retire early. It is wrong to conflate this “employment effect” (i.e. the impact of the disability on the claimant’s long-term employment prospects) with the “wage effect” (i.e. the reduction in earnings attributable to the injury, which will usually be reflected in a lower multiplicand for residual earnings). The fact that the court has adopted a lower multiplicand for post-injury earnings does not make any allowance for reduced employment prospects due to disability. Recent research has shown that the disability employment gap is 29%, whereas the disability pay gap is 10-20%.
On the other hand, the reduction factors in Tables B and D already include an allowance for the risk of having to retire earlier than normal retirement age. If, therefore, the medical evidence shows that, as a result of the injury, a claimant may have to retire earlier than would otherwise have been the case, adopting a base multiplier to the earlier retirement age and applying a Table B or D reduction factor, may amount to a double discount. An appropriate adjustment in such a case might involve treating the claimant as having a younger age when applying the reduction factor. For example, suppose a female claimant aged 35 with several GCSEs suffers injuries which mean she is now likely to retire by her mid-50s, rather than at 60. Her pre- and post-injury earnings could both be calculated using Table 8 (earnings to age 60), applying the respective reductions factors of 0.86 (Table C) and 0.44 (Table D). If, on the other hand, Table 6 (earnings to age 55) were to be used to calculate the base multiplier for her residual earnings, it might be appropriate to adjust the Table D reduction factor from 0.44 (age 35-39) to 0.48 (treating her as age 40-44), reflecting the shorter period to retirement age.
Fatal Accident Claims
The approach laid down in Cookson v Knowles [1979] AC 556 that multipliers for loss of dependency in fatal accident claims had to be assessed at the date of death, criticised by the Law Commission, was finally overruled by the Supreme Court in Knauer v Ministry of Justice [2016] UKSC 9. Ever since publication of the 4th Edition, the Ogden Working Party had argued that an actuarial method should be used to avoid double-discounting in the pre-trial period, and had produced an alternative methodology to try and avoid this injustice.
As a result of the decision in Knauer, multipliers must now be calculated from the date of trial when assessing the value of future dependency claims. As a result, Section D of the Explanatory Notes has been re-written to reflect the law as it now stands. Helpful examples are provided.
Conclusions
The late Sir Michael Ogden QC saw the task of the Explanatory Notes as to be readily comprehensible, so that they could be understood by “the most stupid circuit judge in the country and … the two most stupid advocates”. The 8th Edition of the Tables he founded was long overdue. Fortunately, the content justifies the wait. In its approach to claims for loss of earnings in particular, the Working Party has laid bare the errors into which many advocates and judges (none of whom could be described as stupid) have fallen in the past. Careful application of Section B should ensure that impressionistic tinkering becomes a thing of the past.
The Supreme Court in Knauer righted a longstanding injustice in fatal accident claims. It is to be hoped that the Ogden Working Party has similarly ensured that the injustice resulting from misapplication of the reduction factors is never repeated.
[1] See Latimer-Sayer and Wass (2013) JPIL 1, 36-45
[2] Overturned by the Supreme Court on the unrelated issue of recovery of surrogacy costs in California – [2020] UKSC 14
