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Mitigation, taxation and assessment of loss: how to win most of the legal arguments but recover less than 10% of a £33 million claim

Mathieu v Hinds and Aviva Plc [2022] EWHC 924 (QB)

Manuel Mathieu (the Claimant) was a 29-year-old rising star in the world of fine art, studying for a Masters’ degree in Fine Art at Goldsmiths College. On 28 November 2015 he was struck by a moped driven by Tony Hinds who had stolen it earlier that day. The moped was insured by Aviva plc (the insurers). Liability was admitted. The Claimant sustained a serious brain injury in the accident, albeit that it was agreed by the experts that he has made a very good recovery. The Claimant went on to enjoy a successful artistic career. He lives in Canada and his paintings and other work are displayed in galleries and exhibitions around the world.

The Claimant contended that he continues to suffer headaches, fatigue and cognitive issues arising from the index injury, which affect his productivity as an artist. His work now sells at considerable prices. As a result, he claimed damages in equivalent to £33,617,057 mostly consisting of past and future loss of income. Although the insurers accepted that the Claimant suffered a serious brain injury, they disputed the alleged effect on his productivity. The counter-schedule of loss proposed an award of £49,500 inclusive of general damages.

The Court awarded him damages in the sum of £3,178,741.64 of which £3,087,815.58 were his past and future loss of income.

Mrs Justice Hill’s judgment of 360 paragraphs deals with a number of issues that are of general interest including: (i) mitigation of loss; (ii) whether damages reflecting loss of income should be gross or net of potential tax in Canada; (iii) whether an award of any shortfall of artistic productivity should be quantified using a multiplicand/multiplier or a Blamire approach; and (iv) whether provisional damages should be awarded in relation to a chance of developing dementia due to the brain injury.

 

Mitigation of loss

The insurers advanced two strands of argument in relation to mitigation. One concerned the Claimant’s refusal to take medication to help his headaches and the other his failure to undergo the full recommended course of psychological therapy.

Mrs Justice Hill included in her judgment a helpful precis of the general legal principles relating to the mitigation of loss at [87]-[92].

On the issue of medication, there was an agreement between the experts that if the Claimant took amitriptyline, it could substantially ameliorate his headaches. However, the Claimant was unwilling to take this medication because of a concern about the risk of it making him feel drowsy and interfering with his creative process. It was also suggested on his behalf that some research papers indicate significant increase in a risk of dementia after exposure to anticholinergic antidepressants such as amitriptyline. Since the Claimant was already worried about the risk of cognitive decline associated with his brain injury, he was unwilling to contemplate an additional increase in risk associated with medication.

The Judge said that, at first glance, the argument appeared finely balanced due to the potential agreed benefits of medication. However, there was a subtlety in the case. The Claimant is an artist, in the Judge’s words, “a person whose raison d’être is his art”. His concern that the side-effects of amitriptyline will dampen his creativity was therefore understandable. The Judge reminded herself that whether the Claimant failed to mitigate his loss was a question of fact not the law. She added that since one of his experts considered the Claimant’s position to be reasonable, this made it harder to find that the Claimant was acting unreasonably. The burden of proof regarding unreasonableness being on the insurers, the Court held that they failed to satisfy it on the issue of medication.

The other argument concerning psychological treatment failed at the first hurdle. The Court found that the insurers did not give the Claimant fair notice of this argument and therefore failed to comply with the pleading requirement (Geest Plc v Lansiquot [2002] 1 WLR 3111 PC at [16]) and also failed to put forward a “concrete case” to demonstrate what the Claimant might reasonably have done (Samuels v Benning [2002] EWCA Civ 858 at [26]).

Mrs Justice Hill observed obiter that in relation to both strands of argument there was a failure on the part of the insurers to show what difference medication or further psychological treatment would have made.

The judgment serves as a reminder of the importance for any defendant wishing to raise allegations of a failure to mitigate to plead the same in a concrete and particularised manner and to lead evidence in support, particularly, as to what difference it would make to the claimant’s situation.

 

Taxation

Initially, the Claimant claimed his loss of income net of tax in accordance with the principle derived from BTC v Gourley [1956] AC 185 that any loss of earnings should be awarded on net basis. The Claimant revised his position in his latest Schedule of Loss, asserting that he would be subject to taxation in accordance with Canadian and Quebecois tax laws and therefore claiming his loss of income on gross basis.

There was no dispute between the parties that, in light of Bank Mellat v HM Treasury [2019] EWCA Civ 449 at [53], foreign law was a question of fact to be proved by a duly qualified expert in the law of that foreign country and that the function of such an expert extends to both the interpretation and application of the foreign law. Furthermore, the burden of proof rests on the party seeking to establish the proposition of foreign law in question and that the English court will not undertake its own research into questions of foreign law.

The parties in this case reached an impasse regarding instruction of a single joint expert on the issue of whether the Claimant’s damages would be taxed at a federal or local level in Canada. Each party counted on the burden of proof being on the other side.

Mrs Justice Hill held at [148] that the important distinction between Gourley and the present case was the lack of clarity as to whether the Claimant’s damages would be subject to tax. In Gourley, it was clear that the claimant would not be taxed on the damages. The Judge applied the principle from Stoke-on-Trent City Council v Wood Mitchell [1980] 1 WLR 254, CA that netting exercise in Gourley is not to be undertaken unless it is “clear beyond peradventure” that the damages in question will not be taxed in future. The situation was therefore interpreted by Mrs Justice Hill as placing the burden of proof on the insurers on the basis that, as a paying party, they wanted to avoid incurring the additional cost of a gross award. Having chosen not to place any foreign law evidence before the Court on the issue of taxation, the insurers were unable to satisfy this burden.

 

The approach to calculating the loss

Mrs Justice Hill was unpersuaded by the insurers’ argument that the assessment of past and future loss of income should be undertaken using the approach in Blamire v South Cumbria Health Authority [1993] PIQR Q1. She reminded herself that in Bullock v Atlas Ward [2008] EWCA Civ 194, the Court of Appeal made it clear that judges should not adopt the Blamire approach too easily and that, when the uncertainty was about whether the Claimant would achieve a certain level of earnings, the Court is bound to use a conventional approach, which is “a much more appropriate method for fairly assessing damages”. The Judge also favoured the conventional approach because the Claimant advanced his loss from early 2022 on a loss of a chance basis. The Judge reviewed loss of a chance cases and concluded that they required the Court to assess the extent of the loss and then reduce to the extent of the lost chance: see at [164].

Although most of the Claimant’s arguments on the legal issues concerning the approach to the assessment of his damages prevailed, he secured less than 10% of the damages he claimed. This was a result of a factual assessment by the Court. The Judge was not persuaded that the Claimant’s current success is likely to persist at its current level beyond 2029: see at [254]-[269]. As the Judge put it, “the uncertainty works both ways”. Accordingly, the Claimant’s award for loss of income from the age of 43 for the remainder of his working life which may well extend into his 80s was similar in its magnitude to the award that he received for the period of 5 years preceding that date namely, a sum equivalent to around £800,000.

 

Provisional damages regarding dementia due to the brain injury

Mrs Justice Hill’s judgment offers a helpful precis of the authorities and legal principles concerning an award of damages on a provisional basis at [289]-[305]. The correct approach to the issue of provisional damages remains as set out by Scott Baker J in Willson v Ministry of Defence [1991] ICR 595 at pp.598H-599A. Three questions need to be answered, namely (1) is there a chance of the claimant developing the disease or deterioration in question? (2) is the disease or deterioration serious? and (3) if so, should the court exercise its discretion to make an award of provisional damages?

The Judge had no difficulty making an award of provisional damages for the risk of epilepsy assessed by the experts between 5 and 8% on a lifetime basis. The Claimant’s contention that provisional damages should also be awarded for a risk of dementia arising from traumatic brain injury (TBI) generated a great deal of controversy. The expert neurologists placed before the Court a large volume of medical literature and both experts were closely questioned on the issue. However, the Judge “was not particularly persuaded by each party’s attempts to undermine the credibility of the other’s expert”.

Mrs Justice Hill started her analysis by observing that wording of section 32A of the Senior Courts Act 1981 makes clear that a claimant can succeed in a claim for provisional damages if it is admitted by the defendant that the statutory criteria are met, or by the claimant proving that they are. Although provisional damages can still be available where the experts do not agree on the existence of a chance, the Judge noted it was not surprising that such awards are generally made when there is agreed expert evidence.

The Judge considered the literature and the rival manners in which it was interpreted by the experts. In the end, she accepted the evidence of the expert instructed by the insurers. He argued that the association between TBI and dementia that emerged from some of the research did not necessarily mean causation, particularly, when the causative “route” between TBI and dementia was unclear. Accordingly, the Court concluded that, on the current state of the science, the Claimant was unable to prove the existence of a generalised enhanced risk of dementia arising from TBI. Furthermore, the Judge considered that, even if such risk could be established generally, in the Claimant’s case it was made even less clear by his unusually good recovery from TBI and other protective factors he had in place. The claim for provisional damages for dementia caused by TBI failed at the first hurdle, on Wilson question (1).

The Judge went on to observe obiter that, had the Claimant established the existence of a chance, she would have had difficulty accepting the insurers’ argument that the Claimant also had to establish that his future dementia would be caused by TBI. Mrs Justice Hill was not persuaded that the authorities required causation to be established at the outset. She considered that this would be an argument for any restored hearing.

The point relevant to Wilson question (2), namely whether dementia would be a serious condition was not controversial, the insurers having accepted the same.

On the issue of the exercise of discretion, namely Wilson question (3), Mrs Justice Hill observed, again obiter, that the authorities suggested that the factors needed to be considered in the exercise of discretion, included:

  • the clarity of the development of the condition relied upon, the extent to which the developing condition can be “severed” or separated from the original condition and the ability to identify the cause or origin of the developing condition;
  • the degree of the risk and the consequences of it; and
  • the extent to which the claimant will be under-compensated without a provisional damages award if the risk eventuates, balanced against the lack of finality such an award creates for the defendant.

The Judge had no difficulty with factors (ii) and (iii), which clearly supported the case on provisional damages for dementia.

However, she concluded that factor (i) militated strongly against provisional damages for 3 reasons. Firstly, the Court was not persuaded that post-TBI dementia would be clearly diagnosable, given the “diagnostic uncertainty” referred to in the literature before the Court. Whilst in the future specific diagnostic criteria may emerge, the Court needed to exercise its discretion now. Secondly, “the current state of scientific knowledge, a post-TBI dementia is often not severable from the consequences of the initial TBI.” This would make such a condition akin to a worsening of a current condition, which is unsuitable for provisional damages. Thirdly, dementia may have many causes and effects and, as such, is akin to osteoarthritis or certain psychiatric conditions which are unsuitable for provisional damages because of their generic and evolving nature and also because the cause is often difficult to establish.

Interestingly, although the Judge was unpersuaded by the insurers’ argument at Wilson question (1) that the Claimant needed to establish causation of dementia at the stage when application was made for provisional damages, the factors that the Judge considered militated against the exercise of discretion at Wilson question (3) foreshadowed a difficult causation argument that would have had to be mounted in due course. Causation arguments were in effect used to define dementia as a “very general condition”, “Protean in its form and effects”, the opposite of “clear and severable” or “clearly identifiable” and therefore unsuitable for provisional damages.

 

NADIA WHITTAKER

20 April 2022



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