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MULTIPLIER: Assessment of Damages

By P S Ranjan & Co.
Advocates & Solicitors
Malaysia

Introduction

In all catastrophic personal injury cases the court and the parties will have to consider the claimant’s life expectancy and multiplier when assessing general damages for the future. The life expectancy would be reduced by a certain number of years so as to arrive at the multiplier. The multiplier would be applied to the annual sum for each item of future loss and damage (e.g. an annual sum for nursing care). The annual sum would be the multiplicand. The equation the multiplier x the multiplicand would yield the total sum of damages for the item of loss and damage concerned.

The court will have to see that for the future the successful claimant has enough funds for his financial needs that would be escalated as a result of the catastrophic injuries. Assessment of future loss and damage can be difficult. In Lim Poh Choo v Camden and Islington Area Health Authority [1979] 2 All ER 910, Lord Scarman when considering the once and for all system of assessing damages, had very tellingly said that ‘There is only one certainty: the future will prove the award to be either too high or too low.’

Relevant Factors

There are several relevant factors that will have to be considered when calculating the multiplier, namely:-

  1. the ordinary life expectancy of the claimant;
  2. the life expectancy estimated by the experts;
  3. the age of the claimant at the time of calculating the multiplier;
  4. the interest or return rate of any capital investment;
  5. the available investment opportunities;
  6. the inflation rate and the stability of the currency;
  7. the appropriate discount rate for early receipt of the lump sum award made by the court; and
  8. the contingencies, both adverse and favorable, that may affect the claimant in the future.

In Malaysia, a point that has not been considered by the courts is that there are preferential investment opportunities for Bumiputera claimants giving higher government guaranteed investment returns. A higher investment rate or return should correspondingly attract a higher discount rate when calculating the multiplier. Therefore, a non-Bumiputera claimant who is ineligible for such generous investment opportunities should have a lower discount rate applied when calculating the multiplier.

Contingencies

Mortality has been the main factor in reducing the multiplier. In assessing damages for the future the Federal Court in Inas Faiqah bt. Mohd Helmi v Kerajaan Malaysia & Ors [2016] 2 MLJ 1 had followed English authorities and said as follows:-

“ [24] With the above proposition, we are of the view that the standard of proof with regard to the assessment of future loss or damage is on the balance of probabilities, but with a lower degree of certainty as to the occurrence of such loss or damage in the future. From the authorities, one can say that such a lower degree to be attached is best termed by the word ‘possibility’, ‘chance’, ‘risk’, ‘danger’ or likelihood’, but regardless of the words used and their semantics, they must also essentially be a substantial one and not speculative, and that the standard of proving such ‘possibility’, ‘chance’, ‘risk’, ‘danger’ or ‘likelihood’ of the future damage is still, in our opinion, on a balance of probabilities. …”

In catastrophic injury cases, appropriate medical experts can be relied on to give the claimant’s estimated life expectancy, which is invariably a reduced life expectancy when compared to the national statistical life expectancy of the claimant, taking into account the risk of early mortality.

However, the favourable contingencies are often not considered. One favourable contingency, namely, the prospects of future increased income, cannot be considered because of section 28A(2)(c)(iii) of the Civil Law Act 1956. Other favourable contingencies that should increase the multiplier or reduce the discount rate, for example poor investment returns, high inflation rates and a declining currency, are often not taken into account.

However, the unfavourable contingency of their occurring mortality before the end of the usual life expectancy period is taken into account twice. The first time, correctly by the medical expert when estimating the reduced life expectancy. And, the second time, wrongly and unnecessarily, the court, when calculating the multiplier, applies the discount rate to the life expectancy which has already been reduced by the expert.

The result: an unintended double deduction to the detriment of the claimant.

England

In England, there is statutory provision for the Lord Chancellor to prescribe the investment rate to be applied in calculating the multiplier. See: section 10 of the Civil Liability Act 2018, with a proviso that the court can take into account a different investment rate if it is shown to be more appropriate. The Lord Chancellor has to consult the Government Actuary, the Treasury and an Expert Panel provided for by statute in determining and reviewing the rate of return.

In Wells v Wells [1998] 3 ALL ER 481 the House of Lords had accepted the argument made on behalf of the claimant that, once an arithmetical multiplier was agreed to after considering the expectation of life as agreed by the experts, there was no more logic or justice in making a “judicial discount”, as put by one of the Law Lords, on the multiplier on account of contingencies.

In addition, for some years now in England there have also been provisions for the court to undertake, following judgment after trial, periodic assessment of damages, instead of once and for all when giving judgment at trial as was the case at one time and still is in Malaysia.

Malaysia

In Malaysia, as mentioned above, damages have to be assessed by the court at trial on a once-and-for-all basis. There is no assistance from the judicial authorities on the investment return rate nor are there any provisions for periodic assessment of damages after delivery of judgment. When calculating the multiplier, the courts in Malaysia have for a long time applied a reduction at the rate of either 30% or one-third from the life expectancy. The courts have done so irrespective of the prevailing economic conditions and the rate of return on money which is invested. Such an approach is not sufficient.

However, there are now signs of a change in judicial thinking.

To the knowledge of the writers, in the past two years, there have been at least four cases, all of them medical negligence cases, in which the learned trial Judges had departed from the 30% or one-third “rule” and applied instead a reduction of 15% to the life expectancy when calculating the multiplier. Three of the cases are pending appeal before the Court of Appeal following the withdrawal of an appeal in one case.

In Page v Sheerness Steel Co plc [1996] PIQR Q26 Dyson J had said that the application of the discount rate was not a rule of law. Judges are therefore not bound by a 30% or one-third “rule.”

Conclusion

The indiscriminately applied 30% or ⅓ deduction should not be considered as a rule of law. If necessary, evidence must be brought and arguments raised regarding the appropriateness of the discount rate. The law is often slow in catching up with developments and sometimes with reality. There is a greater opportunity but unfortunately less effort has been made in road accident cases so as to address the difficulties and disadvantages faced by claimants in regard to the duty of the courts when calculating the multiplier in such cases.

Clearly, there is a need for review of the subject of the calculation of the multiplier. The calculation of the multiplier will require not only the assistance of medical experts on life expectancy but also the expert assistance of actuarists and economists. It will however be difficult, expensive and time-consuming for litigants to bring evidence regarding the discount rate. The judiciary in Malaysia, assisted by counsel, should keep up with the developments that had been achieved in other jurisdictions.

A good start would be for there to be reasoned deliberation and judgment by the courts in Malaysia regarding this much-neglected subject.

P S Ranjan & Co.
All Rights Reserved
January 2021

 

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